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Apple's earning revision

jk441
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https://www.apple.com/newsroom/2019/01/letter-from-tim-cook-to-apple-investors/

 

Not too sure if this is already posted in the forums, but I did some searches and wasn't able to find this topic being posted; sorry if it's a re-post in advance.

 

tldr; of the letter is Tim Cook issuing an open statement to their investors that they've now revised their earnings for 2019 that they'll get less of that $$$ and blames the following:

1. iPhone sales are not that great (obviously)

edit: BATTERY REPLACEMENT PROGRAM (What...?! really?! yes really.... that's an excuse) - this is a part of the iPhone sales not a separate topic

2. They're not getting as much value from the China market as they expected

3. New products constraining sales in previous existing products.

4. US Dollar value

5. Some countries may, and are, struggling economically.

Also mentioning that investors shouldn't worry to much but still keep on investing.

 

Some of their observations are pretty hilarious others more in a "meh" imo.

What are your thoughts on Tim Cook's letter?

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China banned iphone sales over the qualcomm dispute, seems like a pretty big hit to their future growth potential... second largest economy in the world.. 

 

the other stuff is just trying to dilute that terrible news

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It's important to note that Apple mainly blamed the iPhone sales shortfall on China, so it's hard to say that this is some broader rejection of Apple's strategy.  It did note slower sales in "developed markets" but suggested those weren't nearly as large a factor.

 

What's interesting to me is that Apple suggested its recent iPhone trade-in program wasn't the only thing it would do to fuel sales.  I'm not expecting it to cut prices, but I could see it bundling things (say, a free case), ramping up marketing, maybe getting more aggressive with included storage levels.

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I'm not surprise at all

In France first macbook pro 15" start at 2800 euros (3167 dollars !!!) and for this price you only got 256Go of SSD. A lot of Apple's fanboys go for Dell's XPS because they can't follow the price increase trend.

The first "lowcost" iPhone start at 855 euros (967 dollars) that's insane for a lowcost version.
Lot of people miss the days when iPhone were at 600 euros, which is a lot of money, but still reasonable.

They do the best hardware in the world but man ... 3k for a computer it's way too much

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48 minutes ago, NoOverflow said:

I'm not surprise at all

In France first macbook pro 15" start at 2800 euros (3167 dollars !!!) and for this price you only got 256Go of SSD. A lot of Apple's fanboys go for Dell's XPS because they can't follow the price increase trend.

The first "lowcost" iPhone start at 855 euros (967 dollars) that's insane for a lowcost version.
Lot of people miss the days when iPhone were at 600 euros, which is a lot of money, but still reasonable.

They do the best hardware in the world but man ... 3k for a computer it's way too much

Macs were actually a strong point of the quarter.

 

I do wish Apple would offer more affordable MacBook Pros, but the current 15-inch model isn't aimed at the same market as the XPS.  It really is aimed at the pro crowd - the sort who might edit 4K videos in the field or work on a CAD project while they're on a business trip.  It's generally worth the money if you make a living from your laptop.  The issue is that there isn't an option for people who just want a desktop replacement and don't mind buying a slower CPU or a consumer GPU.

 

Apple never pitched the iPhone XR as a "low-cost" iPhone, by the way -- it's just lower cost compared to the iPhone X and XS.  Its more affordable options are the iPhone 7 and 8.

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1 hour ago, jk441 said:

BATTERY REPLACEMENT PROGRAM (What...?! really?! yes really.... that's an excuse) - this is a part of the iPhone sales not a separate topic

For the record, this did actually cause many people to hold onto their phones for another year, that is exactly what happened with me and my iPhone 6s Plus. 

 

iPhones are supported for years and they last, why spend another $750-$1100 when you could spend $30 and keep the current phone you have running like new? (something that iOS 12 enabled)

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1 hour ago, AntiTrust said:

China banned iphone sales over the qualcomm dispute, seems like a pretty big hit to their future growth potential... second largest economy in the world.. 

 

No? Chinas bans have no effect on any iPhones currently on the market. 

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Things they missed:

 

Airpower still MIA

Homepod a day late and a dollar short

Still selling an outdated trashcan mac pro for full price

Airpods 2 MIA, missed holiday launch (not really announced, but seems like an item worthy of refresh with the w2 chip and XR colors)

Apple Music still behind spotify, lacking catered playlists

Flawed Macbook Pro keyboards

 

That said, a lot of what Tim brought up isn't just hurting Apple, but the whole industry. Market hasn't been great to a lot of tech stocks in the past 9 months. 

 

2 hours ago, Commodus said:

 

What's interesting to me is that Apple suggested its recent iPhone trade-in program wasn't the only thing it would do to fuel sales.  I'm not expecting it to cut prices, but I could see it bundling things (say, a free case), ramping up marketing, maybe getting more aggressive with included storage levels.

I was honestly gonna pull the trigger on a XR with my 8 plus trade-in after the holidays, but my 8 plus suddenly lost ~100 bucks trade-in value. Not really fueling sales that way.  

 

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What fantastic news this was to wake up to :) - I predicted a poor quarter for Apple and went long on some puts a couple weeks ago, I was expecting the bad news to eventuate as part of their earning reports at the end of January but releasing it now is even better as options theta is still quite high. I made a tidy 4,000 USD so looks like I'll be building a new PC when AMD release their next line, the announcements should be at CES next week.

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It would be nice if Apple will axe the NVME SSD on the MacBook Air and just use the slower SATA SSD, which is still significantly faster than a spinning hard drive. This will make purchasing a MacBook Air more justifiable. 

 

Also, I hope Apple brings back the Fusion Drive option to the base model Mac mini. 

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I see the soul that is inside

 

 

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This was somewhat expected by most folks, though institutional investors did their best to ignore it and will now act shocked and drop the stock price significantly, at least temporarily.  It is important to note that there were a lot of things in the letter, because ALL of them were noted risk factors during the guidance they provided previously during the last quarterly report.

 

So, while there were several reasons listed in Tim's letter, the main one (and only one that isn't acting as they expected in the initial guidance) is the Chinese emerging market sales drop, and that's why they are revising their projected outlook.  This isn't actually anything to do with the Qualcom ban, since that only banned phones that weren't being sold anymore (as of this moment anyway).  In general, China has been trying to push Chinese goods/tech over foreign goods, and China has been hit hard financially by the tarrifs and global slow economies. They were the cheap production for everyone, and now there are moves of many towards India/Korea/others for cheap labor instead.  That has caused a ripple in MANY tech companies, most of which are seeing similar issues right now.  

 

Tim commented on this further than the letter in an interview afterwards, further talking about how the drop in iPhone sales in China alone accounts for this change.

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Tim's a business magician, he'll be on the right track. 

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4 hours ago, Commodus said:

Macs were actually a strong point of the quarter.

 

I do wish Apple would offer more affordable MacBook Pros, but the current 15-inch model isn't aimed at the same market as the XPS.  It really is aimed at the pro crowd - the sort who might edit 4K videos in the field or work on a CAD project while they're on a business trip.  It's generally worth the money if you make a living from your laptop.  The issue is that there isn't an option for people who just want a desktop replacement and don't mind buying a slower CPU or a consumer GPU.

 

Apple never pitched the iPhone XR as a "low-cost" iPhone, by the way -- it's just lower cost compared to the iPhone X and XS.  Its more affordable options are the iPhone 7 and 8.

Ehh, I'm not going to suggest too much different... but until the MBPro gpu refresh this past quarter... the XPS 15 was a noticeably more capable system for CAD or video editing (outside of final cut specific apple benefits) regardless the target audience.

 

The 15 MBP capped at a radeon pro 560X, which was noticeably slower (even on things like luxray and premiere) than the 1050ti, cpu power being similar story.

 

Yes, I expect the vega 20 configuration to leave those both in the dust, but it also claims a 150-300w design power envelop, which obviously can't be true for the MBP, so I'm not sure how much exactly the MBP can utilize its gpu power (Apple claims a 60% perf uplift).

 

 

Anyways... on topic. I don't buy the China argument as the largest downturn reasoning. I think it is a convenient out, but Apple has a pretty tiny market share in China according to leading industry analysis (~6%). Apple doesn't break things down though (anymore), and did note downturns in developed markets as well, which are dramatically larger for Apple (last official numbers showed 7m out of 47m total were sold in China).

 

But with all that said, Apple isn't struggling, and market speculation is a hyper-cesspool of stupidity at the moment (see Nvidia's meteoric rise and fall in stocks while maintaining at or near record profits).

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The downturn is not all that surprising. The smartphone market as a whole has kinda waned and even Samsung hasn't had a stellar year.

 

From what I know, the reason for that is probably due to the following;

  • Slow iPhone sales, potentially due to either the higher price or another factor that would have given potential iPhone customers a second thought
  • Current iPhone users holding onto their existing phones for a longer period of time across a wider user-base
  • The effects of the trade war between the United States and China

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10 hours ago, Curufinwe_wins said:

Anyways... on topic. I don't buy the China argument as the largest downturn reasoning. I think it is a convenient out, but Apple has a pretty tiny market share in China according to leading industry analysis (~6%). Apple doesn't break things down though (anymore), and did note downturns in developed markets as well, which are dramatically larger for Apple (last official numbers showed 7m out of 47m total were sold in China).

 

But with all that said, Apple isn't struggling, and market speculation is a hyper-cesspool of stupidity at the moment (see Nvidia's meteoric rise and fall in stocks while maintaining at or near record profits).

It's plausible -- 6 percent of the Chinese market still represents a lot of customers.  It's also a market with a lot of upheaval between the economy and rapid shifts in vendor status (Huawei has been on a tear lately).  

 

You're right Apple isn't really struggling, at least not right now.  I think it was counting on a healthier Chinese economy and a certain American leader not messing things up too badly.  I do think Apple might be regretting its tendency to creep prices upwards, though.  I'm not expecting dramatic cuts, but it might ease up on price hikes for a while.

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What they expect when their phones have pretty much lost its magic?

 

I still use the iphone 8 because it suited my need when it came time to change but i highly doubt I will get another apple phone in my next upgrade. Most likely Samsung's note phones since they are exactly what I need if i'm not using my computer.

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17 hours ago, NoOverflow said:

I'm not surprise at all

In France first macbook pro 15" start at 2800 euros (3167 dollars !!!) and for this price you only got 256Go of SSD. A lot of Apple's fanboys go for Dell's XPS because they can't follow the price increase trend.

The first "lowcost" iPhone start at 855 euros (967 dollars) that's insane for a lowcost version.
Lot of people miss the days when iPhone were at 600 euros, which is a lot of money, but still reasonable.

They do the best hardware in the world but man ... 3k for a computer it's way too much

btw, they dont really, specially on the laptop side 

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18 hours ago, Commodus said:

Macs were actually a strong point of the quarter.

 

I do wish Apple would offer more affordable MacBook Pros, but the current 15-inch model isn't aimed at the same market as the XPS.  It really is aimed at the pro crowd - the sort who might edit 4K videos in the field or work on a CAD project while they're on a business trip.  It's generally worth the money if you make a living from your laptop.  The issue is that there isn't an option for people who just want a desktop replacement and don't mind buying a slower CPU or a consumer GPU.

 

Apple never pitched the iPhone XR as a "low-cost" iPhone, by the way -- it's just lower cost compared to the iPhone X and XS.  Its more affordable options are the iPhone 7 and 8.

No they said that Services, Mac, iPad, Wearables/Home/Accessories all combined growth, not individually.
Lot of student for exemple switch from macbook air to ipad pro

 

XPS are suited for professional environment, there even a 4K version. CPU and GPU performance are comparable. The difference is the keyboard (in favor of the Dell, expect for the touch bar witch is a cool feature), the OS (in favor of Apple in my opinion), the build quality (Apple) and the autonomy (Apple but not by a lot).

Even if you make a living from your computer, 3k is still a tons of money. For an average dev, it's basically a full months income (once the income's taxes are paid), it's a lot. The difference with Dell is 1k euros, it's a big deal.

 

Apple never marked a product as "low cost" but that's the way it is in the head of the consumers

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3 hours ago, Commodus said:

I do think Apple might be regretting its tendency to creep prices upwards, though.  I'm not expecting dramatic cuts, but it might ease up on price hikes for a while.

I think Apple is more likely to either maintain current prices and offer more appealing trade-in offers or just a minor cut in prices (like $100 off or so).

 

Apple has never done "low-cost" and I know for a fact that they want to appear as a company that caters to the premium segment, so I very much doubt they'll pull a Xiaomi.

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3 hours ago, Commodus said:

It's plausible -- 6 percent of the Chinese market still represents a lot of customers.  It's also a market with a lot of upheaval between the economy and rapid shifts in vendor status (Huawei has been on a tear lately).  

 

You're right Apple isn't really struggling, at least not right now.  I think it was counting on a healthier Chinese economy and a certain American leader not messing things up too badly.  I do think Apple might be regretting its tendency to creep prices upwards, though.  I'm not expecting dramatic cuts, but it might ease up on price hikes for a while.

I think its plausible, but not probable. But plausible is enough in business stuff like this. You can't (legally) blatantly lie, but you can make it seem like the reasons of an issue are of different relative magnitude compared to reality. And Apple would want to do that for myriad reasons.

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3 hours ago, D13H4RD said:

I think Apple is more likely to either maintain current prices and offer more appealing trade-in offers or just a minor cut in prices (like $100 off or so).

 

Apple has never done "low-cost" and I know for a fact that they want to appear as a company that caters to the premium segment, so I very much doubt they'll pull a Xiaomi.

True, Apple never done low-cost, BUT 1000-1500$ is ridiculous. 

Apple has to come down from its own incredibly high horse. Those days when Apple's computers were revolutionising the US PC space are long gone, those days when Apple sold its first iPod, or iPhone, or Macbook Air are long gone. Other companies with small steps did chase down Apple and Apple's miracles are nonexistent, they wont come up with some breakthrough any time soon. Well, the market is the king and Apple failed to deliver "the next big thing" in quite some time, which was... uhm... retina on Macbooks in 2012? Maybe iMac 5K 2 years back, but they pale in comparison to the Macbook Air launch, and prices are going steep... 

 

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I wonder why people fall for this.

 

There seems to be a lot of 'analysts' these days (I'm using this in a negative sense) and that investors should trust analysts lol. Totally unrelated but I digress.

I'll translate to exactly what Tim said -

 

1. iPhone sales are not that great

- "Aye, people didn't fall for our 'It's expensive because it has to be' approach. Also we lost some money trying to repair the phones they don't want to replace."

 

2. They're not getting as much value from the China market as they expected

- "We were expecting the No.1 growing economy in the world to buy the No.1 most technologically advanced products in the world. Clearly, one of those turned out to be a wrong assumption and it's not us"

 

3. New products constraining sales in previous existing products.

- "It's funny how people would rather buy the cheaper older models than buy our newer more expensive ones." 

 

4. US Dollar value

- "That's right, it's clearly not us"

 

5. Some countries may, and are, struggling economically.

- "I find it laughable how other people are still poor. Just stop being poor lol."

 

EDIT: Just so people know, I did own Apple products. They were really great, but that was a different Apple.

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How I plan my builds -

Spoiler

For me I start with the "There's no way I'm not gonna spend $1,000 on a system."

Followed by the "Wow I need to buy the OS for a $100!?"

Then "Let's start with the 'best budget GPU' and 'best budget CPU' that actually fits what I think is my budget."

Realizing my budget is a lot less, I work my way to "I think these new games will run on a cheap ass CPU."

Then end with "The new parts launching next year is probably gonna be better and faster for the same price so I'll just buy next year."

 

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US Dollar value? It's doing better than it has in the least 10 or so years, all these excuses are pretty bad.

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Ehmmmm USA Banned huawei and try to arrest(or extradit from canada) CFO , tell people that huawei are spying (germany says its all ok no spying) pushes to Japan and New Zeland, and you are surprised about low sales on china by an USA company? well this is another chapter of china-USA trading wars.

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