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Apple Reports Record Third Quarter Results (apple.com)
70 points by davidbarker on July 21, 2015 | hide | past | favorite | 114 comments

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.

Note that Apple isn't into surprises -- they announced in advance that they weren't going to break out Apple Watch sales. And they didn't. That was already priced into the stock.

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-...

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.

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

Also: the aWatch is cheaper than either the iPhone or the iPad was at launch (both cost $500 for the cheapest model, as opposed to $350 for the watch).

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

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%.

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.

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

"Greater China sales fell by 21% from $16.8 billion to $13.2 billion"

That's reading sequential quarters, which pretty much nobody in finance (who wants to be taken seriously) does, because it overlooks seasonal factors. The year-on-year figure (which serious financial people do use) is up over 100% from $5.9bn. The stock market maybe is concerned that China is too important and that if its stock market is plunging, so will sales of Apple stuff.

Wasn't that due to the Chinese New Year last year?

Shouldn't new year be every year?

Stock is already down 6.31% in aftermarket! Geez

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

Below expectations (Previous Quarter results and current quarter projections):

Here's what analysts are expecting, via the Bloomberg Terminal.

Revenue: $49.4 billion EPS: $1.81 iPhone units: 48.8 million (whisper number is 50 million) iPad units: 10.9 million Mac units: 4.9 million Revenue guidance: $51.06 billion

At most very slightly below, right?

Revenue and EPS are actually better in their earnings report.

The only thing that’s worse is that they sold 1.3 million fewer iPhones and .1 million fewer Macs. iPads are right on. Revenue guidance is $49b to $51b.

This always happens with Apple, although I admit that 6.31% is a bit on the high side.

In general, Wall Street doesn't act the slightest bit rationally around Apple. No matter how record-breaking Apple's numbers are, there's always some insane analyst that projected even higher numbers, which means everybody then reports Apple as a "miss" (even though they always beat their own estimates, and meet or beat all of the sane analyst predictions, which is most of them). And since it's a "miss", stock drops.

Really, what's more shocking is those very rare times when the stock climbs after-hours after an earnings report (or after the WWDC keynote or the annual September event).

Stock tends to over-react in after-hours trading, I think. I don't do any after-hours trading, but it seems like it usually settles in someplace before market open the next day. I'm not saying it will or anything, but that seems to happen immediately after an earnings report is dropped.

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.

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.

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.

>but even so it is amazing how detached stock brokerage is from investment and how close it is from gambling.

Funny, I reach the exact opposite conclusion: people were willing to pay a specific price for Apple dependent on the expectations of future earnings. Those earnings didn't meet expectations, therefore the market adjusted the price. Working as intended.

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.

No Apple Watch numbers = lousy start

They explicitly stated in the last earnings call that they would not break out Apple Watch sales separately for competitive reasons.

Apple never said they would be breaking out the numbers for the watch.

They missed revenue estimates by a mile. This is why serious stock watchers tend to prefer links to industry analysis and not press releases.

That is completely incorrect. They are right in the middle of revenue predictions. Slightly on the lower end, sure, but that does not qualify as missing by a mile. If you say missing by a mile I would expect at least one standard deviation.

Here is a spreadsheet of analyst predictions: http://fortune.com/2015/07/21/apple-earnings-expectations-q3...

They range from $48b to $53b.

Horace Dediu predictions are really funny

For Apple, that's a miss by a mile, sorry. And it's not like I'm the only one that thinks so -- check the stock price. It doesn't care much about downvotes either.

>>For Apple, that's a miss by a mile, sorry. And it's not like I'm the only one that thinks so -- check the stock price. It doesn't care much about downvotes either.

Pointing to the stock market as some sort of paragon of rationality is not a bright move. You may want to reconsider your stance.

I mean, I get the effect on stock prices and why it happens (people use the best available info and use past experiences with that info to calibrate their expectations) but that’s stock land. Here in the real world that’s not a miss by a mile, it’s just business as usual with no material effects on Apple’s outlook (i.e. this might be a miss by a mile if you trade stocks but that doesn’t mean there are any material consequences for Apple from this).

So people adjust their predictions, stock prices fluctuate, hopefully no one cares because Apple missing predictions by a couple million bucks is materially irrelevant for the company and couldn’t be any more materially irrelevant if it wanted to.

Expected Q3 revenue was 46 billion to 48 billion as per the Q2 earnings press release. They earned 49.6 billion so beat the estimate by 1.6 billion.

Or are saying they missed the estimate that some analyst pulled out of their ass ?

Analysts on average actually did better in predicting Apple’s revenue than Apple. (Apple obviously seems to be very conservative in their predictions, though.)

The analysts' recta have historically been much more accurate than Apple's press releases, which have (as is not atypical in the tech industry) routinely and severely underestimated revenue.

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

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

Clear as mud maybe.

>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] http://appleinsider.com/articles/15/07/21/apple-watch-sales-...

In the first week yes, but recent independent analysis[1] suggests, that sales dropped like a rock afterwards. Also, most sales were apparently for the cheaper sports version which is unlikely to be great news for Apple's margin in this category. So, while I believe the CFO told the truth, it may very well not be the whole story.

[1] http://qz.com/410027/apple-watch-orders-fell-sharply-after-t...

Analysis with a very poor sample set (a set of USA online buyers of unknown representativity, who happen to let some company read their emails). Even Slice themselves cautioned about extrapolating from their data.

Tim Cook, on the call:

> On the Watch, our June sales were higher than April or May. I realize that’s very different than some of what’s being written, but June sales were the highest. The Watch had a more of a back-ended kind of skewing.

It was also pretty heavily supply constrained during initial launch too.

I wouldn't say it makes it clear, but rather it's an early indicator of such.

A lot of people are taking the "wait and see" approach to the watch, a lot of reviews said to wait for v2, and they don't really have their developer ecosystem in order yet.

If the results still look like this in, say, October 2016, then I think we can say the conclusion is clear.

Or that supply constraints remain (for now..) a limiting factor?

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!).

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).

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.

To offer a datapoint, I'm left handed and I wasn't aware I was supposed to have a problem.

As a lefty, I appreciate that the upside-down watch crown-dial is towards the bottom. The upper left side of the watch is right where a big bone sticks out of my wrist. I don't know why you right-handers put up with that kind of thing!

In any case, being a non-starter for left-handed people won't hurt the product much. Neither your personal opinion nor mine are important; data about the overall market is what you want to look at.

I'm left-handed and i wear my watch on the left hand. Am i doing it wrong? :)

Yes. Please turn in your membership card. And please have the decency to turn it in with your left hand. : )

In all seriousness, watches are generally worn on the non-dominant hand. I'm not really sure why that is, I only know for me wearing a watch on my left hand leads to inconvenience and scratches.

But not all left-handed people are alike. Some of us write "hook" style, and some of us write basically like a mirror image of a right hander; and from what I've read it is correlated to whether we are right-brained or left-brained. So maybe that also makes a difference in whether a watch on our left hand makes sense.

Your data is: you and your ex-gf did not get the Apple Watch. Not helpful.

My point is that, although the Watch is not hugely popular and although I personally do not care for it, I can still see the potential and think it is way too early to say its just like the Apple TV. I'm sorry you didn't find my "data" useful, but I was sharing my experience and a larger idea.

It is typical for technically-minded people to not buy new Apple products due to missing features and perceived design problems ("No wireless. Less space than a Nomad. Lame.").

Often after not using the product long enough to see if it's really a problem. Or, perhaps to discover what really is there (as opposed to what seems to be missing). These people -- quite astonishingly -- seem to not appreciate how much testing and prototyping Apple does with new product categories.

And then, to denounce the product as likely-to-fail in tech forums due to their personal lack of interest.

Such people are trying to answer an aggregate market question, with weakly-informed personal tech prejudices.

Anyway, this mode of reasoning has proved to be quite misleading; it has missed the boat on every major Apple product category. So yes, I think these observations don't really move the conversation forward.

Yeah, it only sold about a billion dollars worth last quarter, barely two percent of Apple's revenues, if that. How much did Apple TV sell its first quarter? [quite a lot less]

How so?

Look in the data summary (PDF below). "Other Products" which includes the Apple Watch grew 'only' a billion year over year.


So I'm maybe missing something, but Other Products 2014 didn't include Beats headphones sales, right? Because the acquisition didn't happen until Aug 1, 2014?

And Other Products 2015 explicitly does include Beats Electronics.

And wikipedia (https://en.wikipedia.org/wiki/Beats_Electronics) says that Beats revenue in 2013 was $1.5 billion.

If all that is right -- and it may not be -- then that implies that Beats + Apple Watch < $1b revenue, which would indicate that something is very wrong. Indeed, it would imply that something is SO wrong that I doubt I have the facts above correct.

EDIT: Duh, thanks thedaveoflife, obviously the $1.5b for 2013 Beats is an annual number, not a quarterly one. And of course the iPod numbers are presumably shrinking. That explains it.

Beats had $1.5 Billion in annual revenue in 2013. Beats + Apple Watch were < $1b revenue in Q3 alone.

"Other Products" also includes AppleTV which got HBONOW AND a price cut last quarter to boost sales

The CFO stated that the watch provided was more than 100% growth of revenue in the Other category. Also that the watch sold more than iPhone and iPad in the same initial 9 week period. So more than 3 million Apple watches compared against initial iPad sales.

Note that during the conference call they said that the watch represented more than 100% of the "Other Products" increase…

It's too early to tell but I think wearables will be huge.

The Watch is only first generation so the benefits will increase. The first generation iPhone didn't have a camera, for example. The current Watch is a tethered device.

Selling the health and safety benefits of a wearable shouldn't be too hard for Apple and Google.

I'm curious about this. Why? I think the best hindsight for successes was about enabling.

- The iPod enabled you to take your music with you in a much more polished and convenient form factor (sorry, Rio).

- The iPhone enabled you to have much more functional mobile experience (in a much more polished and convenient form factor... sorry, Blackberry).

- The MacBook Pro... "

- The Apple Watch enables you to... ... what? I'm honestly asking.

You can't physically put a bigger screen on your wrist. No one has come up with a convenient input device for interacting with it. Sure, battery, processing power, and connectivity will improve as hardware does. But none of those change the basic proposition. What is the problem that it solves?

Continuous health monitoring is helpful, but I think obesity statistics bear out how much people generally care about their own health.

I can see an alternate past where the iPhone was instead a watch, and now we're all communicating via watches (albeit those first few generations would have been bracelets). But competing against an entrenched surfeit of cell phone screens? I just don't see it.

(Side argument familiar to Tesla owners: also, now you have tech curve depreciation is what was formerly a more value-retaining object, if you're thinking of just using it as a watch)

Don't underestimate the effect of more personal notifications. I can be in a meeting and feel a gentle (and silent) tap on my wrist, take a quick glance, and go back to paying attention. It's much more subtle than having your phone vibrate loudly, picking it up, and stowing it away again. You wouldn't think so, but in practice it is.

> I think obesity statistics bear out how much people generally care about their own health.

I was surprised at how quickly and readily I started going along with my watch's insistence to get up off my butt and walk around from time to time. I don't know why I obey my watch when that's something I should be doing on my own, but I'm no longer neglectful about it. Also, don't underestimate the value of gamification. I now get points and awards for standing throughout the day, walking lots, and exercising. It's dumb and I have no excuse for not doing those things without my watch pestering and then rewarding me. And yet, now I'm walking more.

But back to the notifications. I've said this here before, but I was amazed at the silent navigation feature. Whenever I request a route through Apple Maps (on my phone or my watch) and start it, I can put my phone in my pocket and start walking. When I get to an intersection, my watch gives one series of taps if I'm supposed to turn left and a different one if I should turn right. I can walk through sketchy neighborhoods with my head held high, without wearing the "I'm lost - rob me!" signal of hunching over my phone. I just keep moving until it tells me to change direction. I swear, it's like a superpower. I'm not even kidding.

And maybe that's my final answer: The Apple Watch enables you to... project the Internet onto reality. You can get much of the same effect with phone apps, but a phone doesn't have the intimacy to really make the bridge between your data and the outside world. On paper it doesn't sound like that big of a deal, but after wearing it around for a little while I'd sure hate to give it up.

> On fitness

I think that's going to come down to insurance involvement. And God knows how that ends up given the innumerable potential deals that could be made.

> On notifications

I do agree on that. Maybe another way of phrasing it is "It enables you to not take out your phone." Which is no small thing in a lot of circumstances.

The only issue here is... doing that well is UI. I think history teaches us that if there's one thing third party software is terrible at then it's interface.

> Continuous health monitoring is helpful, but I think obesity statistics bear out how much people generally care about their own health.

You should have a look at the size of the fitness sector. We fatsos might care about our health intermittently, but we tend to periodically overspend desperately trying to catch up. If Apple can persuade me that the iWatch will make me lose weight all the time, I'm happy to hand them my life savings.

I personally think the watch is pointless until it remains a dumb sensor hub (and it stays at a luxury price point), but being the central point for overall health monitoring is the killer spot for wearables. Sport, medical and insurance companies will be on it in seconds, followed by child-safety, elder care, entertainment, payment, the lot. Smartphones will look clumsy in comparison.

(edit to answer your enabling question: if it becomes the focal point for continuous health monitoring, it enables me to know exactly what's going on in my body at all times without having to see a doctor and book exams.)

I agree that there's certainly money to be made in fitness. I'm just saying it's closer to AppleTV money (people who want a more advanced media hub) than iPhone money (people who want the internet in their pocket).

How about being able to monitor your heartbeat so you stay within training range? I'm working on a "Two week review" on my blog. The gamification of health is alluring.

Here's a pic, the only thing finished :-) https://h4labs.files.wordpress.com/2015/07/awards.png

The safety aspect is also huge. "Help I've fallen and I can't get up"... or you're in a car accident or seriously injured...

Your watch is always on you. Not true yet because it might be charging. :-(

Looking forward to the review! I'll keep an eye out.

Health gamification is a shift, but I don't see it being a major shift without incentives being tied to it. As the story went on the Prius, one of the biggest impacts in testing was putting an instantaneous MPG display on the dash. And driving habits suddenly change.

But there's a short term financial incentive there. I'd argue that people just don't fundamentally think about their health that way. That this soft drink today will cost me $x on average 30 years from now by increasing my risk for something? Does not compute.

The first generation iPhone didn't have a video camera.

Right, I did take a few pictures with the iPhone 1. They were really bad.

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.

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?

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).

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...


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...), 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.

I feel that for a lot of people, cheaper Android makes like Xianomi are just stepping stones until they have the cash to buy Apple

That's a good position to be in for any company.

IMHO there is an incentive for wall st to be a bit cautious on their estimates (better to beat, then everyone is happy, vs a miss in which a huge pullback occurs and the analysts are questioned). There is not the same incentive on estimize. 9/10 estimize's estimates are slightly higher than the street, which more often than not is correct.

Apple has moved from traditional tech to consumer devices.

College kids may one day decide Apple is not cool.

Are college kids driving that market or are you just making an assumption?

College kids are the arbiters of cool.

The fact you believe this shows you that you should really stop acting like you understand what is cool. The correct answer would have been that each age demographic has its own culture and trends. And even more so people aren't caring what other groups think or do.

Maybe but they've executed a great vendor lock in strategy for kids. Apple Purchases are shared with child accounts as is Family Sharing in Apple Music. Transition costs are going to be very high for those that are part of the "iPad mini is my first computer" generation.

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

(I'll bite)

Consider this : 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.

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.

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.

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.

UX is more than UI. Apple's UI design is still the best, but the judgment on consumer needs and product integration is gone with Steve Jobs. A brash and creative genius like Jobs has no chance climbing the corporate ladder. Has to start his own company. My guess is Apple will continue to be financially successful, but the best days are over.

I think this is a very good insight. UX is a huge differentiator. In the early to mid years of Android, Apple had no real competition. Although I have some qualms about Material UI designs (why does it lag when I press ON and OFF? why does it look and feel like dreamy cotton candy world?), the UX has gotten considerably good on the Android due to faster and cheaper phones. However, I do agree that Jobs absolutely nailed it with UX and focus on that area (much like how luxury car brands focus on the little things).

My answer to your exercise is that Tim Cook indeed tried to duplicate the same formula to a new device. Some problems are that there is such a small screen real estate, the UX would need a different approach. Another is market fit for the demographic that are into luxury. Would wearing the apple watch make you look cheap and "techie" or send other unintentional messages about you? The people who wear watch these days seems to be those that wants to flaunt their 100k Rolex or older generation. I remember people stopped wearing watches when cell phones displayed time, (I never wore one, I relied on my internal clock), an entire generation might have never wore a watch before, could the apple watch end up like the iPad where people first buy it out of curiosity and nobody bothers with it afterwards? Who knows but Apple will have enough cash to screw up several times now (if they do reach trillion dollar market cap). If Tim does make the Apple Watch a success, it would be huge for Apple. You just convinced your loyal iPhone buyer they need a watch now too. Experience and lessons gained with Apple Watch could lead to more wearables, maybe we'll see Tim do his take on the Google Glasses.

i wish they would make databases and webservers and cacheing proxies and clustering tools and distributed filesystems or something like that. the ux on android, windows phones , symbian, etc are all plenty good already.

The whole apple worship thing is kind of creepy to me.


(edit: go ahead fanboys, I got lots of karma for next time. go ahead and down vote my previous threads while your at it.)

GP here: Don't get me wrong, I would rather see out-of-the-box Linux win in the laptop market and I strongly dislike walled gardens (mobile and otherwise) on philosophical grounds. But that doesn't stop me from hypothesizing about why Apple is making a boatload of money.

>(edit: go ahead fanboys, I got lots of karma for next time. go ahead and down vote my previous threads while your at it.)

now that is creepy.

I'm not even an Apple user but it doesn't mean I can't analyze and form my own opinions. So your argument here is moot that there's a massive conspiracy of Apple lovers downvoting your comment. I certainly am not a fan of Apple but you gotta give credit where it's due, it's headed to be the first trillion dollar company this year or the next so I pay attention.

And I can't downvote anyone since I'm a mere peasant with under 300 karma points.

a bit off topic but in my security analysis course long time ago, I remember a professor telling a story of a hedge fund that blew up because they relied excessively on such viz heatmaps and other fancy graphics to base their trading theories. It's pretty but it doesn't really show the underlying intrinsic core business. Like the other commenter replied, apple realized early UX is key to establishing luxury brand whereas the rest thought it was about having faster and better hardware for cheap and innovated their way out of existence (motorola, nokia).

I'm sorry that viz maps caused a hedge fund to fail.

Good reason to stick to index funds.

why would you be sorry? I'm just illustrating the pitfalls of relying excessively on visualization diagrams and graphs to form unsound insights.

Index outperforms vast majority of money managers but that's a whole other topic.

On an infinite timescale, that analysis will be correct ;)

God, I wish I could listen to Siracusa talk about Tech more than those 1:30 hours, that he does every week.

Yes yes so much yes.

FWIW he does a podcast with Merlin now, called Irreconcilable Differences, but it's not primarily about tech.

This cool factor has always been largely nonsense.

College kids may buy an iPod based on it being cool but they sure as hell aren't going to spend thousands on a iPhone, MacBook or iPad based on nothing more than the perceived gain of social status.

The fact is that PC laptops (apart from Surface) are largely cheap junk with bloat ware and questionable antics eg disabling software updates all of the place. Likewise iOS is far more polished, far better supported over the long term and is the primary development platform compared to Android.

History has shown that people won't buy Apple products based on coolness alone eg. Cube, Newton, eMate.


College kids never spend a lot on trying to gain social status.

The saturation point of the smartphone market is near and Apple knows this very well and the novelty factor for their products is diminishing and people are looking for a new thing to experience rather than the old Apple can deliver.

What's with the Samsung bashing on an Apple thread?

Where's evidence of people looking for a new thing to experience? Apple's great power is you know exactly what to expect every time you open the box, even if you have no clue what the product itself is.

Koolaid much or you have skin in the stock market game?

Neither, I'm just asking for evidence that people are moving away from Apple when a) people have been saying the same thing for years and b) the company has only grown in value.

I think you can draw some parallel if you look at the car luxury market, people are more likely to keep buying the brand they like vs. non-luxury market where people are inclined to get the most value for less. Guy purchasing M5 for his daily driver and an M class for his wife isn't probably looking to drive it for the next 20 years vs. a single mom purchasing a van will be driving it for the next decade or so.

Market saturation calls for distinguishing yourself, and it's tougher to do this in the lower end market vs. luxury. Cars are everywhere, yet Ferrari & Lamborghini are constantly finding new customers in emerging markets. This hasn't been easy for the rest who are fighting each other over the average joe. There are so many players on this level and stakes are high especially because the margins are thin. Failing to stay relevant will drive them out. Failing to deliver across the board will not suffice. One reason Hyundai has been so successful here is that they offer a lot more value for the price to the average driver. Today, the brand has improved, car has improved as American cars have. In fact, the industry has improved a great deal because people in this segment is very demanding but without the rewards of high margins a luxury or supercar producer might enjoy.

As your income grows, your taste begins to change, and luxury brands know this very well. Do you really need a button that gives you extra 200 HP on demand? Will embedding diamonds in your dashboard increase km/L? The typical questions a non-luxury buyer will ask won't apply to those that demand the absolute best. One reason might be social hierarchial reasons, if you were a hedge fund manager and you were golfing with your other hedge fund buddies equally looking to impress clients and sell image of success, an Acura isn't just going to cut it.

I really like your rebuttal, it's food for thought but here's my counter-argument to this. You can't really compare the experience you get from driving a certain car to that of a smartphone.

Cars are in a whole new category and there are a lot of tangibles and bells and whistles that symbolize or embody a car brand where in the smartphone world it's all about smoke and mirrors and how to market your overrated stuff as the latest shiny thing to attract as many gullible people as you could to hand you their wallet.

So, no cars can't be compared to consumer electronics in terms of brand loyalty or user experience.

Based on the second quarterly decline in iPad sales, we may have already reached the saturation point in the tablet market.

In some ways, I think people bought a tablet and the time it takes to buy a new one is much longer than a phone. Plus, a lot of people are not doing well yet or in the first part of recovery.

one theory might be that iPhones are publicly visible since you are using it at work and your friends see it (so you are more likely to keep upgrading to show that you have a taste for luxury), where as iPads can't be carried around in public due to it's large size and remains parked at home.

ex. (warning hypothetical stereotypes here that I just thought of) J.A.P. wouldn't want to be caught dead with an old iPhone (what would Samantha think of her now) but might be using an older iPad if it means she can still play Candy Crush at home before bed and tucked away in a drawer.

It is saturated in developed countries so the thing to focus on is upgrade cycles.

Countries like China, however, have a huge growing middle class and represent a ton of opportunity.

The Chinese economy has some problems this year, I wouldn't be surprised if Apple gets hit by that for the rest of the year.

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