Microsoft today announced record revenues of $21.5 billion for the quarter ending December 31, 2012. It was a quarter where Microsoft launched Windows 8, Windows Phone 8 as well as the Surface tablet. In many respects, the situation is not that different from Apple’s recent quarter where the company refreshed almost its entire product portfolio with a new iPhone, iPads, iPods and Macs. Apple too reported record revenues of $54.5 billion.
However, one key takeaway is that Apple’s iPhone business alone generated more revenues than all of Microsoft put together. Apple generated $30.66 billion in revenues by selling iPhones alone at an ASP of approximately $640. This is not counting the revenues Apple made out of selling apps and accessories for the smartphone.
Had Apple been wary of cannibalizing its own products, it would have probably not seized the opportunity it had with the iPhone and iPad. The iPhone business accounted for 56 percent of Apple’s revenues, which is followed by its iPad business that accounts for approximately 20 percent. In other words, roughly two-thirds of Apple’s revenues are generated by products that were non-existent six years ago. The iPhone cannibalized Apple’s bustling iPod sales while iPads, which are less than three years old, have started cannibalizing Mac sales, once the mainstay of Apple’s revenues.
There cannot be a better reasoning to justify why Tim Cook is right in encouraging cannibalization of Apple’s own products.