> The Company posted quarterly revenue of $58 billion, a decline of 5 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.46, down 10 percent.
On 1 quarter YoY basis, their core iPhone business saw a plateau slowdown of -17.3% ($31B). iPad saw 21.5% growth ($4.9B) and their newest categories Wearables (Watch/Airpods) saw a 30% jump ($5.13B) whilst their Service Revenue increased 16.2% ($11.45B).
Despite their Apple News+, Apple Card, Apple Arcade and Apple TV+ services/subscription revenues not having kicked in yet so I'd expect they'll return to overall revenue/profit growth next year when all their revenue centers are operating on full cylinders.
I think it's sales. So their watches sell almost like macs. No wonder they don't really care about computers. No growth potential for computers, but very few people bought watches, so much more potential to grow.
I can only support your comment anecdotally (perhaps actual figures have been published somewhere), but the majority of my circle has purchased airpods. They're the only Apple product I love. I don't know any current watch wearers, although many purchased one when initially released.
Multiple people at work have an Apple Watch and I'm starting to see it more and more around the city. Definitely has some market penetration.
But also Apple is a premium products company so not everyone needs to have one, just a decent sized niche. At $400-500 they make a killing off each sale. Same with AirPods at $200 too... other similar bluetooth pod earphones sell for $40-60 on Amazon and they're pretty good products, so it can't be too expensive to produce.
The elephant in the room is that the iphone revenues are down because volumes are down because the price is to high for the iphone X (and not compensating for the reduced volumes). All the other revenue is upselling to people who own iphones. They are doing really well with that. Nevertheless the iphone doing poorly is bad news long term for Apple because it shrinks that market. Long term, their strategy of growing sevice business is tied to keeping people inside the apple ecosystem. Short term it's not an issue because there are lots of people hanging onto their old iphones.
I think it's a fixable problem to come up with a cheaper/more attractive product than the current iphone. Simply dropping the price might do the trick for a lot of people. In the same way the keyboard situation is a fixable problem that might improve their fortunes on the laptop front.
If you want to find root cause, you need to dissect that one number.
Without breaking out China vs non-China you would have concluded that Apple is slowing down/customers unhappy/products unattractive. This would have been the wrong conclusion for the non-China world.
Yeah, but "sales are down because the 2nd largest economy in the world is tanking" is very different from "sales are down across the board because people don't want to buy our products as much".
"Apple is rapidly losing business in china, but doing strongly everywhere else" is very different from "apple's entire business begins a slow decline."
Apple does not depend in any way on sales from China. Apple would continue to grow and prosper without any sales whatsoever in China, just at a slower rate/smaller scale.
People who constantly expect Apple’s rate of growth to continue at historic levels or even increase likely believe that Apple depends on sales in China to achieve this, and they are probably right. But nowhere in Apple being Apple is it mandated that they must continue their existing rate of growth. Indeed, as this quarter shows, that is impossible.
"Demand for the Chinese tech company's [Huawei] devices is red hot even though the country's overall market for smartphones is shrinking."
That's the second sentence in your link. And it says Oppo grew at 1.1% (in 2018q4)-- that's not exactly winning. Xiaomi plummeted 28%, even more than apple. There's clearly more going on than a simple competition between apple and Huawei.
They have to accept a more normalized - ie slow - rate of economic growth. They have to switch from the non-stop stimulus & extreme debt based approach, to allowing organic growth to mostly take over.
They've been riding an unsustainable approach since the great recession mess tanked the global consumer. Simply put, they have to switch to a sustainable model for their economy. It's a painful process, made worse by the choices of delay that they've previously made.
It's also not uncommon. The US nearly got thrown into a depression by the stupidity of the Fed trying to avoid a recession after 9/11 and the stock market crash post dotcom bubble. You can try to dodge reality, usually though it'll just compound the painful price you pay later. In China's case, the potential price is best represented by what has happened to Japan through their previous attempts to dodge economic reality (via debt, keeping zombie corporations alive, etc).
China's organic rate of growth would be very low (for them, versus the recent past). Strip out the fake numbers, then reduce the stimulus efforts to mostly emergency circumstances, and you'd see something more typical like 2% to 3% GDP growth. That's obviously unacceptable to the government authorities.
The Chinese Government is trying to both delay and buffer that process, of dropping from the previously fast rates of growth to the rates you see in more developed nations. I think they fully understand it's inevitable. They want to minimize the social disharmony of it, for the purpose of retaining their power. The fear of revolution is always present. They're trading future stagnation for present buffering of the downside to dropping rapidly from high growth to slow growth (they'll worry about the consequences of that trade later). China faces the not enviable situation of ending up with a mature, slow growth economy, while still having hundreds of millions of people in near third world poverty. I think that's impossible for them to avoid given the scale of their population, the present phase that it's in in terms of transition, and typical rates of more normal organic economic expansion (whether domestically or in the global economy).
How do you explain to 500 million extremely poor people that the best days of growth are permanently over and they'll never get to become well-off like the lucky ~10% that were in the right places in eastern China 20-30 years ago and got to ride the easy boom? To maintain that fantasy (that everyone will get to participate, even though the party is already over), you need to project extremely high rates of growth. Traditional service economies with their far slower growth can never deliver on that.
"China’s economic growth held to a 6.4% rate in the first three months of the year as factory production picked up significantly amid signs authorities worked forcefully to stabilize business following months of weakness."
If Apple isn't doing well in China it isn't because of the economy.
> amid signs authorities worked forcefully to stabilize business
The concern with China is that they might work so forcefully to stabilize business that people report numbers that look good even if they are not entirely true.
They’re fine. But stock buybacks and dividends are a waste. I’d rather that money (I’m a shareholder with not enough shares to matter but oh well) be used to purchase companies like a Netflix (too late now of course) or a Disney (also too late) or making bigger purchases to control more of their supply chain like buying a Qualcomm or increase the R&D budget by double maybe. 75B in buybacks just juices the EPS numbers. It’s the exact same BS that IBM has been doing to keep wall street happy. And it seems very un-Apple. I’d rather Apple take a more cold stance toward shareholders like Steve did and just act like the company was constantly in the verge of failing and keep making bigger bets (having huge piles of cash helps with that and they still do it just I don’t care about a dividend! Find me the next thing better than an iPhone)
I disagree. Apple is a very capital efficient company and already spends a tremendous amount on R&D.
Just like the concept of the mythical man-month, the marginal utility of investing additional money in r&d goes down as r&d spend goes up. Or to put it a simpler way, Apple is running out of effective avenues to invest their money.
The correct move in that situation is to return the capital to shareholders, and stock buybacks are the most tax-efficient way to do so, with the added benefit that if the stock is undervalued (and Apple's certainly has been in the last few years relative to free cash flow), then the shareholders get an "extra" return on top of that.
Don't get me wrong, Apple should absolutely invest in R&D...which they do. They're not pinching pennies, except in situations like the keyboard fiasco, not including adapters etc - but that's a separate issue.
Absolutely the worst thing they could do is just go acquiring companies that don't actually fit with their business model. Remember that it takes human effort (meaning cognitive expenditure) to run a business, and getting side-tracked with non-critical businesses is absolutely antithetical to that. If/when Apple does find a company that has something unique for their situation, then they do acquire them.
> marginal utility of investing additional money in r&d goes down as r&d spend goes up
This would be true if there are no new products with huge potential to explore. I strongly believe any company's future depends on diversification. Your old products will eventually start becomming commodity with margin race to the bottom. Companies like Apple needs to come up with new product line every two years. To get one new product out, you need to invest in R&D for may be 10 internally because other 9 won't pan out. For each new product you eventually got out, most likely half might not show promise longer term to become big. So you are probably left with 1 big product coming out every 4 years and at the same time your previous big product that is ~12 years old starting to become low margin commodity. Apple is certainly doing great by putting out series of new products at predictable schedule but I think this could easily be twice of current rate given the untapped potential in so many areas.
I will concede the point on the tax efficency of stock buy backs. But where I find we are in disagreement is in the purchasing of companies. An apple with Netflix and Disney would make Apple TV+ a whole lot better out of the gate than otherwise. Netflix has proven it can do original content and Disney's back catalog (now that they've bought Fox) is too big to laugh at.
Owning Qualcomm would be immediately accretive to EPS given how important they are to the industry and would ensure that any modem needing components would be easily sourced.
And you're right about the keyboard fiasco, what the heck went wrong there?
In any case I am still very bullish overall on Apple and I can't wait for ARM based Macs.
I don't necessarily want them to buy Netflix but I feel that they could have invested a lot of this money they are returning to shareholders via share buyback into funding to make more content. Netflix is going to spend $10-15 billion this year to make original shows and movies vs just $1 billion for Apple. So if Apple wants to go all-in on services business then they need to spend like one.
They're investing in R&D - except people on the outside can't see what. Keyboard,Notch,Airpower - where is the money going exactly? on the credit card? ipad is slimmer i guess
They're not pinching pennies - except they're obviously pinching pennies across the board, no long cable in macpro box anymore, no headphone dongle in iphone box anymore, no extra tips in apple pencil case anymore etc etc.No product recall on the garbage keyboard design is another penny pinching move imo, they've lost so much goodwill coz of that garbage design.
I think the reality is quite different from what you're painting. They're cash bloated and dunno where to go because they've painted themselves into the "we're the best" corner
120hz screens - made by samsung,they also sold to razer for their phone and htc i think
Airpods - a proprietary bluetooth stack that only runs well with apple devices, wow much r&d. They run well but samsung mostly replicated the proprietary bluetooth stack for their own earpod/works with galaxy only pairing solution.They also die in a year with average use so imo it's just more electronic fad garbage.
AR- vaporware currently to the point where they're talking about the credit card as a selling point. also AR in general is garbage on current gen devices. it's fun but it's not useful.
Is announcing things that are nowhere near completion as finished products coming soon and putting logos for them everywhere also a "normal part of research"?
Why don’t you take the money from the dividends and spend it on Netflix shares? If Tim Cook went and spent all that cash on some company you don’t like, wouldn’t you be mad? If there’s one company Apple shareholders can agree is a good idea to buy... it’s Apple.
Realistically they've run out of blockbuster new products and are just hoping high-end phone and tablet sales will keep growing enough to keep their stock from cratering. Acquiring Disney makes no sense since they are completely different businesses. Stock buybacks and dividends are fine if they can't spend their cash reserves efficiently. If I were them I'd do more to encourage and help high quality software development for their hardware and hope someone develops a killer app that drives more sales.
Apple acquires small companies all of the time to integrate technologies into their core products and as acquihires.
How would acquiring companies like Netflix or Disney add any goodwill value - the sum is greater than its parts?
If they acquired Qualcomm, not only would they run into possible antitrust concerns, they would either continue selling to competitors (not likely) or lose a large amount of the value of the company
As far as the next big thing. The mobile phone market was already on a trajectory to have worldwide ubiquity before the iPhone was introduced and now has 66% world wide penetration. There is no amount of R&D that has any hope of achieving more worldwide penetration than the “computer in your pocket” market - except maybe social media. Do you really think that Apple should jump into that market?
if apple has so much excess capital that it can net icahn 2 billion dollars in a couple years, is that excess capital (that is ostensibly being generated by its employees) being “returned” to them as well?
Agree on stock buybacks and dividends are a waste, and big bet like Steve era. Disagree on buying companies. At least not Netflix and Disney, both are content companies and does not fit into Apple's business model. Not to mention a gigantic company like the two requires lots of human resources to integrate as the 2nd reply mentions.
It is all about value. Apple has always been extremely good at value creation. That is what innovation is all about. Except the values Apple has to offer has been in decline, in iPhone and Mac Segment, and in their use of cash.
Looking back in the past 10-12 years of Smartphone revolution, we are obviously in the late cycle where even the entry $200 to $400 Model are good enough for many. We are already seeing Huawei and Samsung A Series doing extremely well. I had always thought those Cheaper Chinese SmartPhones such as Oppo, OnePlus, Vivo, Xiaomi, would have cost a lot more in EU and US when they had to pay more patents and other operation expenses. Turns out that is not true. They are selling it at only a slight premium to China's pricing, vast majority of them below $500. While the current cheapest iPhone starts at $449 for a "small screen " and $569 for what is now considered a normal screen in many market, with lower quality camera. And it is obvious these Phone aren't competing very well.
What could those $400B+ have done that went into Stock buyback over the years? I would have thought instead of going to Intel's route 5 years ago, having their own modem team would be one. Had they invested in it 5 years ago they would already have their own Modem shipping in 2018's iPhone. Not to mention having a major BOM cost advantage which both currently Huawei and Samsung enjoys.
Opening More Apple Stores, Apple had ~430 in 2014 and ~460 Stores by end of 2015. Today Apple had ~510 Store Worldwide.they now have 1.4B devices. During those 600M+ devices usage increases between ~2015 - 2019, Apple had less than 60 Stores opening world-wide. In 2015 I expected Apple Store to reach at least 1000 by 2020, but right now they are only half way there.
Quickly admitting mistakes like TouchBar and Keyboard. You may not even need to do recall, but actually work on alternative or better solution instead of waiting to recoup whatever your initial investment into the technology ( Also Force Touch ). This is very Tim Cook Style of handling. You could imagine Steve using the Keyboard himself, having space bar double spacing and the eee key stuck. And what he will do inside Apple Park.
Going into Market that may not always have your target Gross Margin and Net Profits. Like TV, I still don't understand why Apple is not entering the TV set Market. And why they abandon the Router market. Just because the Net Profits margin could not fit within the 20% required of Apple. Both would have been a much better experience, instead they went with a Profit Margin based product like HomePod.
The iPhone wasn’t a “big bet”. The mobile phone market was already growing like crazy and everyone saw the writing on the wall that the mp3 market would be consumed by the phone.
The TV set market has long life cycle, negative margins and the main way that TV manufacturers make money in 2019 is by selling user information through the apps.
The router market is minuscule. Most people use routers bundled with their ISP and Apple couldn’t provide the end to end support without also going into the ISP business.
The average consumer doesn't care enough about privacy to pay extra for it. But that still doesn't change the fact that the logistics of selling large TV's is much harder than selling computers and people only buy a new TV every 8 years. People don't just go out and buy new TV's every 2-3 years like phones.
From the financial statements, revenue from Wearables, Home, and Accessories was up 30% vs the last year. There wasn't a huge release this quarter (aside from the AirPods refresh which was at the edge of the March 30th cutoff), so I wonder why it went up so much.
AirPods have plenty of viable competitors. They also sound bad, and aren't water-resistant to speak of. Their main competitive advantage is they come in Apple white and are conspicuous enough that people see them.
Add in that they were near the end of the release cycle and it's definitely weird how much they went up.
I think this is a totally naive viewpoint. Despite the memes, Airpods aren't just a mere status symbol (and as status symbols they are very poor ones, which I think is the whole joke about airpods => rich). What makes them incredible is their seamlessness. They do have occasional bluetooth fuckery but they felt like the first wireless earbuds that just worked^TM.
This is a very common take from people who have never used Bluetooth headphones before. I've had several sets of Bluetooth headphones and earbuds in the past, and they've been the same type of "just works" experience for me. Except better sound quality, and frequently water resistant.
If you like the AirPods then that's great for you, but stop pretending they're some fantastic innovation over what came before, or that they've kept up with what's come out since.
It's not about fantastic technical advancements, so much as packaging new tech such that it could fit seamlessly in 100 million lives. That second part might not seem like a technical challenge, but it often is, in ways you might not immediately appreciate.
They aren't really that much more expensive when compared to other wireless headphones with similar features[1]. You can find < $50 wireless headphones but none with microphone and feature sets approaching the Air Pods.
I've been seeing so many recently in public transport, worn by the sort of people I wouldn't expect to be Apple customers, that I distinctly remember wondering a couple of days ago whether cheaper knock-offs had been released in the Android world.
What I love about the airpods is that the enclosure is so small and well-shaped that I can have it in my front pocket at all times without even noticing it's there. That also means I always put the pods back in the enclosure after use and have not yet lost a pod. Haven't noticed any battery degradation after a year of use.
You can buy individual pod and case replacements. It's still quite expensive, around $50-60 I believe, but it's not like you're just out $160 if you lose one piece.
The AirPods are the one thing I actually lose (and I've lost a number of times). But I always manage to find them eventually.
The fact that I can't send a sound to them (somehow) when the case is closed is moderately insane. All it can tell me is that they were somewhere near my house when I last used them. That doesn't help me understand where they went to after I put them back in the case and misplaced the case.
This is also my only major complaint (I otherwise love them enough to have upgraded to the new ones when they were released). I would love for the case to be able to beep when pinged by Find My iPhone. Presumably there's cost involved in adding Bluetooth to the case, or adding some kind of communication from the pods to the case, but if it's in the < $50 range I'd probably be ok with it.
That's why I went with the Bose SoundSports. The two ears are tethered to each other, can be clipped to the shirt collar, and securely fit against the concha. I don't see being sweaty and bouncing around on rocky trails leading to anything good with those fancy airpods.
you sound like the type of person who would never lose an AirPod haha. I lose all sorts of things, but I have found it pretty easy to keep track of my AirPods.
Apple has been allowing their partners to aggressively price the "old" Apple Watch (Series 3), starting as low as under $200. This picked up a lot in 2019.
This has effectively allowed them to enter a new lower segment of the market while the series 4 continues to chomp away at the higher end consumer.
The "official" price of the Series 3 is $279. Or at least the price Apple pins its value at.
Series 3 and Series 4 watches are also the most visually distinct due to the S4's significantly larger screen. S0-S3 are all identical, aside from the red dot on the side of the LTE S3 and minor (1-2mm) changes in dimensions.
Share repurchasing of that magnitude doesn't seem like a good sign to me. I am interpreting that as meaning they could not find anything better to do with that money. If they were problem free and executing perfectly, maybe that would make sense. But that's hardly the case.
This is not a new strategy[0] for Apple or in general.
“That is a reduction of 21 percent in shares outstanding since 2013. What’s that mean? It means all other things being equal, the company’s earnings per share are 21 percent higher than they would have been had it not done the buybacks.“
Based on the after hours results, it looks like this might push them just over a market cap of 1 trillion again, which if I'm not mistaken would make them the only company currently over $1T.
Edit: Apparently MSFT closed at exactly $1T today, so tomorrow shall be interesting.
MSFT closed at exactly 1T to two decimal places today, and is up slightly in after-hours trading, but this would be the first time we’ve had two 1T companies at the same time.
"Apple no longer reports iPhone, iPad, and Mac unit sales numbers..."
Probably because they only care about revenue and profits these days, not innovation and products. Apple didn't get to where they are by optimizing the supply chain but by coming up with incredible products that everyone HAD to have. I bought an iPhone last spring because it was the least-bad option in my opinion; if the Librem 5 is a flop I don't know what I'll get when my current phone dies because I will NOT buy a phone that unlocks by FaceID.
Because the number is the wrong metric for measuring the health of their products and customers. Unfortunately, the financial analysts have been so intensely focused on unit metrics to the point that they can't seem to grasp the true reality and condition of the company.
As a result, Apple had to go so far as to:
1) State that their goal is to make their devices last longer.
2) Stop giving unit numbers.
Still, I anticipate it will take years before financial analysts to internalize the true nature of this beast.
Can we just stop with the 'Apple stopped innovating' propaganda, the same thing can be said about any big corps, be it Google/FB/Netflix/...
Innovation doesn't just mean creating new products (the Airpod is one of Apple's killer product by the way), improving current products used by millions of people while keeping them coming back to buy more and more is not easy, this is also counted as innovation in my book.
They actually state why they don't report unit sales numbers: they aren't meaningful now that the iPhone is no longer opening in new markets, the mobile phone market has reached maturity, and the number that is meaningful for their business growth is active devices.
I'm not going to defend Apple's reasons for crafting their message to Wall Street, but to say that they only care about revenue and profits, but not innovation or products, just doesn't follow from sales number reporting (or from their other actions, in my opinion).
Well, seeing that their Apple Watch business is the size of a F200 company. I think they are doing well.
Also, if you compare their revenue mix and knowing Apple you know they are running each part profitably, they are doing much better than Google who after all of these years is still just an ad company.
> Apple didn't get to where they are by optimizing the supply chain but by coming up with incredible products that everyone HAD to have
Apple's supply chain used to have some really bad inventory turnover numbers. Unsold inventory would literally sit in warehouses depreciating in value, costing the company lots of money. You might be interested in reading this piece on Tim Cook's changes to the supply chain:
It's either misguided or completely dishonest for you to assert that Apple's supply chain management plays second fiddle to its products when it comes to their success as a company.
> Probably because they only care about revenue and profits these days, not innovation and products
Apple seems, to me at least, to have more conviction that innovation and fantastic products lead to revenue and profits than any company operating in the consumer hardware space today. And there are plenty of comparatively awesome companies who innovate and invest in breakthrough products (Google, Tesla… Microsoft(!)).
They likely no longer split out those product categories for several reasons:
1. Their financial results are news in the mainstream media, and their customers read the mainstream media. If the ASP of an iPhone rises to $1,000 and grows revenue whilst offsetting a contraction in unit sales, it's great news for Apple and its investors, and likely not a sign of anything other than a maturing market -- but it won't be reported as anything other than stagnation or doom and gloom by the mainstream media.
2. Apple's future, and maybe the future, is not in one-off transactions. We've seen most professional and a lot of consumer software move towards subscription pricing steadily over the last decade. Hardware is going to go the same way, and Apple is preparing for that. Persuading people to stay in their ecosystem (NB not "locking people in" -- it's pretty easy to "leave" the Apple ecosystem) is going to be a combination of hardware, software, and services, and customers will be paying some sort of blended subscription which includes hardware and software. It's predictable, steady revenue for them, and it obviates the need for stupid "how many units did you ship hurr durr" conversations.
TouchID still has less lag - and I can auth/unlock from my pocket. FaceID is great for my aging parents who have calloused hands, but I still prefer TouchID.
I much prefer FaceID. It seems faster not slower for me than TouchID was, I like that it enables a full frontal screen, and I love not having a home button.
I also really like when my kids steal my phone and try to get it to unlock by holding it up to me and I can make funny faces at it so it won’t. But maybe that’s just me.
And to anticipate the follow-on to that, if a true adversary is holding my phone and it hasn’t been hard-locked through power-off of rapid click sequence, then I’ve already lost, whether it’s TouchID or FaceID.
I find FaceID worse than TouchID, in a couple of ways:
1. It's very common both at work and at home that the iPhone is flat on a table and I want to quickly unlock it to check something. Previously, snaking a finger out was sufficient; now, I have to deliberately pick it up, look at it, and then swipe upwards. (It's also much more conspicuous in meetings.)
2. FaceID seems to struggle (i.e. fail to unlock, or delay the unlock) more often than TouchID - it seems quite sensitive to the angle it's held at as it scans my face.
Another problem is that you don't get to control the start of a FaceID scan. Many apps that I use (mostly for banking) have some non-deterministic loading procedure that can take from 1-20 seconds. At some point, the load completes and the app initiates a FaceID scan. If you're not holding the phone at the right angle at that moment, the scan fails. Then it falls back to a passcode.
It's a terrible user experience. They should give me the chance to push a button after I've gotten the phone in the right position before initiating the scan. Or they should give me the chance to retry the scan if I wasn't ready. As it is, they expect me to hold my phone rigidly for a non-deterministic amount of time in order to use FaceID.
If your face is not recognized, it will prompt you with a system modal to either “Try Face ID Again,” which does what you want, or “Cancel,” which lets the app decide what to do (most of mine go to a button you can tap to try Face ID again.)
So they are shrinking, not growing.