#Apple

Quick Observations On Apple’s Q2 2014

In no particular order:

  • A 7-for-1 stock split is insane (in a good way).
  • 800 million iTunes accounts and almost all of them have credit cards attached. This is perhaps the most important (and to some extent, most overlooked) part of Apple’s business going forward. They’ll hit a billion very soon.
  • Tim Cook’s second explanation on the iPad “miss” was better than his first. At first, he said it was channel inventory and sell-through. But later he spoke about how fast it grew — faster than any other product Apple has ever done — and implied that it’s hard to maintain such growth. Both explanations may be true, but the first is a technicality, the second is something everyone should be able to understand.
  • iPad revenue for the quarter was $7.6 billion. If my math is correct, the iPad has brought it roughly $32 billion in revenue in the past 12 months. If it were a stand-alone business, those numbers would place it in the top 100 of the Fortune 500. Think about that for a second.
  • By the same count, the iPhone as a stand-alone business would be in the top 25 of the Fortune 500.
  • Overall, this quarter was only the 15th best in terms of profit in the history of any company in the world.
  • Apple cash horde was actually down this quarter due to the buybacks. But it was almost all U.S. cash that was down — Apple still refuses to repatriate the overseas cash and instead is borrowing debt to pay for these massive buybacks. At one point, it sounded like Apple was basically (but indirectly) asking the U.S. for a tax holiday to bring some of their money back to the U.S.
  • The iPhone ASP decreased by quite a bit. But it wasn’t because the iPhone 5c is selling well, it’s because the iPhone 4S continues to sell well.
  • That said, margins overall were still amazing at 39.3 percent.
  • Angela Ahrendts is starting next week, nullifying reports to the contrary.
  • Tim Cook continues to sound more confident about the Apple TV as a product category as he announced “about” 20 million units sold. If I had to guess, I think we’ll see a new Apple TV product announced well before the iWatch this year.

The one thing people seem to unanimously like about the Amazon FireTV is the voice search. So yeah, this makes sense. Though I wouldn’t be shocked if it’s able to search across all content on the Apple TV (unlike on the FireTV right now).

I just wonder if we’ll see this roll out before any new Apple TV hardware or if it will utilize the iOS Remote app. Otherwise, you’d think we’d need some new hardware to be able to listen…

Yes, that’s Tim Cook narrating. As Rene Ritchie notes:

My best guess as to why Tim Cook narrated the “Better” video is because it speaks to Apple’s core values, and speaking to Apple’s core values is both deeply important to Tim Cook, and how he’s been positioned atop and within Apple.

You can say Tim Cook is not a product guy, but there’s no question that he knows better than anyone how Apple does what it does. And because he cares about it, he’s made that process… better.

Ben Thompson:

Interestingly, both Apple and Nike have markedly similar business models: as various pundit never tire of telling us, Apple is selling a commodity and is doomed to inevitable margin pressure and/or massive loss of share in the face of good-enough cheap Android. For better or worse we in tech are stuck with these folks, because who knows what they would make of a company like Nike, selling pieces of leather and bits of fabric. Talk about a commodity! And yet, there is Nike, sporting a ~45% gross margin in an industry that averages 33%. Clearly they are more than just an apparel maker.

Lost in the story of the demise of the FuelBand is just how similar Nike and Apple are in many respects. Apple’s “iWatch” may not be the reason Nike is killing off the FuelBand, but both companies will be better off as a result of a partnership in this space — as will consumers.

Farhad Manjoo:

Samsung’s problems, meanwhile, will be more difficult to address, as you can tell by spending some time with the S5. One of its major new features is a fingerprint-sensor meant to let you unlock your phone without typing a passcode, a feature Apple introduced on the iPhone 5S last year. I don’t fault Samsung for copying Apple’s fingerprint idea, just as I won’t fault Apple for copying Samsung when it makes a bigger phone. Fingerprint unlocking is a good idea, and more phones should have it.

But I do fault Samsung for the slipshod manner in which it introduced fingerprint scanning. I’ve been using the iPhone’s fingerprint sensor for the last six months, and it has worked about nine times out of 10 for me. The Galaxy S5’s finger sensor is unusable. It has failed to recognize my finger just about every time I have tried it. It has been so terrible that the sensor feels more like a marketing gimmick than a legitimate feature. 

I’ll just reiterate: I understand why Samsung felt like they needed to include this feature in their new phone. But why on Earth would they let such an inferior product actually ship? In what way does it benefit them to have something so broken on the market? in fact, it must hurt them. Right?

Nick Statt:

Nike is gearing up to shutter its wearable-hardware efforts, and the sportswear company this week fired the majority of the team responsible for the development of its FuelBand fitness tracker, a person familiar with the matter told CNET.

Yikes. Though the reality is that this seemed inevitable as something Apple this way comes:

As Apple enters the fray, Nike has a potential partner. Apple CEO Tim Cook, who was seen wearing a FuelBand at the company’s launch of the iPad mini in October of 2012, sits on Nike’s board, and has for the last nine years. That relationship has been fruitful over the years, helping Nike enter the wearable market as early as 2006, with the Nike+iPod shoe sensor package, with a strong brand partner.

I’ve been saying this for a while: Tim Cook remaining on Nike’s board while Apple readies its own health/fitness-focused device was awkward at best. Unless Nike decided to exit that business and instead partner with Apple on such a device…

(As an aside, Secret strikes first again on this news.)

Update: Nike has issued a fairly standard non-denial, denial. They’re admitting to the layoffs, but dismissing the notion that the FuelBand is being killed off. To which I say, as always with these types of statements: yet.

(Of course they’re not going to admit to killing the FuelBand right now, there is still product on the shelves — not to mention new color variations, long in the pipeline, about to launch. They could either kill the product and sell none of those or postpone that announcement and sell at least some of those. No-brainer.)

John Gruber, ripping apart this piece by Joe Nocera:

The iPad was “just a big iPhone” when it was unveiled in 2010; today it’s hailed as Apple’s last great new product. My guess is we’ll see the same reaction to whatever Apple releases this year. It takes years for even the most amazing of new products — the iPhone, for example — to prove themselves on the market. It’s a long game.

Even then — come, say, 2017, when Apple is reaping billions in profits from some product first introduced this year — the doomed-without-Jobs crowd could (and I bet will) just argue that the product succeeded only because it had been conceived while Steve Jobs was alive. It’ll never stop.

A fun exercise would be to write Apple critiques years in advance and see just how close they are when the stories hit in the future. I bet they’d be pretty close. It’s like paint-by-numbers for the tech press.

Jason Snell:

In other words, in four years the wearables market might grow to be one-tenth the size of today’s smartphone market—in units shipped. Presumably the average selling price of wearable items will be a fraction of that of smartphones, meaning the dollar value of the wearables market is even more minuscule compared to the smartphone market.

All of which means that wearables, while dramatic and exciting and with huge potential to change people’s lives, are never going to rival smartphones in terms of market size. Same goes for smart TV boxes. These are interesting, fun areas of technological change. But the smartphone—that boring old Internet-connected 64-bit supercomputer in your pocket that just keeps improving year after year—is going to be the big dog in the tech world for years to come. Apple’s future success or failure will be dependent on the iPhone, and to a lesser extent the iPad, not on a smartwatch.

That’s exactly right. I’ve been saying this for a while: there is no industry, save maybe the oil business, that could yield the type of profits Apple is used to with the iPhone. And that points to a lot of disappointment in the eyes of Wall Street no matter what comes — unless Apple buys Exxon.

Kim Masters:

A source with ties to the studio says Fincher potentially could re-enter negotiations but that the fee he is seeking is “ridiculous,” adding, “You’re not doing Transformers here. You’re not doing Captain America. This is quality — it’s not screaming commerciality. He should be rewarded in success but not up front.”

He apparently was asking for a $10 million up-front fee, as well as control over marketing. I say give it to him. Then get Christian Bale.

blogoculaire asked:

What is the percentage of time you use your iPad(s)/iPhone versus PC/MacBook(s). Can you make it to 100% soon?

I’d say it’s probably 70/30 on iDevices vs. MacBook. Most of the MacBook Air time is work-related. And that figure is so heavily tilted in the iDevices favor because I use the iPhone far more than any other device.

That said, when it comes to “general computing”, I much prefer to use the iPad Air (with the Logitech keyboard) for almost everything. But I suspect a rumored 12” Retina MacBook Air could tilt the numbers back in the MacBook favor, if only temporarily.