Apple has become the most profitable company in history, but what are the crises?

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Last week, Apple became the most profitable company in history, and analysts couldn't contain their excitement and went "crazy". "Shocking", "outstanding", "monster" are how these analysts describe Apple's profit of $18 billion in three months: from October to December, an average of 34,000 iPhones were sold every hour. Apple now has $178 billion in cash in the bank. But after all this great news, Apple needs to face the following six major problems that all companies in the world face.

1. Did last quarter’s sales growth peak?

Apple emphasizes its quarterly earnings announcements and downplays its financial announcements to attract investors and analysts. But the size of these quarterly earnings announcements is a little different. From October to December, sales grew 30% to $74.6 billion, while profits grew 37% to $18 billion. This is the fastest quarterly growth since March 2012. As Apple CFO Luca Maestri said, "For a company of our size, this sales growth is a significant achievement."

Katy Huberty, an analyst at Morgan Stanley, said that Apple's growth this time should be written in the record books. She believes that Apple's stock can rise to $126-133. Geoff Blaber, vice president of market research firm CCS Insight, said that Apple's biggest challenge is to find the next growth point.

"The Western European and North American markets are becoming saturated. If Apple needs a market, it needs to rely on the growth of Android devices. Apple's focus is on the Chinese market and then on India."

Analysts polled by Thomson Reuters expect Apple's revenue to grow 22% in September, but the growth rate will slow to 4%.

2. How many people still need an iPhone?

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Apple sold 74.468 million units last quarter, up 46% year-on-year. Apple CEO Tim Cook said: "The demand for Apple has been astonishing and has shattered our highest expectations. It's confusing."

Apple's mobile phone revenue accounts for two-thirds of the company's revenue, and it also exceeds the combined revenue of Microsoft and Google in the same period. "It seems that everyone in the world needs an iPhone," Steven Milunovich, an analyst at UBS Group, wrote in a research report to investors. He pointed out that every consumer needs a mobile phone, but Apple's production capacity cannot keep up with these consumers' demand.

But Toni Sacconaghi, an analyst at Bernstein Research, cautioned that Apple's growth is too dependent on the iPhone.

"Betting on Apple's growth is betting on iPhone growth. The good news is that the iPhone works great. The bad news is that the iPhone has driven 100% of Apple's revenue growth so far."  

3. How important is China to Apple?

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China is very important to Apple! iPhone sales in China have exploded, reaching $16.1 billion, up 70% year-on-year, and $17.2 billion across Europe. Last quarter, Apple surpassed local Chinese phone maker Xiaomi to become the best-selling phone in China. Cook said: "I went to China in October after the launch. People's enthusiasm for iPhone 6 and iPhone 6 Plus was amazing. You can say that our die-hard fans are in China." Apple plans to increase the number of Apple stores in the Holy Land of China.

"China is an immeasurable market, and people there really like Apple products. We will also do our best to serve the Chinese market well."

According to market research company Canalys, in October 2013, Apple ranked sixth in the Chinese market, with the top five being Xiaomi, Huawei, Lenovo, Samsung and Coolpad. Canalys said that it was a great thing for Apple to be the number one in the mobile phone market, because the average selling price of the iPhone was twice that of its competitors. While Chinese smartphone manufacturers have risen internationally, Apple has remained entrenched in China.

4. Will the Apple Watch fail?

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It has been five years since Apple launched the iPad. Known for its innovation and moving away from its reliance on the iPhone, Apple needs to fight a battle it cannot lose with the Apple Watch. Cook announced that the Apple Watch will be available in April to boost third-quarter finances, rather than relying on holiday spending during Christmas or the Chinese New Year. He said: "We are making great progress with the Apple Watch."

Apple defines this smartwatch as a personal device because it can detect the wearer's physical health data and connect to the iPhone for other functions. Cook said he was impressed by the application developers on the smartwatch because there are some incredible innovations.

Carolina Milanesi, a researcher at market research firm Kantar Worldpanel Comtech, said the Apple Watch will broaden the market for Apple products. She said:

"Apple is smart because it's pushing jewelry and design instead of smart technology right now. It's focusing on design and fashion instead of technology. I think it's smart to buy an extra iPad because it's a fashion statement to buy another iPad."

In 2013, Apple announced that it had hired Angela Ahrendts, the former CEO of luxury brand Burberry, to be responsible for the "strategy, development and operations" of Apple's retail stores and online business. Milanesi said that Apple Watch will benefit from Ahrendts' fashion and operations. In addition, Apple has also recruited a number of executives and designers from major fashion brands to join the Apple Watch team, such as Patrick Pruniaux, an executive of Tag Heuer, and Paul Deneve, an executive of Patrick Pruniaux.  

5. Can Tim Cook break away from Jobs’ influence?

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Jobs is closely tied to Apple, but Cook will face an uphill battle: He needs to win investors' approval for his presentation and vision. Investors David Einhorn and Carl Icahn have tried to interfere with Cook's management, but he has remained firm in his views, such as firmly dismissing former iOS head Scott Forstall.

Milanesi, who has worked at Apple for more than a decade, said that Jobs and Cook have very different personalities, and Cook is impressive in his management of operations and product chains. Moreover, Cook has done a lot to make Apple more approachable. "Compared to Jobs's ambition and unattainability, it seems that Cook is more open and approachable. This is also because Apple wants to expand the scope of consumers. For Cook, the biggest test should be Apple Watch, because this is the first product he really leads."

6. Will Apple's huge cash pile become a burden?

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Apple makes more money than it spends, in part because it has a $178 billion cash pile. It added $23 billion to its coffers last quarter, and nearly all of that money is in overseas banks. If it were to distribute the money in its coffers to U.S. shareholders, it would generate a huge tax bill.

In fact, in order to appease investors, Apple has been buying back these shares, but it is through book borrowing rather than using funds. Last year, it bought back $45 billion in shares, and the cash did not decrease too much, but increased $35 billion in debt. Analyst Blaber said that Apple needs to maintain a certain amount of surplus funds to flexibly invest in new projects. The most recent acquisition is Apple's acquisition of headphone manufacturer Beats for $3 billion. Apple's cash holdings have attracted the attention of politicians. Cook once told Congress that he would transfer Apple's cash back to the United States.