From the Press Release: the Company sold 26.0 million iPhones in the quarter, representing 28 percent unit growth over the year-ago quarter. Apple sold 17.0 million iPads during the quarter, an 84 percent unit increase over the year-ago quarter. The Company sold 4.0 million Macs during the quarter, a two percent unit increase over the year-ago quarter. Apple sold 6.8 million iPods, a 10 percent unit decline from the year-ago quarter
This caught my eye. 26 million iPhones. Galaxy S III just did 10 million in 6 weeks since launch? That's 20 million in a quarter. Assume the iPhone number is a blended number too between older and latest model. So did we just see the first real example of one phone model legitimately challenge the iPhone? The argument was always that Android success was across so many phones. Now is the breaking down? Please don't flame me as hater or fan boy and just help me with the question of whether this is meaningful or flawed.
A better comparison would be to a quarter introducing a new phone model - Apple sold 37.04 million iPhones in Q1 2012, the fiscal quarter during which the iPhone 4S launched.
I think that's a good comparison. Maybe not to the iPhone 4S though as by then the franchise was established as where the S III is, up till now, a less established brand. But you're right that we should compare some sort of launch to launch data.
Which might hide a week or two of supply line latency. The difference only becomes very important when the product is dead in the water. Like the Playbook & Windows Phone 7.
If the difference was only a week or two of channel fill, then these vendors would be reporting actual sales instead of dancing around, trying to avoid the topic at all.
I guess the question is: how many iPhone users are locked in contracts and can't move to another phone at the moment, and would they move to the Galaxy S III if they could?
And how much money did the Galaxy S III earn on those 10 million sales vs iPhone?
I'm no Apple fanboy, but it always amuses me that the Android boosters talk unit numbers while Apple continues their "BMW" revenues on product. Congrats, you sold 100 Beetles... our sales of 1 BMW generated more profit.
Unit talk numbers are very relevant, as it foretells how many people will be on each platform going forward. As a user or dev, I hardly care about Apple's profit per phone; I care about how large of an ecosystem I'm in.
And how much money did the Galaxy S III earn on those 10 million sales vs iPhone?
I'm not sure if you are actually asking for an answer here - it seems you think you already know the answer.
Samsung just had record profit last quarter, prior to the Galaxy 3 launch.
They don't break down per phone profit & margin, but:
Samsung's quarterly handset division profits nearly tripled to 4.27 trillion won ($3.8 billion), accounting for 73 percent of total profit, and operating margins jumped to 18.4 percent from 12 percent in the preceding quarter on strong sales of the Galaxy S and the Note phone/tablet, the surprise consumer hit of recent months.[1]
Now 18.4% profit margin isn't as high as Apple's, but OTOH it includes a lot of low end (and less profitable) phones too.
TL;DR? That thing about Apple making most of the profit in the mobile phone market is no longer true.
A rule that I learned a long time ago in tech is, "The commodity always wins."
And it seems to work out that way most of the time. If there are two technologies, and one manages to become a commodity that is installed all over, that's the technology that you see innovation coming from and the future coming out of. It is often the worse technology. But it wins.
I don't have a horse in the phone race. But when I see Apple folks talking about profit margins and Android folks talking about units sold, I'd lay my money on Android winning in the long run. It may be a worse market to be in now, it may make a lot less money. But where the users are is where the future tends to be.
This happens for a lot of reasons. Let me give just one. When teenage kids (who don't have a lot of money of their own) get a smart phone, they are going to be given Android devices because it is cheaper. When they play around with those phones and master them, they will be learning Android. Many will stick with Android. Others will learn Android, and their first programming experiences will be with it because that is what they have. And once they grow up they will be worth a lot more than $0, both as customers or developers. But they won't be imprinted on iOS.
What I mean by win is that they will wind up becoming the dominant technology with the lion's share of the market, revenue, and other companies building on top of. The also ran technology may survive, but it becomes relatively insignificant.
For example compare the Mac vs Microsoft Windows. The Mac was better, had better product margins, etc. Microsoft was the commodity and completely owned the market.
For other historical examples compare VMS vs Unix, Lisp vs C, OSI protocols vs TCP/IP, Smalltalk vs Java, traditional client-server vs web apps, CORBA vs SOAP (vs JSON rpcs), Perl vs PHP, and so on. In many cases the losing technology was technically much nicer to work with. But the winning technology won.
So how your theory explains Apple's success in recent years?
Comparing Mac to windows makes no sense, but still: just look at the sales trend of Mac's vs. other computers.
Then see how much companies are making with Android: many adopted the OS but only a couple actually get profits from it.
Apple's recent success has come from recognizing and creating new markets. Even in traditional computers, a large part of their current success is that they pioneered the market for people who want physically attractive computers. This is unlikely to continue to succeed for them without Steve Jobs a the helm.
As for Mac vs Windows, I'm referring to the old macs, OS 7, etc. That story ended with Apple almost dying before Steve Jobs came back and did what he did best - focused the company on creating new markets.
Moving back to your focus on profits, I think you could benefit from reading The Innovator's Dilemma and its followup The Innovator's Solution. What you'll learn is how across many types of technologies (examples include ship design, steel production techniques, earth moving machines, disk drives, etc), across many decades, whenever two technologies compete head to head, the odds very, very strongly favor the one that is cheap and crappy. Throughout the competition, all of the revenue to be made is in the established, strong technology - until they suddenly have no market left.
Given that history, there is no question what to expect in phones. The iPhone is clearly the superior option that makes more money. Android is clearly the cheap crappy option that ships more units. But both are going to improve faster than people's needs increase, and Android is going to win.
Yes. Because the people who benefit from a "race to the bottom" are the customers. It's a basic tenet of free market capitalism and seems, more or less, to be working.
Why the apple community feels the need to attack the concept of free market competition I have no idea, I think they just like the sound of the phrase, it's certainly become popular recently without any outward sign that most people who use it even know what it means.
This assumes that Apple learned nothing from the success of the iPod.
If you look at Apple's product line up right now, they are slowly but surely back filling their product line up just like the iPod. Look how that turned out for everyone else.
It's too early to bet on either platform in the long term.
Read item #5 in http://www.paulgraham.com/ambitious.html and you'll find out that the best inside information that Paul Graham could get says that Apple has what Steve Jobs left in its pipeline, and nothing else big coming.
This tells me that the trend you are hoping for in Apple's product line should not be counted on.
They missed the analysts predicted revenue and EPS, but not their own guidance: revenue of $34 billion and earnings per diluted share of $8.68. Wall Street investors go bullish when iPhone sales slow, and bearish when sales are exploding.
The amount of the first dividend in a while has been set.
"Apple's Board of Directors has declared a cash dividend of $2.65 per share of the Company's common stock. The dividend is payable on August 16, 2012, to stockholders of record as of the close of business on August 13, 2012."
I don't really understand how people keep calling Apple a hardware company. Yes, they make their own hardware (in some cases) but on the record, repeatedly, everyone at Apple says, all the time, that they treat themselves as a software company.
That's not fair, both wheels and engines are hardware ;)
In all seriousness Apple isn't either. They make better software than any hardware company I know of, and better hardware than any software company I know.
My point is that both wheels and engines are simply components of what Ford actually makes, which is cars. Likewise hardware and software are just components of what Apple actually makes.
Totally agree that Apple isn't either, which was exactly my point.
Because that's what they sell... Look at the revenue figures. Yes they make two operating systems, but they produce little direct revenue (iOS updates are free, the next OS X version is $20).
Oh... also buried in the release - Mountain Lion is released tomorrow:
"We've also just updated the entire MacBook line, will release Mountain Lion tomorrow and will be launching iOS 6 this Fall. We are also really looking forward to the amazing new products we've got in the pipeline."
With iPhones, "less than a year old" means "the new one's about to come out". My two year plan expired a few months back and I'm holding out for iPhone 5, and I suspect a lot of iPhone 4 purchasers are in the same boat.
ATT mentioned in their earnings call that they've made it harder to upgrade by extending the amount of time you must wait to be able to upgrade. They did it to boost earnings and it helped. That might also explain the softness in the iPhone numbers.
Wait, there's more than one way for AT&T to dial back the subsidies it is paying Apple? Who'd have guessed that? I thought their customers wanted the iPhone so badly that they had no choice in the matter.
It's also worth noting that upgrade games for iPhone users are quite common outside the US (higher "early upgrade" fee, delayed upgrade eligibility and so on). It isn't terribly surprising to see AT&T borrowing from that playbook (though I suppose they should patent those tricks before Apple does ;) ).
Mac sales are static, overall iPhone sales softening as the lineup ages, iPads surging, iPod continues to dwindle, miscellaneous sales remain miscellaneous.
+ stock buyback next year
+ dividends being issued as expected
+ China sales exploding
So: a quiet quarter. New Mac OS released tomorrow. Yay!
If you can make $8 billion profit in a single quarter and for some reasons the estimates where higher, that's a problem with the estimators, not with your business. In 2012 on the planet Earth averaging nearly $4 million in profit every single hour of every single day is tremendous business.
Here is a better TL;DR. Apple, missed average estimates for most of the reported values for iPhone, Mac, EPS, revenues and profit margin, but beaten its own guidance, which is usually quite low. The stock price was down over 5% after markets.
Most articles blame the next iPhone for the lower than expected sales. So In 1 year there are 4 quarters, and in the last 2 quarters misses on estimates are explained by rumours for the next iphone, this year and last year. Finally, will the current quarter also be worse for iPhone due next release approaching?
Analysts; please be clever enough to take care of new releases in your estimates.
Q: Can you talk about what your conversations are like with carriers in terms of pricing, subsidies, etc.?
Tim Cook: (laughing out loud)
I don't want to talk about specifics with carriers, but generally I'd say our role is to make the very best smartphone in the world that has an incredible user experience that's far superior than anything else, that customers want to use every day at the end of the day, carriers want to provide what customers want to buy the most important thing for Apple is to continue making the best products in the world. we are maniacally focused on it
I'm surprised the Mac grew at all given how late in the quarter they updated the notebooks plus no desktop updates at all. I guess it just proves how little people really care about spec sheets anymore -- or maybe they made it all up at the end of the quarter with the new notebooks?
They missed their estimates and stocks tumbled 6% in after hours trading. That's $33, more than 10 times the dividends they will be paying on that $8B profit.
The market was trading on a belief that Apple's numbers would be about $2 billion higher than they were. Therefore the stock will fall as people digest the number and re-evaluate where Apple should be trading.
Since they reported numbers that were in the neighborhood of 6% below what was expected, their stock fell about 6%. Which is a pretty large drop.
"Apple said its earnings per share were $9.32 on revenue of $35 billion. Analysts polled by Thomson One Analytics predicted earnings per share of $10.36 on revenue of $37.19 billion."
It doesn't matter how much money you actually make when you are as big as Apple, it matters what you make compared to what people (analysts) think and expect you to make.
You said "their estimates" which I took to mean Apples own estimates. Isn't it tradition for Apple to beat their own estimates, fail to meet analysts estimates, and having their shares drop for a period of time afterwards? I'm not a trader though so correct me if I'm wrong.
They're usually pretty good about their own estimates, but they don't manage "expectations" very well. By way of contrast, Microsoft seems to do this much better, leading to fewer surprises.
These analysts have their heads up their asses, though, as that's the only place you could get numbers like this.
It is a tradition. Manipulation of Apple's stock price by people looking to make a quick buck goes back at least a few years now, with even some big names openly admitting to having done unscrupulous things to make it happen.
You say this as if it means Apple has done something wrong, or that they've somehow underperformed. The fact is this: they issued guidance for their profits for this quarter, and beat their own guidance. Third-party analysts issued their own estimates, which were significantly higher, and the market responded to those estimates by overvaluing the stock. When the quarterly results were issued, it turned out that the analysts were wrong, and the market, which had "bought the rumor", promptly corrected to a more realistic valuation. I fail to see how a third party being over-optimistic is Apple's fault.
People tend to assume that when a stock loses a significant amount of value in a short period of time, a company has done something wrong. This is a great example of why this is not the case - speculators wrongly assumed that Apple would be even more ultra-profitable than they actually are, and overvalued the stock. The resulting correction was healthy.
Inspite of being the most valuable company on Earth and making an amazing profit by any metric - you still lose value (stock price) if you come in under "analyst" estimates.
The relentless march of capital may be increasingly going off the rails.
It makes perfect sense. If you're widely expected to make a lot of money, people will price that into your stock. If you make a lot minus n, you're doing less well than the analysts expected, and so your stock is overvalued.
The failing here is not that the stock price dropped on results that were worse than the market expected, it's that the market expected too much in the first place, causing the stock to become overvalued.
> The failing here is not that the stock price dropped on results that were worse than the market expected, it's that the market expected too much in the first place, causing the stock to become overvalued.
I don't really see how what I said disagrees with what you said - what I was pointing out was that a stock price falling when the company fails to meet expectations is good and rational behaviour. The problem is the bad analytics that caused the inflated expectations in the first place. Feel free to speculate as to the cause of that as you wish :-).
81 comments
[ 4.3 ms ] story [ 165 ms ] thread- you are assuming the Galaxy sales will keep going at the same rate for 6 more weeks. certainly possible, but let’s wait two more months.
- most companies talk about shipments to retailers, not sales. Apple is talking about real sales to customers.
- summer iPhone sales slow down because a lot of people are expecting a new model in the fall.
Because that would be dumb.
I'm no Apple fanboy, but it always amuses me that the Android boosters talk unit numbers while Apple continues their "BMW" revenues on product. Congrats, you sold 100 Beetles... our sales of 1 BMW generated more profit.
I'm not sure if you are actually asking for an answer here - it seems you think you already know the answer.
Samsung just had record profit last quarter, prior to the Galaxy 3 launch.
They don't break down per phone profit & margin, but:
Samsung's quarterly handset division profits nearly tripled to 4.27 trillion won ($3.8 billion), accounting for 73 percent of total profit, and operating margins jumped to 18.4 percent from 12 percent in the preceding quarter on strong sales of the Galaxy S and the Note phone/tablet, the surprise consumer hit of recent months.[1]
Now 18.4% profit margin isn't as high as Apple's, but OTOH it includes a lot of low end (and less profitable) phones too.
TL;DR? That thing about Apple making most of the profit in the mobile phone market is no longer true.
[1] http://www.reuters.com/article/2012/04/27/samsung-idUSL3E8FQ...
And it seems to work out that way most of the time. If there are two technologies, and one manages to become a commodity that is installed all over, that's the technology that you see innovation coming from and the future coming out of. It is often the worse technology. But it wins.
I don't have a horse in the phone race. But when I see Apple folks talking about profit margins and Android folks talking about units sold, I'd lay my money on Android winning in the long run. It may be a worse market to be in now, it may make a lot less money. But where the users are is where the future tends to be.
This happens for a lot of reasons. Let me give just one. When teenage kids (who don't have a lot of money of their own) get a smart phone, they are going to be given Android devices because it is cheaper. When they play around with those phones and master them, they will be learning Android. Many will stick with Android. Others will learn Android, and their first programming experiences will be with it because that is what they have. And once they grow up they will be worth a lot more than $0, both as customers or developers. But they won't be imprinted on iOS.
For example compare the Mac vs Microsoft Windows. The Mac was better, had better product margins, etc. Microsoft was the commodity and completely owned the market.
For other historical examples compare VMS vs Unix, Lisp vs C, OSI protocols vs TCP/IP, Smalltalk vs Java, traditional client-server vs web apps, CORBA vs SOAP (vs JSON rpcs), Perl vs PHP, and so on. In many cases the losing technology was technically much nicer to work with. But the winning technology won.
For a famous essay reflecting on why, see http://www.jwz.org/doc/worse-is-better.html from the Lisp vs C war.
As for Mac vs Windows, I'm referring to the old macs, OS 7, etc. That story ended with Apple almost dying before Steve Jobs came back and did what he did best - focused the company on creating new markets.
Moving back to your focus on profits, I think you could benefit from reading The Innovator's Dilemma and its followup The Innovator's Solution. What you'll learn is how across many types of technologies (examples include ship design, steel production techniques, earth moving machines, disk drives, etc), across many decades, whenever two technologies compete head to head, the odds very, very strongly favor the one that is cheap and crappy. Throughout the competition, all of the revenue to be made is in the established, strong technology - until they suddenly have no market left.
Given that history, there is no question what to expect in phones. The iPhone is clearly the superior option that makes more money. Android is clearly the cheap crappy option that ships more units. But both are going to improve faster than people's needs increase, and Android is going to win.
Why the apple community feels the need to attack the concept of free market competition I have no idea, I think they just like the sound of the phrase, it's certainly become popular recently without any outward sign that most people who use it even know what it means.
If you look at Apple's product line up right now, they are slowly but surely back filling their product line up just like the iPod. Look how that turned out for everyone else.
It's too early to bet on either platform in the long term.
This tells me that the trend you are hoping for in Apple's product line should not be counted on.
"Apple's Board of Directors has declared a cash dividend of $2.65 per share of the Company's common stock. The dividend is payable on August 16, 2012, to stockholders of record as of the close of business on August 13, 2012."
The fact is Apple is a PRODUCT company. Meaning they do the software, hardware and most importantly everything in between the two.
In all seriousness Apple isn't either. They make better software than any hardware company I know of, and better hardware than any software company I know.
Totally agree that Apple isn't either, which was exactly my point.
Apple (or Microsoft) sells a platform. Samsung sells hardware. Intuit sells software.
"We've also just updated the entire MacBook line, will release Mountain Lion tomorrow and will be launching iOS 6 this Fall. We are also really looking forward to the amazing new products we've got in the pipeline."
Yep. Hi. *waves from a 3g-only Verizon iPhone 4 :(
It's also worth noting that upgrade games for iPhone users are quite common outside the US (higher "early upgrade" fee, delayed upgrade eligibility and so on). It isn't terribly surprising to see AT&T borrowing from that playbook (though I suppose they should patent those tricks before Apple does ;) ).
Mac sales are static, overall iPhone sales softening as the lineup ages, iPads surging, iPod continues to dwindle, miscellaneous sales remain miscellaneous.
+ stock buyback next year + dividends being issued as expected + China sales exploding
So: a quiet quarter. New Mac OS released tomorrow. Yay!
Most articles blame the next iPhone for the lower than expected sales. So In 1 year there are 4 quarters, and in the last 2 quarters misses on estimates are explained by rumours for the next iphone, this year and last year. Finally, will the current quarter also be worse for iPhone due next release approaching?
Analysts; please be clever enough to take care of new releases in your estimates.
Q: Can you talk about what your conversations are like with carriers in terms of pricing, subsidies, etc.?
Tim Cook: (laughing out loud)
I don't want to talk about specifics with carriers, but generally I'd say our role is to make the very best smartphone in the world that has an incredible user experience that's far superior than anything else, that customers want to use every day at the end of the day, carriers want to provide what customers want to buy the most important thing for Apple is to continue making the best products in the world. we are maniacally focused on it
They missed their estimates and stocks tumbled 6% in after hours trading. That's $33, more than 10 times the dividends they will be paying on that $8B profit.
Since they reported numbers that were in the neighborhood of 6% below what was expected, their stock fell about 6%. Which is a pretty large drop.
Via http://www.mercurynews.com/breaking-news/ci_21147940/apples-...
It doesn't matter how much money you actually make when you are as big as Apple, it matters what you make compared to what people (analysts) think and expect you to make.
Edit: Put wrong quarter numbers, fixed.
These analysts have their heads up their asses, though, as that's the only place you could get numbers like this.
People tend to assume that when a stock loses a significant amount of value in a short period of time, a company has done something wrong. This is a great example of why this is not the case - speculators wrongly assumed that Apple would be even more ultra-profitable than they actually are, and overvalued the stock. The resulting correction was healthy.
The relentless march of capital may be increasingly going off the rails.
The failing here is not that the stock price dropped on results that were worse than the market expected, it's that the market expected too much in the first place, causing the stock to become overvalued.
The thing is, analysts have shown, historically, that either:
1) They are really, really bad at their jobs to have such a consistent track record of producing poor estimates for Apple, or
2) They are really, really good at their jobs, but the jobs they're doing aren't the jobs we think they're doing.
I don't really see how what I said disagrees with what you said - what I was pointing out was that a stock price falling when the company fails to meet expectations is good and rational behaviour. The problem is the bad analytics that caused the inflated expectations in the first place. Feel free to speculate as to the cause of that as you wish :-).