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Apple Financial Results – Q1 2019 Conference Call LIVE (apple.com)
57 points by ahakki 49 days ago | hide | past | web | favorite | 62 comments



Notes.....

Pre Release:

- first time since 2001 that Apple will report a decline in its most critical quarter

- Options showing an implied 5.6% one-day change.

- Slightly higher than the average move of 4.4% following the last eight releases

- Shares traded down on day on average volume

- Market Cap is now below AMZN, GOOG, and MSFT

Numbers:

- cash on hand(net not gross) $130 Billion

- 1Q EPS $4.18, Est. $4.17

- 1Q Rev. $84.3B, Est. $83.97B

- 1Q Service Rev. $10.88B

- 1Q China Rev. $13.17B down big from $17.9 last year

Revenue by Product:

- iPhone: $52 billion

- Services: $10.9 billion

- Mac: $7.4 billion

- Wearables/Home/Accessories: $7.3 billion (up from 5.5 billion last year)

- iPad: $6.7 billion

- reportedly returned $13 billion via buy backs and dividends last quarter

Forward Numbers:

- 2Q Rev. $55B to $59B, Est. $58.97B

Misc:

- suppliers up slightly

- North America grew revenues.

- user base is at 1.4 billion, impressive that they rival FB in metrics like this when FB is free and iPhones are most decidedly not.


$13 billion in revenue from China last quarter, down 27% from a year ago https://www.cnbc.com/2019/01/29/apple-china-revenue-q1-2019....


Do we have any reliable information if this is just Apple or if Chinese consumption is down across the board?


As per [1] overall Chinese smartphone market is down 11%. Huawei seems to be doing good in China, Xiaomi/Oppo may have seen some decline in China but they made up for that in India where Apple is negligible.

[1] https://www.strategyanalytics.com/zh/strategy-analytics/blog...


They are all down (their economy in general), but there is also a concerted effort by some in China to not use Apple products, especially after the Huawei incident.

> Chinese companies are now threatening employees by demanding they not purchase any Apple products whatsoever, going so far to withhold bonuses, garnish wages or even terminate an uncooperative employee.[1]

[1] https://9to5mac.com/2018/12/24/huawei-iphone-termination-app...

The Chinese courts also blocked iphone sales in China over Qualcomm. My understanding is the newest line of phones weren't affected (they used intel modems), but it affected the older models - which are obviously cheaper and more attractive to the avg. Chinese person compared to the $1,000+ flagships.

Both might not be huge factors in themselves, but probably contributed to Apples decline more than the other brands. It wasn't a proportionate decline across all brands. Apple was hit harder.


>The Chinese courts also blocked iphone sales in China over Qualcomm. My understanding is the newest line of phones weren't affected (they used intel modems

The Qualcomm patents in the China suit were software patents unrelated to cellular modems.

>The patents allow users to edit and resize photos and manage apps by using a touchscreen, according to the lawsuit.

https://observer.com/2018/12/qualcomm-lawsuit-iphone-ban-chi...

Apple has already issued a patch with a software workaround.

You may be thinking about the case in Germany.


Across the board.

>DONGGUAN, China — China’s consumers and businesses are losing confidence. Car sales have plunged. The housing market is stumbling. Some factories are letting workers off for the big Lunar New Year holiday two months early.

https://www.nytimes.com/2018/12/14/business/china-economy-xi...


Samsung is seeing the same hit out of China.

Jan 8 "Samsung said fourth quarter profits would likely come in at around 10.8 trillion Korean won ($9.67 billion), well shy of the market consensus of 13.2 trillion won, with sales falling 11% to 59 trillion won. Samsung only has a 1% share of the China handset market, compared to around 9% for Apple, but its chips and screens make their way into handsets made by Huawei Technologies, as well as Apple's iPhones, and that segment comprises a much larger portion of its operating profits"

https://www.thestreet.com/investing/stocks/apple-v-samsung-c...


Nvidia also reported Chinese consumer consumption being down in their results.


1,4 billion user-base? I wonder how they calculate this. It looks like non-unique users (devices connected). Or maybe lifetime accounts number.


According to Tim Cook on the earnings call he called it "active install base". Make of that what you will.


Sounds like actively used devices. Which means the number of users is lower as some/many people use more than one Apple device.


Are they counting iTunes on Windows?


Well, he didn't say happy users.


I believe it's the number of unique devices that connect to one of their services in a month, or something similar to that.


That wouldn't be a user base though. People have N apple devices each. Could be unique appleIDs to use the appstores.


Since you need an Apple ID to access their services, I'm sure it's easy to deduplicate users.


Average per customer is based on the Apple ID. User base is number of devices. Don't have a quotable source though.


Maybe distinct count of Active Apple IDs?


Let’s look at the numbers and compare it to the HN narratives.

https://sixcolors.com/post/2019/01/apples-dramatic-q1-2019-r...

1. People are abandoning Macs: Revenue for the Mac is tied for its highest quarter ever.

2. The Apple Watch is a failure/AirPods and abandoning the headphone jack is hurting Apple: Wearable and home accessories are higher than ever.

3. Apple made a mistake by raising iPhone prices: Despite Apple’s missing its revenue predictions. This is still it’s 2nd most profitable quarter ever. It’s only under its most profitable quarter by around $100 Million.


> compare it to the HN narratives

Seems like you constructed a strawman to knock down. This site contains diverse opinions that you'd find in any community of large enough size.

PS - The graphs are very attractive, but it is unclear if they're inflation adjusted. $6.9B in Q1 2015 Mac Revenue dollars is worth $7.42B in 2019 dollars.


Yes, he made a mistake, it's not HackerNews fault, it's every single mainstream media outlet out there.

You'll see things like "flagging iPhone sales", "failing iPhone sales", "post-iPhone era", "iPhone sales slump", etc. etc. etc.

You'll start to believe that.


You better believe that iPhone sales have fallen pretty dramatically, because that is exactly what Apple has just reported.

However, what I would like to know is whether Apple has lost market share outside of China. I would also like to know whether Apple's share of mobile usage has declined.

I think these questions are a lot more important to developers than quarterly financials.


Developers don’t care about market share. If they did, they would have been prioritizing Android years ago. Developers care about reaching people who are willing and able to spend money. Statistically, that is still iOS users.


I agree that the share of spending on each platform is the most important factor for developers. But if market share declines were beginning to affect Apple's share of mobile usage, then that would be a worrying trend for iOS developers.

Apple does have far wealthier customers than Android, but compensating for market share losses by moving ever further up-market would be a dangerous strategy in my view.

If middle class kids are priced out of iOS, they're unlikely to come back later when they make their own money. Same for people from less wealthy countries. I do not believe that this idea of being the "aspirational product" applies to computing platforms in the same way it may apply to expensive cars.

But I was just asking questions. I'm not making a claim that any of this is actually happening right now.


I wouldn’t think that most middle class kids are buying their own phones. Either their parents are buying them or they are getting hand me downs.

My son had a 2018 Moto G, he was more than happy to “upgrade” to a 2015 iPhone 6s. Mid range Android phones are nowhere near as performant as iPhones that are 3 years older. Refurbished, used iPhones are cheap.

Besides, it seems to be a habit when people talk about iPhones they act as if the only iPhones that Apple sells is the maxed out $1500 iPhone XS Max. Completely ignoring the $475 iPhone 7s that will still give you better performance than most Android phones and get years of updates.


Obviously kids are not buying their own phones, but someone is paying for them in some shape or form (hand-me-down phones are not free either).

The average selling price of iPhones has gone up pretty sharply. We don't know yet if that is what's behind the drop in sales because China is such an idiosyncratic market, but I think the answer matters.


And mobile carriers like T-mobile are increasing the length of their payment plans from two to three years. Apple is also starting to push their payment plan/trade in program harder.

They are all trying to do phone-as-a-Service with continuing subscription payments where you never pay off the phone. Psychologically most people only care about the monthly cost. I’m not saying that is wise.

Unless my son breaks his iPhone 6s that I bought for myself in 2015 for $750, I don’t see any reason it won’t be a good phone for another two years and the rate things are going, it might still be faster than your average mid range Android phone in 2020.


Apples moves don't matter.

iPhones last longer and going rates for second hand ones speak volumes for themselves.

Also, Apple sells more products than the top of the line XS Max, they have plenty of middle of the road models like the iPhone 7, which is still faster than any Android phone ever made.

If you really care about it, why don't you talk about the regaining iPad? Are you selling Apps for themselves? iPad is the prime platform and with Photoshop coming, it will only do good.

Apple says they have now 1.4 billion active devices.


>Apples moves don't matter

I think this claim is not on very firm footing until we learn a bit more about how Apple's higher average selling price is affecting markets outside of China.


Then just look at Android... the stumble is global and bigger than Apple.

Go develop for Android, they are needing it.


Why would I go develop for Android because they are needing it? Android is not a charity. I don't care what they need.

All I want to do is find out what the underlying trends really are. You're trying to create some sort of controversy that I don't really understand.


> However, what I would like to know is whether Apple has lost market share outside of China.

Apple has been losing market share for some time, it was relatively flat on units sold while the market was increasing. See e.g. this from a year ago: https://communities-dominate.blogs.com/brands/2018/02/apple-...

> at one point Apple did 20% of all smartphones sold. The last three years? 16%, 15% and now 14%.


Yes, but the question is whether that translates into lower usage share or if it's just a reflection of the fact that the useful life of iPhones is longer than that of Android phones.

Also, I am more interested in what's going on outside of China, because China is not representative of anything else for various reasons.


No one does inflation adjusted year over year comparisons.


They do if they want accurate comparison of growth. Otherwise you're just measuring inflation by proxy.

A lot of companies are actually flat when you adjust for inflation.


I’m not arguing that you are not technically correct.

I am saying that when analysts and companies compare year over year growth, they generally don’t express it in inflation adjusted terms. If that were the case, Microsoft reached an inflation adjusted market cap of $1 trillion right before 2000 I believe.


Looks like a significant drop in iPhone YoY revenue.


That’s true. But if they made up for it by focusing on services, isn’t that the sign of a well run company?

No one derided them when iPod sales declined and the iPhone was growing. That would also be like critizing Netflix’s cratering DVD business while ignoring their streaming service.


What a confusing post.


A 15% drop in iPhone sales, but net income stayed the same.

~$60B in net income in the last 12 months, and the market cap minus shareholders' equity is now ~$610B.

Apple could afford to pay a 10% dividend (on the share price ex shareholders' equity) just from its earnings, without touching cash. And that's with iPhone sales dropping 15%.


> net income stayed the same

the WSJ article says it was helped by a tax rate that declined to 16.5% from 26% a year earlier prior to the 2017 tax overhaul.


The operating income shows the income drop that the big tax rate change (which won't repeat next year) is helping to soften in the net income figure.

A decline from $26.2b to $23.3b, or 11%.


True. Still, the argument that AAPL is undervalued still stands even if they did $55b in net income next year. Or $50b.


Couple of interesting tidbits:

* Calling out challenges with China's App Store on app game approval.

* Appreciation of dollar on international markets.

* Subsidized iPhones are making people less incentivized on purchasing a new phone.


Apple discloses Services margin for the first time and it was 62.8%!


This is what they need to cut if they want to sell phones.

Get people gaming on iOS devices and they will buy the latest and greatest hardware to get the best experience.

But if all you can play are casual games, your experience can get no better.

Take a page out of Epic and Valve's book:

- Cut commissions to 12% for app store purchases

- Find a way to promote full-priced games, and demote free-to-play

- Offer one good free game every fortnight to your entire customer base

- Allow refunds within two weeks and if under 2 hours played

- Sell an official Apple game controller

- Offer centralised Achievements and friends

- Sign up exclusive deals with the best studios

- Discourage games from supporting older versions of iOS. Deprecate the iPhone 5S in iOS 13 so that developers no longer have to support that unique screen.

- Focus more on battery life (including bigger batteries) to allow longer content sessions


The 5s has the same screen as the SE.


Well, yeah, taking money from Google for positioning does tend to have pretty high margins...


What I want to know, how many SE's did they sell in the past week to beat EPS by a cent?


Stock up 5% after hours on Cook news.


Is a company like Apple actually any good for world’s economy ? They seem to be hoarding too much cash without spending any significant portion of it.

I dont care about companies earning money however i care if they dont invest back.


They return their cash to shareholders via dividends and share buybacks, letting those investors allocate it to wherever they expect better returns. Apple doesn't need to become a conglomerate or start a corporate VC arm themselves.


No, they don't, apparently. According to the top post in the thread, they have $130 billion in cash on hand.


That's nothing. They had a profit of $100 billion last fiscal year.

It's the same as someone having 15.6 salaries in their bank account (not counting for the loans).


Don't understand this comment - seems to me Apple spends a _lot_. From their Q1 financial statement, cost of sales ("buying stuff and services") is $52.3B, and R&D and admin expenses are $8.7B. I think it's fair to say $61B is a "significant" amount they're spending during the quarter...


On top of that, they owe almost the same amount of money they have, and that's their target: cash neutral.


Do companies physically warehouse cash? No, they deposit it in the banking system, or buy treasuries with it, right? It's being invested in the world economy, just not directly.


True, but what about cash in excess of what you need to keep for operations?

You’ll want to put a reserve in something safe, like treasuries.

You’ll want to invest some in somethingnhigher Heike for opportunistic needs, like an acquisition or, in Apple’s case, locking in pricing with suppliers (most companies can’t afford that).

But if you have more than that? Might as well return to shareholders since they aren’t investing in you for your stock market prowess, but for your computer manufacturing and sales prowess.

Apple had a problem for a while with that middle category: they were the fastest growing large cap stock so there wasn’t anything better than their own stock to buy.

This is an interesting problem to have. Imho they still should have paid out more dividends, but what they did was probably more tax advantageous.


Apple spent $60B in 2018 buying supplies and components from 9000 US companies.

As for investing back, here's one Apple PR story about Finisar, in which Apple invested $390 million to produce VCSELs in Texas.

https://www.apple.com/newsroom/2019/01/component-manufacturi...

Apple is not just sitting on its cash but making strategic purchases as it goes forward.


AHAH, I'm rich now, I bought shares this Monday (lot's of them, for what money I had), because I know no matter what happens (Apple hit on point their revised estimate of $84B), their stock was completely under-appreciated.

I'm going to sell this when the new iPhones come out next September, because it's always the same game every year.

People, it's free money, don't believe me?

https://www.youtube.com/watch?v=wwHlKbfX_0Y

This video was made last year!


Why didn't you buy call options instead if you're so sure? Could make a lot more.




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