Where Would Apple Be Without the iPhone and iPad?

Seems a lot of people have been playing mind games with Apple (Nasdaq: AAPL  ) of late -- the type of games that involve fantastical what-ifs and dreams of what could have been.

Some analysts on the Street have done the number-crunching on Cupertino's effect on the S&P 500 (hint -- it helps a lot); our own Morgan Housel Foolishly broke it down some more. Fellow Fool Rick Munarriz joined in and imagined an insightful competitive landscape with no Apple iSights in sight.

Can I play, too?
I'll go with the flow and play along, but I'll take a slightly different approach. In my scenario, the Mac maker is still the same company we know and love, but Macs are its main flame. Where would Apple be without the iPhone and iPad?

I'll let it keep the iPod, since it's had that one for more than a decade now. You'll know the company, but you might not love it so much in this alternative reality.

So much of Apple's fortunes in recent years are directly attributable to the runaway success of the iPhone and iPad. Those segments combined chalked up more than 72% of the $46.3 billion in sales last quarter. Magically whisking those away leaves a gaping hole in its income statement.

Here's a look at how Apple's revenue over the past three years would have looked without those two magical devices.

Sources: earnings press releases, author's calculations.

Sources: earnings press releases, author's calculations.

This time frame includes the first iPad's launch in Apple's third quarter of fiscal 2010. Excluding the iPhone and iPad would have clearly been disastrous for Apple's top line. Magical, indeed.

All that money makes you look fat
Over the past four quarters, Cupertino has seen $127.8 billion in revenue. Let's slim that down to $41.9 billion. That brings Apple back down to Earth on a trailing-12-month sales basis to bump elbows with and even look up to other tech players like chipmaker Intel (Nasdaq: INTC  ) with $54 billion, PC maker Dell (Nasdaq: DELL  ) with $62.1 billion, and longtime rival Microsoft (Nasdaq: MSFT  ) with a towering $72.1 billion. The Mac maker would still have Google (Nasdaq: GOOG  ) beat, though, with its $37.9 billion.

In fairness, Apple would lose out a little more in the form of App Store sales, which wouldn't really exist anymore, either. Although on the other hand, iPod revenue would be stronger, since the iPhone and iPad aren't there to cannibalize them.

Apple closed out yesterday with a $585.9 billion market cap, and that figure's going to need to lose some weight as well. Shares currently trade at about 4.6 times sales, which is near the average over the past few years.

Using that price-to-sales ratio implies that Apple's market cap would be just $192.7 billion sans iPhone and iPad. Let's keep stacking it up against the rivals we just mentioned.

Company

TTM Revenue (Without iPhone and iPad)

TTM Revenue (Actual)

Market Cap (Without iPhone and iPad)

Market Cap (Actual)

Apple $41.9 billion $127.8 billion $192.7 billion $585.9 billion
Intel   $54 billion   $137.5 billion
Dell   $62.1 billion   $28.6 billion
Microsoft   $72.1 billion   $255.7 billion
Google   $37.9 billion   $203.8 billion

Sources: Reuters, Morningstar, author's calculations. TTM = trailing 12 months.

Apple's new market cap would be smaller than that of two of its most important current rivals. However, Apple and Google wouldn't really compete as much without the presence of Apple's mobile devices. It would still stand tall above Dell in market cap, while falling short in sales.

Back to the Mac
Good old Macs would again be the king of the product hill, comprising 42% of TTM revenue, as opposed to the 14% it's been relegated to in reality. They would be the most important product family, albeit not as important as iPhones and iPads combined are today.

Apple investors surely wouldn't be enjoying the same gains, and mobile would probably be more of a slow migration of blind geese than a full-speed revolution.

It's a good thing this is just a game.

That revolution I mentioned is blaring full-speed ahead, and investors had better get onboard now before they miss the train. It's going to be huge.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Intel, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Google, and Intel, writing covered calls on Dell, and creating bull call spread positions in Microsoft and Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (8) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 12, 2012, at 10:37 PM, demodave wrote:

    It's a poor argument. Intel's sales are influenced by Apple (albeit maybe not so much due to iPhone and iPad). Without iPhone and iPad to copy, Google wouldn't have Android, and wouldn't have anywhere near the mobile revenue that it does. Without Apple as a beacon, Microsoft would stay stuck in the 90s.

    Come on! The competitive field needs Apple to show it how it's done.

  • Report this Comment On April 12, 2012, at 10:55 PM, makelvin wrote:

    @demodave, as you have pointed out, Apple's iPhone and iPad does not have much Intel components in there and would have little to no effects with Apple's absence of iPhone and iPad devices. I can also argue that without iPad, the netbook market would continue to do well and thus allowing Intel to sell even more processors.

    As for Google, with the recent filing to the court in the case with Oracle, Google must very little from mobile revenue from their Android OS. As a matter of fact, they are making more mobile ad revenues coming from the iDevices than from their own Android OS. The whole mobile ad revenue is minuscule compared with their main desktop/laptop search ads. I can even argue that since Google had spent billions in the development of Android and another $13 billion to acquire Motorola Mobility just to try to fend off their IP attacks, Google would have better bottom line overall revenue and profit without Android altogether.

    I do agreed that Microsoft might still be stuck in the 90s and will continue to have their Windows Mobile OS to compete against Nokia Symbian, RIM BlackBerry and Palm Pilot for the top position in the smartphone market that the consumers hate to use.

  • Report this Comment On April 12, 2012, at 11:57 PM, lucasmonger wrote:

    @makelvin

    Google bought the Android software from the initial developer in 2005, so if iPhones didn't happen, Android would still be there in some form (but probably without a touchscreen).

    http://en.wikipedia.org/wiki/Android_(operating_system)

  • Report this Comment On April 14, 2012, at 1:13 PM, beigeljo wrote:

    What about the I cache digital wallet.

  • Report this Comment On April 14, 2012, at 4:04 PM, Rayheem wrote:

    I wish that DELL stock looked as good as APPLE does without the iPhone and iPad.

  • Report this Comment On April 14, 2012, at 9:31 PM, mikecart1 wrote:

    We'd be a lot smarter and a lot less lazy as a country overall. This country has lost intelligence overall and has become a lot lazier. People will sit all day texting or playing games on their iPhones while the world passes them by. Apple has done very little for the world in terms of positivity.

  • Report this Comment On April 15, 2012, at 3:57 AM, Tangoko wrote:

    Not to forget, iPhone & iPad also cannibalized MacBook sales to some degree.

  • Report this Comment On April 20, 2012, at 11:43 AM, vclort wrote:

    Article does not take into account the "coat-tail" effect that the iphone and ipad have had on apple computer sales. If you dig deeper you will see that mac computers also benefited from brand name recognition.

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