To Beat the Law of Large Numbers, Apple Must Expand Its Product Line

new york times today addressed apple's record growth in both revenue , stock price in context of "law of large numbers".

quote

apple big, it's running against law of large numbers.

known golden theorem, proof attributed 17th-century swiss mathematician jacob bernoulli, law states variable revert mean on large sample of results. in case of largest companies, suggests high earnings growth , rapid rise in share price slow companies grow ever larger.

if apple's share price grew 20 percent year next decade, far below current blistering pace, $500 billion market capitalization more $3 trillion 2022. bigger 2011 gross domestic product of france or brazil.

put way, increase revenue 20 percent, apple has generate additional sales of more $9 billion in next fourth quarter. company $1 billion in sales has come $200 million.

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apple has posted annual revenue growth of 16%, 56%, , 69% on past 3 years respectively, sales rising $39 $61 $103 billion. staggering growth company large, apple seems continuing trend fiscal 2012. apple reported more $46 billion in revenue first quarter, , provided guidance of $32.5 billion in revenue second quarter.

$78 billion in revenue first half of fiscal 2012 (which higher, apple traditionally underestimates on guidance) represents yet massive increase in revenue year-previous quarters. q1 2012 number rise of more 73% on prior year, , q2 guidance represent 32% increase growth.




enormous growth apple has shown in recent years largely on backs of 2 products: iphone , ipad.

iphone, product category, has grown mere $630 million in sales in 2007, more $47 billion in fiscal 2011. ipad, part, tallied more $20 billion of apple's revenue last year. between 2 of them, apple's main ios devices account more 65% of apple's total sales. remove 2 , apple different company.

it's bit of theoretical exercise, of course. iphone , ipad halo effects real, , have had beneficial impact on other parts of apple's businesses -- point remains: apple's astounding growth direct result of company's move new product categories.




above chart shows, apple's overall year-over-year revenue growth impressive, if iphone or ipad backed out, revenue growth less awe-inspiring. without ios devices, apple showed 12% , 8% revenue, versus 56% , 69% otherwise.

continue doubling total revenue every 2 years, there 2 main possibilities:

apple need show extraordinary -- perhaps impossible -- growth in ipad , iphone divisions. massive sales growth iphone (which has grown more 90% each of past 3 years) , ipad can drive apple's revenue growth quite while, not forever.

if iphone continue 90% annual growth 2 more years (which count 5 consecutive years of near 90% annual sales increases), in 2013 apple have $170 billion in revenue coming iphone. ipad, grew astounding 330% 2010 2011, report $78 billion in sales same year -- $248 billion between two.

impressive (hypothetical) growth, , given apple's astounding first quarter numbers, perhaps doable. follow numbers out 2015 , numbers begin grow improbable sizes.

more prospect apple launch yet product category, in addition growth of existing businesses. possibilities endless, there 1 new product seems getting more attention others.

1 thing sure: whatever coming out of apple's cupertino r&d labs next key company's continued explosive growth.

article link: to beat law of large numbers, apple must expand product line

 

tl;dr:

apple can double revenue on next 2 years existing product lines, @ pace more once going require entirely new products.

 

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