3) I don't care for the increase in Mac purchases coming from Mac users. I'd love to see"switchers" being a growing segment of the Mac market, and if I get my wish that will happen in the not too distant future.
I read this "switchers" comment yesterday with some puzzlement.
If "Nearly 60 percent of purchases came from new Mac users", and the installed base grew by "double digits", let's say 10-15% because much more than that seems unrealistic, what does that say about people switching away from Macs? If 4.1 million unit sales grew the installed base by 10% does that mean the installed base was only 40 million? Does "installed base" mean the number of machines in use, or the number of users? In 2018 we're way beyond each user having only 1.0 computers.
I don't really have answers, just questions. If anyone has done the deep dive on this and can explain, please do.
3) I don't care for the increase in Mac purchases coming from Mac users. I'd love to see"switchers" being a growing segment of the Mac market, and if I get my wish that will happen in the not too distant future.
I read this "switchers" comment yesterday with some puzzlement.
If "Nearly 60 percent of purchases came from new Mac users", and the installed base grew by "double digits", let's say 10-15% because much more than that seems unrealistic, what does that say about people switching away from Macs? If 4.1 million unit sales grew the installed base by 10% does that mean the installed base was only 40 million? Does "installed base" mean the number of machines in use, or the number of users? In 2018 we're way beyond each user having only 1.0 computers.
I don't really have answers, just questions. If anyone has done the deep dive on this and can explain, please do.
Yeah, I misread that line in that article. I addressed my error here upon reading netmage's post, but it was far too late to remove it. Mea culpa.
Same doom and gloom we’ve seen the last 15 years. I was on the sideline hoping a for a huge selloff so that I could swoop in and buy more shares. Oh well.
Ditto. I was very close to pouncing (again), but I missed the window as the stock started creeping up a few days prior to earnings. And I'm very, very deeply long right now anyway, so I benefited a lot from the past couple days in any case.
I think one must to have had followed Apple during the SJ years closely to understand the product rollout and philosophy. The iPhone X was not meant to be In the hands of everyone. It was priced high for a reason as every newly-featured device has been so the early adopters can pay for the R&D while economies of scale allow the features to trickle down to later devices. This has happened since the beginning of time with Apple, they’ve always tempered the features. Of course they could sell the X at a 5% margin on day one, but they have never sold anything for a margin less than 30-40%. Everyone (analysts) should know this by now. Apple has never raced to the bottom...ever. They are more mature than that and it is why they sit on a hoard of cash they don’t know what to do with. Of course Apple could sell out their customers like FB and GOOG for a quick buck, but they’re more far-sighted and innovative than that. It takes a lot of restraint on behalf of the team to continue what made Apple a different company from the beginning. I commend them, as does my portfolio.
1) So where are all the people that kept saying that the iPhone X was a flop?
Oh, they'll definitely come up with something. Believe me.
They'll probably twist Cook's Super bowl winner comment to say that Apple was expecting to sell more iPhone X models and that is why it's a flop.
There is good and not so good news.
The good:
The top selling phone was the absolute top of the line phone
Growth in urban China
'Other'
The not so good:
iPhone sales remain largely flat.
iPhone X sales were down (if my headline interpretation is correct) but I doubt many expected them to beat Q1.
Chinese competition (plus Samsung) will be much stronger this quarter.
If people 'complained' that the last quarter (Q1) was one week shorter than the year before, that missing week (in theory a high demand week) logically passed into Q2.
ASP was down but that is overrated from a consumer perspective IMO.
I think any YoY growth is ultimately excellent news even if by just a little. The underlying issue is though, and has been for the last couple of years, the flat growth on iPhone, as iPhone still dominates revenues.
The longer the period without unit growth, the more burning the question, where are the users?
The longer the period, the more potential of an existing user upgrading. If everybody with an iPhone upgraded after two years or slightly longer you would expect more than flat growth (adding in Android switchers) for this year. That doesn't seem to be playing out. There is a possibility that the 'super-cycle' is actually playing out but just isn't sending numbers much higher.
Tim Cook explicitly mentioned that 60% of Mac sales went to non Mac users. He mentioned something very similar in the Q1 17 earnings call (the year iMacs were not updated).
That poses the same question. Where are the pre-existing Mac users?
Apple is seemingly targeting Android switchers but AFAIK, no mention was made of how many iPhones went to first time/Android users.
These questions should begin to see some answers at the end of this year and beginning of next. Apple already has this information in explicit detail of course.
All-in-all Apple can be chuffed with these results for a few reasons but the issue of increasing unit sales remains and as long as they depend on iPhone, that will be an issue to work on.
No one expects Q3 to be stellar so the pressure is off (to a degree) as long as they meet their guidance. A full six months into the iPhone refresh, it would be logical to see interest in the top of the line phones drop off fairly sharply but iPhone X will be judged on a full year of performance, not one or two quarters.
I only followed a live text feed of the call and not the audio or transcript, so this is based on those snippets only.
So Neil Cybart had the best overall accuracy, and Horace Dediu of asymco came in second, based on their estimates for the past quarter. Both base estimates on guidance from Apple.
That would be an estimate of 15% revenue growth YoY, and likely to be pretty close to what Apple will announce in about three months.
Essentially, Apple is seeing longer times between upgrades and acquisition of Android OS users to iPhone, hence the near flat units sales. That said, the user base for iPhone just keeps on increasing, driving all of that service growth.
"ASP was down but that is overrated from a consumer perspective IMO". Considering that we are speaking of the Corporate product lines with Apple having the highest ASP by at least a factor of three or more on any competitor, I think that it is, in fact, a relevant metric.
Your favored Chinese companies, on the other hand, are great at unit sales, lousy at ASP, and one, Xaiomi, is actually throwing in the towel with a new business model that embraces low profits of 5%, as if they have actually even seen that in the recent past, or present. I look for these companies, and Samsung, to fight for marketshare via price reductions, all with continued lowering of ASP, no matter the premium phones they bring to the fight.
You probably meant 5% profit margin cap for Xiaomi. We'll see how that one plays out. It is strange but if I were in Xiaomi marketing I would have a field day with this proposal.
ASP is irrelevant. Huawei still manages to invest HUGE amounts in R&D (often more than Apple), has a MASSIVE patent portfolio, is the third (or second) biggest handset manufacturer worldwide and makes billions in profits. Lousy at ASP has not affected the consumer in any way and Huawei currently has arguably the best phone on the market right now despite a lower (but increasing) ASP.
As I said before, any YoY growth is good.
However, what really counts are unit sales.
Here is a three year snapshot of Apple in China:
Apple's iPhone unit sales in China:
2015: 71 million
2016: 59 million
2017: 49 million
2018 (estimate): 47 million
Source: UBS estimates/Gartner
While a 13% YoY growth spurt is good, when seen in the bigger picture it looks totally different.
That's just three (closed) years.
Huawei was just warming up back then and the political situation was nowhere near as tense as it is now. The negative implications of a trade war escalation involving Apple would do untold damage to the company.
Just as some people took the Q1 results and drew absolute conclusions from them in a yearly context, the same people are doing the same with these results but utterly failing to see the wider context.
1) So where are all the people that kept saying that the iPhone X was a flop?
Oh, they'll definitely come up with something. Believe me.
They'll probably twist Cook's Super bowl winner comment to say that Apple was expecting to sell more iPhone X models and that is why it's a flop.
There is good and not so good news.
The good:
The top selling phone was the absolute top of the line phone
Growth in urban China
'Other'
The not so good:
iPhone sales remain largely flat.
iPhone X sales were down (if my headline interpretation is correct) but I doubt many expected them to beat Q1.
Chinese competition (plus Samsung) will be much stronger this quarter.
If people 'complained' that the last quarter (Q1) was one week shorter than the year before, that missing week (in theory a high demand week) logically passed into Q2.
ASP was down but that is overrated from a consumer perspective IMO.
I think any YoY growth is ultimately excellent news even if by just a little. The underlying issue is though, and has been for the last couple of years, the flat growth on iPhone, as iPhone still dominates revenues.
The longer the period without unit growth, the more burning the question, where are the users?
The longer the period, the more potential of an existing user upgrading. If everybody with an iPhone upgraded after two years or slightly longer you would expect more than flat growth (adding in Android switchers) for this year. That doesn't seem to be playing out. There is a possibility that the 'super-cycle' is actually playing out but just isn't sending numbers much higher.
Tim Cook explicitly mentioned that 60% of Mac sales went to non Mac users. He mentioned something very similar in the Q1 17 earnings call (the year iMacs were not updated).
That poses the same question. Where are the pre-existing Mac users?
Apple is seemingly targeting Android switchers but AFAIK, no mention was made of how many iPhones went to first time/Android users.
These questions should begin to see some answers at the end of this year and beginning of next. Apple already has this information in explicit detail of course.
All-in-all Apple can be chuffed with these results for a few reasons but the issue of increasing unit sales remains and as long as they depend on iPhone, that will be an issue to work on.
No one expects Q3 to be stellar so the pressure is off (to a degree) as long as they meet their guidance. A full six months into the iPhone refresh, it would be logical to see interest in the top of the line phones drop off fairly sharply but iPhone X will be judged on a full year of performance, not one or two quarters.
I only followed a live text feed of the call and not the audio or transcript, so this is based on those snippets only.
So Neil Cybart had the best overall accuracy, and Horace Dediu of asymco came in second, based on their estimates for the past quarter. Both base estimates on guidance from Apple.
That would be an estimate of 15% revenue growth YoY, and likely to be pretty close to what Apple will announce in about three months.
Essentially, Apple is seeing longer times between upgrades and acquisition of Android OS users to iPhone, hence the near flat units sales. That said, the user base for iPhone just keeps on increasing, driving all of that service growth.
"ASP was down but that is overrated from a consumer perspective IMO". Considering that we are speaking of the Corporate product lines with Apple having the highest ASP by at least a factor of three or more on any competitor, I think that it is, in fact, a relevant metric.
Your favored Chinese companies, on the other hand, are great at unit sales, lousy at ASP, and one, Xaiomi, is actually throwing in the towel with a new business model that embraces low profits of 5%, as if they have actually even seen that in the recent past, or present. I look for these companies, and Samsung, to fight for marketshare via price reductions, all with continued lowering of ASP, no matter the premium phones they bring to the fight.
You probably meant 5% profit margin cap for Xiaomi. We'll see how that one plays out. It is strange but if I were in Xiaomi marketing I would have a field day with this proposal.
ASP is irrelevant. Huawei still manages to invest HUGE amounts in R&D (often more than Apple), has a MASSIVE patent portfolio, is the third (or second) biggest handset manufacturer worldwide and makes billions in profits. Lousy at ASP has not affected the consumer in any way and Huawei currently has arguably the best phone on the market right now despite a lower (but increasing) ASP.
As I said before, any YoY growth is good.
However, what really counts are unit sales.
Here is a three year snapshot of Apple in China:
Apple's iPhone unit sales in China:
2015: 71 million
2016: 59 million
2017: 49 million
2018 (estimate): 47 million
Source: UBS estimates/Gartner
While a 13% YoY growth spurt is good, when seen in the bigger picture it looks totally different.
That's just three (closed) years.
Huawei was just warming up back then and the political situation was nowhere near as tense as it is now. The negative implications of a trade war escalation involving Apple would do untold damage to the company.
Just as some people took the Q1 results and drew absolute conclusions from them in a yearly context, the same people are doing the same with these results but utterly failing to see the wider context.
"ASP is irrelevant".
Keep telling yourself that...oh, you do, over, and over, and over again.
"The negative implications of a trade war escalation involving Apple would do untold damage to the company". Sure, if that were to actually happen, but Apple would survive, and China would ultimately give up millions of assembly jobs when Apple shifts its assembly operations to other countries, and at the same time, sets up highly automated assembly in North America. I give all of that that a low possibility of happening. I'll "panic" when and if that happens, but right now, it's just Pork Bellies, soybeans, and basic metals that are at risk in the U.S.
In the meantime, Huawei, Xiaomi, Oppo, ZTE, et al, will all be competing for marketshare in and outside of China with low pricing, and Huawei, whatever you think of their "arguably the best phone on the market right now", won't be able to leverage a unique operating system, services, or ecosystem to drive sales. All of those companies compete as Android OS equals, and because of diffusions of features amongst them, none will ever really gain a long term advantage over the other on anything but price. Certainly, none will ever attain that ASP's that Apple enjoys.
Still, it would be fair to state that all of those Chinese companies have Samsung to compete with, and I doubt that Samsung is going to give up its marketshare without a fight.
Your world where Huawei dominates smartphones won't ever exist, except in the case of flooding the market with low cost devices, which will do nothing but increase Apple's profits.
1) So where are all the people that kept saying that the iPhone X was a flop?
Oh, they'll definitely come up with something. Believe me.
They'll probably twist Cook's Super bowl winner comment to say that Apple was expecting to sell more iPhone X models and that is why it's a flop.
There is good and not so good news.
The good:
The top selling phone was the absolute top of the line phone
Growth in urban China
'Other'
The not so good:
iPhone sales remain largely flat.
iPhone X sales were down (if my headline interpretation is correct) but I doubt many expected them to beat Q1.
Chinese competition (plus Samsung) will be much stronger this quarter.
If people 'complained' that the last quarter (Q1) was one week shorter than the year before, that missing week (in theory a high demand week) logically passed into Q2.
ASP was down but that is overrated from a consumer perspective IMO.
I think any YoY growth is ultimately excellent news even if by just a little. The underlying issue is though, and has been for the last couple of years, the flat growth on iPhone, as iPhone still dominates revenues.
The longer the period without unit growth, the more burning the question, where are the users?
The longer the period, the more potential of an existing user upgrading. If everybody with an iPhone upgraded after two years or slightly longer you would expect more than flat growth (adding in Android switchers) for this year. That doesn't seem to be playing out. There is a possibility that the 'super-cycle' is actually playing out but just isn't sending numbers much higher.
Tim Cook explicitly mentioned that 60% of Mac sales went to non Mac users. He mentioned something very similar in the Q1 17 earnings call (the year iMacs were not updated).
That poses the same question. Where are the pre-existing Mac users?
Apple is seemingly targeting Android switchers but AFAIK, no mention was made of how many iPhones went to first time/Android users.
These questions should begin to see some answers at the end of this year and beginning of next. Apple already has this information in explicit detail of course.
All-in-all Apple can be chuffed with these results for a few reasons but the issue of increasing unit sales remains and as long as they depend on iPhone, that will be an issue to work on.
No one expects Q3 to be stellar so the pressure is off (to a degree) as long as they meet their guidance. A full six months into the iPhone refresh, it would be logical to see interest in the top of the line phones drop off fairly sharply but iPhone X will be judged on a full year of performance, not one or two quarters.
I only followed a live text feed of the call and not the audio or transcript, so this is based on those snippets only.
So Neil Cybart had the best overall accuracy, and Horace Dediu of asymco came in second, based on their estimates for the past quarter. Both base estimates on guidance from Apple.
That would be an estimate of 15% revenue growth YoY, and likely to be pretty close to what Apple will announce in about three months.
Essentially, Apple is seeing longer times between upgrades and acquisition of Android OS users to iPhone, hence the near flat units sales. That said, the user base for iPhone just keeps on increasing, driving all of that service growth.
"ASP was down but that is overrated from a consumer perspective IMO". Considering that we are speaking of the Corporate product lines with Apple having the highest ASP by at least a factor of three or more on any competitor, I think that it is, in fact, a relevant metric.
Your favored Chinese companies, on the other hand, are great at unit sales, lousy at ASP, and one, Xaiomi, is actually throwing in the towel with a new business model that embraces low profits of 5%, as if they have actually even seen that in the recent past, or present. I look for these companies, and Samsung, to fight for marketshare via price reductions, all with continued lowering of ASP, no matter the premium phones they bring to the fight.
You probably meant 5% profit margin cap for Xiaomi. We'll see how that one plays out. It is strange but if I were in Xiaomi marketing I would have a field day with this proposal.
ASP is irrelevant. Huawei still manages to invest HUGE amounts in R&D (often more than Apple), has a MASSIVE patent portfolio, is the third (or second) biggest handset manufacturer worldwide and makes billions in profits. Lousy at ASP has not affected the consumer in any way and Huawei currently has arguably the best phone on the market right now despite a lower (but increasing) ASP.
As I said before, any YoY growth is good.
However, what really counts are unit sales.
Here is a three year snapshot of Apple in China:
Apple's iPhone unit sales in China:
2015: 71 million
2016: 59 million
2017: 49 million
2018 (estimate): 47 million
Source: UBS estimates/Gartner
While a 13% YoY growth spurt is good, when seen in the bigger picture it looks totally different.
That's just three (closed) years.
Huawei was just warming up back then and the political situation was nowhere near as tense as it is now. The negative implications of a trade war escalation involving Apple would do untold damage to the company.
Just as some people took the Q1 results and drew absolute conclusions from them in a yearly context, the same people are doing the same with these results but utterly failing to see the wider context.
"ASP is irrelevant".
Keep telling yourself that...oh, you do, over, and over, and over again.
"The negative implications of a trade war escalation involving Apple would do untold damage to the company". Sure, if that were to actually happen, but Apple would survive, and China would ultimately give up millions of assembly jobs when Apple shifts its assembly operations to other countries, and at the same time, sets up highly automated assembly in North America. I give all of that that a low possibility of happening. I'll "panic" when and if that happens, but right now, it's just Pork Bellies, soybeans, and basic metals that are at risk in the U.S.
In the meantime, Huawei, Xiaomi, Oppo, ZTE, et al, will all be competing for marketshare in and outside of China with low pricing, and Huawei, whatever you think of their "arguably the best phone on the market right now", won't be able to leverage a unique operating system, services, or ecosystem to drive sales. All of those companies compete as Android OS equals, and because of diffusions of features amongst them, none will ever really gain a long term advantage over the other on anything but price. Certainly, none will ever attain that ASP's that Apple enjoys.
Still, it would be fair to state that all of those Chinese companies have Samsung to compete with, and I doubt that Samsung is going to give up its marketshare without a fight.
Your world where Huawei dominates smartphones won't ever exist, except in the case of flooding the market with low cost devices, which will do nothing but increase Apple's profits.
You danced around the elephant in the room:
"Apple's iPhone unit sales in China:
2015: 71 million
2016: 59 million
2017: 49 million
2018 (estimate): 47 million
Source: UBS estimates/Gartner"
YoY growth is nice for a couple of quarters and the only way to see that point is positively but unless that results in a increase in yearly sales, it won't be good enough.
ASP is good for investors (potentially at least) and the coffers of the company (as shown by Apple).
For consumers, it is irrelevant as my previous post outlined.
Xiaomi has just confirmed its IPO plans and will have a relatively low ASP. I think the decision to cap net profit margins at 5% is a brave decision but if consumers buy into it, it will definitely put some stress on those with the highest ASPs. Public opinion can sometimes be powerful. We'll see how Xiaomi marketing uses this potential tool. In the meantime, Xiaomi has just signed a deal with a UK carrier (Three) has opened some of its own stores in Spain and is looking to expand in Europe.
What counts is competition and if the IPO is successful we will have plenty of that in the short term and not limited to their home market. Having a product portfolio of around 300 branded products kind of reminds me of Sony before it ran aground but we'll have to wait and see.
If (and it's only an if) Huawei keeps up current growth rates, it will probably overtake Apple this year. It overtook them for two quarters last year and in the quarter Apple moved back into second place, it was just by 8 million units.
Honor has shown incredible growth in India, a market Huawei has been focusing on for sale while.
Comments
If "Nearly 60 percent of purchases came from new Mac users", and the installed base grew by "double digits", let's say 10-15% because much more than that seems unrealistic, what does that say about people switching away from Macs? If 4.1 million unit sales grew the installed base by 10% does that mean the installed base was only 40 million? Does "installed base" mean the number of machines in use, or the number of users? In 2018 we're way beyond each user having only 1.0 computers.
I don't really have answers, just questions. If anyone has done the deep dive on this and can explain, please do.
^this^. All of it.
ASP is irrelevant. Huawei still manages to invest HUGE amounts in R&D (often more than Apple), has a MASSIVE patent portfolio, is the third (or second) biggest handset manufacturer worldwide and makes billions in profits. Lousy at ASP has not affected the consumer in any way and Huawei currently has arguably the best phone on the market right now despite a lower (but increasing) ASP.
As I said before, any YoY growth is good.
However, what really counts are unit sales.
Here is a three year snapshot of Apple in China:
While a 13% YoY growth spurt is good, when seen in the bigger picture it looks totally different.
That's just three (closed) years.
Huawei was just warming up back then and the political situation was nowhere near as tense as it is now. The negative implications of a trade war escalation involving Apple would do untold damage to the company.
Just as some people took the Q1 results and drew absolute conclusions from them in a yearly context, the same people are doing the same with these results but utterly failing to see the wider context.
Keep telling yourself that...oh, you do, over, and over, and over again.
"The negative implications of a trade war escalation involving Apple would do untold damage to the company". Sure, if that were to actually happen, but Apple would survive, and China would ultimately give up millions of assembly jobs when Apple shifts its assembly operations to other countries, and at the same time, sets up highly automated assembly in North America. I give all of that that a low possibility of happening. I'll "panic" when and if that happens, but right now, it's just Pork Bellies, soybeans, and basic metals that are at risk in the U.S.
In the meantime, Huawei, Xiaomi, Oppo, ZTE, et al, will all be competing for marketshare in and outside of China with low pricing, and Huawei, whatever you think of their "arguably the best phone on the market right now", won't be able to leverage a unique operating system, services, or ecosystem to drive sales. All of those companies compete as Android OS equals, and because of diffusions of features amongst them, none will ever really gain a long term advantage over the other on anything but price. Certainly, none will ever attain that ASP's that Apple enjoys.
Still, it would be fair to state that all of those Chinese companies have Samsung to compete with, and I doubt that Samsung is going to give up its marketshare without a fight.
Your world where Huawei dominates smartphones won't ever exist, except in the case of flooding the market with low cost devices, which will do nothing but increase Apple's profits.
YoY growth is nice for a couple of quarters and the only way to see that point is positively but unless that results in a increase in yearly sales, it won't be good enough.
ASP is good for investors (potentially at least) and the coffers of the company (as shown by Apple).
For consumers, it is irrelevant as my previous post outlined.
Xiaomi has just confirmed its IPO plans and will have a relatively low ASP. I think the decision to cap net profit margins at 5% is a brave decision but if consumers buy into it, it will definitely put some stress on those with the highest ASPs. Public opinion can sometimes be powerful. We'll see how Xiaomi marketing uses this potential tool. In the meantime, Xiaomi has just signed a deal with a UK carrier (Three) has opened some of its own stores in Spain and is looking to expand in Europe.
What counts is competition and if the IPO is successful we will have plenty of that in the short term and not limited to their home market. Having a product portfolio of around 300 branded products kind of reminds me of Sony before it ran aground but we'll have to wait and see.
If (and it's only an if) Huawei keeps up current growth rates, it will probably overtake Apple this year. It overtook them for two quarters last year and in the quarter Apple moved back into second place, it was just by 8 million units.
Honor has shown incredible growth in India, a market Huawei has been focusing on for sale while.
https://www.counterpointresearch.com/india-feature-phone-market-doubled-smartphone-market-remained-flat-yoy-q1-2018/
The same goes for Latin America.