Calendar 2011 sales for Apple Inc. (Nasdaq: AAPL) are forecast to jump 57 percent from 2010 (based on a optimistic analysts' consensus estimate for $37.9 billion in the December quarter). By contrast, the entire consumer electronics market where the company generates a huge portion of its revenue is forecast to grow 1.5 percent in 2011, according to market researcher iSuppli Corp. , a division of IHS Inc.. Clearly, Apple is the brightest star in a galaxy filled with dull meteorites.
The company isn't about to burn out. As the consumer electronics market struggles again to grow next year -- the forecast is for a paltry 4.3 percent in 2012 -- Apple's fiscal sales by contrast are soaring to approximately $138.9 billion, up more than 28 percent from the 2011 fiscal year. While Apple and a handful of companies in the electronics market are posting solid growth, this experience is not widely shared in the industry, and that gulf is likely to continue widening over the next years.
Understanding this dichotomy between the faster-growing electronics companies and the rest of the field is important to any discussions about the future of the market and the strategies enterprises in the industry should deploy for 2012 and beyond. At Apple, for instance, the focus is and should be on building on current gains by figuring out how and when to break into new market segments. For rivals like Motorola Mobility Inc. (NYSE: MMI) and Nokia Corp. (NYSE: NOK), however, simply holding onto current market share would be considered success in 2012.
Revenue projections for both Motorola Mobility and Nokia reflect this. Analysts generally expect Motorola Mobility's revenue to rise to $13.5 billion in 2011, up 18 percent from $11.5 billion in 2010. That's admirable, but it pales into insignificance matched against Apple's stronger growth and the fact Motorola Mobility only in 2007 had more than $23 billion in annual revenue. The company is therefore only trying to capture its lost glory, and the current momentum won't take it to that level for several more years.
Nokia is in an even worse position. Analysts see the company's annual sales declining about 6 percent in 2011 and barely growing in 2012. Sales have fallen in the last three consecutive quarters and are projected to decline more than 21 percent in the December quarter on a year-over-year basis. In order to regain its growth trajectory, Nokia would have to win not only in emerging markets where it is still one of the top players -- in China, for instance, it is the biggest supplier of smartphones -- but also in the developed economies of North America and Western Europe where product sales carry higher margins.
Apple, Motorola Mobility, Nokia, and rivals worldwide, whatever their records and analysts' predictions, won't have it easy in 2012. The wobbly global economy and continuing fears in Europe coupled with the still fragile employment situation in the United States will likely hurt the entire consumer electronics market next year. ISuppli's latest analysis is projecting weak growth in 2012, but even this may not materialize if the current economic problems persist and drag out through the first half of the year.
In fact, the research firm admits that its initial forecast for 2011 appears to have been too optimistic. "A sharp slowdown in spending due to continuing economic chaos will cause revenue growth in the global consumer electronics (CE) market to fall short of growth expectations by more than 75 percent this year," the firm said in the statement referenced above. "CE revenue in 2011 will amount to $357.3 billion, up a scant 1.5 percent from $351.9 billion in 2010, and equivalent to a 77 percent reduction compared to the previous IHS forecast of 6.4 percent growth for the year."
Over the next few years, iSuppli sees consumer electronics equipment sales rising slowly, up 4.8 percent in 2013 and 1.6 percent in 2014 before declining 0.2 percent in 2015. Those numbers are not in any way appealing, and even if the research firm was off by a few percentage points in either direction, it still means many players in the sector aren't likely to see much growth. Not with the likes of Apple sucking so much sales into its own coffers, which it must do to maintain its huge market value. If Apple investors think for a moment the company might start registering low single-digit sales in future, many would dump the shares.
That's why Apple and its top rivals have to keep outgrowing the market -- by more than a few percentage points. Bad news for small, already less competitive players.