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Apple earnings growth hangs on enterprise use

Apple had another record quarter, but the company looks to grow even more by enabling iOS in the mobile enterprise through key partnerships and features.

Following yet another record quarter, Apple views iOS in the mobile enterprise as its ticket to further growth.

The company highlighted its strategy for further growth through the enterprise during the Apple earnings call this week, where it reported a record $51.5 billion for the fourth quarter of fiscal year 2015 -- up 22% from the year-ago quarter -- and $11.1 billion in profit. For the fiscal year, Apple reported a record $233.7 billion in revenue -- up 27% from the prior year -- and $53.3 billion in profit.

As he first revealed during his fireside chat at the BoxWorks conference in San Francisco last month, Apple CEO Tim Cook said his company made about $25 billion in annual revenue over the last 12 months -- up over 40% from the prior year -- calling it "a major growth vector for the future."

"The enterprise business is not to be underestimated," Cook said on the call. "I doubt many people knew that we had a $25 billion enterprise business that we quietly built in not too many years."

With each release of iOS over the years, Apple has changed its mobile operating system to enhance it with more enterprise-friendly features, ranging from improved built-in security, authentication and multitasking capabilities. Moving forward, Apple will continue these types of enhancements, but "with a little more intensity," Cook said.

They believe they can reshape the enterprise.
Patrick Moorheadpresident and principal analyst of Moor Insights & Strategy

"Apple's enterprise play is a long-term movement," said Patrick Moorhead, president and principal analyst of Moor Insights and Strategy, a tech analysis firm based in Austin, Texas. "They are dominant in premium smartphones, premium tablets and premium consumer PCs, and are looking for profitable growth areas where they believe they can bring a completely new experience. They believe they can reshape the enterprise." 

During the September quarter, when the company launched the iPhone 6s and 6s Plus, Apple earnings beat last year's record of iPhone sales, selling more than 48 million phones in the quarter -- up 22% from the year-ago quarter.

At the same time, Apple sold more than 5.7 million iMacs and MacBooks, up 3% from the fourth quarter of last year. This growth occurred in a PC market that shrank by 11% overall in the quarter, according to research firm IDC, based in Framingham, Mass.

The low note of the earnings call was Apple's iPad sales, which continued to sink for the fifth straight quarter -- this time falling 20% year-over-year, with under 9.9 million iPads sold. Apple will release its business-focused iPad Pro in November.

Today, Apple's enterprise penetration is low, Cook said, but the company has made "significant actions to deepen that," he said.

IBM, Cisco to be the Trojan horses for iOS 

One of those actions is the IBM partnership the company inked last summer, where IBM intends to build 100 iOS-exclusive, business-focused apps. There are now 55 apps in the IBM MobileFirst for iOS catalog, Apple said.

The drop in Apple earnings on iPad sales were one of the reasons Apple inked a partnership with IBM, Cook revealed during the company's July earnings call last year, as he sees a substantial upside for sales in business.

"Keeping an eye on the developers is really the way to figure that out," said Michael Oh, CTO and founder of TSP LLC, a Boston-based Apple reseller. "If you see unique apps that don't exist on any other platform, then that will be an indicator of growth."

To further enable iOS devices in the corporate world, Apple agreed to another major enterprise-focused partnership when it struck a deal with Cisco in late August. The central premise of the agreement between the two tech giants revolves around Cisco building a "fast-lane" on its corporate networks, allowing IT departments to prioritize content being delivered to and from iPhones and iPads.

"The partnerships with IBM and Cisco are big factors for the future, but not for the short term," Moorhead said. "Apple is working with IBM and Cisco to redefine the mission-critical app, and responsiveness and communications space. It could be years before we see something that could be considered a breakthrough, but I'm optimistic."

In addition to the major deals between IBM and Cisco, Cook said during the call that Apple is working with 75 mobility partners in the U.S., and is expanding in this area internationally as well.

"It is looking quite positive just through BYOD and companies having more pressure to be Mac-friendly from the user base," he said. "It gives IT managers and CIOs a reason to say that Apple is serious about the enterprise."

Apple's "sandwich approach" to the mobile enterprise is slowly but surely allowing its footprint in business to continue to grow, Oh said.

Because Apple can approach businesses from the top level through its partnerships with IBM and Cisco -- two of the top enterprise players in the world -- businesses also have an incentive to take Apple seriously from the prevalent number of employees using the iOS and Mac devices they've brought to the office.

Ramin Edmond is a news writer with TechTarget's End User Computing media group. Contact him at Redmond@techtarget.com

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