iPad Remained World's Most Popular Tablet Last Quarter While Huawei Topped Apple in Smartphones Again

[Michael Goff]

Well I care about unit sales because the more successful a device is, the more the manufacturing company will expend efforts in progressing the device. Developers will focus on more successful products and it’s even important for things like accessories.

And yet most developers spend more time on iOS despite Android having more unit sales. And there are huge amounts of accessories for them.

 

[Abazigal]

And yet most developers spend more time on iOS despite Android having more unit sales. And there are huge amounts of accessories for them.

Which doesn’t disprove her point. Apple enjoys the third party app and accessory support it does mainly because it sells a ton of high-end devices. Which in turn implies that their users tend to have more disposable income to spend on apps and peripherals accordingly.

So Apple enjoys the best of both worlds in a sense. They have enough users in an absolute sense to sustain their own thriving ecosystem (even if that number pales in comparison to android) and Apple also owns the best users in terms of spending power. It doesn’t take a genius to recognise that if you have a market that is more lucrative and which requires less effort to develop for, you go for it.

So yes, unit sales matter. Profits and margins matter. People can pretend they are above such “petty” metrics, but the reality is that this has very real benefits for every user in the Apple ecosystem, even if they are loathe to acknowledge it.

 

[ipponrg]

That’s because these companies are still at the early growth stage, where it’s considered acceptable to make a loss while you set up your fundamentals and chase market share. These companies are essentially buoyed by investor money and sold on dreams of upending the current status quo and replacing it with a new world order.

Eventually, they will have to not only turn a profit, but make a lot of it in order to keep shareholders happy. Otherwise, the board will simply replace the CEO with someone who can and will.

I don’t think you will find a company whose shareholders will be happy to see it keep reporting losses every quarter in perpetuity. None of them are charities. Not even Spotify.

Apple is a mature company. They will not be able to produce the same growth they did like 5 years ago. So it’s only natural that they transition from chasing market share to selling more hardware at increasing prices.

https://stratechery.com/2018/apples-middle-age/

It’s basic business 101. I have no idea why people are acting all shocked or surprised.

I would hardly consider companies that have been around for 9+ years to be “early growth stage”. Tesla, as an example, has demonstrated continued failures in appeasing shareholders but they still develop, innovate, and release while keeping their share prices high

In your rhetoric, you are missing a key point. Apple relied on unit sales to depict the story of ASP. It’s the story that drove Apple’s profits up.

If you read today’s Stratechery, you will see graphs that show growth of unit sales has essentially flattened which is why Apple is trying to pivot into services. You can’t convince much longer that you are growing your user base if you don’t have a story to tell behind it

Regardless of this in Business 101, it’s naive to assume you cannot do innovation without profits. Many companies have proven it.

 

[Abazigal]

I would hardly consider companies that have been around for 9+ years to be “early growth stage”. Tesla, as an example, has demonstrated continued failures in appeasing shareholders but they still develop, innovate, and release while keeping their share prices high

And why do you think share price is high? Because people expect that Tesla will eventually turn a profit.

In your rhetoric, you are missing a key point. Apple relied on unit sales to depict the story of ASP. It’s the story that drove Apple’s profits up.

If you read today’s Stratechery, you will see graphs that show growth of unit sales has essentially flattened which is why Apple is trying to pivot into services. You can’t convince much longer that you are growing your user base if you don’t have a story to tell behind it

I have read the article and I am still trying to digest it, because the article seems all over the place, with multiple takes apparently being stitched together.

So in the meantime, I see your Stratechery link, and I raise you one Aboveavalon article.

https://www.aboveavalon.com/notes/2018/10/22/the-gray-markets-impact-on-iphone-pricing

Basically, the article posits that a strong market for 2nd-hand iPhones can actually help fuel sales of Apple's newer, more expensive iPhones, precisely because the money from selling older iPhones can be used to help subsidise the cost of these phones. As such, iPhone sales will remain strong, with higher ASPs resulting in higher revenues and profits for Apple. Meanwhile, your user base is still growing via all the iPhones sold in the 2nd hand market, which bodes well for services revenue.

Regardless of this in Business 101, it’s naive to assume you cannot do innovation without profits. Many companies have proven it.

Let me phrase it another way then.

I feel it would be difficult to sustain innovation without profits, especially in the long run. Up to a certain point, investors are not going to keep throwing money at your company if they didn't think they will see a reasonable return on their investment. And if you don't eventually make a profit, what are you going to use to pay the bills, once your source of investor funding dries up?

 

[Baymowe335]

Are you sure you are looking at the bigger picture?

There are tons of tech companies that continue to invest in custom technology without raking in increasing profits. Examples? Look at Tesla and Uber to start. You may not like their business model or some of their ethics, but they stay in business, keep the lights on, do all the things they are doing now, and continue investing in custom technology.

/shrug

Tesla is not profitable and neither is Uber. And don't be confused....Tesla wants to be profitable, but they can't make money in their current model. Even the most recent "profitable quarter" was the first time they reported income, but it was financially engineered. Not exactly a good comparison. Tesla keeps its lights on by raising more money in the equity market and taking on additional debt. Uber is going to IPO to raise public money as well.

Tesla has real bankruptcy concerns long term and will face intense competition. Remember, Tesla sells electric cars, not teleportation pads. Electric car technology is not a mystery to BMW, Mercedes, Ford, GM, Honda, and Toyota. How would you like competing with them?

BTW, your "innovative" Tesla essentially bought Toyota's old factory to build their cars because Toyota moved out to higher tech production. Tesla's production is a joke compared to a company like BMW.

Tesla has horrible quality, consistently bottom 5...because their production sucks.

Apple has the best build quality in the industry, the most profitable company in the world, and the top selling premium devices on the market. Every company wants to be Apple, period.

 

[ipponrg]

And why do you think share price is high? Because people expect that Tesla will eventually turn a profit.

The same with Amazon right? You shouldn't look at share prices as the sole indicator. That's investor problem 101.

I have read the article and I am still trying to digest it, because the article seems all over the place, with multiple takes apparently being stitched together.

So in the meantime, I see your Stratechery link, and I raise you one Aboveavalon article.

https://www.aboveavalon.com/notes/2018/10/22/the-gray-markets-impact-on-iphone-pricing

Basically, the article posits that a strong market for 2nd-hand iPhones can actually help fuel sales of Apple's newer, more expensive iPhones, precisely because the money from selling older iPhones can be used to help subsidise the cost of these phones. As such, iPhone sales will remain strong, with higher ASPs resulting in higher revenues and profits for Apple. Meanwhile, your user base is still growing via all the iPhones sold in the 2nd hand market, which bodes well for services revenue.

iPhone sales essentially are not growing at the rate they once were. The market has been saturated now. 2nd-hand iPhones are fueling the services sectors which is what Apple is pivoting towards. They've realized that people are holding onto their iPhones longer. The higher ASPs are a red herring in the room because it's their rhetoric to convince investors that they are increasing their profits. You offset the number of unit sales for a higher ASP.

Let me phrase it another way then.

I feel it would be difficult to sustain innovation without profits, especially in the long run. Up to a certain point, investors are not going to keep throwing money at your company if they didn't think they will see a reasonable return on their investment. And if you don't eventually make a profit, what are you going to use to pay the bills, once your source of investor funding dries up?

Two words: private funding.

 

[Abazigal]

The same with Amazon right? You shouldn't look at share prices as the sole indicator. That's investor problem 101.

Of course I don’t just look at share price in a vacuum. I am not sure why you are bringing in Amazon, but here’s my take since you mentioned it.

With amazon, the market is basically willing to pay three times more for a dollar of Amazon operating cash flow versus a dollar of Apple operating cash flow. The market essentially thinks Amazon has better growth prospects given the sheer size of the markets it plays in. (In contrast, the market has a very difficult time valuing growth opportunities in new markets).

Not to mention Amazon has a narrative that’s easy to digest - disrupt the entire retail industry. It effectively boils down to investor sentiment as well.

iPhone sales essentially are not growing at the rate they once were. The market has been saturated now. 2nd-hand iPhones are fueling the services sectors which is what Apple is pivoting towards. They've realized that people are holding onto their iPhones longer. The higher ASPs are a red herring in the room because it's their rhetoric to convince investors that they are increasing their profits. You offset the number of unit sales for a higher ASP.

Market share is the means, profit is the end.

Two words: private funding.

Which doesn’t change a thing. Wherever the funding is coming from, the source of the money still expects to earn a profit at the end of the day.

That Apple is as profitable as it is is simply proof that it has a business model which works. It is what it is.