
Apple Reports Record First Quarter Results, Slowing Growth in iPhone Sales - davidbarker
http://www.apple.com/pr/library/2016/01/26Apple-Reports-Record-First-Quarter-Results.html
======
pavlov
Superficially it looks like revenue growth has slowed down quite a bit. But
the Reuters article mentions that "the strong U.S. dollar ... knocked about $5
billion off the company's revenue":

[https://finance.yahoo.com/news/apple-sells-fewer-iphones-
exp...](https://finance.yahoo.com/news/apple-sells-fewer-iphones-
expected-215513644.html)

That makes quite a difference (and illustrates that it can be pretty hard to
figure out growth numbers for a multinational corporation, even one that has a
super-simple product line like Apple's).

~~~
guelo
It's actually pretty easy, count units sold. They sold 74.779 million iPhones
this holiday quarter and 74.468 million last year. Basically the same number.
It shows that sales growth has stopped after a decade of hyper growth. It's
still a heck of a lot of phones though.

~~~
ricksplat
It's the same number, but I think the cost of units has gone up year on year
too - though that could just be the dismal Euro ...

~~~
tempestn
In terms of USD the cost has gone down slightly, which can also be seen by
comparing the sales numbers to the revenue.

------
JohnTHaller
The record results include one not so happy metric: "Apple iPhone Sales Grow
at Slowest Rate Ever, Company sees revenue in current quarter declining at the
steepest pace in 15 years" (From: [http://www.wsj.com/articles/apple-reports-
slowing-growth-in-...](http://www.wsj.com/articles/apple-reports-slowing-
growth-in-iphone-sales-1453843920) )

Free click-through-Google link to read:
[https://www.google.com/search?q=Apple+iPhone+Sales+Grow+at+S...](https://www.google.com/search?q=Apple+iPhone+Sales+Grow+at+Slowest+Rate+Ever)

iPhone sales are basically flat from last year, growing at about 0.4%. This
isn't just an Apple phenomenon either. As with desktops/laptops several years
ago, and tablets over the last couple years, we're getting to the point that
it doesn't make sense to upgrade your phone every year or two. As long as your
phone still works and does what you need it to, anyway.

~~~
jobu
> _we 're getting to the point that it doesn't make sense to upgrade your
> phone every year or two_

The biggest reason for this (in the US at least) is the decline of 2-year
mobile phone contracts over the last year. Many people are rethinking their
upgrade cycle now that cellphones are a direct expense instead of being
subsidized by the carrier.

~~~
overcast
Nothing was ever subsidized by the carrier, it was just amortized over those
two years. The difference of off contract was exactly the price of a phone
over a two year period. Which is why they started that ATT Next nonsense to
get people locked into renting their phones.

~~~
mikeash
Some carriers had no difference between on and off contract. With those, if
you didn't upgrade your phone every two years you were leaving money on the
table.

~~~
overcast
That also occurred, people sitting on old phones, paying that monthly
amortization costs forever.

------
erikpukinskis
It's interesting iPad sales are down 25% year over year. That continues to be
the biggest shock to me about Apple's product line, although that writing has
been on the wall since 2013/2014.

I keep wondering when the desktop/laptop form factor is finally going to die.
I thought tablets would do it but that's obviously wrong. Phones,
surprisingly, seem to be continuing to eat away at the desktop use cases,
which is expected, but I wasn't expecting them to be carrying the brunt of it,
and there are ergonomic limits to how far that can go.

VR is the obvious candidate to take out desktops. The solitary nature of
desktop activities fits VR well. That's my new operating hypothesis: in 10
years it will basically be phones+VR, probably with TVs still strong.

VR will eat some of TV, but it can't really compete with TV's ambient nature.
AR could, and will eventually kill TV, but I am skeptical it will make a dent
in the home in this decade, because that's how long it will take to get
miniaturization where it needs to be for home use.

~~~
bengoodger
IMO it's foolish to think the laptop form factor is going anywhere, barring a
fundamental shift in UX. Anything that requires productivity, e.g. content
creation, is better done with a keyboard and some kind of instrument more
precise than a finger. Any work involving accumulation of material from
multiple sources (e.g. research) i.e. multitasking, is going to benefit from a
larger screen form factor.

It's no surprise that mobile is eating consumption use cases as it means
people can consume wherever they find themselves. But for the most part tablet
UIs are just scaled up versions of phone UIs, even though individual apps may
show more content laid out better with the additional real estate,
multitasking and input don't work quite as well as laptops.

~~~
erikpukinskis
VR will almost certainly precipitate a fundamental shift in UI. I don't see
how it could not.

Whether the result will usurp mouse+keyboard remains to be seen, but I suspect
it will. Body tracking just has more bandwidth.

~~~
danellis
How do you get to "almost certainly"? What makes you think people want to wear
a VR headset to get real work done? It's not even established what the effects
of long-term VR usage are.

------
nemo44x
Exchange rates are killing them. The strong USD is cutting into profits in a
major way. With iPad, Mac and now iPhone showing flat (and negative) growth I
would expect a fairly flat stock price for the time being. When/If the USD
begins to lose value to other currencies I'd call that a good time to consider
to build a position in AAPL.

I don't have a position but was hoping for a big win this quarter. AAPL
exemplifies a lot of the issues many companies are having because of exchange
rates and I do not expect the broader market to do much better for awhile.

Especially with so much foreign debt in USD, a lot of companies are going to
have a hard time paying off bonds and loans, hurting their ability to grow.

~~~
Analemma_
> was hoping for a big win this quarter.

The largest quarterly profit ever recorded by _any_ company wasn't enough of a
big win? I don't want to soapbox too much, but there is something deeply wrong
with capitalism when you can be more profitable than any corporation that has
ever existed and it seems like a letdown.

> Especially with so much foreign debt in USD, a lot of companies are going to
> have a hard time paying off bonds and loans, hurting their ability to grow.

All the tech companies that have had big bond issues recently (Apple,
Microsoft, etc.) are doing it because it's literally cheaper than repatriating
their actual foreign earnings to the United States. As long as those foreign
earnings continue to exist, borrowing money is arguably a _better_ way to
finance their day-to-day operations, especially when interest rates don't seem
likely to climb much in the intermediate future.

~~~
jonknee
> The largest quarterly profit ever recorded by any company wasn't enough of a
> big win? I don't want to soapbox too much, but there is something deeply
> wrong with capitalism when you can be more profitable than any corporation
> that has ever existed and it seems like a letdown.

Of course it can. They didn't meet revenue estimates and advised that the
current quarter is going to be much worse than expected. Wall Street
[typically] values companies based on future expected earnings and there is
constant pressure to increase growth. The same compound math that gives
quickly growing companies lofty valuations works in reverse when your revenues
are declining.

~~~
macintux
Revenues aren't declining yet, and their valuation has been significantly
depressed for years during rapid growth.

Apple continues to do the smart thing given the situation: buy AAPL.

~~~
ironsides
Are you suggesting that the smart move for Apple is a stock buy back?

As opposed to investing in more R&D? Or, perhaps acquiring start ups with
exciting new products or technologies?

~~~
macintux
When you have $200 billion dollars lying around, you can do multiple things
simultaneously.

When you have $200 billion dollars lying around and your business is
dramatically undervalued, it would be practically criminal not to buy some of
it back, to save on dividend payments if for no other reason.

~~~
jonknee
> When you have $200 billion dollars lying around and your business is
> dramatically undervalued, it would be practically criminal not to buy some
> of it back, to save on dividend payments if for no other reason.

Who's to say Apple is undervalued? It's one of the most widely held companies
and they have been so for several years. Tim Cook doesn't know what's going to
happen in China. Their US sales were down in Q4 2015 and they are forecasting
global sales to be down in Q1 2016. They may have been spending billions
buying back shares at an all time high.

~~~
macintux
It's hard to imagine a scenario where Apple has peaked. Even replacement sales
would sustain a healthy business, and they have extremely high satisfaction
and retention rates.

People value what Apple offers. A global depression could hurt the company
badly. Anything short of that should allow them to keep making money. A bad
Apple quarter is still lots and lots of money.

~~~
jonknee
> It's hard to imagine a scenario where Apple has peaked. Even replacement
> sales would sustain a healthy business, and they have extremely high
> satisfaction and retention rates.

It's not that hard, their largest growth market (by far) is a huge question
mark. It's tough to rely on a single product that is expected to be replaced
every year. There will be a ton of pressure on the iPhone 7.

~~~
scarface74
Apple's services revenue is growing every year. As long as their installed
base keeps growing or even remains stable they can make money off of their
existing customers. They aren't in the position of other phone manufacturers
or computer manufacturers - with decreasing margins and only being able to
make money at the point of sale.

It was reported that the average selling price of iPhones was up by $3 and
would have been up by $80 if it weren't for currency fluctuations.

------
randomsearch
Every product has a cycle. The iPhone is mature now. It basically does
everything I need it to do. Only a radical change in what the product _is_
will make any difference from herein. Can't see it. Time to move on.

The watch is still an iPhone accessory. That's going to take time to mature,
and will eventually be a mass market product (or more likely the non-Apple
equivalents if Apple don't figure it out). Too many technical problems for the
time being, but things will improve.

In the meantime, Apple desperately need their next big thing, and it seemed
incredibly obvious to me even years ago that a full TV was a no-brainer. TV
interfaces suck, I mean they are just _awful_, have you used a modern TV? If
you don't own one, try out the controls next time you're at a friend's house.
Be prepared to feel alternating waves of anger and despair. It's so so bad, if
modern TVs were websites they'd have flashing GIFs and a sign saying "Welcome
to our homepage!" Actually, it's worse than that. It's like using a broken
flash animation over a dial-up connection with the latency of relayed
semaphore.

The fact that Apple _haven't_ yet launched a full TV makes me think they have
completely lost the plot. Steve talked about it on many occasions, and he was
absolutely spot-on (as usual) in his analysis of current products, so where
the heck is it? The market is there, the disruption potential is unbelievably
huge, the timing is perfect. Tim had it right when he predicted "apps"
(interactive channels) would be the future of TV, but not in the ludicrous
form of a mac mini intruding into my living room with cables hanging out the
back of a TV, especially if it's wall-mounted. If there's one thing the
consumer world does not need, it's more stupid third-party boxes plugged into
the back of TVs.

Modern TV UIs are utter, utter, garbage. They're the dumb phones of the
contemporary consumer electronics landscape. This is exactly the type of
market Apple usually walk into and completely monopolise. How on earth have
they not done this yet? Who doesn't want control of the biggest screens in the
house? That are increasingly going to integrate with mobiles? That connect to
Games Consoles, which you could... replace. I mean, for the love of god, the
potential is ludicrous, what on earth is wrong with them?

~~~
gwright
> In the meantime, Apple desperately need their next big thing,

Why 'desperately'? They have a product line that generates a billion dollars
in profit every five days. They have over $200 billion of cash on hand. That
doesn't sound like a desperate situation.

~~~
Nicholas_C
Earnings treadmill

~~~
randomsearch
Better way to put it, thanks.

Not Nicholas Carr, btw?

~~~
Nicholas_C
Not I.

------
FreedomToCreate
Its absolutely incredible how year after year, Apple convinces people to
continually upgrade their devices, as well as drive new customers to there
business.

An important metric to note from there release however is that 66% of sales
came from international markets.

~~~
tinkerrr
That important metric actually understates their sales due to the strength of
the US Dollar this last year. On a constant-currency basis, it is about 15%
higher. Just goes to show the 'real' results are even more impressive.

~~~
forgetsusername
> _That important metric actually understates their sales due to the strength
> of the US Dollar this last year._

Maybe sales were _over_ -stated in the decade prior due to weakness in the US
dollar? I don't understand the meaning of picking a favourable exchange rate
to normalize the earnings.

For all we know, it's high dollar from here to eternity.

------
chvid
One would expect this to be due to the strong dollar but the biggest drop in
revenue (dollar-wise) is in the Americas.

[http://images.apple.com/pr/pdf/q1fy16supplementalmaterial.pd...](http://images.apple.com/pr/pdf/q1fy16supplementalmaterial.pdf)

Japan has the biggest in percentage drop. China and Europe are up.

------
dmix
Just yesterday I read an NYTimes article announcing how Apple is beyond their
growth phase.

> Investors have long relied on Apple to deliver one crucial attribute:
> growth. Now they are beginning to wonder whether Apple’s days as a growth
> stock are coming to an end.

[http://www.nytimes.com/2016/01/25/technology/looking-for-
sig...](http://www.nytimes.com/2016/01/25/technology/looking-for-signs-that-
apples-runaway-growth-is-waning.html)

$74.6 billion ---> $75.9 billion is not huge but it's noteworthy they've
maintained positive numbers.

~~~
nilkn
They're running an article right now on slowing iPhone growth numbers:

[http://www.nytimes.com/2016/01/27/technology/apple-
earnings-...](http://www.nytimes.com/2016/01/27/technology/apple-earnings-
iphone-
sales.html?hpw&rref=technology&action=click&pgtype=Homepage&module=well-
region&region=bottom-well&WT.nav=bottom-well)

------
ajeet_dhaliwal
Consumers have increasingly wised up to the two year more significant hardware
update (and number increment), it would be more interesting to see sales later
this year when iPhone 7 is released because in 2014/2015 there were all these
reports about iPhone 6 being the fastest adopted and best selling iPhone yet.

------
HSO
Re: Declining iPad sales

I think the biggest thing Apple could do here is to change their app store
policies to (re-)motivate existing developers and attract new ones. Letting
prospective buyers test-drive apps, upgrade pricing, and better discovery come
to mind. I have both a Mini and a Pro with Pencil and I _love_ the hardware.
The software is the problem though. Few apps make use of all the
possibilities; existing apps will also have to be (re)written and possibly
reconceived for the different form factors. It's a good sign that Phil
Schiller is overseeing the app stores now, hopefully something will change
this year.

Re: iPhone

Here, the obvious thing to do seems to produce a new 5S-sized model. 60
percent of 5S or older install base have not upgraded? Maybe there is a
reason… Also, they could always try to go "down-market" and produce a greater
variety like with the iPod to take further share from Google. I don't see the
end of growth in this market, by far.

Re: currency effect

True, stronger dollar affects revenue or unit sales (where prices have been
adapted) _relative to previous years_. But one could also argue that the years
2009-2014 were special in that the US weakened the dollar through QE, and
perhaps Apple (and other US companies) enjoyed "backwinds" then rather than
"headwinds" now. It looks whiny to me to say "look ma, 100 then is only 85
now". As someone said, "if my aunt had balls, she'd be my uncle". Macro gives
and macro takes.

Also, the 214bn cash bandied about should be posed against the debt they took
on to pay for the buybacks. So enterprise value not quite as low as suggested
but I agree it's an undervalued company.

~~~
Spooky23
The problem with iPad is that tablet is a tough form factor, and many users
aren't big app users -- they are web and media consumers.

The price point for a device that works for those users is heading south of
$100, while iPad has a 3x entry price.

My wife happily uses our iPad 2. I have about 3,000 users of iPad 3's at work
who aren't clamor I for new stuff -- it's almost like a thin client lifecycle.

------
thecosas
Great coverage (via twitter) from Horace Deidu of
[http://asymco.com](http://asymco.com):
[https://twitter.com/asymco](https://twitter.com/asymco)

Some of my favorites:

* [https://twitter.com/asymco/status/692106160376303616](https://twitter.com/asymco/status/692106160376303616)

* [https://twitter.com/asymco/status/692108871012343808](https://twitter.com/asymco/status/692108871012343808)

* [https://twitter.com/asymco/status/692111023197798401](https://twitter.com/asymco/status/692111023197798401)

------
kmfrk
Any ideas how they end up at a 25.5% tax rate?

~~~
toephu2
Ireland

~~~
Nicholas_C
For anyone curious:

[https://en.m.wikipedia.org/wiki/Double_Irish_arrangement](https://en.m.wikipedia.org/wiki/Double_Irish_arrangement)

------
venomsnake
I am no apple fanboy ... but this is no news. They only way people could
possibly consume more iPhones is if Apple grinds them to a paste and sell them
as dietary supplements. Or label them as statins.

Every person in the world that wants iPhone - already has one. With lack of
killer apps in the last 2-3 years we are in mature market already.

~~~
sumedh
> Every person in the world that wants iPhone - already has one.

Well not really. India is still an untapped market although most Indians
cannot afford one right now but they will in the future.

Apple is going to open its exclusive stores in India this year.

[http://www.reuters.com/article/us-apple-india-retail-
idUSKCN...](http://www.reuters.com/article/us-apple-india-retail-
idUSKCN0UY0OX)

------
Steko
Big news is Apple finally feeling effects of weakness in China and the
collapse of demand in oil dependent places like Canada.

~~~
jbverschoor
weakness of the chinese currency

~~~
Steko
Weakness of the Yuan affects the revenue number by the size of the China
market but shouldn't by itself impact the raw number of phones sold (Apple
pays for the phones parts and labor mostly with Yuan).

~~~
simonh
The cost of assembly is tiny compared to the cost of the parts, which largely
come from Korea, Japan and for some of the SOCs and glass the US.

------
acomjean
Apple might start having to upgrade its computers to drive sales. The Mac
"Pro" is an astounding 2+ years without an upgrade (I think the imacs are
faster now...). The mac mini has gone 460 days without refresh. They do
refresh their notebooks more frequently and I know i-devices drive a lot of
their revenue, but charging full price for last years technology has to be
holding back some sales.

~~~
jjtheblunt
Mac Pro models can hold far more cores, in Xeon processors, than iMac can in
i7. Check benchmarks, I suggest.

~~~
acomjean
Plus Ecc memory and dual graphic cards for the pro. Bu if your software is
multi-core I guess its the way to go, but if your just using 4 cores, the iMac
5k is pretty competetive if not faster[1] and significantly cheeper.

[1][http://barefeats.com/imac5k.html](http://barefeats.com/imac5k.html)

------
draw_down
Huh, I guess they really are doomed after all.

------
brooklyndude
I'm happy with my iPhone 6 Plus. I see NO reason to buy another right now.
Zero.

------
xyzzy4
What Apple needs to do is intentionally make the phones buggier the longer you
hold onto them.

------
XJOKOLAT
Probably about time a slow down happened.

I own a Moto G 3rd Gen. Swift, waterproof, stong-glass, bloat-free, removable
battery, memory-upgradable, £150. Does the job I need it to do and, I'd
imagine, the job most others need also. (I don't work for Moto, nor even
remotely related to them).

I've been wondering what on earth iPhone and Sammy users are doing with their
£400-£600 modern icon-ophones

Are people just in a trance?

(This from a renowned gadget freak who used to trade in smartphones every 3
months)

~~~
blinkingled
Yeah, I would say people haven't gotten enough time to sense that a $200 phone
beats the pants off of a $750 one if you consider price, battery life and what
it does objectively. Just a year or so ago $200 phones could be dinged in some
way or the other - bad camera, bad battery life, low durability, slower
performance etc.

I wonder how planned obsolescence plays into this though. If every two years
your phone is going to become dog slow or is not getting updates anymore you
will have to upgrade. Good old days of Windows where you could run the same
hardware for 3 different OS releases and upgrade the CPU/GPU for the 4th one!
:(

~~~
thaumasiotes
I have a Nexus 4 which is experiencing battery swelling. Apparently that's a
common problem for them.

I don't think, though, that it's an example of "planned obsolescence"... I
suspect that phone performance multiple years out just isn't a design
consideration, overlooked in a way similar to what was going on in the
stylized "real estate prices can't drop" belief model.

When it's not considered, it's pretty likely to be terrible. When people start
keeping their phones for several years, they'll get upset about aging issues,
and graceful aging will become a design consideration.

~~~
blinkingled
Yeah for the prices they are selling the Nexus/Moto G type devices it makes
somewhat sense that durability beyond 2 years wasn't their design concern.

Still leaves open the part about software updates and slowdowns due to
updates. Apple for e.g. has better hardware quality than most but the slow
downs due to major OS updates and withholding features from older devices
definitely helps them with people upgrading every two years.

------
samstave
I was litereally just walking down the street 5 minutes ago and this lady
behind me kept saying out loud "FUCK YOU APPLE!!!"

I stopped and looked at her and she had the new Macbook Air -- and she was
holding the charging cord and she was pissed off because "apple changed the
fucking charger AGAIN!!!" and was lamenting that the lew cable isnt a standard
USB connector and she was in a lurch with no ability to charge her machine
because the new cable was not compatible with anything her or her friends had
on hand.

~~~
rocky1138
Don't put too much weight on this data point as the loudest voices during
tough Apple times are the most likely to go right out and buy iWhatever 7 the
second it is release.

"I think it's dumb that Apple made my $999 pair of Beats useless when they
removed my headphone jack, but... iPhone 7, man, gotta have it."

~~~
simonh
Because physically removing the headphone jack from the phones in people's
pockets is something Apple are going to do? Because a lightning to headphone
jack adapter is not a thing that's possible?

