I've never seen as many people coming into the middle class as they are in China. That's where the bulk of our sales are going.
If you look at [Brazil, Russia, India, and China] within the emerging markets, [those] countries were up 64 percent year over year. And so... it's clear to me that [growth] has to be coming from the middle class. Because the upper income earners, there's only so many of those, and you can't grow those kind of numbers without getting significantly into the middle class. And so that I think that's where we are, and I hope we're also beyond the middle class, but I don't have the data to suggest that's the case or not the case. But it's clear to me that the middle class statement is true.
It's hard to imagine the scale of serving a market double the size of Europe or four times the size of the United States--even if the middle class in that market is a smaller percentage of the whole--but it's vitally important for Apple's growth. Apple has been focusing on China for the past few years (including several Chinese-specific features in both iOS and OS X), and it seems to be paying off.
Tim's still an iPad believer
Then there's the iPad. I love mine, you might love yours, but when we talk about raw numbers, things are... problematic. After an initial flurry of sales, iPad growth has come to a stop. Year-over-year iPad sales have been down for five consecutive quarters.
To be sure, the iPad is still a valuable business for Apple. Last quarter it represented ten percent of Apple's revenues, roughly the same as the Mac. But the growth has vanished, which troubles growth-focused financial types. Tim Cook, on the other hand, says he's not worried:
When you look at the underlying data, it makes you feel a lot better than the sales do. Things like first-time buyer rates, the latest numbers from the U.S. are like around 40 percent, and when you look at China they're almost 70 percent. These numbers are not numbers you would get if the market were saturated... We also see usage numbers that are off the charts, so far above competition, it's not even in the same planet. And we see customer satisfaction at or near 100 percent. So these kind of numbers, along with intent-to-buy numbers, everything looks fantastic...
I believe the iPad is an extremely good business over the long term. When precisely it begins to grow again I wouldn't want to predict, but I strongly believe that it will.
This whole section of Cook's remarks reminded me of something from the world of sports statistics. There are two ways to look at a baseball player's stats: There are the raw numbers, like hits and runs (or for pitchers, ERA or hits allowed). And then there are the peripheral stats, more esoteric numbers that might not reflect performance on the field, but are a good predictor for what the player will do next. A player who isn't hitting or pitching well, but who has good peripherals, is likely to bounce back--they've just been unlucky.
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