Apple lowers guidance for Q1 - your reactions?

apple

#41

Gruber has been arguing for a while that it’s not that the issue isn’t that Apple’s prices are higher (Apple’s margins have been around the same 38% rate for the last 5 years, and they were at 44% in 2012!), but that overall Apple (as indicated by its margins) has chosen to build products that are more expensive to produce. (If they were deriving higher profits from higher prices, they’d show up as higher margins, duh.) So it seems the numbers are on his side here.

It appears that Services are responsible for ‘margin enhancement’ compared to hardware, too. Jefferies & Co analysts predict the gross margin on Apple services will be 60-66% over 5 years, compared with the consensus analyst estimate of 56%. (Apple’s App Store sales have a gross margin of about 90%, according to estimates from Macquarie Securities analyst Ben Schachter. Overall, he estimates the rest of Apple’s services have a gross margin of 65%.)

As part of its changes to financial disclosures announced in November, Apple will disclose gross margins for its services in its next earnings report, so we’ll know for sure then.

But right now it all suggests that hardware margins are therefore somewhat lower than that 38% average… again indicating that Apple is simply making more expensive products, not gouging customers for higher margins.


#42

@Yaphet, I’m fairly certain I will be disappointed - though there is some light at the end of the tunnel.

The new Air kept touchID (useful) but dumped the Touchbar (useless for most) taking a chunk of cost out of manufacturing and allowing lower prices.

Dongle hell will ultimately come to an end when everything else migrates to USB C. While more slots would be better, 2 is probably enough (one to charge and one for connections albeit via a hub).

Apple patented a magsafe adaptor for USB C (though I won’t hold my breath on that one either) https://www.digitaltrends.com/computing/apple-usb-type-c-magsafe-adapter-patent/

The latest variant of the shallow keyboard might allow people to eat a sandwich within ‘crumbs fall’ of the laptop…

When my current (6 yr old) mac dies I will almost certainly buy another Apple. That said, strategy/design choices of the last few years meant that Apple lost out on an upgrade (I have wanted a new machine for 3 years) and the services revenue that would have come from whoever got my old machine in that time has been lost.

I’m not a shareholder but decisions whose outcome reduces/limits the number of people in the ecosystem is probably a bad idea in the long term if the future prosperity of the business relies on selling services to those self same users.


#43

The mistake people make when discussing anecdotal purchases that apple missed out on is presuming that they are representative or statistically relevant. The actual results do not bear this out, and in altering their strategy to service a slim minority use case Apple likely would have missed out on a greater market (a market they did in fact service as borne out by the actual results). It’s a non sequitur: “if I don’t buy an Apple product then Apple have made less money, if Apple are making less money then it’s because I (and people like me) didn’t buy the product”.

I’m not saying that Apple made great product or pricing decisions necessarily, but the reasons that those decisions aren’t a good fit for some of us are likely to be the reasons the products have been successful elsewhere. And they have. The current generations of MacBook and iPhone are outstandingly popular by any analysis. This is their second best quarter on record.


#44

Same here. Just a user. Don’t get the obsession with it’s financial results.


#45

I agree, I don’t see Windows and Android changing much any time soon. But I don’t share your view that Apple’s problem is due to the recent financial markets. Markets have been going boom and bust for 400 years. I’ve rode through a few “crashes” myself.

Apple is a well run company with excellent profits. And our economy is in good shape.

IMO, the only thing that can really cause Apple to falter, in the foreseeable future, is Apple. They have the ball, it’s theirs to fumble.


#46

There are no problems with Apple currently - it is a company, which makes 80+ billons profit after all. The problem is the market and its unrealistic expectations of increasing profit forever.


#47

I agree, Apple is in good shape. But investors in today’s market are no different than the ones who put money into the Dutch East India Company. Or the recent graduate who is shopping around for the best interest rate for his first savings account. People invest their money where they think they will get the best return.

A company doesn’t have to issue stock and deal with the rollercoaster of the various markets. They can knock on doors and try to borrow money from banks or individuals.

It’s not a perfect system, but no one has come up with anything better.


#48

I am a (small) stockholder and not overly concerned. $84 billion vs. $85+ billion is still freaking billions in revenue. Also predict the highest earnings per share ever. Not too shabby. A good run that eventually was going to end. I’m still bullish on Apple for these reasons:

  1. still the best phones
  2. still the best tablets
  3. still the best computers
  4. still the best overall user experience

Phones are a small luxury that most people can afford, especially when they are not actually buying the phone, but the monthly phone payment. Sure, they might wait an extra year or two to upgrade, but a high percentage are going to buy Apple again. I sure as heck can’t use anything else now. And I’ll buy my kids Apple when they are old enough.

Side note - this is why people suck at investing - they watch the news and panic when one little short-term blip happens after years of success. I am tempted to add to my Apple stake now at a discount and enjoy the ride back up while collecting my nice dividend check along the way. <—this is not stock advice