Apple Reports First Quarter Results

[austenallred]

To understand scale: Apple has given $43 Billion to investors since July 2012. Twitter's market cap is $32 Billion. Apple's net profit of $13b over the last 3 months was more than the company made from its founding in 1977 'til the iPhone launched in 2007.

Last night my wife and I were organizing our room, and ended up putting our computers together, and we found three MacBooks (one is really old), two iPads and two iPhones - about $3500 worth of product. The phones are heavily subsidized by our phone bill, the computers are simply "must-haves," and the iPads are our most expensive ($350 ea.) toys. We're one year out of school and make $40,000/year.

[glomph]

'subsidized'

[tcdent]

Not trying to one-up you, but I have at least a dozen Apple products lying around the house. I've been using them most of my life, so some go a-ways back.

Some are for nostalgia, like an SE, a Portable, a 12" PowerBook and my well-worn first-gen iPhone. My G4 tower was still getting regular use as a file server until pretty recently. Now that we just upgraded to Airs, I have a couple MacBook Pros waiting around for something creative, too. I won't drag on, but I definitely have a hard time letting some of these things go.

[georgemcbay]

Phones and tablets are very close to the point that desktop/laptops got to a few years back where unless there is some major disruptive technology introduced (eg. batteries with 100%+ efficiency over current ones) on top of them the one you bought this year is pretty much good enough to keep for the next many years, until it breaks somehow.

There will still be a market of ultra-fashion-conscious buyers who really need this years model, just like there are people who lease brand new cars every year, but that market isn't big enough, IMO, to sustain the growth that Apple, Samsung, etc have enjoyed thus far.

[ryanhuff]

Non-replaceable battery is probably a primary why this may not be the case. My iPad 3 seems to be discharging much more quickly these days, and will probably mean a replacement will be needed sometime next year.

[jsz0]

I don't think we're quite there yet with tablets. Maybe another 3-4 years. They are relatively inexpensive and they have a strong hand-me-down life cycle. A lot of people buying new iPads every 1-2 years are doing so to give their old model to kids/family/etc. They are very personal devices no one really wants to share a tablet. There is also going to be more churn in the market because they are very mobile devices more prone to being broken or lost. Being very mobile devices they are more likely to be replaced/upgraded simply due to fashion/social pressure. Best parallel to that is car sales. A lot of people buy new cars simply because they don't want to drive an old/unfashionable car anymore.

SmartPhones are much closer to that 'good enough' point though I think subsidized devices are still very much in impulse buy territory for a lot of people. Given the cost of your cellular contract there's questionable value in saving $100-$200 every two years skipping an upgrade. You have to pay for the service either way it's in your best interest to have a device that can make the most of it. For unsubsidized devices (non-Apple devices at least) there is a healthy low-mid range market developing where the same trends should play out.

[plg]

In principle this could be true but I don't think it will be. A simply example: right now speech recognition happens in the cloud. Could be that a future device has a dedicated chip for speech recognition (or some kind of preprocessing). Then future versions of the OS will require this. Hence you have to upgrade.

This is how it has gone with things like graphics, animation, even sound. In principle the core elements of the Mac OS don't require extremely fast chips/hardware ... but once you get into the fancy desktop animations, the sound processing, face recognition (e.g. iPhoto), etc etc, you require fancier hardware.

There are still lots of directions for Apple to push their software, directions that will be aided by better and/or more specialized hardware.

If all you need is a text editor, an email client and some CPU power for crunching spreadsheets then for sure, all you "need" is a desktop circa 2000 (or even earlier ...) ... but if you want to run the latest OS, even if you don't need/want all the features of that latest OS, you need to keep up with the hardware.

Never mind games.

[Already__Taken]

It's not only batteries that have to catch up we're still exceedingly wasteful in other areas. There's tons of potential for display technology to move forward it just comes at the cost of per unit price.

Computers don't need to be screaming away rending this form at 60fps but that's what we're doing at the moment just to make panels as simple as possible.

[snowwrestler]

I think mobile software has a long way to go, and hardware performance will drive quite a bit of upgrading for years to come. Two areas off the top of my head: moving more voice recognition and "smarts" onto the client to speed things up, and better and better gaming.

Non-replaceable naturally create refresh points for mobile devices, in a way they don't even with laptops. I have a Macbook Pro from 2009 with a totally dead battery, but it doesn't matter since I most use it at home, where it's easy to keep it plugged in. That doesn't work with a phone or tablet.

[baddox]

I don't think that's true. Even without significant software improvements, the iPad could noticeably benefit from a generation or two of faster storage and wireless technologies (both LAN and WAN).

[grecy]

> but that market isn't big enough, IMO, to sustain the growth that Apple, Samsung, etc have enjoyed thus far.

Which is why Apple is pushing so hard into "Developing markets" like China, Brazil, India, etc. etc.

There are hundreds of millions of people on the planet that have never really even had the option of buying an iPhone or iPad. I'll wager tons of them have the means to buy one, and they clearly have the desire.

[bane]

Something interesting that Apple has been able to do the last few years is find one new technology, or push the notch up on an existing one, such that people feel they're significant enough upgrades that they end up buying whatever it is. What will Apple throw out next? I have no idea, but I'm expecting to be mildly surprised when it happens.

[peter303]

Unless there is "planned obselescens" like not support the OS on only the three newest models.

[benihana]

It's funny. Every year, since 2007 I've heard this argument, that the market isn't big enough and every year: record growth and profits. No but seriously. This year is the year that Apple's iPhone success catches up to them.

"Apple's iPhone business is finally going to fail this year" is the new "this is the year of the Linux desktop"

[jmduke]

The magic paragraph:

The Company sold 51 million iPhones, an all-time quarterly record, compared to 47.8 million in the year-ago quarter. Apple also sold 26 million iPads during the quarter, also an all-time quarterly record, compared to 22.9 million in the year-ago quarter. The Company sold 4.8 million Macs, compared to 4.1 million in the year-ago quarter.

If I were to play armchair quarterback, I'd say that iPhones are reaching saturation (which, given the 5C, is relatively surprising) and the iPad is where the majority of Apple's growth lies in the coming quarters.

EDIT: Apple's trailing twelve-month revenue (credit to Benedict Evans): https://pbs.twimg.com/media/BfBIdoYCEAAzNqI.jpg:large

[ChuckMcM]

The trailing revenue number is one I've been watching as well. It shows solid execution but a not a lot of growth. This makes me more curious than ever to hear about this years products. They have had a solid year of flatness, so I don't doubt there is quite a bit of pressure on. Personally I'd like a 12" iPad with a retina screen and a Wacom class stylus with zero lag. Not holding my breath though.

[jsz0]

> iPhones are reaching saturation

I would agree Apple's current/last-generation iPhone pricing/sizing/models have hit saturation. If they offer a larger iPhone 6 and perhaps push the 5C downmarket to be a competitive unsubsidized device they will sell a ton of iPhones. I suspect we will see new iPhones (much?) earlier than Fall 2014 this time around.

[lstamour]

I wouldn't. People have caught on that if they wait another 8 months, they'll have two new iPhones to choose from. ;-)

[pervycreeper]

interesting to note where the inflection point is on that chart.

[sirkneeland]

As with Microsoft earnings, we will get two reactions:

1) Some people will say the sheer amount of money they are making shows they are not doomed anytime soon

2) Some people will say that making a ton of money now does not mean they will continue to do so in the future, and could still be doomed (if not to bankruptcy than at least irrelevance) in the future.

Both are right. Both will argue the other is wrong.

[davidwihl]

Very limited growth. Profits are flat. No wonder the stock is down 6%. Apple needs to find more competitive means in both phones and tablets - their market share will continue to erode. They are priced as a growth stock, but they are not growing.

[mdemare]

They're not priced as a growth stock. P/E is about 13, and that's including their huge pile of cash. Average P/E for the S&P is 19.

[loso]

Apple after hours are down 6%. Analyst do not like the short term stock growth prospects.

[nailer]

Analysts were all totally bullish - http://www.washingtonpost.com/business/technology/apple-shar... and http://appleinsider.com/articles/14/01/27/earnings-preview-w... and any result older than the last hour for 'Apple earnings' on Google.

The iPhone numbers missed expectation, and as Apple's main product it didn't look good. http://www.businessinsider.com/apple-q1-earnings-2014-1

EPS, Mac and iPad all did well.

[JonFish85]

That and the iPhone number missed analysts' expectations, apparently.

[Perceval]

This happens every single time Apple gives an earnings report. AAPL rises before the report and falls after the report. If I had the money I would short the stock every single time.

[capkutay]

Tim Cook can sandbag the iPhone business all he wants. While they can still bring in a ton of cash from profits, it won't trick wall street into driving their stock price up to a $1000. Maybe that's not his intention.

[mdemare]

I wonder how well the 5C sold. I see a lot of 5Ss in the wild, but hardly any 5Cs.

[brador]

General consensus in China was C stood for cheap.

[squigs25]

Wow, investors aren't liking these numbers.

The reason I recently purchased Apple stock is that I foresee a large number of users coming on board once Apple launches a larger screen size for their iPhone line up. That's the main reason I can't use an iPhone.

[lowglow]

I'm bearish on Apple. I just don't see the leadership or focus I once saw when Jobs was still at the helm. I think they still might have a few tricks up their sleeve, but I think we're going to see less innovation as the years go on.

[mdemare]

Live financial result earning conference call here: http://events.apple.com.edgesuite.net/14pijnaefvpijbnfdbvpij...

Starts at 22:00 UTC

[bhartzer]

That's a lot of ipads and iphones sold. Can't wait to see how many Samsung sold.

[nailer]

Less than expected: http://www.businessinsider.com/apple-q1-earnings-2014-1

[IBM]

Another great quarter for Apple. Growth in gross margins as well as growth in units in every product line but the iPod. China Mobile sales will end up in next quarter.

[john_b]

This and the levelling off of their revenue will probably increase shareholder calls for share buybacks, a dividend increase, or both.

[pcurve]

Carl Icahn with $3.6 billion stake isn't probably too happy about this.

[lijman]

I love apple!

[pezh0re]

Yes, because the ~6 Million iPhones that didn't get bought were because people were freaked out by the NSA. I think it's more likely because the general public weren't that thrilled with where iOS and the iPhone 5C went.