Apple Reports Q3 2013 Quarterly Results: $6.9 Billion Profit on $35.3 Billion in Revenue [Call Concluded]

[zedsdead]

iOS in the car was the most interesting comment to me. I am VERY curious about that.

I really hope Apple also makes a dedicated screen one can buy and install in an existing car.

This is definitely one of those "new product categories" Tim was refereeing to. Car audio/maps is DISGUSTINGLY bad. The UI's and lag are terrible. Apple can make some serious headway here.

 

[oliversl]

The call ended but I'm hearing Bloomberg on Apple live feed?

 

[tigres]

Tim again breaks the mold by hinting at new products in the fall.
Mac Pro preview etc...

More staggered is better than all at once IMO.

 

[KPOM]

The normal iPad is due for a major redesign, and many like myself are content with the iPad 3 (or iPad 2). Once the iPad 5 hits, there will be many sales. And more once the mini goes retina next year.

Hopefully you are right about that. Apple is probably down to around 40% of the tablet market last quarter. Considering that they had nearly 100% 2 years ago and 2/3 last year that is a potential concern. Android tablets may be having an impact. I'm waiting for the Retina Mini to upgrade from my current Mini.

 

[foobarbaz]

Yeah, up 19 after hours. My guess is they just looked at the upside surprise on the iPhone numbers and ignored everything else.

The change in the stock price doesn't say anything about whether the results are good or bad. It tells us if the results are better or worse than the average investor expected. And investor expectations are exceptionally low recently.

 

[KPOM]

Help me understand this. iPhone sales are up, but profits are down. How is this good news? I understand that the stocks is dead cheap and the company is generally in a very good shape, no competition in sight. Still this earnings report doesn't strike me as a positive surprise. Maybe investors really thought Apple was doomed and are now shocked it's still alive and making money?

Revenue and profits were at the high end of Apple's guidance and above analyst expectations. iPhone is where they make their money and they hit it out of the park, beating consensus by 4 million. iPad disappointed but the margins are lower so the iPhone offset that.

Margins are down but that's to be expected since the products are due for a refresh (apart from the MacBook Air).

 

[Rogifan]

Hopefully you are right about that. Apple is probably down to around 40% of the tablet market last quarter. Considering that they had nearly 100% 2 years ago and 2/3 last year that is a potential concern. Android tablets may be having an impact. I'm waiting for the Retina Mini to upgrade from my current Mini.

How are you arriving at that 40% figure?

 

[4TheLoveOfTech]

How are you arriving at that 40% figure?

IDC Tablet Market Share by OS

http://www.businessinsider.com/android-ahead-of-ios-tablet-market-share-2013-5

 

[HiRez]

Not one question about the hack into the developer site? I was kind of hoping there would be, not that they would say anything useful about, but just to show Apple that Someone Cares, and that people are paying attention. Still no indication from Apple when the site will be back up (they keep saying "soon", but coming up on 6 days now), is there a sense of urgency? Does Cook even know about it? Or care?

 

[Gudi]

In my book you're only doomed of you are losing money. Apple is making money hand over fist. A decline in profit means you are making money, just not as much as you did last time.

Which is a very bad thing, if you are an investor who bought the stock at a higher price, when the company was making way more money than it is now.

There are things to worry about as an investor:
– iPad minis lower selling price compared to the iPad
– rumors of an low-cost and presumably lower-profit iPhone
– the decline of the PC market as a whole

This all could mean that the times of big profits are over. The stock can be in trouble without the company being in trouble. Of course Apple will continue to make money, but how much?

 

[69650]

Still think it's a mistake to load all their product releases into the space of a few months each year. People only have so much money to spend at Christmas. They should spread things out more like they used to.

 

[Gudi]

Margins are down but that's to be expected since the products are due for a refresh (apart from the MacBook Air).

No, margins should go down only after the refresh. Just before the refresh margins should be at their highest point during product lifetime. Unit numbers and revenues should go down shortly before a refresh, when the MacRumors Buyers Guide lights signal red. So it is a surprise, that they sold so many iPhones. But its also a surprise, that they squeezed so little money out of them. Normally higher iPhone unit sales also mean higher overall profits. This quarter was different.

 

[HiRez]

Still think it's a mistake to load all their product releases into the space of a few months each year. People only have so much money to spend at Christmas. They should spread things out more like they used to.

I agree with that, for a number of reasons.

1. As you say, people can't buy everything at Christmas. In fact, I wonder how many iPhones are really sold at Christmas. Because they are tied to carriers and contracts, it seems like something that is difficult to give as a holiday gift. Maybe iPhones should be released in the spring?

2. It avoids those really long periods with zero product announcements where all the analysts and media start piling on Apple about having no innovation and nothing new to show (right or wrong, those matter because it's what the general public and shareholders will hear).

3. It lets Apple spread out its resources and keep core teams together. We've seen a number of times where engineering and design teams will get pulled off whatever they are working on in a push to get another product out, which delays the product they were working on, and may mean more bugs from using engineers not as familiar with the project they were working on daily. We may see this happen soon with OS X Mavericks and iOS being released so close to one another.

But one problem with this, for software, is that there is only 1 WWDC each year, and Apple likes to put beta versions in developer's hands at the conference. I wonder if, at some point, they would do a winter WWDC (January?) just for OS X, and leave the summer WWDC for iOS. It would be smaller of course, but considering tickets for this year''s WWDC sold out in under 2 minutes, it seems like it could be supported.

4. It avoids overloading Apple support call centers and genius bars, with all kinds of problems, training, repairs, and returns all coming at the same time. That means a worse experience for users, if they have to wait in long lines.

 

[69650]

Sales growth flat, average margins & profits down significantly and yet shares up over 3% in after hours trading. You have to love Wall Street.

 

[Breaking Good]

When you have a single product line accounting for over half your revenue, it is pretty easy to stumble.

 

[Rogifan]

Sales growth flat, average margins & profits down significantly and yet shares up over 3% in after hours trading. You have to love Wall Street.

There's something called expectations, and Apple beat the concensus. That's why they were up after hours. Honestly Apple had a couple insane quarters totally out of the norm for them yet some are treating that as the new normal and expecting Apple to have $14B in profit and 40% gross margins every quarter. That's silly.

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When you have a single product line accounting for over half your revenue, it is pretty easy to stumble.

And yet iPhone numbers were the best of the lot.

 

[69650]

I agree with that, for a number of reasons.

1. As you say, people can't buy everything at Christmas. In fact, I wonder how many iPhones are really sold at Christmas. Because they are tied to carriers and contracts, it seems like something that is difficult to give as a holiday gift. Maybe iPhones should be released in the spring?

2. It avoids those really long periods with zero product announcements where all the analysts and media start piling on Apple about having no innovation and nothing new to show (right or wrong, those matter because it's what the general public and shareholders will hear).

3. It lets Apple spread out its resources and keep core teams together. We've seen a number of times where engineering and design teams will get pulled off whatever they are working on in a push to get another product out, which delays the product they were working on, and may mean more bugs from using engineers not as familiar with the project they were working on daily. We may see this happen soon with OS X Mavericks and iOS being released so close to one another.

But one problem with this, for software, is that there is only 1 WWDC each year, and Apple likes to put beta versions in developer's hands at the conference. I wonder if, at some point, they would do a winter WWDC (January?) just for OS X, and leave the summer WWDC for iOS. It would be smaller of course, but considering tickets for this year''s WWDC sold out in under 2 minutes, it seems like it could be supported.

4. It avoids overloading Apple support call centers and genius bars, with all kinds of problems, training, repairs, and returns all coming at the same time. That means a worse experience for users, if they have to wait in long lines.

I would agree with your analysis.

I would release iPhones in June, iPads in Sept and iPods in April.

People use their phones more in the summer and Apple need to keep developers on side. They don't have to release new iOS at the same time as the new iPhone. This way they get 2 sales spikes - one when the new iPhone is released and another when the new iOS is released.

iPads have replaced the iPod as the Christmas gift of choice so it makes sense to keep it at Sept.

iPod sales are falling through the floor faster than a stone. Why not move it to a spring release and promote it as the perfect product for travel, spring/summer in the park, etc.

I'm not sure they can do a whole lot with the Macs. They're tied to Intel's release schedules.

 

[0029937]

This way they get 2 sales spikes - one when the new iPhone is released and another when the new iOS is released.

iPads have replaced the iPod as the Christmas gift of choice so it makes sense to keep it at Sept.

I like your thinking. Might be easier said than done but having the iOS separate from the actual hardware release could keep consumer interest high as you'd have every 6 months some sort of major release.

Either way, iPad and iPhone updates so close together don't make any sense to me.

 

[chairguru22]

I really hope Apple goes back to a more scattered release schedule of products. Having nothing for 6-8 months and then everything all at once is not the greatest strategy to do each year.

Maybe next year it will be more spread out. It was nice having iPad updates early in the year, iPhone mid year, iPod/iTunes in the fall, and Macs throughout.

And those Mac numbers are depressing, but expected given its lack of focus.

I would suspect that the innovation and technology for these upcoming updates were harder to create and produce. The timing of certain products seems to have been pushed back or delayed. Sucks to just happen to all coincide with each other.

Maybe Apple is also trying to "weather the storm" of all the competitor releases and come out with an AMAZING fall lineup that will blow everything away.

 

[SactoGuy18]

I think what really helped iPhone sales is the fact there are now a LOT more cellphone carriers offering the iPhone worldwide, including now T-Mobile USA, the last major carrier holdout in the USA.

But what I'm watching is will Apple finally announce that the iPhone 5S and the new lower-cost iPhone gets official support for the TD-SCDMA digital cellular system used by China Mobile. If that happens, Apple sales will zoom through the roof because that means a 750 million user base of cellphone users can now officially use the iPhone.

 

[KylePowers]

Not quite.

For all of 2003, Apple sold 939,000 iPods for $345 million in total revenue, versus 22.9 million iPods in 9 months of fiscal 2013 for $3.8 billion in revenue.

Sorry, I meant as a percentage of total revenues (i.e. from 2% to 70% of total revenues, not $3.8 billion to $133 billion haha)

 

[lildimsum7]

Sales growth flat, average margins & profits down significantly and yet shares up over 3% in after hours trading. You have to love Wall Street.

Do you actually think a company has to keep growing just for the market cap to rise?

 

[Gudi]

There's something called expectations, and Apple beat the concensus. That's why they were up after hours.

Stupid consensus! Most institutional analysts had no idea what to expect and placed themselves safely in the range Oppenheimer provided for them. But even the upper bound of that range represented a steep decline in profits. Speaking of Lowered Expectations ...

Honestly Apple had a couple insane quarters totally out of the norm for them yet some are treating that as the new normal and expecting Apple to have $14B in profit and 40% gross margins every quarter. That's silly.

How about making the same money as one year ago? Apple failed to do that and is a shrinking company at this point in time. This is the new normal and a normal reaction to that would be a further decline in stock price. Unless you expect this to be the last loosing quarter and profits can only go up from here?

It is silly to be happy about beating your own lowered expectations. In this case I suggest you MSFT. At this point Windows 8.1 can only exceed peoples expectations. Apple's guidance for Q4 2013 includes expected revenue of $34-37 billion and gross margin between 36 and 37 percent. Q4 2012 was $36.0 billion and 40.0 percent. So we are looking forward to another quarter of lower or equal profits. Nothing to be overly happy about.

 

[donutbagel]

Currently up 4.3% in after hours trading.

Why do investors like it when revenue goes up but profit goes down and not when profit goes up but revenue goes down? I expected the stock to rise last time and fall this time.

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Not one question about the hack into the developer site? I was kind of hoping there would be, not that they would say anything useful about, but just to show Apple that Someone Cares, and that people are paying attention. Still no indication from Apple when the site will be back up (they keep saying "soon", but coming up on 6 days now), is there a sense of urgency? Does Cook even know about it? Or care?

Maybe it's just me, but as a beginner developer, I rarely need to access the dev centers. All of the reference pages (NSManagedObject class reference, for example) have always been up anyway.

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Mac is only 14% of Apple. No wonder it can't make headway in worldwide PC market.

14% of Apple's income and around 7% of all PCs isn't bad, especially if you take out all of the XP computers that are probably cash registers or DMV office computers.

 

[69650]

Do you actually think a company has to keep growing just for the market cap to rise?

Yes because market cap is based on the share price and if revenues and profits don't grow the share price won't rise.