What’s it going to take to get India going? Tim Cook says Apple is bringing all the things it brought to other markets, including supply channels, stores and ecosystems. Phil Schiller just went over to open a developer center there
“We agree that we are under-penetrated there,” admitted Tim Cook. “We’re putting a lot of energy in it.”
“We make it a point not to forecast by (geographic regions),” Tim says, basically brushing off a question about India. It’s the third-largest smartphone market, behind China and the United States, and Tim says the 4G infrastructure expanding across the company represents a “huge opportunity for Apple.”
Now an analyst wants an apple-to-apple comparison of channel inventory … haha.
Apple saw the largest absolute number of upgraders ever in the first half of this fiscal year, Tim says, and the largest number of switchers outside of greater China, too.
Tim says Qualcomm isn’t following FRAND guidelines for “fair, reasonable, and non-discriminatory terms” for licensing its technology, so Apple is “taking a principled stand.” See you in court, Qualcomm!
Apple’s royalty battle with Qualcomm came up. Tim Cook says the company is withholding royalties because “you can’t pay something when there is a dispute about the amount.”
There has not been a meeting of the minds to decide what the right rate is, so Apple is taking it to the courts.
“Qualcomm’s trying to charge Apple a percentage of the total iPhone value. They do some really great work…but it’s one small part of what an iPhone is,” said Cook.
This is what I’ve been waiting for >>> “We do have a really great pipeline here,” Tim says, chuckling as he talks about the Apple Watch and competition. All hail the magic pipeline!
Asked about the opportunity in wearables, Tim Cook says Apple views its watch as a key product category.
“We’re really proud of the growth of the business. The watch units more than doubled in six of our top 10 markets, which is phenomenal growth for a non-holiday quarter,” said Cook. “That business was well into the Fortune 500. That’s pretty fast to come that far. The watch hasn’t been out that long and AirPods have only been out for 3 or 4 months.”
Cook wouldn’t comment on where the product is headed but did say Apple has a “really great pipeline” ahead.
How many unique users does Apple have? Luca says they won’t disclose the number of subscribers but many people use multiple paid Apple services. “It’s very good for us to see the breadth of subscriptions,” Luca says. “It’s a large number.”
The number of subscribers is growing strongly, he says — in other words, every iPhone or Mac that gets sold turns into a moneymaking machine. “People tend to spend more over time,” Luca says.That’s the *real* power of the vaunted Apple ecosystem.
You won’t believe this, but Tim is still bullish on China! Mac revenue and services both grew in China, he says. Plus, traffic at retail stores in China grew 27 percent year on year. On the flip side? Currency devalued by 5 percent, which Tim called “not an insignificant headwind.” Plus, Hong Kong got hammered a bit. And while iPhone 7 Plus did well, previous generation iPhones took a hit.
China is now home to 7 of Apple’s highest traffic stores in the world.
“One thing we did not get right is the mix between the iPhone 7 and iPhone 7 Plus,” admitted Tim Cook, saying the iPhone 7 Plus demand was way stronger than Apple expected.
“Everytime we go through a launch we learn something and you can bet that we are brushing up our models and applying everything we learn to the next time. “
OMG there’s a follow up… asking Tim about supply chain problems. Basically, how come we can’t get AirPods yet?
How are prices of NAND and DRAM affecting gross margins? Cost pressures on memory will remain, Luca says, but Apple expects to offset that with other component savings and a boost in services revenue.
Every time Luca starts talking numbers, economic headwinds and gross market compression I start hearing the teacher from Charlie Brown speaking.
First up is Morgan Stanley asking, “Something something… gross margin expansion…and commodity pricing contracts?”
And after the numbers blitz, here come the questions from Wall Street analysts …
Apple’s share repurchase program is going up to $210 billion (from $175 billion). Apple’s also boosting dividends by 10.5% — all of which shows the company’s confidence in future performance, Luca says.
Mac revenue grew 14 percent, setting a new March quarter record with 2.4 million sold, says Luca Maestri. He called MacBook Pro demand “very strong.” This comes even as the rest of the PC industry remains flat.
iPad sales were better than Apple expected with 8.9 million units sold, down from 10.3 million last year. Still, Luca Maestri said iPad sales actually grew year-over-year in the US.
App Store revenue grew 40% year-over-year, setting an all new quarterly record.
Apple is now using 100% renewable energy in 20 countries, including all of its data centers.
Talking AirPods, Tim references that 98 percent customer satisfaction study from yesterday. AirPods demand continues to significantly outstrip supply, he says, and that’s just part of the Apple wearables picture. Lump together Apple Watch, Beats headphones and AirPods, and you’ve got revenue the size of a Fortune 500 company.
Mac sales and Service revenue was up in China. But overall revenue was down over $2 billion. Apple doesn’t sound too worried about it though.
“We continue to be enthusiastically optimistic about our future in China,” said Cook.
Apple Watch sales have doubled year-over-year. Tim isn’t giving any numbers though.
Tim touts Apple’s “expressive video” app Clips as an example of the company “continually making our products even more engaging.”
Apple Pay transactions are up 300%. In Japan, customers are completing 20 million Apple Pay transactions per month.
BTW: You can listen in on the call too by visiting Apple’s investor site.
And the call is starting… The first 10-15 minutes is usually filled with a bunch of financial numbers and generic praise for Apple’s amazing products.
Tim Cook confirmed to CNBC before the call that the company is exploring products at the crossroads of machine learnings and transportation. Expect to see similar boilerplate statements from Apple for the next five years.
Cook to @CNBC: We are investing ton in machine learning & autonomous systems. Can use those for variety of things including transportation.
— Sally Shin (@sallyshin) May 2, 2017
Tim Cook and Luca Maestri should be hoping on the investor call any minute now…
Apple now has $256.8 billion in cash and liquid assets on hand. Over 90% of it is held overseas.
Apple set its revenue guidance between $43.5 billion to $45.5 billion for Q3 2017.
Revenues in China dipped to $10.7 billion compared to $12.5 billion in the year-ago-quarter. Other products revenue was up 31%, suggesting strong AirPod and Apple Watch sales.
iPhone sales dropped to 50.8 million, down slightly from the 51.2 million units it sold in Q2 2016. Mac sales reached 4.2 million units while iPad sales were down 12% at 8.9 million.
Apple just released its numbers and they’re just about as good as investors were hoping for. Total revenue was up to $52.9 billion, which is an improvement from Q2 2016 even though iPhone sales took a slight dip. Services saw the most growth but sales in China are slipping.
T-minus 9 minutes until Apple sends out its press release. We should have the numbers shortly.
We’ve got a couple hours to burn while we wait for this afternoon’s call to start. Here’s a little background reading to prep: What to expect from Apple’s Q2 2017 earnings report.