Apple Lowers Revenue Guidance for Q1 2019 Citing 'Fewer iPhone Upgrades' Than Anticipated

[trifid]

Another Jobs quote:

"Problem is the recipe for how to create the next Macintosh, no one at Apple has any clue […] they’ve just been living off that one thing for over a decade, and the last attempt was the Newton, and we know what happened to that, so it’s kind of tragic."

Replace Macintosh with iPhone
Replace Newton with Apple watch

Minute 41:

 

[az431]

Because its true. It just isn't something that shows right away.

Time Cook and Company have spent the past seven years pulling all the value out of Apple. They've taken their customers for granted and it is finally at the point where it is beginning to show.

When you run off the smartphone cliff it happens a lot faster than people think it will. Nokia, Motorola, BlackBerry and HTC were all powerhouses at one point. Look where they all are now.

Apple was always in a precarious position. It was envitable that sooner or later we would hit peak smartphone. We may have finally hit that point.

Strange. People started saying we hit peak iPhone in 2012, yet almost 7 years later Apple stock has tripled.

https://www.forbes.com/sites/robert...one-hurrah-as-market-nears-peak/#69ed5f713004

https://www.theatlantic.com/technology/archive/2013/07/weve-peaked-smartphone/313243/

But keep regurgitating the same tired story.

 

[dgdosen]

Sigh. No. Again:

1) Gross margins have been very consistent company-wide for 10 years now. That's 40 consecutive quarters.
2) The phones are more expensive because the parts cost more to make, and Apple has chosen a strategy that does not involve sacrificing GPM.

In fact...if you look at the historical data, it's often the case that Apple's latest iPhones actually have MSRPs that are LESS expensive relative to teardown costs than they were years ago.

Example: the iPhone 5S had a teardown cost around $200. (Source: https://www.techspot.com/news/54112...phone-5s-costs-199-to-build-5c-even-less.html). Do the math at the $649 MSRP. If we'd kept that multiplier and applied it to last year's iPhone X debut, the iPhone X would have been around $1149 at launch!

There's a lot that's happened and changed over the years, both in the industry and within Apple. That said, the narrative that "Apple got greedy and started charging too much" is simply not supported by the facts and evidence. People often confuse causation and correlation, and they engage in faulty inductive reasoning. Both of these are happening here.

Apple is pretty opaque with their product line financials - We really don't have an accurate picture into the gross profit margins in the past, and we know even less now. Apple didn't have to build an A7 chip that's faster than all the laptops - they chose to do it. They also knew full well (or know now) that the price the market will support is not the same as a consistent 'markup' percentage of prior years - that's their choice. A better question to ask would be - what useful user features will we enable if we build this chip? If the best answer was animoji - well...

 

[az431]

What is left out here is that Apple demand has collapsed in India as well. Blame the SE phone. Chinese phone makers are actively pursuing the Indian market. When Tim increased the price it was an eye opener for even wealthy Indians who are increasingly moving to Android/Samsung, Huawei, Pixel etc. Big strategic blunder by Apple to push the envelope on pricing. I own an iPhone X and a iPhone Xsmax. I felt that the higher price was not worth the minimal update in the iPhone Xs since iPhone 7+

Apple has a 1% market share in India. There is no demand to collapse, and not aware of any news that supports your claim of a collapse in India. About the only place it can go is up.

 

[I7guy]

Because its true. It just isn't something that shows right away.

Time Cook and Company have spent the past seven years pulling all the value out of Apple. They've taken their customers for granted and it is finally at the point where it is beginning to show.

When you run off the smartphone cliff it happens a lot faster than people think it will. Nokia, Motorola, BlackBerry and HTC were all powerhouses at one point. Look where they all are now.

Apple was always in a precarious position. It was envitable that sooner or later we would hit peak smartphone. We may have finally hit that point.

It may have been true in 1995, but 27 years later things have changed significantly in every aspect of modern life.

Apple has been posting such massive profits that any down quarter their stock gets punished. Apple took several unusual steps to counter the old planned obsolescence meme by having inexpensive battery replace. IOS 12, which optimized the performance on all 64 bit devices. And may have contributed to device longevity at the expense of iphone sales. I did take the plunge and got a max, which I really enjoy using.

Everybody is going to believe what they want and have the opinions they have.

My opinion is apple is going to be just fine and apple has already been formulating their counter-strategy and is always ahead of the curve. What that is we will come to know.

 

[az431]

Apple is pretty opaque with their product line financials - We really don't have an accurate picture into the gross profit margins in the past, and we know even less now. Apple didn't have to build an A7 chip that's faster than all the laptops - they chose to do it. They also knew full well (or know now) that the price the market will support is not the same as a consistent 'markup' percentage of prior years - that's their choice. A better question to ask would be - what useful user features will we enable if we build this chip? If the best answer was animoji - well...

Apple's financials at the product level have always been far more detailed than its counterparts at Samsung, Google, et al. Show me where on Samsung or Google's earnings reports they break out those numbers.

 

[Shanpdx]

128GB SSD is enough for everyone!

 

[john123]

I never used the term greedy, I pointed out that the phones are more expensive than they ever have been and if the perception is that Apple got greedy, and it increasingly is, then that is a problem.

Do you honestly think the average customer cares what Apples margins have been over the years? They care what the price is.

Of course all this is happening against a backdrop of Apple getting caught throttling the performance peoples phones and its CEO today openly admitting that the subsequent battery replacement programme deterred people from buying new phones.

My quoted line wasn't a reference to any of your words but rather common ones by others in this thread. I see it all the time, and I get tired of it.

I don't disagree that perception matters. But that's actually an entirely different topic. Many people (not you) have alleged that Apple has "changed" under Tim Cook and has moved away from some Steve Jobs vision of innovation at affordable prices, and that's why iPhones are so expensive. It's a tidy and cute narrative, but it isn't supported by the facts. And that's the gist of what I'm addressing.

All Cook is doing is the exact same thing that Jobs did, just with later stage, more boring tech where the marginal innovation is less impressive and yet more expensive. That's common in many product life cycles. I don't blame Cook for it.

Anyway, getting back to my original post in this thread, and tangentially touching on your "average customer cased" part...there's no evidence to suggest that if Apple, say, sold the XR at $649 and the XS at $899 that they'd make more money. In fact, I'd be willing to bet they'd make less money. Why? Because if there's one thing you can say about Cook, it's that he understands the accounting side better. And I know how sensitivity and elasticity of demand analysis is done, and that Apple employs gobs of people to work on exactly that. If that was the better approach, I'm pretty damn confident that that's the route they wold have gone.

Corporate finance is a decades-old science at this point. It's pretty formulaic. That's not to say it's perfect; it isn't. After all, we're here talking about missed guidance! But it's far more accurate and unbiased than the finger-in-the-wind "Gee I wish I could get a new phone cheaper" than 99% of the posters on here are doing.

 

[unchecked]

The worldwide economy is slowing down, more people are doing freelance, gig work, and the reality of the world is that people are looking over their finances tighter than before.

Apple can still price their products high, but the rest of us won't have the money to upgrade. A $70 dollar out-of-warranty battery replacement is still better than a $700 phone replacement.

We're approaching the bottom end of the cycle, it will bounce back up in a few years. The question is what will Apple do during this slump part of the cycle to get people to spend on their products instead of others. Do they tide themselves over these couple of years with luxury products or drop prices and go for volume. Both ways are justified. They just have to brace for the impact.

 

[dgdosen]

Apple's financials at the product level have always been far more detailed than its counterparts at Samsung, Google, et al. Show me where on Samsung or Google's earnings reports they break out those numbers.

What relevance does Samsung or Google's transparency have on an effort to determine an accurate gross profit margin percentage of Apples' wares?

 

[john123]

Apple is pretty opaque with their product line financials - We really don't have an accurate picture into the gross profit margins in the past, and we know even less now. Apple didn't have to build an A7 chip that's faster than all the laptops - they chose to do it. They also knew full well (or know now) that the price the market will support is not the same as a consistent 'markup' percentage of prior years - that's their choice. A better question to ask would be - what useful user features will we enable if we build this chip? If the best answer was animoji - well...

I'll just leave this here:
https://ycharts.com/companies/AAPL/gross_profit_margin

We don't need specific breakouts to draw some reasonable inferences (although of course we'd certainly prefer them—more is always better).

I do agree that Apple made those choices. And I agree they're struggling with ideas (the classic marketing 101 features vs benefits issue)

I don't agree that things would have been different under Steve Jobs. Nor do I agree that we can read anything into this announcement that the market "won't support" the existing pricing structure. That's a logical leap not even remotely supported by the evidence.

 

[Zdigital2015]

So many of you don’t get the Chinese iPhone dynamic. I do, I live there. The fall in sales in China is the doing of the Chinese government. Firstly they use their massive influence in Huawei (which wouldn’t exist without the govts say so) to develop their phone market. They then have recently started a “people’s” movement to boycott Apple because of Trumps trade war. This is all over social media here and it’s got to a point where you are seen as not patriotic to not own a Chinese phone.

They know that Apple is so big, damaging it is a huge tool to damage the US economy and they are exercising it now.

Without this influence on the market, the iPhone would be the phone of choice of people who can afford it. It still has a quiet prestige way above Huawei. Foreign stuff is still seen very much as prestige but many feel they have to toe the line.

The arrest of Huawei’s CFO, who is the daughter of one of the founders, may also have something to do with the Chinese government’s attitude towards Apple - https://www.nytimes.com/2018/12/05/business/huawei-cfo-arrest-canada-extradition.html - this has been reported fairly widely, but I do not think most understand just how big a deal this is inside China. Or am I incorrect?

 

[ipponrg]

Apple has a 1% market share in India. There is no demand to collapse, and not aware of any news that supports your claim of a collapse in India. About the only place it can go is up.

It can also go nowhere. It depends how much Apple values market share over profit. Will they place more weight on a user in India over profit?

 

[dgdosen]

It can also go nowhere. It depends how much Apple values market share over profit. Will they place more weight on a user in India over profit?

I'd add that without market share growth, there's little or no service revenue growth, which is arguably the most important part of Apple's future growth plans.

 

[sirozha]

Good. Time for Tim to stop the grift. Price products appropriately. Customers first, not shareholders. A return to the days of a 30% 'Apple Tax' (as opposed to whatever eye-watering number it is at now) is long overdue.

Customers first, not shareholders?

What has he done for the shareholders? Have you looked at the stock price lately?

 

[trifid]

I don't agree that things would have been different under Steve Jobs.

You honestly believe it would have taken Apple that long to wake up and come up with a competitor to Spotify if Steve were around? Really? What about a revolutionary tv service? Steve was always looking to do the next big thing, all Cook is doing is milking what Jobs left behind. Same thing with the iCar, same thing with caveman Siri. Disastrous Homepod. No vision, no innovation. It’s not an accident we see these results.

 

[sirozha]

A field day, the haters shall have today.

The revenue decline was driven by China, while developed countries are actually expected to post higher revenue.

Meanwhile, many products remain supply constrained. Meaning that demand outstrips supply.

This shows that pricing isn’t really a key factor. By and large, consumers are still willing to buy Apple products at Apple prices.

Do people even read articles before commenting anymore?

There's no excuse for supply constrains, especially when Apple is lead by the supply chain guru like Tim Cook.

 

[itguy06]

MacRumors readers: Fire Tim Cook for making less than expected money
Also MacRumors readers: Fire Tim Cook for everything being too expensive. Apple didn’t need such huge margins.

:-|

No, it's Fire Tim Cook for this:

Basically gave up all 2018's gains and are back to mid 2017.

 

[oneMadRssn]

Let's see:

2007 - iPhone is $399 (after initial flub)
2019 - that would be $487 with inflation - where is my $499 flagship phone? (which honestly should still be $399 as tech gets cheaper, certainly storage is)

So, I don't disagree with everyone else saying prices are too high. They are. But you're numbers aren't right.

The $399 price in 2007 was with carrier contract subsidy. It's hard to compare to today's prices because, iirc, the original iPhone was never for sale in the US without carrier subsidy. In other words, it couldn't be purchased outright without contract. It's not a fair comparison to today, where there are no carrier contracts, subsidies, and all phones can be purchased outright.

The iPhone 3G could be purchased outright without contract, and it started at $599, which is ~$700 today.
The iPhone 4s started at $649, which is ~$725 today. A price increase back then.

Still, the fact that the least expensive new design iPhone starts at $750, and ASP is actually probably around $1000 or so, that is crazy and bad for Apple's long term.

 

[john123]

You honestly believe it would have taken Apple that long to wake up and come up with a competitor to Spotify if Steve was around? Really? What about a revolutionary tv service? Steve was always looking to do the next big thing, all Cook is doing is milking what Jobs left behind. Same thing with the iCar, same thing with caveman Siri. Disastrous Homepod. No vision, no innovation. It’s not an accident we see these results.

Yeah. The dude wasn't Jesus Christ, contrary to modern myth and lore. There's some right-place-right-time stuff that happens. That's not to take away from him—he was no doubt a product genius—but there are plenty of examples of stupid stuff and failures that happened under his tenure too.

But hey, go on with your hero worship. Seems like fun.
[doublepost=1546485695][/doublepost]

No, it's Fire Tim Cook for this:
View attachment 813774
Basically gave up all 2018's gains and are back to mid 2017.

Uhhhh. The stock market is not a very good measure of corporate success, contrary to what you might be led to believe watching TV and reading Yahoo Finance.

 

[itguy06]

Yeah. The dude wasn't Jesus Christ, contrary to modern myth and lore. There's some right-place-right-time stuff that happens. That's not to take away from him—he was no doubt a product genius—but there are plenty of examples of stupid stuff and failures that happened under his tenure too.

Steve brought us:

• Apple 2
• Macintosh
• iMac
• iPod
• iTunes
• iPhone
• iPad

Tim brought us:

• Beats
• Dongles
• Touchbars

So either Steve was an incredibly lucky guy or maybe, just maybe he had a knack for product. No doubt he was an incredible salesman.

[doublepost=1546485695][/doublepost]

Uhhhh. The stock market is not a very good measure of corporate success, contrary to what you might be led to believe watching TV and reading Yahoo Finance.

True but it's a pretty accurate indicator of corporate success.

 

[Michael Goff]

No, it's Fire Tim Cook for this:
View attachment 813774
Basically gave up all 2018's gains and are back to mid 2017.

So the CEOs of most companies should be fired? 2018 was rough on most companies in the stock market.

 

[cardfan]

A premium brand isn’t going to lead in market share but in rare cases. Sales were always going to flatten. What people are missing about the iPhone is the other half. Software, services, and ecosystem. Samsung doesn’t have to care as much because google does much of this for them.

I have posted that apple needs to expand its ecosystem. iOS is the key. Macs remain the heart. All that research into smart speakers and only the HomePod to show for it??

Apple needs more airpods type products. That just work within its ecosystem and outclass the competition. Its services have to get much better. Software needs refreshed.

Personally I don’t think Apple has it in them to provide better services than google such as maps or voice assistant. Apple’s software has gone downhill. Adobe showed photoshop on iPad. Where was anything from apple?

Perhaps apple needs a fresh approach. Back to basics. Focus on core foundations.

 

[NIKKG]

I got an ipad 9.7 brand new for 209 (229-20 coupon) from Walmart during Christmas week. I didn't even want an ipad but got it anyway as a toy to play games or read news. That tells you how bad they are doing. From 329 MSRP to 209. They just giving it away to boost up sales before the end of the year. I think Amazon and Target did 229 too. I believe Sprint did buy 1 get 1 free iphones.

The retailers aren't losing money either, Apple probably gave the retailers rebates to push volume to hit end of the year numbers, they must really be in panic mode, anyone holding their stock would be wise to dump it.

 

[Michael Goff]

Steve brought us:

• Apple 2
• Macintosh
• iMac
• iPod
• iTunes
• iPhone
• iPad

Tim brought us:

• Beats
• Dongles
• Touchbars

So either Steve was an incredibly lucky guy or maybe, just maybe he had a knack for product. No doubt he was an incredible salesman.

[doublepost=1546485695][/doublepost]


True but it's a pretty accurate indicator of corporate success.

It’s really not.