...Now, let's get to work. Source: Apple
Since announcing the purchase of Beats Audio and Electronics,
had been rather silent about its plans. But after finally gaining
regulatory approval from the EU and the United States, Apple
moved quickly to bring the brand to its website. And that's great
for Apple investors, because the purchase of Beats will make
accessories Apple's next $10 billion a year business.
Apple's accessories product line has mostly been considered an
afterthought, an accounting convention to book sales of USB
cables, EarPods, and wireless keyboards. But with overall
top-line growth slowing over the last four fiscal quarters and a
product segment rapidly approaching $6 billion, it appears Apple
is taking accessories quite seriously. The chart below gives some
Source: Apple 10-Q's. Right Y-Axis denotes year-over-year
growth, the left Y-Axis is revenue. Figures in thousands.
As you can see, the accessories segment over the past four
quarters has provided a solid performance when compared to
overall revenue growth. While Apple's overall growth over the
trailing 12 month period clocked in at 5.1%, accessories alone
turned in 5% growth by growing to nearly $6 billion.
$5.9 billion is a large number
At times Apple investors don't seem to understand how much
revenue Apple brings in. And that makes sense, considering humans
have problems understanding large numbers. For perspective, Apple
reported $178 billion over the last four reporting periods -- or
nearly half a billion dollars per day. As a matter of fact, Apple
came in fifth in the Fortune 500 -- a list based on revenue.
But even more shocking is when you compare Apple's accessories
segment to others on Forbes' list. Right now, if it was its
own business, Apple's accessories division would be in the
Fortune 500 itself. For perspective, coming in at $5.926 billion
over the 12 months would put Apple's overlooked division at No.
432 -- tucked in between
The iconic motorcycle company,
actually comes in two spots lower.
How Apple gets to $10 billion
The heavy lifting has been done merely by the purchase of
Beats. While never confirmed by the private company, multiple
third-party sources peg Beats Electronics' revenue at $1 billion
to $1.5 billion last year. Using the midpoint of $1.25 billion,
that puts Apple's newly combined accessories segment at nearly
$7.25 billion, or three quarters of the way to $10 billion when
including the Beats revenue.
And while the $1.25 billion addition isn't as large as Apple's
current accessories business, it appears Beats Electronics is
growing rapidly. Fast Company reports that Beats expected $350
million in revenue in 2011, providing growth of roughly 48% per
Finally, it appears the only other sub-$10 billion product
line -- the iPod -- won't reverse its decline anytime soon.
Perhaps it could reverse its awful trend if a newer iteration is
released. With that being said, it appears that Apple is content
to let the iPod fade away. Once an important product for the
company, Apple hasn't released a new iteration in two years. But
the purchase of Beats' high-quality headphones could provide
moderate tailwinds to the music-based iPod.
Over the last four quarters Apple has struggled with overall
revenue growth, only reporting a 5.1% gain. To grow a top line
now pushing $200 billion a year, it helps to have each product
line firing on all cylinders. Apple's purchase of Beats is a
game-changer for its accessories unit and should help it become
Apple's next $10 billion business.
Leaked: Apple's next smart device (warning, it may
Apple recently recruited a secret-development "dream team" to
guarantee its newest smart device was kept hidden from the
public for as long as possible. But the secret is out, and some
early viewers are claiming its everyday impact could trump the
the iPad. In fact, ABI Research predicts 485 million
of this type of device will be sold per year. But one small
company makes Apple's gadget possible. And its stock
price has nearly unlimited room to run for early in-the-know
investors. To be one of them, and see Apple's newest smart
Is This Apple's Next $10 Billion Business?
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