
Apple Reports Fourth Quarter Results - runesoerensen
https://www.apple.com/newsroom/2017/11/apple-reports-fourth-quarter-results/
======
chollida1
Making my running notes again from the earnings report and call.....

Numbers:

\- $52.6 billion in revenue, up 12% YOY

\- 46.7 million iPhones sold, up 2% YOY for revenue

\- 10.3 million iPads sold, up 14% YOY for revenue

\- 5.4 million Macs sold, up 25% YOY for revenue

\- $8.5 billion services revenue, up 34% YOY

\- $3.2 billion other products revenue, up 36% YOY

\- Q1 guidance: $84 to $87 billion, a record high.

\- 4Q EPS $2.07, Est. $1.87

\- 4Q Rev. $52.6B, Est. $50.7B

Where it came from:

\- China is back to growth with 22% quarter over quarter and 12% year over
year revenue growth. Europe saw the strongest year over year revenue growth,
up 20%. The U.S revenues increased year over year by 14%, while the rest of
the Asia Pacific increased by 5% year over year.

\- Apple announces it sold 46.7 million iPhones in Q417, compared to 45.5
million units in the year-ago quarter. This is in line with expectations. This
represents a year-over-year 3% unit growth and 2% revenue growth, suggesting
slightly more people are buying higher priced iPhones like the 7 Plus and 8
Plus.

\- Apple sold 10.3 million iPads in Q417, compared to 9.3 million units in the
year-ago quarter

\- for the Apple Watch, Apple Pay and Apple TV products... The 36% year-over-
year growth for this category, meaning Apple Watch and AirPods sales have been
strong.

\- Apple announces it generated $8.5 billion in revenues on services, which
includes the App Store and Apple Music, in Q417. This is 34% growth from $6.3
billion in the year-ago quarter and 17% quarter over quarter growth.

\- Apple sold 5.4 million Macs in Q417, representing 10% unit growth year over
year. Mac revenues are up 25% year over year

~~~
fancyfacebook
25% increase in macs sold is huge, not sure if this was just a weird spike or
not but that really stands out

~~~
DigitalJack
25% increase in revenue. 10% increase in units.

~~~
gordon_freeman
Must have been due to huge increase in Mac profit margin per unit.

~~~
valuearb
It's Mac revenues. Average selling price hasn't changed much.

~~~
FireBeyond
If the units have only gone up 10% but revenue has gone up 25% then
absolutely, yes, profit per unit has gone up, across the board.

~~~
danmaz74
Technically, unit price has gone up for sure. Profits also depend on costs, so
it probably went up, but you can't say for sure just from this data.

~~~
FireBeyond
True, but in the context of the parent post, "average sale price hasn't
changed much", then if we assume the following:

unit price remains stable, unit sales have increased 10%, unit revenue has
increased 25%, then profit has absolutely increased (and as you say, only due
to a decrease in costs).

~~~
kgermino
But revenue is not profit. If units are up 10% and revenue is up 25% then
there must have been an increase in average selling price.

That alone doesn’t tell us anything about whether profit went up or down.

~~~
AceyMan
I believe you'd could get the same ratios when unit costs go down (e.g., raw
materials costs drop, fixed costs such as tooling are amortized, and so
forth).

~~~
kgermino
No, you could see those ratios with net income or profit but revenue is simply
numUnitsSold*avgSellingPrice. It doesn’t take unit costs into account.

------
IBM
Narrative killer: Mac unit sales up 10% YoY, revenue up 25% YoY

~~~
dpkonofa
I'll never understand this. The pattern is the same _every_ year. They
announce a product, "journalists" say it's a failure, they sell more units and
make more money than ever before, and the cycle repeats. Apple will definitely
drop the ball someday but I think people are a little too quick to make that
call. I realize most of that is in the never-ending quest for clickbait but
still...

~~~
D-Coder
Oh absolutely (and not just journalists, but all the Apple-haters). Every year
since at least 1984, "Apple hasn't come out with a new product in _weeks_!
They're doooomed!"

Every single year. For at least 30 years. "Dooooooomed!"

~~~
pjmlp
If NeXT had not bought Apple, because that was what actually happened, Apple
would be gone by now.

~~~
smallhands
it is the other way round apple~next

~~~
pjmlp
Not at all.

Apple did buy out NeXT, but then Steve Jobs and his team took ownership over
Apple key positions from inside.

A situation that happens quite often where the bought company, manages to own
the buyer.

So on the paperwork and bank transactions, Apple bought NeXT, on management
level, NeXT bought Apple.

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ihuman
MacStories has some nice visualizations of the new quarterly results compared
to previous quarters.
[https://www.macstories.net/news/apple-q4-2017-results-52-6-b...](https://www.macstories.net/news/apple-q4-2017-results-52-6-billion-
revenue-46-7-million-iphones-10-3-million-ipads-sold/)

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dmode
$87 billion projected for Q4. What an empire they have built. Amazingly
impressive. And all I heard over the last 4-5 years was how Apple was doomed

~~~
shmerl
It's not necessarily a good thing. Apple are quite nasty. And the bigger they
are, the more damage they can cause.

~~~
sbuk
Extrapolate.

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djrogers
Interesting to hear the execs talk about iPhone sales in a manner that
explicitly refutes the rumors of iPhone 7 outselling 8:

“They instantly became our two most popular iPhone models and have been every
week since then.”

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vermontdevil
$269 billion in cash. Insane to think about that.

~~~
danjoc
$269 billion in tax avoidance.

~~~
toasterlovin
This is the tiredest trope that ever traipsed.

The company's management has an obligation to the company's owners to pursue
all legal means to reduce their tax obligation. You better believe the IRS
would have come knocking already if they were doing anything illegal by
keeping that $269B outside of the U.S.

~~~
danjoc
>if they were doing anything illegal by keeping that $269B outside of the U.S.

You've reversed cause and effect. They keep the money outside the U.S. to
legally avoid the taxes. They can't bring it back.

They'd rather horde the cash than contribute Apple's fair share to the country
that made Apple's success possible. Deplorable.

~~~
macintux
I’m sure you would find Apple pays plenty in American taxes. 35% is a huge
haircut to take on money earned outside the United States. The shareholders
would correctly be out for blood.

~~~
danjoc
>I’m sure you would find Apple pays plenty in American taxes.

I found Apple incorrectly reports to investors taxes paid.

"For example, in fiscal year 2011, on its 10-K reports filed with the U.S.
Securities and Exchange Commission, Apple said it paid $6.9 billion in taxes
to the U.S. government, but on its tax return filed with the U.S. Internal
Revenue Service, it reported taxes due of $2.5 billion, the report said."

[https://www.infoworld.com/article/2614464/techology-
business...](https://www.infoworld.com/article/2614464/techology-
business/senate-report--apple-claims-subsidiaries-to-avoid-paying-billions-in-
taxes-each-y.html)

So yeah, I'm sure you think they pay a lot of money.

>35% is a huge haircut to take on money earned outside the United States.

30% is a huge haircut to take on money earned outside the app store, but Apple
still demands that too. Suddenly Apple's in favor of taxes. Developer taxes.

~~~
toasterlovin
All I can say is thank God we live under the rule of law and not the rule of
the mob.

------
pwtweet
Walt Mossberg‏ @waltmossberg Perspective: Mac revenues alone in Apple’s qtr
just released were $7+ billion. At an annual rate, that would put the Mac in
the Fortune 100.

Is Walt correct on this?

~~~
bradfa
If they do a quarter like this past one for macs for the upcoming three
quarters then Mac sales would be on the cusp of being in the Fortune 100, not
just in the 500!

[http://fortune.com/fortune500/list/](http://fortune.com/fortune500/list/)

------
diminish
year-over-year 3% unit growth for iPhone units. So generally are we at the end
of mobile absorption by humanity and mobile growth? From now on instead of
market growth shall we see market share competition? Apple is lucky to sell
more expensive iPhones and better margins with better ASP. Carriers are still
the big driver by bundled tariffs and that helps high end smartphone sales.

~~~
elefanten
We are not at the end because there are still lots of people in less developed
areas to reach.

~~~
pjmlp
Those countries don't have the budget for getting iPhones beyond the lucky
ones on the higher society layers.

~~~
lo65
Not true. Its a status symbol. Which means it allows ppl to signal they are
breaking class/caste barriers when they buy one. That's a big thing in the
developing world.

~~~
pjmlp
Hence my hint about lucky ones on higher society layers.

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MarkMc
Income before tax: $13.9 billion

Income tax: $3.2 billion

So Apple's effective tax rate is 23%. Honestly that's better than I expected,
but still less than it should be. Federal corporate income tax is 35% and
California adds 8.84%. So there are other California companies which pay
almost twice as much tax as Apple.

(Keep in mind that almost all of the value created by Apple is created in
California. If Apple were to outsource all their sales and be a purely
Californian company then it would make almost the same amount of pre-tax
profit)

~~~
adventured
> So Apple's effective tax rate is 23%. ... Honestly that's better than I
> expected, but still less than it should be. ... Federal corporate income tax
> is 35%

That's misleading. You're comparing their global effective tax rate versus the
US Federal rate. The question is how much did Apple pay in taxes in the US, on
US-based profits.

23% isn't less than it should be, it's extremely reasonable compared to rates
around the world. The OECD average statutory corporate income tax rate is
around 24% (the effective rate is even lower).

The average effective corporate income tax rates for 2012: UK, 10%; Germany,
14%; Canada, 16%; Australia, 17%; China, 19%; France, 20%; South Korea, 20%.

Even Scandinavian nations like Finland (20%) or Sweden (22%) have lower
statutory rates (to say nothing of the effective). Denmark has a reputation
for having a government spending rate that is among the highest on earth among
developed nations as a share of its economy, and its statutory rate is merely
24.5%.

~~~
MarkMc
My point is that almost all of Apple's profit is _in reality_ generated in
California, even if its sales and accounting profits are booked overseas. So
I'm comparing US-based profit with the US Federal tax rate.

Let's say an iPhone is sold in the UK, generating a $200 profit. How much of
that profit was really generated in the UK and how much in the US? The answer
is to consider what would happen if Apple's US and UK operations were two
distinct, independent companies: Apple in California would determine almost
everything about the way iPhones are sold in the UK - where the Apple stores
are located, what the stores look like, what their TV and billboard
advertising should look like, what happens when a customer returns a product,
etc. Apple US would then take this list of requirements and negotiate with a
UK business partner. In that negotiation the UK partner has very little
leverage - if the UK partner doesn't like terms Apple US is offering, Apple US
can just find another partner. The UK partner then sells phones according to
Apple's specification. The result is that the UK partner will have thin
margins and almost all profit will flow back to the US.

Unfortunately, tax law allows Apple to move its intellectual property to an
Irish subsidiary company. The profit on UK sales is then booked in Ireland and
Apple pays the low Irish tax rate even though the real profit has been
generated in the US.

I accept your point that 23% may be a good corporate tax rate - but in that
case it should be 23% for all Californian companies, not just the ones which
are able to transfer their IP offshore.

~~~
fauigerzigerk
I think the difficulty with corporation tax for global corporations is that
asking where profits are generated is not the only relevant question.

You could also ask who bears the cost of generating those profits. Where did
Apple's employees grow up and go to school before they joined Apple in
California? Who builds the infrastructure for manufacturing and distributing
Apple's products?

So the global distribution of value generation and the global distribution of
cost can vary significantly. In fact, Apple is a relatively simple case
compared to, say, Amazon.

Of course, this doesn't make the sort of "tax planning" you're talking about
any less problematic. On the contrary.

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fragsworth
I have a question. What are the "Services" they refer to in the article? Are
these B2B and/or government contracts, the kind which Oracle/IBM are well-
known for?

~~~
_s
iCloud, iTunes, storage etc I think.

~~~
gxs
It's been mentioned that what Google pays apple to keep Google as the default
search in Safari is included in this figure.

Not sure what percentage that is, but I've seen it mentioned several times.
Not sure about what else is included.

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submeta
Somehow happy and delighted to see this

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sssilver
Offtopic -- what's up with the digit 1 in paxton1@apple.com,
hoover1@apple.com?

~~~
jkeat
Either they weren't the first ones at Apple with those last names, or they're
avoiding bots that guess email addresses.

~~~
nikofeyn
no need to guess now that they're in plain text on a popular website. lol.

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Aron
Come on Apple. Buy Tesla. Let's go. OBVIOUS.

~~~
Aron
This site is pretty good at sniping comments that would pass a 'is this reddit
quality?' discriminator on generic NLP but I think the underlying idea is
interesting under the context of 'what now brown cow?' Elon Musk has done his
job getting EVs kickstarted. I suspect he's happy to move along and work on
tunnels and rockets. Tesla principally needs some capital security, some
quality tech managers and bench, and some just plain maturity in investor
relations. The two would do pretty well in brand alignment in general. Apple
needs, on a shareholder concern basis, to find markets of large enough size to
matter, and Tesla has its toes in some extremely large markets. Anyway that's
the hypothesis for those that want to ponder 'how does Apple do something
other than make iPhones'. Thanks for the downvotes anyway, bots.

