How Does Apple Make its Money?
It’s always an interesting question: how does X plc make its money. We know its sales are £million or billion; we know that they have some excellent products and services; and so on. Which product and which service brings in the most profit though?
As they were discussing Apple’s second quarter 2015 results earlier this week I decided I would try to answer my own question: this is what I did.
To answer my questioon, I not onlu needed to know sales, profit and and so on but which products they sell and how many of them. Normally, getting hold of such information in detail is a problem: it’s just not possible to get it. So it proved with Apple. That is, in the time I allowed myself to find it.
I was looking for sales units of iPhones, iPads, Mac desktops, Mac laptops and so on. I found a mixture of quarterly and annual data. As far as mac computers are concerned, I had to estimate those sales. However, I was reasonably pleased that at least I had this:
|Year||Sales ($bn)||Macs||iPhone||iPad||Gross Profit ($bn)|
The sales and gross profit figures are in $ billions and the sales of macs, iPhones and iPads are in millions of units.
I used the Data Analysis ToolPak to provide me with the regression equation and so on and, making Gross Profit my Y variable, I generated four different models, which you can see in the spreadsheet linked to the bottom of this page: The main part of the output of model four follows:
|SUMMARY OUTPUT||Sales = Y|
|Adjusted R Square||0.9985|
|Coefficients||Standard Error||t Stat||P-value|
This page is just a summary page so I will assume that you understand the variables and results you see here. The outcome is, however, that Gross Profit can be said to be a function of the sales of macs, iPhones and iPads. In addition, we can see that the computers are the most significant items that are sold, b coefficient of 1.0860, followed by iPads with a b coefficient of 0.9334 and iPhones are far behind in their significance with a b coefficient of just 0.3771.
This is a very small study with just 8 years’worth of annual data but it does give us a small insight into the importance of the contribution of the various products that the company sells.
download my file apple_analysis