
Apple Had Five Ways to Fuel Earnings. Only One Still Works - pseudolus
https://www.bloomberg.com/opinion/articles/2019-01-03/questions-on-apple-aapl-earnings-strategies-after-outlook-cut
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whitepoplar
I can't quite put my finger on it, but Apple products feel like they've lost
their soul. I remember buying my first Apple computer back in 2004, a 12"
iBook G4. It was mesmerizingly good. It wasn't objectively the fastest and I'm
sure other people can point to other computers that ticked more boxes, but the
computer just made me want to use it, look at it, and admire it--the green
glow of the power connector ring, the white cables, the "breathing" sleep
light, the high quality polycarbonate, the FireWire port in case you wanted to
connect a pro-level video camera--it all screamed "I'm a high quality product
with a soul." Not to mention that OS X seemed much more stable than it is
today.

I have a 2018 MacBook Pro and while I think it's objectively the best MacBook
Pro they've ever made, it's just depressing to use. It feels like all the
desire has been sucked out of it. It doesn't feel like Apple is making the
best computer they can make, it feels like they're making the best computer
for their bottom line. Most importantly, it feels like Apple has lost respect
for their customers.

~~~
jf-
It would help if the MBP were actually a professional level device instead of
being a souped-up, hyper-expensive consumer laptop.

That would mean more ports, a higher minimum spec, and the ability to upgrade
the internals. The touchbar could be dropped entirely, it’s really just a
marketing gimmick.

~~~
r00fus
The lack of touchbar (retaining the touchID login) is one of the reasons I'm
digging the latest MB Air. The ports issue... I'm not sure if Apple will ever
resolve that.

~~~
whitepoplar
How's the screen? I've heard it's less bright than the MBP.

~~~
neilsense
I mean you could compare the figures for the nits but, as an example, I feel
like my retinas are burning off at 100% brightness.

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nicoburns
I find it odd that being a big in a large market that isn't growing (like the
mobile phone market) is seen as a problem. Why does the company need to grow
if it's profitable as it is?

I think what apple will find is that the market won't stand for their high-
priced iPhones forever. If they have any sense, they'll notice this and put
their prices down again.

~~~
nemild
Because for shareholders, the stock price only appreciates if the company
grows.

In many ways, it mirrors the issues for Hacker News entrepreneurs. To get VC
capital, you have to dangle promises high returns on your equity — even if a
consistent cashflow business is a great outcome for an entrepreneur (these
businesses are pejoratively called "lifestyle businesses").

~~~
zip1234
Which is why dividends exist. Mature companies may grow less, but they produce
profit, which can be distributed to shareholders in the form of dividends.

~~~
oarabbus_
Dividends are not some magic; they are taken out of the share price. There's
not really a difference between reinvested dividends vs. no dividends at all.
And non-reinvested dividends are less optimal as you'll pay taxes on them, so
you actually have less net worth from collecting and not reinvesting dividends
vs. either reinvesting them, or investing in a company which doesn't yield a
dividend.

It's a fallacy that many people fall for though. See Berkshire Hathaway for
the prime example.

~~~
nradov
Some public companies choose to return cash to shareholders through share
buybacks rather than dividends because it's more tax efficient.

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JohnJamesRambo
Isn't the main problem the same one that beset PC manufacturers as the
computers got fast enough that no one needed to upgrade anymore? Couple that
with Apple making phones that cost >$1000 and it seems like the natural end
this was headed to. My iPhone SE does every single thing I need a phone to do
and it costed about $99.

~~~
pacaro
I’ve had similar thoughts. I currently have an iPhone 6S, I’ve had it for 30
months, and don’t really have a need to change it. I remember when I started
changing laptops only when they broke, and it’s a similar feeling

~~~
throwaway427
I've had my 6S Plus now for 36 months and definitely don't need a change,
though I do like the screens on the newer iPhones.

One interesting thing about the my phone is I managed to crack the screen on
the 3 iPhones I had before, sometimes multiple times. I've put this one
through hell and back and it just keeps going. I wonder if the build quality
(not just features and performance) has been a factor in slowing upgrades...

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giancarlostoro
The problem I see is that as the iPhone became big they shifted focus towards
it instead of trying to focus on everything they already have. But I could be
wrong, and maybe someone else might have more insight. I want Apple to
succeed, same with Microsoft. They are imho necessary companies, otherwise
we're stuck with whatever Google, Facebook or Amazon feed us.

~~~
scarface74
The mobile phone market was already becoming the largest electronics market in
the world before Apple entered it. It made perfect sense to focus on that.

Eleven years later, there is still not a single electronic item that is larger
than the smart phone market.

PC's aren't making a comeback, TV's are low margin and bulky, etc.

~~~
giancarlostoro
You still need proper machines to develop for those phones though, and since
Apple requires Macs for it, they really should of never neglected their
computer market. I am pretty damn sure if they hadn't we'd have seen a lot
more Macs all throughout. Now we're seeing plenty of dedicated Mac users jump
ship to Linux or even Windows 10.

~~~
oflannabhra
I think you misunderstood the parent comments point. “PCs aren’t making a
comeback” doesn’t mean they disappear entirely. It means that they’ve now been
relegated to niche use cases, like the ones you point out.

Not only have mobile phones cannibalized the “a PC on every desk” for people
at home, they’ve expanded to “a computer in every pocket”.

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nostromo
The real story here is the sharp economic downturn in China.

The fact that Apple hit or exceeded their sales goals in most regions but
crashed in China is telling.

Perhaps China is decoupling from global growth much like Japan did in the
early 90s.

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PopeDotNinja
Speaking only for myself, a single iPhone has always cost more than I want to
pay. I'm doubly concerned with dropping it. My main thought with buying a
phone is would I be willing to buy a second one if something happens to the
first one.

~~~
mtrpcic
Out of curiosity, do you have that same mindset (i.e. a factor of your
decision to purchase is whether or not you're willing to buy another one if
the first one is unusable) with anything else in your life? Also, Applecare+
is a worthwhile deal if you're that concerned about breaking the phone (and
probably even moreso now with the glass-backed phones).

~~~
ethbro
The difference for me is the "good enough" factor.

I'm fine with paying an explanation premium to go from 90 -> 100%
functionality.

But only when 90% functional doesn't already cover my needs.

Apple goosed the iPhone price exactly as phone processors started hitting
Moore's cliff of diminishing performance returns. High performance across the
market + most users served by "good enough" processors = commodity

Apple's never done well with commodities.

~~~
iainmerrick
“Moore’s cliff”?

iPhone processors (unlike Macs) are still getting much faster every update.
You can debate whether that extra speed is actually useful in everyday life,
but they are getting faster.

~~~
ethbro
The A12 made some extremely smart memory µarch changes and benefited from a
node shrink to TSMC's 7N.

We'll see how EUV scales for everyone.

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fitzroy
To summarize the comments here...

Apple sells outrageously-overpriced commodity technology, coupled with
gimmicky features, buggy software, and planned obsolescence, to naive
consumers who buy it every year regardless.

AND

Apple’s products are so well-designed and reliable that customers remain
satisfied for years and don’t feel the need to upgrade on an annual basis
because their current devices do everything they need.

Also, Apple’s constant incremental innovation combined with the fact that they
stopped all innovation a decade ago (save for headphone jack removal) will be
the death of the company.

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alt_f4
Here's an idea on how to make billions selling a product in a market that
seems in decline.

1) Take the latest Macbook Pro

2) Remove the Touchbar, add back F row buttons and ports.

3) Replace the LCD with a 4K OLED display with thin bezels

It is that easy.

~~~
TomMarius
Another suggestion:

1) Take the latest iPhone XS

2) Give it a better camera

3) Make it iPhone-SE sized, get rid of the huge display crop

4) Include 5G support

~~~
wklauss
You might as well ask for wings on it. So far 5G phones have to be extremely
big and ungainly as they need antennas facing in numerous directions.

(and there is a large percentage of the population that prefers larger screen
phones).

~~~
TomMarius
There is also a large percentage that prefers smaller screen phones. I know
that 5G tech isn't there yet, I didn't mean it has to be today, more like
within a year or two.

~~~
nomel
A year or two _is_ what’s being developed today.

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santhoshr
Lived and invested in India for the last four years. This is definitely not
China and I dont see the inclination among Indian consumers to shell out $1000
for an iPhone. India is the most competitive Android market in the world, with
high-end, competitive phones with same features as an iPhone retailing for
$200 - $300 (see Pocophone F1 by Xiaomi). Apple would need a radically
different game-plan if they are serious about India.

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andy_ppp
Apple will just have to make a car, release a ring, move into healthcare AI,
make their own Netflix, and come up with new things like a search engine or
something completely new (yes I know you all think search is done and it’s
impossible to compete with the incumbent). Or they could make a purchases in
cash of up to $285bn which if you take that pile of money out of their stock
price they look extremely cheap today.

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sna1l
I know that growth is obviously important, and Apple has had bigger quarters,
but estimating $84 billion of revenue with a 38% gross margin in a SINGLE
quarter is wild.

~~~
gammateam
It is important for share price speculators

The company itself is okay of course

People that overbid its shares will not be

~~~
mandevil
And employees who count on stock options in their financial plans will not be
happy.

~~~
gammateam
Correct, employees of liquid publicly traded companies should get restricted
stock units or restricted stock awards

Stock options holders simply wont exercise, and can buy shares for cheaper in
the ESPP window

Too bad about the time used in the best years of their lives though, better to
optimize that with better negotiation

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scarface74
_Financially, Apple continues to be a well-managed company. It is generating
returns for shareholders in spite of operational missteps._

What "operational missteps"?

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TheOtherHobbes
Maps, BatteryGate, the unpopular decision to kill the jack, Butterfly
KeyboardGate, the increasingly vocal unhappiness of professional users...

There are probably more, but those are the obvious ones.

~~~
scarface74
And outside of the tech bubble. No one cared.

Volume sales didn’t take a noticeable hit because of any of those issues...

And they have reported volume sales up through last quarter.

iPhone users are not flocking to Android in developed countries. Even in
China, prices have more to do with Apples issues than anything.

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gordon_freeman
One thing this article misses is Apple's strong 1 Billion+ installed base.
Here is the thing: It is hard to make more money from a few million (and
declining YoY) new devices that Apple sells every year. But Apple can make
more and more money from every Apple ID currently active. This is a big change
in their business model I agree but it just makes sense.

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buboard
Bloomberg seems to love gory stories . Apple still has quite the low P/E
ratio.

~~~
eeeeeeeeeeeee
It's not just Bloomberg. Many others have been expecting this for a while
because Apple has been disproportionately dependent on iPhone revenue and they
don't have some new product that will push them to the next level.

Both the iPad and Watch are not the home run product that is needed.

In many ways Apple's extended software support of their older hardware gives
users even less of a reason to buy a new device. I think that shows they are a
company not primarily focused on profit because they could make changes to
push people to upgrade their device faster.

It seems like they need to do more with services or start buying up some other
businesses with all that cash they're sitting on.

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karmakaze
Apple is failing the same way IBM had failed. It saw itself as a hardware
company with software only promoting hardware sales. Sure they have the app
store and apple music but that's a sliver of their income.

Apple has both failed to diversify into other areas and run out of ways to
innovate in current ones. I'm not sure why they went for autonomous cars when
they were such a easy sell as a consumer electronics brand, they could have
sold TVs and home theatre systems that are so much easier to use than existing
ones without much effort.

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phillipburch
Unfortunately, I think one of their problems is that iPhones last too long.
I'm still very happy with my iPhone 6. The spec updates aren't as tantalizing
as they used to be.

~~~
lallysingh
Don't worry. Many people buy new ones based on gimmicks (the notch, marginally
thinner devices, etc). But they're running out of those too.

Having a reputation for low quality would kill the demand they have now. Their
strategy is to entice upgrades, not to replace on breakage. Which is better,
as it makes for a happier consumer that had choices on this.

BTW: did you change your battery?

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matchagaucho
The good news for Developers is that native smartphone apps will start
disappearing over the next 5-10 years in favor of WebAssembly apps (no more
annoying app updates!) and we'll see a full swing back to a browser-based
Internet.

[EDIT: Not implying Apple will support wasm, but their plateau enables _other_
wasm-first platforms to emerge. Content providers will give away $100 phones
to secure subscription revenue.]

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jf-
Web assembly is definitely a threat to apple’s app revenues, though maybe not
an existential one. Given that apple are already experiencing a slowdown, and
big names like Netflix are trying to avoid the “apple tax”, I’d expect to see
them fight this tooth and nail. Even to the extent of blocking wasm on some
sort of security grounds, wether valid or not.

~~~
nomel
> I’d expect to see them fight this tooth and nail. Even to the extent of
> blocking wasm on some sort of security grounds, wether valid or not.

Do you have an example of precedence that supports this extremely user hostile
view of Apple?

~~~
jf-
PWA support. Safari was late to the party, and iOS doesn’t make adding a PWA
intuitive at all.

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someguydave
I wish apple would consider creating a rack-mount server to compete with
Intel. They clearly have the silicon expertise to mint their own CPUs. I
realize this isn't a sexy industry with lots of growth, but neither is the
phone market anymore.

~~~
pram
The Xserve ecosystem used to be pretty neat, but I doubt it was very
profitable. It’s hard to compete against cheap commodity servers like
supermicro and such.

~~~
wklauss
I think a case could be made about being in not-so-profitable industries if it
helps support your whole business.

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eruci
[reiterating]*

-1 points by eruci 62 days ago | parent [-] | on: Apple Used to Be an Inventor. Now It’s Mainly a La...

Apple died with Steve Jobs. No new products just same shit with double and
triple price. Shrinking customer base due to overpricing is the death of any
company and utter betrayal of Jobs vision.

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caseyf7
Apple will need to focus more on the quality of its software (which has
lagged) as the hardware is commoditized and they've maxed out our willingness
to pay more for the iPhone.

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izzydata
Not surprising when you put almost all your eggs in one basket and the fad
dries up.

~~~
arcticbull
It's been 143 years, and finally the fad of... phones is behind us.

~~~
izzydata
Having the latest and greatest marginally improved status symbol of a phone
fad.

