Apple Reports 2Q 2019 Results: $11.56B Profit on $58B Revenue as Services Revenue Hits All-Time High

[ipponrg]

Wouldn’t happen under Steve Jobs region either. You’d get a bumper case under Steve.

Yeah I never said it would. Hence why I said it’d be uncharacteristic of Apple.
[doublepost=1556717447][/doublepost]

Not at all. As services revenue has a huge profit margin, it can easily subsidize the hardware.

If somebody subscribes to HBO and Showtime, that brings in $250-$300 a year. Don’t you think that’s worth throwing an AppleTV HD/4K box at them—which costs Apple maybe $50-75? Manufacturing larger quantities will drive the cost down even further.

Cook isn’t stupid. It’s really no different from them bumping up the iPhone trade in allowance by $50-75 dollars. Basically it’s just buying a chunk of profit for a small fee. Just think of how profitable it is after a few years. If someone cancels early, they have to return the device. It can then be reused/refurbed as necessary. Maybe after a year or two they could keep it even if they cancel.

Of course I think it’s worthwhile to throw in. I am one of those that subscribe to HBO Now on AppleTV.

However, you’re playing into the hope that Apple will give away devices when they have never (or rarely) done (except maybe back to school). Apple isn’t known to be giving away things even if it makes sense to grow their ecosystem.

Their narratives right now are to grow services sector while trying to dampen the lack of growth in their core hardware sector. If they are giving away devices, they are going to have to convince the market that they are are not recessing their hardware in favor of their services

What makes Apple different than Google and Amazon is that they are not hardware companies and have always pitched themselves as services. I don’t see it the same with Apple

 

[Baymowe335]

No one says that. They are saying that Apple is transitioning from a "hardware" company to a "services" company.

In the old days, it was hardware or software. Both are products, but they have different traits.

The difference between software and services is mostly in how you pay for them. Software is generally seen as a one-time purchase (that you might have to re-buy in 3 to 4 years). Services is generally a monthly (or annual) fee that you would lose if you didn't keep paying.

It's all "product", but different.
[doublepost=1556716653][/doublepost]@Baymowe335 I apologize because I should know this. Are you the MR member that had the statue of the bull as your member picture? That's how I usually remember members.

Thanks.

I don't have an avatar. If I did, a bull would be fitting because I'm a long term bull on AAPL and American business.

 

[Meandmunch]

This seems like great news but isn't this the beginning of a slow long decline. If you are not replacing hardware and installing new hardware, then what good are services?

Projected out, if you have repeated quarters of shrinking hardware sales its only a matter of time as the oldest hardware out there goes offline everything starts to shrink faster yet.

 

[Vanilla35]

Wow pretty soon iPhone will be less than 50% of Apple revenues.

I can't imagine how little they'll update it when that becomes a reality.

 

[dogslobber]

This is the 7th time in less than 7 years the dividend has been increased.

I don't want a dividend. I was new products to increase my share value in the long run. What we have from Cook is garbage products from the legacy portfolio and trash like the crappy watch produced post-Steve. Apple needs vision and direction in its leaders as Cook is neither.
[doublepost=1556726885][/doublepost]

You don’t actually believe that the CEO of the number one publicly traded corporation on the planet in terms of market capitalization makes a unilateral decision on buybacks and dividend prices, do you?

I do sometimes wonder about the financial acumen of posters on here. Do some of you even understand what stock buy backs and dividends even mean? Hint: clueless leadership.

 

[I7guy]

I don't want a dividend. I was new products to increase my share value in the long run. What we have from Cook is garbage products from the legacy portfolio and trash like the crappy watch produced post-Steve. Apple needs vision and direction in its leaders as Cook is neither.
[doublepost=1556726885][/doublepost]
I do sometimes wonder about the financial acumen of posters on here. Do some of you even understand what stock buy backs and dividends even mean? Hint: clueless leadership.

If one is a shareholder and thinks the leadership is clueless, why would one be holding on to the stock?

 

[ryanwarsaw]

Based on what was expected, yes Apple did well and Google didn't. This is why Apple stock is up and Google is down.

Besides, it's silly to compare a hardware/tech company to an advertising company. Completely different markets.

I think that Apple is up so much because all of the money that ran out of Google had to find a place. So Apple ate Google's lunch here. Amazon also had a bit of a sell off the past couple of days. Those are two expensive stocks and one share of those buys a basket of Apples.

Also with Apple being down 2% before the announcement it was a perfect set up. So anybody that bought that day is now up roughly 8.6%.

Threads seem tp become quiet when haters are silenced.

 

[PickUrPoison]

Yeah I never said it would. Hence why I said it’d be uncharacteristic of Apple.
[doublepost=1556717447][/doublepost]

Of course I think it’s worthwhile to throw in. I am one of those that subscribe to HBO Now on AppleTV.

However, you’re playing into the hope that Apple will give away devices when they have never (or rarely) done (except maybe back to school). Apple isn’t known to be giving away things even if it makes sense to grow their ecosystem.

Their narratives right now are to grow services sector while trying to dampen the lack of growth in their core hardware sector. If they are giving away devices, they are going to have to convince the market that they are are not recessing their hardware in favor of their services

What makes Apple different than Google and Amazon is that they are not hardware companies and have always pitched themselves as services. I don’t see it the same with Apple

I’m not playing into any hope, I merely speculated about one possible future:

Eventually Apple will be able to actually lower prices on hardware and take a smaller gross margin, knowing they’ll make it up on the services side. They could even provide free hardware with certain subscriptions, for instance free AppleTV HD/4K with a TV+ Channels subscription...

I’m saying they certainly have the option of buying a $250-500 per year revenue stream for a one-time cost of $50-75. Just like they “buy” a $750 iPhone XR sale by throwing in $50-75 in bonus trade-in value.

Apple doesn’t have to convince the market of anything. They made $7 billion gross profit on $11 billion in sales, while it took $46 billion in hardware revenue to earn $14 billion. That why their stock is up $14 today and their market cap is over a trillion again, whereas Google dropped $115 on their earnings release.

Once Apple releases a higher core CPU, I wouldn’t be at all surprised to see them launch a cloud computing service to compete with Amazon/Google/Microsoft. I think it’s inevitable and could easily add hundreds of dollars to Apple’s share price. Maybe 2022 or so.

 

[prasand]

I don't want a dividend. I was new products to increase my share value in the long run.

Anyone who doesn't want a dividend, doesn’t have enough shares for the dividend to be that significant; and thus isn’t an adequate judge of appropriate market action. You’re trying to grow your few shares, so it’s understandable that you’d care about more products. But that is a small perspective, not big picture.

 

[PickUrPoison]

This seems like great news but isn't this the beginning of a slow long decline. If you are not replacing hardware and installing new hardware, then what good are services?

Projected out, if you have repeated quarters of shrinking hardware sales its only a matter of time as the oldest hardware out there goes offline everything starts to shrink faster yet.

iPhone units peaked years ago, but they’re still selling 250 million iPhone/iPad/Macs. Just not 275 million.

Installed base continues to grow. They didn’t give iPhone statistics for competitive reasons, but Apple did mention that 50% of both Mac and iPad sales are to new users. That’s 40 million/year plus whatever happened with iPhone. As long as new units sold outpace replacement rate + churn, the installed base will keep growing.

 

[Pootie Tang]

I don't want a dividend. I was new products to increase my share value in the long run. What we have from Cook is garbage products from the legacy portfolio and trash like the crappy watch produced post-Steve. Apple needs vision and direction in its leaders as Cook is neither.
[doublepost=1556726885][/doublepost]
I do sometimes wonder about the financial acumen of posters on here. Do some of you even understand what stock buy backs and dividends even mean? Hint: clueless leadership.

You picked a bad day to call for Tim Cook’s resignation, the stock is up 7%! The Apple cash hoard is $225.4 billion. I don’t think a resignation is in Tim Cook’s immediate future.

 

[PickUrPoison]

Anyone who doesn't want a dividend, doesn’t have enough shares for the dividend to be that significant; and thus isn’t an adequate judge of appropriate market action.

Yes, and very similar to share buybacks, which are essentially a non-cash dividend—with the added benefit of long-term, deferred taxation (vs. taxable current income).

 

[Baymowe335]

I don't want a dividend. I was new products to increase my share value in the long run. What we have from Cook is garbage products from the legacy portfolio and trash like the crappy watch produced post-Steve. Apple needs vision and direction in its leaders as Cook is neither.
[doublepost=1556726885][/doublepost]
I do sometimes wonder about the financial acumen of posters on here. Do some of you even understand what stock buy backs and dividends even mean? Hint: clueless leadership.

Based on what? Look at Cook's results. $700B in shareholder value.

Buybacks aren't clueless leadership. Buybacks have a bad reputation because so many companies execute them so poorly.

Apple is unique in their cash position and cashflow. Apple makes almost 3X the profit of the second most profitable company in the world. They literally have too much cash and buybacks are the correct use of excess cash assuming AAPL is trading at reasonable levels, which it is.

Buybacks make sense at one price but not necessarily at another.

Warren Buffett, the greatest investor of all time, likes buybacks when executed properly. Who are you to disagree? The math makes sense.

 

[PickUrPoison]

I don't want a dividend. I was new products to increase my share value in the long run. What we have from Cook is garbage products from the legacy portfolio and trash like the crappy watch produced post-Steve. Apple needs vision and direction in its leaders as Cook is neither.
[doublepost=1556726885][/doublepost]
I do sometimes wonder about the financial acumen of posters on here. Do some of you even understand what stock buy backs and dividends even mean? Hint: clueless leadership.

Your post is ridiculous. Apple Watch is a huge hit, now posting over $10 billion/year in revenue, and along with AirPods, is responsible for the very high growth rate of wearables. And your questioning the financial knowledge of others is ironic given your fundamental misunderstanding of both dividends and stock buybacks. Apple’s share price is tremendously undervalued, which management knows since they have visibility into future earnings growth. (Basically the opposite of clueless management.)

 

[dogslobber]

Based on what? Look at Cook's results. $700B in shareholder value.

Buybacks aren't clueless leadership. Buybacks have a bad reputation because so many companies execute them so poorly.

Apple is unique in their cash position and cashflow. Apple makes almost 3X the profit of the second most profitable company in the world. They literally have too much cash and buybacks are the correct use of excess cash assuming AAPL is trading at reasonable levels, which it is.

Buybacks make sense at one price but not necessarily at another.

Warren Buffett, the greatest investor of all time, likes buybacks when executed properly. Who are you to disagree? The math makes sense.

A buyback is an admission by the execs that they don't know how to make cash work for the business. This means that Apple is leaving even more money on the table by not reinvesting it. Why do you think Steve never done dividends? Because he knew how to reinvest profits. Apple could do worse than look to Bezos for guidance in how to grow a company. Cook is no Bezos.

Your point about Buffet is irrelevant as you can't compare him to a typical investor. When he invests then he is a market maker who drags the stock north. Nobody else has such an ability to manipulate stocks.

 

[sofila]

with international sales accounting for 61 percent of revenue

So big numbers come from outside US but "US only" mantra is still happening for most services. Interesting

 

[IIGS User]

But my idevices still ship with substandard chargers.....

 

[Baymowe335]

A buyback is an admission by the execs that they don't know how to make cash work for the business. This means that Apple is leaving even more money on the table by not reinvesting it. Why do you think Steve never done dividends? Because he knew how to reinvest profits. Apple could do worse than look to Bezos for guidance in how to grow a company. Cook is no Bezos.

Your point about Buffet is irrelevant as you can't compare him to a typical investor. When he invests then he is a market maker who drags the stock north. Nobody else has such an ability to manipulate stocks.

No, it's not. Apple is unique in their cash position and overall profitablity. You're trying to cookie-cutter the mindset for all companies. No company is like Apple. Apple is already spending $15B/year on R&D and simply has SO MUCH other cash that there aren't better uses for said cash than returning it to shareholders.

Any impact Buffett has buying stock is short-lived. AAPL dropped to 140 long after Buffett had bought it and it had traded as high as $230. That's nonsense. He's a net buyer of stocks, so talking his book is counterproductive.

Buffett's philsiophy on buybacks is entirely separate from AAPL. He just likes that Apple is doing it because he understands math.

You don't just "go buy TSLA" because you have $50B. That doesn't make sense. Apple sees more value in their stock than they do in other opportunities in the market, namely large acquisitions. Have you looked at stock prices? The premiums required to buy entire businesses over current levels would not be appealing to sound investors. Why do you think Buffett hasn't made a large acquisition recently? Not one to be made at the moment. Berkshire has over $100B in cash.

 

[2GoldFish]

Since you seem to have such conviction, why not short it here?

Your analysis is stuck in the past.
Services growing 16%, wearables 30% and iPad 20%.

iPhone is a mature product but people aren’t switching. They are spending money on wearables and services. Active devices hit a new record at over 1.4B and did so in every market.

Oh, and another $75B in buyback authorization. That is huge. Apple doesn’t need huge growth in hardware for the stock to work. Welcome to the new Apple. Services alone might be worth $1T by 2021. A 35 multiple on a $60B business with 70% margins? Do the math.

My analysis was based on facts.

You can grow as much as you want, but the reality is, revenue is still guiding for minimal growth.

 

[ipponrg]

Once Apple releases a higher core CPU, I wouldn’t be at all surprised to see them launch a cloud computing service to compete with Amazon/Google/Microsoft. I think it’s inevitable and could easily add hundreds of dollars to Apple’s share price. Maybe 2022 or so.

I would love to see them do this.

Everyone in industry jokes how Apple is not a competitor in cloud computing and rightfully so. Their services and software have always been pretty mediocre across the board

Let’s see if Apple can walk the walk.

 

[Baymowe335]

My analysis was based on facts.

You can grow as much as you want, but the reality is, revenue is still guiding for minimal growth.

Think what you want. I told you revenue growth is not the point with Apple. Apple is going to buyback almost 20% of the company in the next 2 years. That alone is enough for the stock to work. Good luck.

 

[PickUrPoison]

I would love to see them do this.

Everyone in industry jokes how Apple is not a competitor in cloud computing and rightfully so. Their services and software have always been pretty mediocre across the board

Let’s see if Apple can walk the walk.

They don’t compete in that space, so they have exactly zero market share. Indeed, everyone can rightfully say they’re not a competitor in cloud compute lol.

They are cutting back on outside expenditures though, as they continue to build out their own data centers. Maybe they got fed up with outages, or perhaps it’s just too expensive and they can save money by bringing it in house.

Either way, their internal capabilities are apparently quite extensive, as they’ve reportedly slashed their AWS spending by more than $400 million/year. Their google spend is also down, supposedly due to some incompetence on Google’s part that disrupted iCloud services. Sometimes, if you want something done right...

Of course, if Apple perceives the market is too commoditized, they won’t enter as a service provider. Why get into a price war with Amazon/Google/Microsoft/et al; that wouldn’t make any sense at all. They could just continue to keep it in-house as a competitive advantage instead.

But if they can offer something unique that would give customers a compelling reason to choose an Apple offering over others’, there’s certainly no reason they couldn’t productize it. They could definitely bring millions of low-power CPU/GPU/NPU cores to the table; they’re already doing upwards of a billion or more of each of those every year, just with their current silicon.

They’ve stayed closed mouth on any future plans as of yet; given the recent debacle of AirPower, they may walk the walk before they ever talk the talk... who knows ¯\_(ツ)_/¯

 

[simonmet]

Why is the chart extrapolating beyond these latest reported results?

 

[Abazigal]

A buyback is an admission by the execs that they don't know how to make cash work for the business. This means that Apple is leaving even more money on the table by not reinvesting it. Why do you think Steve never done dividends? Because he knew how to reinvest profits. Apple could do worse than look to Bezos for guidance in how to grow a company. Cook is no Bezos.

Your point about Buffet is irrelevant as you can't compare him to a typical investor. When he invests then he is a market maker who drags the stock north. Nobody else has such an ability to manipulate stocks.

To add on to what was already said by another member, suggesting that Apple go on an acquisition spree just because it has spare cash in the bank demonstrates a very fundamental misunderstanding of how Apple works.

I don’t think Apple is averse to a huge acquisition if they felt it was justified. However, Apple is not the sort of company who would buy a huge company such as spotify or Netflix just for an additional revenue stream. Which is why this suggestion has never made sense to me.

Large M&As simply isn’t in Apple’s DNA because the transaction invariably entails more than just the acquisition of tech and talent. Apple would also be acquiring different revenue streams, products, business models and users. Problems like potential clash of cultures is a very real risk problem that may well offset any benefit found with such a deal.

For most part, Apple is better off acquiring a small company for a specific piece of tech or manpower they wish to bring into the Apple fold, then use their scale to spread it to every Apple device they have. This allows for maximum benefit at minimum cost.

The issue I see here is that for many self-styled analysts and critics, their view of the world is basically based on what they see around them most - cost leadership, divisional organizational structure, growth through M&A's, engineering-led. For them, Apple is a puzzle as it is different in every single way and brings them discomfort.

As it should. This is what makes Apple unique, and this is what will allow Apple to thrive for a good many years to come.

 

[ipponrg]

As it should. This is what makes Apple unique, and this is what will allow Apple to thrive for a good many years to come.

We will see. If the current state is what you consider “thriving”, you have low standards