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Cook cool on China troubles: still 'a huge opportunity for Apple'

post #1 of 24
Thread Starter 
Apple Chief Executive Tim Cook is still upbeat on the his company's outlook in the world's most populous nation, saying that he isn't discouraged by this past quarter's somewhat disappointing numbers in China.



Apple did $4.64 billion in revenue in China in the recently completed quarter, down 43 percent sequentially and 14 percent year-over-year according to Apple's quarterly data sheet. This coming directly after what Cook called "our best China quarter ever."

Cook says investors shouldn't be concerned about the company's fortunes in that market, which recently passed the United States as the largest market for mobile devices.

"China was weaker in the quarter," Cook said during the iPhone maker's quarterly conference call. "The data sheet focuses on revenue, and it doesn't tell the complete story. If you look at sell-through, the sell-through in China was only down four percent from the year-ago quarter when normalized for channel inventory."

"Mainland China was up five percent year over year," Cook continued. "That's a lower growth rate than we've been seeing, and I attribute that to many things."

Cook made reference to economic troubles in China, which has seen its typically blazing growth rate hobbled by market forces, as well as the impact of a still soft global economy.

"The economy there clearly doesn't help us and others," the Apple CEO said.

Cook pointed to positive indicators in the world's most populous country as a sign that the just-finished quarter should not be taken as an ill omen. Apple's revenues in greater China represented about 14 percent of the company's revenue for the quarter. Over the last 12 months, the company has done $27 billion in revenue.

Additionally, iPad sell-throughs in greater china were up eight percent. In mainland China, Cook said, sell-throughs were up 37 percent. Apple's bestselling tablet also occupies a prime spot in China, with a higher than 50 percent share according to Cook.

Those sell-through figures are likely due to Apple's greatly increased efforts to market its products in China. Those efforts include installment plans for some Apple devices, as well as bigger pushes on the iPhone 4S and iPhone 4, both of which are priced closer to the affordable range for the average Chinese consumer. Apple has seen some success with those efforts, with the iPad mini debuting to "insatiable demand" and stock-outs last year.

Cook also pointed to the growing community of Chinese iOS developers as a positive indicator.

"We now have about half a million developers in China working on iOS apps," Cook said. That's up over 70 percent year-over-year."

Going forward, Apple won't be letting up in China any time soon. The company has plans to double the number of retail stores to 16 over the next two years, according to Cook, who ended his comments on the market in an optimistic fashion.

"I continue believe," Cook said, "in the arc of time that China is a huge opportunity for Apple. I don't get discouraged over a 90-day cycle that could have economic factors."
post #2 of 24
Must have been really hard for him not to mention China Mobile compatibility of the new iPhone.

I have no idea how they never seem to slip up and accidentally let on that a future product exists.
post #3 of 24
Let's see what happens next quarter. There are a lot of moving parts that are having trouble meshing at this time, plus we're about to see iOS 7 and the next iPhone introduced.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #4 of 24

Could it be that China sees as Apple too powerful, so is putting up blocks against Apple's sales increase ?
 

post #5 of 24
Quote:
Originally Posted by jakeb View Post

Must have been really hard for him not to mention China Mobile compatibility of the new iPhone.

I have no idea how they never seem to slip up and accidentally let on that a future product exists.

Absolutely the coolest heads I have ever heard talk. But still pleasant about it. They joke about not being able to say anything.
post #6 of 24

Get the damn China Mobile deal done already.

 

Or start moving production. Use your chips, Tim.

post #7 of 24
Quote:
Originally Posted by JoshA View Post

Could it be that China sees as Apple too powerful, so is putting up blocks against Apple's sales increase ?
 

I doubt it. In many more tangible ways, Foxconn -- a Taiwanese company -- is more powerful than Apple in China, and yet, seem to be doing fine there.

post #8 of 24
Quote:
Originally Posted by SpamSandwich View Post

Let's see what happens next quarter. There are a lot of moving parts that are having trouble meshing at this time, plus we're about to see iOS 7 and the next iPhone introduced.

Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

post #9 of 24
Quote:
Originally Posted by ankleskater View Post

Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

I thought it's been discussed that iOS 7's "ugly" color scheme is likely to appeal in Asian markets.
post #10 of 24

Since China started opening up in the 1970s to the involvement in China of foreign manufacturers, doing business there has always been, from a Chinese perspective, about technology transfer. Perception in government of the degree to which a particular corporation cooperates will have a bearing on that corporation's success in the country.

Where are we on the curve? We'll know once it goes asymptotic!
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Where are we on the curve? We'll know once it goes asymptotic!
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post #11 of 24
Quote:
Originally Posted by IQatEdo View Post

Since China started opening up in the 1970s to the involvement in China of foreign manufacturers, doing business there has always been, from a Chinese perspective, about technology transfer. Perception in government of the degree to which a particular corporation cooperates will have a bearing on that corporation's success in the country.

"Technology" transfer - so that's what it's called these days. How many $technology transfers are needed for China Mobile to agree to terms with Apple?

post #12 of 24
Quote:
Originally Posted by anantksundaram View Post

Get the damn China Mobile deal done already.

 

Or start moving production. Use your chips, Tim.

Brilliant! My dad (English CEO) always said the Chinese are "implacable." but by no means stupid. Apple just needs to negotiate better and not believe anything they say! :)

post #13 of 24
Quote:
Originally Posted by AppleInsider View Post

"I continue believe," Cook said [...]

did he really say that? or did you just get sloppy, lazy, and tired cutting and pasting from some other article, probably cnet's?
"Personally, I would like nothing more than to thoroughly proof each and every word of my articles before posting. But I can't."

appleinsider's mike campbell, august 15, 2013
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"Personally, I would like nothing more than to thoroughly proof each and every word of my articles before posting. But I can't."

appleinsider's mike campbell, august 15, 2013
Reply
post #14 of 24

"We now have about half a million developers in China working on iOS apps," Cook said. That's up over 70 percent year-over-year."

 

Up until now I had totally overlooked the importance of this.

 

A trustworthy developer ecosystem seems to be even more distinguishing in China than it is in the West.

post #15 of 24
There is nothing in the earnings report or conference call that would excite an investor to buy.
post #16 of 24
Quote:
Originally Posted by ifij775 View Post

There is nothing in the earnings report or conference call that would excite an investor to buy.

Sure there isn't¡

Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
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Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
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post #17 of 24
Quote:
Originally Posted by ifij775 View Post

There is nothing in the earnings report or conference call that would excite an investor to buy.

How to enter the Apple logo  on iOS:
/Settings/Keyboard/Shortcut and paste in  which you copied from an email draft or a note. Screendump
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How to enter the Apple logo  on iOS:
/Settings/Keyboard/Shortcut and paste in  which you copied from an email draft or a note. Screendump
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post #18 of 24
Quote:
Originally Posted by ankleskater View Post

Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

You're new around here, aren't you.
post #19 of 24

China's economy is apparently completely lopsided towards investment vs. consumption. Their consumer economy is functionally only a bit larger than Japan's.

post #20 of 24
Quote:
Originally Posted by ankleskater View Post

Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

 

They need a NEW lower cost iphone, its that simple. And not just for China. Getting China mobile will help, but the high end phone will quickly saturated. I like the rumor about Apple doing the same thing with the ipad mini.

 

IF  they can come up with good margins on a $350 phone and $200 tablet they have what it takes for emerging markets. For them, those products will be high end. For rich countries, those would be perfect unlock choices.


Edited by herbapou - 7/24/13 at 6:29am
post #21 of 24
Quote:
Originally Posted by christopher126 View Post

Brilliant! My dad (English CEO) always said the Chinese are "implacable." but by no means stupid. Apple just needs to negotiate better and not believe anything they say! 1smile.gif

"What is “different” about China is that Chinese negotiators do not feel constrained by the rules of good faith negotiation. Thus, when a Chinese company argues that “China is different,” what they really mean is that the fair and impartial laws of China do not reflect the reality of China. The reality is that the Chinese side must take advantage of the foreign side. This means that the foreign side must accede to the unreasonable request of the Chinese side. If the foreign side does not concede to patently unreasonable terms, then no deal can be made."

"It is common in negotiating China Joint Ventures for the Chinese side to insist that the intellectual property contributed to the JV by the foreign partner must ultimately be transferred to the Chinese JV partner. The same is true in many technology license agreements where the Chinese side will say: “sorry, but you cannot protect your IP. You must transfer everything to us at the end of the license.” This situation is obviously the opposite of what the foreign side wants from the transaction. When the foreign side resists, the Chinese side will then play the “never never land” card and state that Chinese law requires such a transfer. In fact, however, Chinese law does not make any such requirement. This is simply what the Chinese side wants out of the deal. Of course, the Chinese government supports the Chinese side, since the free transfer of technology arguably benefits China, so everyone in China is on the same side. Thus government authorities involved will usually do nothing to clarify the situation."

http://www.chinalawblog.com/2012/10/how-to-handle-chinese-negotiating-tactics-part-three.html

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #22 of 24
Quote:
Originally Posted by herbapou View Post

They need a NEW lower cost iphone, its that simple. And not just for China. Getting China mobile will help, but the high end phone will quickly saturated. I like the rumor about Apple doing the same thing with the ipad mini.

IF  they can come up with good margins on a $350 phone and $200 tablet they have what it takes for emerging markets. For them, those products will be high end. For rich countries, those would be perfect unlock choices.

Competing on price alone is death. Should Apple ever go down that road, sell and never look back.

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #23 of 24
Quote:
Originally Posted by herbapou View Post

 

They need a NEW lower cost iphone, its that simple. And not just for China. Getting China mobile will help, but the high end phone will quickly saturated. I like the rumor about Apple doing the same thing with the ipad mini.

 

IF  they can come up with good margins on a $350 phone and $200 tablet they have what it takes for emerging markets. For them, those products will be high end. For rich countries, those would be perfect unlock choices.

This is an extremely myopic view. You  have no vision, no imagination.

post #24 of 24
Quote:
Originally Posted by ankleskater View Post

Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

The next (new) iPhone chipset (from Qualcomm IIRC) will be compatible with the Chinese TD-SCDMA standard and, perhaps TD-LTE as well. Though TD-LTE is in such limited rollout Apple might not bother until it's in wider availability like they did with LTE.

 

Even in mobile speed is good.

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