Tag: apple

Extended warranties are an untapped gold mine

Alaska - Gold MineIn the troubled economic times it is starting to look like resellers are turning to extended warranties as a good way to boost cash.

Buried in Dell’s quarterly results was a surprise statistic which indicated that the importance of the box shifter’s extended warranty program continues to rise.

A few years ago it was twice as large as the product warranty operation, now it’s four times larger and it is accounting for a rising percentage of the company’s total revenue.

Dell has traditionally been a big fan of the extended warranty programme and the idea was nicked by Apple, which has now become the world’s largest peddler of extended warranties.

In its heyday, Dell could control the sales channel from beginning to end through its extended warranty policy, kicking HP which usually sold its computers through retailers. These retailers had their own brands of extended warranty to sell and ended up harming HP’s margins.

The money involved was huge, according to Warranty Week. It estimated that Dell had sold $31.1 billion worth of extended warranties since February 2004, as opposed to the $17.5 billion Apple has sold since October 2003.

Apple saw its extended warranty revenue rocket upwards since the launch of the iPhone in late 2007 and probably matches Dell by now.

All this starts to make it clear why Apple has been so keen to avoid EU laws on warranty. Apple has its AppleCare programme, which is an extended warranty that kicks in after a customer owns a product for longer than a year. EU law says that the warranty for electronic goods should be two years, which makes AppleCare less attractive.

Apple has been in hot water in Italy, and now in Holland, for selling its AppleCare packages without doing enough to tell customers that in most cases they do not need it.

The way resellers can get around all this is to offer extended warranty packages which are more generous than the EU laws. But for this to work, the warranty would still have to expire before the parts on the electronic items start to fall to bits.

Last year, Dell reported $4.3 billion in extended warranty sales revenue, and $1.025 billion in product warranty accruals. Apple sold $5.3 billion worth of AppleCare contracts. It was estimated that the cost of actually fixing Apple products was $1.786 billion in claims paid last year.

This means that even with the large volume of products and the lowering of price of components, the profits that the two biggest warranty peddlers have are extremely high.

Apple’s down but it’s far from out

Apple, iPadConsumer behemoth Apple reported its first quarter financial results yesterday and while it posted revenues of $54.5 billion and a net profit of $13.1 billion, compared to revenues of $46.3 billion and profits of $13.1 billion in the same financial quarter last year, profits were flat.

Gross margin fell to 38.6 percent compared to 44.7 percent in the same quarter last year. Apple is forecasting gross margins between 37.5 percent and 38.5 percent for its second quarter, with estimated revenues between $41 billion and $43 billion.

So, what’s the problem? CEO Tim Cook said that supply problems were a matter to be concerned about, despite media reports.  And Apple has got a stash of cash in its corporate coffers – not far short of $137 billion in both liquid ashes and in cash.  That gives it a pot of gold that would let it buy other companies to make a splash in new or other developing markets.

A bigger problem is its existing slew of products, including the wildly successful iPad and the solidly popular iPhone.  It does face a challenge on the tablet front – particularly so from Google and Amazon devices.  Microsoft Windows 8 using Intel chips may not be so much of a challenge.  Intel cannot necessarily lower the price of its microprocessors, given its business model and Microsoft appears to believe that tablet devices running the touch version of Windows 8 should command the same prices as Apple iPads, or be even more expensive.

Apple’s share price (AAPL: Nasdaq), stood at $460.15 at press time.

Tablets set to take more PC market share

Apple iPadA market research company said that tablets are set to cannibalise more PC sales as their popularity continues to grow.

ABI Research estimates that 145 million tablets will ship this year, with 50 percent of sales outside the USA. Price, new entrants to the market and increased shipments into enterprise will help drive the growth.

Business sales will account for as much of 19 percent during 2013, and a variety of slates using Intel chips and Windows 8 will begin to make more impact this year, according to Jeff Orr, senior director at ABI.

Meanwhile Israeii company Perion said it conducted a survey of 4,400 iPad users about how they used their machines.  Ninety percent of those surveyed said they used their iPads to read and write email.

Women are more likely to read and write emails from their pads, while the favourite app is Apple Mail at 41 percent, Gmail at 31 percent and Hotmail at 13 percent. Eighteen percent of people use browsers to access webmail rather than using clients.

Samsung flattens Apple in smartphone helter-skelter

Samsung rules the roostA report suggests Apple will see its sales of smartphones peak this year and from then on will pursue the seemingly unstoppable rise and rise of Samsung.

According to ABI Research, smartphones will represent 50 percent of all handset sales in 2013, and by 2018 2.4 billion smartphones shipping will represent 69 percent of all handsets. By then, LTE handsets will represent 50 percent of smartphone shipments and 35 percent of all handsts.

Michael Morgan, a senior analyst at ABI, said: “Apple will be chasing Samsung’s technology, software device leadership in 2013 through the foreseeable future.” He said that the Korean chaebol grew its smartphone market share from eight percent to over 30 percent last year. Apple will remain flat until 2018, he predicted. While Samsung is relying on Google Android for 90 percent of its smartphone shipments, ABI thinks that it will use other OSes including Bada, Tizen and Windows Phone.

Even though many handsets will support LTE in the future, people may not have access to LTE networks.  ABI thinks that LTE will be the fastest growing WWAN in history.

Samsung has plenty of advantages over Apple – it is a vertically integrated company and is able to keep costs down by providing essential components from its own manufacturing arsenals.