
Apple Reports Q2 2018 Results - take4
https://www.apple.com/newsroom/2018/05/apple-reports-second-quarter-results/
======
oflannabhra
One thing that is consistently amazing is how accurate Apple's guidance is.

Horace Dediu: "How accurate is Apple’s Guidance? Over the last 23 quarters the
average error has been 2.63% (measuring from top of guidance range)." [0]

[0] -
[https://twitter.com/asymco/status/991345104848867333](https://twitter.com/asymco/status/991345104848867333)

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diminish
Imho this isn't chance but Apple management has several tools to realize it.
My guesses are specific operator campaigns, pricing, supply.

What's surprising is the absence of extreme overshoot. I think smartphone
market has matured enough.

~~~
scarface74
They are also already a month into the next quarter by the time they announce
it....

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chollida1
My notes:

Numbers:

\- Q Rev. $51.5B to $53.5B, Est. $51.4B

\- Q2 2018 revenue of $61 billion, equaling analyst's estimates. That's 16
percent growth from a year ago. It's the fastest year over year expansion
since 2015

\- Apple sold 52 million iPhones in the second quarter, compared to 50.1
million units in the year-ago quarter. This represents year-over-year 3
percent unit growth and 14 revenue growth

\- services revenue up 31 percent from a year ago and 8 percent from the
preceding three months.

\- Quarter over quarter, iPhone sales fell 32 percent in terms of units and 38
percent in terms of revenue. The average selling price was $728 per phone
compared with an average estimate of $740.

\- The iPad made gains from a year ago. Apple sold 2 percent more in the
second quarter from a year ago with a 6 percent revenue gain. It sold fewer
Mac computers compared with a year ago and revenue was flat.

\- other revenue, watch, pay, tv, etc Revenue was up 38 percent from a year
ago.

\- Cash at end of 2Q $267.2 billion vs $285.1 billion q/q

\- est. 3Q operating expenses $7.7 billion to $7.8 billion

\- est. 3Q tax rate about 14.5%

Commentary:

\- apple store now has 270 million paying subscribers - that's 100 million
more than a year ago.

\- \- In a note to investors, Morgan Stanley said it expects Apple to hike its
capital return program by $150 billion to a total of $450 billion in returns
by 2020. This would be up from the $300 billion program announced last year,
which was expected to run through March-2019. Apple is also expected to up its
quarterly dividend to 0.945 cents per share, up from the current 63 cents,
according to Morgan Stanley.

\- Apple was the largest non-financial issuer of U.S. investment-grade bonds
last year.

and from Jon Elichman this was intersting

Number of iPhones sold in Q2:

Q2 2018: 52.2 million

Q2 2017: 50.8 million

Q2 2016: 51.2 million

Q2 2015: 61.2 million

Q2 2014: 43.7 million

Q2 2013: 37.4 million

Q2 2012: 35.1 million

Q2 2011: 18.6 million

Q2 2010: 8.8 million

Q2 2009: 3.8 million

Q2 2008: 1.7 million

~~~
IBM
>\- music now has 270 million paying subscribers - that's 100 million more
than a year ago.

That has to be wrong. They were at 40 million a few months ago.

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chollida1
Your right, not apple music, I mistranslated there:). Appreciate the fact
checking:)

~~~
nkkollaw
You're

;-)

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jonknee
Some scale for the new $100b buyback program... Larger than the market cap of
all but 51 of the S&P 500 (with one of those being Apple!). That's nuts!

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diminish
Are there any risks with such a huge buyback in 2019 to 2020 in a mature
smartphone market and in the absence of other growth drivers next to iPhone??

~~~
jonknee
They have the cash and people generally invest in AAPL for reasons other than
having a stake in a bond fund, so it makes some sense. Buybacks vs special
dividend are debatable, but impossible to say what is better until you see the
future share price. They did hike the dividend substantially too so they're
playing both angles.

~~~
rdlecler1
Buybacks will also increase the dividend yield as dividends are distributed
across a smaller number of shares.

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jonknee
No, it will decrease the amount of money they have to pay out in dividends
though... Theoretically the yield would decrease since the share price should
increase as shares are bought back. That said, they did also announce a
dividend increase which should counteract that.

Think about it in round numbers, if there are 1 billion shares and a $1
dividend it's $1bn per dividend payment. If they buy back 100m shares, the
next dividend payment would be $900m.

tl;dr dividends are declared on a per share basis, not a total amount that is
divided by the current number of shares.

~~~
__blockcipher__
Come on dude, this is totally wrong.

Dividends are expressed in per share basis but that's not actually how it
works, a set amount of money is set for dividends.

Share buybacks increase your % ownership of a company (if you're a
shareholder), directly increasing the intrinsic value of your shares

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ChuckMcM
That is a pretty stellar earnings release. Congratulations on another quarter
of excellent execution!

I think what Apple needs are some barbarians at the gates. Something which
challenges them to be greater than they are, rather than sitting back on their
laurels. I continue to be surprised that they don't step into the cloud
computing pool. There are some solid advantages to having a cloud
infrastructure that you can use to deploy new initiatives at scale.

I also wish they would spin out their computer business (Macbook, Ma Pro, Mac
Mini, iMac) into its own division. While I chided Google for creating
Alphabet, having your own identity can sharpen your focus if it is done well.
It would also let them decide where they wanted to go with some of the legacy
product lines.

~~~
microtherion
> I also wish they would spin out their computer business (Macbook, Ma Pro,
> Mac Mini, iMac) into its own division

To me, one of the core strengths of Apple is integration of all its devices,
and it seems to me that creating separate divisions competing with each other
would risk undermining this integration.

In the late 90s, I heard hair raising stories of how various divisions at Sun
were operating at cross purposes due to a myoptic focus on their own balance
sheets. I believe you worked there. In your opinion, were the competing
divisions a strength or a weakness of Sun?

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ChuckMcM
It is true, Sun did it poorly :-) What Apple has that Sun didn't are vertical
product stacks. A 'Macintosh' company has its own hardware, software, and
(shared) sales channels. The 'iDevice' company has its own hardware, software,
and (shared) sales channels. I think that separation could work.

From where I could watch, Sun's biggest issue was that they forgot they were a
systems company and started trying to be a components company. They had also
pretty much become completely afraid of 'open' systems at that point. Playing
tricks on competing SPARC computer companies, screwing up the OS portability,
etc.

~~~
microtherion
As far as I can tell, Microsoft suffered similar problems, with their desktop
oriented divisions occasionally holding back the mobile divisions. It's not
like Apple never suffers from any organizational dysfunction, but I feel that
separating divisions actively _incentivizes_ dysfunction.

macOS and iOS share quite a bit of software, both in the sense of code bases
that have overlap on the two platforms, and code bases that need to work
together (e.g. for handoff, or features like Apple Watch unlocking a Mac). Not
so sure about the hardware situation, but there is at least some sharing going
on. And in many cases, the _people_ behind the technology are shared as well.

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Analemma_
I'm kind of thrilled to see Mac revenue flat and unit sales down 3%. I was
really worried that these keyboard problems wouldn't have any effect on the
bottom line and give them an excuse to ignore it; hopefully this is setting
off alarm bells and getting them to see that, yes, it really unacceptable and
needs to be fixed.

~~~
loudmax
I hope that's Apple's response too. But I fear they might just conclude to
that their expertise is in cell phones and they shouldn't invest too much in
laptops after all. Maybe introduce some more gimmicks and see if anything
sticks. I really hope I'm wrong. I'd love to see an MBP I could get excited
about.

~~~
rdlecler1
I think that would be a mistake. I believe at least, that Apple owes a lot to
the size of it’s developer computer. Get them off Apple and you’re one step
closer to Android, then you start developing apps for non-Apple products.

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ihuman
MacStories has some visualizations with data from previous quarterly results
[https://www.macstories.net/news/apple-q2-2018-results-xxx-
bi...](https://www.macstories.net/news/apple-q2-2018-results-xxx-billion-
revenue-xxx-million-iphones-xxx-million-ipads-sold/)

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uptown
_APPLE SEES 3Q REV. $51.5B TO $53.5B, EST. $51.4B

_ APPLE 2Q REV. $61.1B, EST. $60.9B

 _APPLE REPORTS NEW $100B BUYBACK PROGRAM, BOOSTS DIVIDEND BY 16%

_ APPLE 2Q IPHONE UNITS SOLD 52.2M, EST. 52.3M

~~~
take4
Also they have services at 9.2B vs consensus 8.4B, which is a fantastic beat
and 31% growth YoY.

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guelo
$100 billion buyback? I thought cash repatriation was supposed to lead to an
explosion of onshore investment.

~~~
bertjk
It is an onshore investment. They are investing in Apple stock.

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antirez
I think the Apple future may not look good for a few reasons:

1\. iPhones units sold stalled for 3 years in a row. This means the company
need to seek every year some trick to earn more from each phone. It is not
obvious if they'll be able to do for a long time.

2\. Top Android devices are improving and Google Pixel 2 is really an
incredible device that is making some iOS users switching. I've no data but my
nerd friends are doing this a lot, and sometimes what you see in the nerd-
sphere in a few years happens in the normal market.

3\. They are struggling at competing in the space of the biggest ecosystems
around phones. Cloud, computational photography, assistant.

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gressquel
2\. No, iOS people are not switching. They are staying but not buying newer
models due to lack of innovation. Personally I would never switch to the
cesspool named Android. Laggy, malware infested garbage

~~~
craftyguy
> Laggy

At least Google isn't making your phone laggy on purpose! (too soon?)

Joking aside, there are a lot of sketchy, crappy Android devices, but there
are also some decent ones (e.g. straight from Google). I suspect you've only
been exposed to the crappy ones.

~~~
shyn3
Google has tried to release a phone before and they fail hard. The phone stops
getting updates. If you want an android device with updates you have to get a
BlackBerry.

Android OS is horrible because it's always different. From release to release.
From phone to phone. Everyone has their own little tidbit to add and makes it
non uniform.

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craftyguy
> The phone stops getting updates

What? They provide major OS updates for 2 years, and security updates for 3
years.

> Android OS is horrible because it's always different

Are you referring to OEM modifications to Android? It's really hard to follow
your rant.

~~~
djrogers
> They provide major OS updates for 2 years,

In iOS land, 2 years is just getting started for OS updates - generally you
get 5 years or so. That's one of the reasons so many iPhones get handed down
and resold compared to Android devices.

~~~
craftyguy
Hence the stalled iphones sales growth. I don't disagree that having a phone
that is supported by the manufacturer for so long is a good thing, I very much
agree with this! But if the manufacturer loses incentive to do so, then don't
expect them to continue doing it for long.

