Apple reports record quarter, stocks plummet

Sales of Macs down 18 per cent, iPad sales up nearly 50 per cent, iPhone sales up 30 per cent.

Apple's released its quarterly earnings yesterday, and they weren't great. Although, in Apple's case, "not great" still means that revenue grew 18 per cent year on year to $54.5bn, profits hovered at $13.1bn, and its financial year 2012 is the largest corporate earnings year in history. Twitter loves to talk about first-world problems — this is "biggest-company problems" of the highest order.

Sales of Macs were down 18 per cent, but iPad sales had grown by nearly 50 per cent, and iPhone sales by almost 30 per cent. The iPhone 5 was the best-selling smartphone worldwide, and the astronomical mark-up on it — it generates a 55 per cent profit margin for the company — means that it will be jealously guarding that market for some time.

Still, the narrative is that Apple's had a bad quarter (because they really ought to own a small country by now, and their failure not to do so is frankly embarrassing), and so in after-hours trading, stocks were down 10 per cent.

The diagnosis seems to be that a hefty chunk of the decoupling of revenue and growth was down to the much-reduced profit margins of the iPad Mini. Apple's profit from sales of the 7 inch iPad is much lower than it gets from sales of the full-size one (although that hasn't stopped people arguing that it's making a mistake to charge so much for it, or not to put a vastly expensive retina display on it), so to the extent that its growth is because of entering that new market, its profit share will fall.

Worse for the company is that there is some evidence the mini is cannibalising sales of the full-size iPad. Certainly, respected bloggers like Marco Arment and John Gruber report preferring their minis to their old iPads, and they would seem to be the target market for the full-power device.

But if its problems stem from a growing presence in low-margin markets, then it's rather odd that the proposed solutions are… growing their presence in low-margin markets. Apple regularly comes under pressure for their low and declining share of the smartphone market — currently at around 20 per cent — with the implication that its strategy of chasing profit over raw sales is wrong. Reports that the company is attempting to build a low-price iPhone which would debut in late 2013 suggest that the company is taking the recommendation to heart.

But it seems that if it does bring out a successful low-margin entry level device, it will be slammed for declining profit; if it doesn't, it will be slammed for declining market share. Meanwhile, whatever the company does, it will be raking money in hand-over-fist. Maybe the problem lies with the people doing the slamming?

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Sadiq Khan gives Jeremy Corbyn's supporters a lesson on power

The London mayor doused the Labour conference with cold electoral truths. 

There was just one message that Sadiq Khan wanted Labour to take from his conference speech: we need to be “in power”. The party’s most senior elected politician hammered this theme as relentlessly as his “son of a bus driver” line. His obsessive emphasis on “power” (used 38 times) showed how far he fears his party is from office and how misguided he believes Jeremy Corbyn’s supporters are.

Khan arrived on stage to a presidential-style video lauding his mayoral victory (a privilege normally reserved for the leader). But rather than delivering a self-congratulatory speech, he doused the conference with cold electoral truths. With the biggest personal mandate of any British politician in history, he was uniquely placed to do so.

“Labour is not in power in the place that we can have the biggest impact on our country: in parliament,” he lamented. It was a stern rebuke to those who regard the street, rather than the ballot box, as the principal vehicle of change.

Corbyn was mentioned just once, as Khan, who endorsed Owen Smith, acknowledged that “the leadership of our party has now been decided” (“I congratulate Jeremy on his clear victory”). But he was a ghostly presence for the rest of the speech, with Khan declaring “Labour out of power will never ever be good enough”. Though Corbyn joined the standing ovation at the end, he sat motionless during several of the applause lines.

If Khan’s “power” message was the stick, his policy programme was the carrot. Only in office, he said, could Labour tackle the housing crisis, air pollution, gender inequality and hate crime. He spoke hopefully of "winning the mayoral elections next year in Liverpool, Manchester and Birmingham", providing further models of campaigning success. 

Khan peroration was his most daring passage: “It’s time to put Labour back in power. It's time for a Labour government. A Labour Prime Minister in Downing Street. A Labour Cabinet. Labour values put into action.” The mayor has already stated that he does not believe Corbyn can fulfil this duty. The question left hanging was whether it would fall to Khan himself to answer the call. If, as he fears, Labour drifts ever further from power, his lustre will only grow.

George Eaton is political editor of the New Statesman.