
Apple Reports Record Third Quarter Results - davidbarker
http://www.apple.com/pr/library/2015/07/21Apple-Reports-Record-Third-Quarter-Results.html
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danielrakh
No Apple Watch sales numbers revealed. They obviously sold millions on launch
but I believe they don't want to set expectations too high by revealing the
number until they see next quarters results. Making the overhyped launch sales
the de facto benchmark will hurt the stock in the future because it will be a
tough number to top. The more likely scenario will be that they'll wait till
the year is over and come out with an average sales number for the year.

~~~
Jerry2
Apple Watch is on a steeper trajectory than iPhone and iPad were.

>The Apple Watch has sold more units in the first nine weeks following its
launch than either the iPhone or iPad did at the same point after their
respective releases, Apple CFO Luca Maestri said on Tuesday. [1]

[1] [http://appleinsider.com/articles/15/07/21/apple-watch-
sales-...](http://appleinsider.com/articles/15/07/21/apple-watch-sales-beat-
iphone-ipad-through-9-weeks-cfo-luca-maestri-says)

~~~
danielrakh
I believe thats mostly due to the combination of the hype surrounding the
release of Apple's latest product line, and the fact that Apple has A LOT more
potential customers paying attention to it than it did when it launched the
iPad and definitely when it launched the iPhone.

~~~
__APPL__
Also Apple launched the iWatch in more countries than the iPhone and iPad,
including China (their second biggest market). The iWatch demand and initial
sales will be more front loaded than the iPhone and iPad

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jstsch
Wow. Will next year China be a bigger share of the revenue than the entire
Americas?

~~~
randomname2
Actually in China the Apple euphoria appears to have ended, Greater China
sales fell by 21% from $16.8 billion to $13.2 billion, which is part of the
reason AAPL stock is currently down 7%.

~~~
jstsch
You shouldn't compare Q3 2015 to Q2 2015, but to Q3 2014. Otherwise seasonal
effects and things like product launches play too big a role. The iPhone 6 has
been out for some time, for instance. Sales of that taper off a bit after
release.

~~~
seanmcdirmid
This oh this. The Chinese market has its own holiday season, why would you
compare Q1 to Q2?

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abhigupta
Stock is already down 6.31% in aftermarket! Geez

~~~
CardenB
Is there a reason why stock would drop so much? Did they fail to hit some
target?

~~~
frinxor
expected 49-51b revenue. rev was at 49.6. i think aapl has been beating rev
estimates for a while, while this one was right in the low end of expected

edit: was incorrect on my numbers.

spiralpolitik: Expected revenue for Q3 was 46-48b (see Q2 earnings press
release). So they beat the estimate by 1.6 billion. The 49-51b number is the
Q4 estimate.

~~~
luso_brazilian
From the press release (emphasis mine):

The Company posted quarterly revenue of _$49.6 billion_ and quarterly net
profit of _$10.7 billion_ , or $1.85 per diluted share. (...) Gross margin was
_39.7 percent_ compared to 39.4 percent in the year-ago quarter.

Investor conclusion: Apple is not doing so well. There is something wrong with
the stock market when a company post record profits, almost 40% margin (on
electronics) and that's seen as an omen.

I understand it is the opposite, brokers bet earlier that the results would be
even better and are now unloading the bets at a lower price (causing the
market correction) but even so it is amazing how detached stock brokerage is
from investment and how close it is from gambling.

~~~
airza
Part of the value of the stock is expected returns, and if the expected
returns suddenly change than the value of the stock will suddenly change too.
I don't think that it's necessarily an omen.

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obblekk
This makes it clear that Apple Watch isn't the kind of category creator like
iPhone, but rather like Apple TV.

~~~
cgriswald
I think it's too soon to make that call. I'm an early adopter of many Apple
products, but find the watch very lacking. Even my ex-gf, who works at Apple,
decided she wasn't going to get the watch.

What's wrong with it?

For starters, it's no-go for left-handed people. If you put the watch on your
right hand, the controls are all on the arm side, rather than the hand side of
the watch. On a normal watch that's not a big deal because you barely access
the controls. The solution then is to turn the watch upside down, but then the
controls are still awkward and since they made the strange decision not to
center the control. One wonders why they went with "watch" controls at all.

Second, it's not really a watch, is it? It's a lot more than a watch. A watch
for me is mostly a fashion accessory. But these things are ugly. I find it
very strange that Angela Ahrendts from Burberry is in charge of retail, but
they didn't do what Burberry does... get watch companies to make the watches
and then tack on their logo. I would _love_ a Burberry type watch (despite my
watchmaker friend telling me how much crap they are), which, by the way, has
many interactive features with my iPhone. But what Apple offered was an ugly,
clunky, underpowered second screen that I have to constantly charge.

All that said, I think they might figure out how to make a good Apple Watch
(as long as they don't treat it like they've treated the Apple TV, which IMHO,
has gone backward with each version -- give me local storage!).

~~~
Brushfire
The left-hand, right-hand issue isnt really a thing. You can change the
orientation of the display and bands such that it works for both left and
right hands. The only difference is whether the crown is on the top right or
bottom left, but it doesnt really affect usability (afaik).

~~~
cgriswald
It affected it for me. I've tried the watch on and its just not usable that
way for me. Another poster says he prefers it that way. I find the choice of
mimicking watch controls odd to begin with, and then to align them in a such a
way that they provide a different experience for different users seems odder
still.

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randomname2
The EPS, revenue and margine may have beat but when looking into the details
of the overall results they do not look good at all.

47.5 million iPhone shipments missing expectations by 1.3 million units, even
with both iPad (whose ASP came at $415 below the $426 expected), and Mac units
coming in as expected.

Greater China sales tumbling by 21% from $16.8 billion to $13.2 billion, in
the quarter when the Composite was hitting multi year highs, and the July
crash was not even on the horizon.

Guidance now sees Q4 revenue at $49-$51 billion, or below the $51.1 bn
consensus estimate, with a warning about the strong dollar.

And all this happened in a quarter in which they bought back $10 billion of
its own stock.

In after hours AAPL seems to be down 7% as a result of all this. Which is
worrying considering how big of a part of the overall market they are.

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chollida1
Apple's suppliers: AVGO, CRUS, INVN, NXPI and SWKS are also being hammered.

Possible trading strategy here, trade the suppliers, and main games makers on
apple results?

~~~
obblekk
This is a good strategy if you want to trade parts of the Apple earnings
report.

For example, INVN is barely down at all while Apple is down >7%, implying that
whatever component INVN supplies is still in demand by Apple (i.e., that part
of their earnings were not bad).

~~~
robbintt
INVN supplies the MPU6050 IMU common to most smartphones. It's a really high
quality combined accelerometer and gyroscope. Samsung also uses tons of these.
Furthermore these will likely be in everything, and they are tiny. They use a
really interesting mechanical technology combined with on-chip kalman filters.

edit: [http://www.invensense.com/products/motion-
tracking/6-axis/mp...](http://www.invensense.com/products/motion-
tracking/6-axis/mpu-6050/)

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curiousjorge
[https://www.estimize.com/aapl](https://www.estimize.com/aapl)

it's pretty amazing how spot on the estimates are to the actual figures for
AAPL compared to other stocks.

The reason it's down is probably because there was no surprise and the numbers
came a bit shy of what the estimates were but regardless, I view it as an
overreaction.

My long term outlook on iPhone and Apple is positive, they've essentially
established a monopoly on the luxury market segment which is always a growing
market with fat margins while Samsung is feeling the squeeze from Chinese
phone makers undercutting them
([http://www.usatoday.com/story/tech/personal/2014/10/07/samsu...](http://www.usatoday.com/story/tech/personal/2014/10/07/samsung-
quarterly-profit-down/16861445/)), it has a similar tone to giants that have
fallen (Motorola, Nokia failed to stay relevant after increased market
entrants that ate into their margins). Samsung's immediate response will be to
continue to spend big bucks on R&D since they can't copy Apple anymore while
nothing stops Chinese companies from copying Samsung (as Korean conglomerates
behave ruthlessly on it's home turf, so do the Chinese) and reaping the
benefits of piggybacking. Also growing wages and demand for increased social
welfare in Korea evidenced by the foul cry over the recent merger of Samsung's
holding companies, screwing over it's investors and seriously putting a smear
on South Korea's corporate governance, market trust is low (message is clear,
if you invest in Korea, you can't fight the powerful conglomerate families or
the government which share the same bed, see Morningstar) from the failure of
government to lay down the law (so much for President Park's promise to reign
in the _Chaebols_ or conglomerate families).

The downfall of Samsung might play right into Apple's hands if they launch a
surprise attack and release a phone in this segment with cheaper hardware but
with the same good software.

Considering Samsung has a repeated history of copying market innovators,
undercutting to win significant market share, and dragging out the legal
process until finally settling, failure to break into the luxury market will
be the downfall for Samsung's phones in an increasingly decreasing margin
game.

All of this is great for Apple.

edit: Someone accuses me of being an Apple fanboy when I'm an Android user
happy with his Motorola phone, I don't see why that changes anything. Sent
from my Android phone.

~~~
tosseraccount
Apple has moved from traditional tech to consumer devices.

College kids may one day decide Apple is not cool.

~~~
Bud
Just standard trolling about how Apple's success is transitory, without merit,
and due to people finding them "cool" for no rational reason.

~~~
tosseraccount
(I'll bite)

Consider this :
[http://finviz.com/map.ashx?t=sec](http://finviz.com/map.ashx?t=sec) (finviz:
a heatmap visualization of the stock market )

Note that Apple is in "Consumer Goods", not "Technology".

At least one market analyst thinks their competitors are Proctor & Gamble and
Coca Cola.

~~~
avn2109
People say Apple is a tech company or a toys for millenials company, but I
claim that fundamentally Apple is a _user experience_ company (maybe the only
one).

They dominate because Steve Jobs realized what business they're in, and none
of their competitors have. This is like when the railroads' lunch was eaten by
the tractor trailer because the railroads thought they were rail companies,
when in fact they were transportation companies. Samsung and all the other
competitors think they're in the device business, but they're not. They're in
the UX business.

It helps to have Steve Jobs, who was actually a user experience zealot and in
a normal org would have been the CUXO, masquerading as a CEO. As an example,
think of the difference between being an Apple vs. Samsung customer, all the
way through the value chain. Shopping in that beautiful airy Apple store,
experiencing those matte textures and ingenious packaging while unboxing your
new devices, the industrial design wizardry that constructed a machine with
such amazing fit and finish and tight panel gaps and textures, software that
(sometimes, mostly) just works.

Jobs was a strong enough leader to make a bunch of mostly-orthogonal
disciplines (e.g. manufacturing, industrial design, software engineering,
packaging design) subservient to the company's ultimate objective, which is
UX. It doesn't hurt that Apple tends to execute best-in-class on each of these
axes, but that's tactics not strategy.

The big question for the future is whether Tim Cook understands this. It's
left as an exercise for the reader whether the Apple watch is a product made
by a UX company or by a company intent on duplicating the financial success of
the ipad and iphone by cargo-culting the "create new device class" methods
that worked before.

~~~
TheOtherHobbes
UX and ecosystem, which includes the software, services, content, and work of
other users. The hardware is a key into the walled garden.

Apple's biggest asset is the fact that it's the only computer company to care
about UX. All other companies try to sell computers as if they're engineering
or business tools designed for engineers or business people.

So you'll often get a load of crap and bloatware which is only really there to
underline the fact that a lot of engineering has happened. (It's like Japanese
hifi which always has something like "SuperDynamic Extra Bitwidth
HyperTechnology" on the front somewhere, so you can tell it's not just another
generic amp, or something.)

Only Apple tries to sell computers to non-technical people.

Nokia would have done the same thing if they'd moved into the computer market,
but they didn't. They got very close with phones, but Nokia were never run by
a dictator, so the culture was too unstructured and chaotic to really nail it.

Microsoft tried it with Win 8 but got it unbelievably, insanely wrong, mostly
by thinking all you have to do is dumb down the UI and add really loud
colours. (Clue: no.)

Unfortunately I think the plot has been lost with Watch, which is a lifestyle
product whose only real point is to be a lifestyle product.

Unlike everything else Apple has made, it's not obviously useful and trying to
be beautiful - it's trying to be beautiful, because Apple.

I hope that's not the beginning of a trend. Maybe a serious use case will
appear, but it's clearly not doing it for the market yet.

~~~
arjunrc
I agree with yours & the parent argument very much. I feel like the Watch
could usher in Security/Identity features, that no other consumer device is
capable of.

Imagine not having to carry your Company ID card, your
credit/debit/loyalty/gym card or any home/car/locker keys or your
insurance/drivers license whatsoever for the rest of your life.

This combine with tracking your health, could be its USP.

As the hardware evolves (in 2 years - where its hopefully independent of your
Phone), all you need is your watch to go to the gym, or take your dog for a
walk.

Iteration/Execution is key, of course. As long as Apple realizes its more
important to fix bugs & not keep adding broken features to more broken
features (like Apple Music & iTunes 12.2 - which have been horrible IMHO) they
should have enough of a user base to make the Watch a household product like
the Phone.

