India Based Profits for Apple Inc. (NASDAQ:AAPL) Shrink by 33% as Sales Go Up by 51%
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Profits enjoyed by Apple Inc. (NASDAQ:AAPL) in India have gone down by 33%; jumping down from Rs. 311.5 to Rs. 112.66 Crore whereas its sales have gone up to Rs. 3,003.11 Crore. These figures are quite different from the ones Apple had back in 2012; its 2012 net profit jumped up by 431% (Rs. 311.5 Crore) and revenue jumped up by 223% (Rs. 2,003.9 Crore).
In order to increase its profits, Apple went all out with an aggressive advertising campaign in India; however it faced trouble due to the popularity enjoyed by Micromax and Samsung among Indian mobile phone buyers. Seeing the current situation, analysts’ expectations of Apple hitting $1 billion revenue in 2014 seem unlikely; however supply has been pushed due to an increased demand in iPhone 5c.
To overcome its losses, Apple went for a new marketing strategy in the fourth quarter of its fiscal year 2013 – quarter that spanned over January and March; this strategy had iPhone 4 price cut downs, an increased marketing budget and a few buyback offers because depreciation of rupee had the ballooning of import bill. This was all done with the hopes to secure the second position in becoming the largest cell phone vendors by value in India – second to Samsung.
According to Manasi Yadav, an IDC India market analyst, this strategy by Apple affected the company profit margins. She said that this strategy caused an in iPhone 4’s sales and shipments as compared to the more expensive iPhone 5.
Yadav believes that if Apple goes for a long-term strategy in India that involves making Apple devices more affordable it can benefit in the long run and get a bigger consumer pool that would not switch to other more affordable devices offered by Apple’s competitors.
A leading multi-brand of a mobile chain executive said that Apple Inc. (NASDAQ:AAPL) subsidized iPhone 4 prices that offered iPhone 4 for Rs. 5,000 (payback offer) and between Rs. 900 and Rs. 1,200 had to go to the bank to cover the cost of interest due to the company’s scheme of 0% EMI. This retail price subsidizing by Apple forced Nokia Corporation and Samsung to offer similar deals to the Indian market.