Apple announced it’s Q1 -2019 quarterly results today. After making an announcement a few weeks ago about Apple having to adjust Apple’s revenue guidance, many were worried about what would come out of this investor call.
I listened to a bit of the Q&A section today (full discloser, I’m a small-time Apple investor) and reviewing the news that came out of the call, here are the things that I found pretty interesting.
Prices were too high
I mentioned the price creep in Apple products after the last Apple event. Today, it was interesting to hear what the bigwigs at Apple had to say about the price of the iPhone.
What I really found interesting about the price was that no one at Apple actually said that the phone was priced too high all around the world. What was actually said was that outside the United States, the phone was priced too high.
Tim actually felt that the price of the iPhone was okay in the United States – because we are more likely to pay for it- than in the developing world. This blows my mind, not because I think the price of the phone is wrong and too high, but because it totally makes sense. In the US and some of the other we are more willing to spend that money, so instead of pricing the phone accurately, we could now be pushed further than other countries.
Another thing that really stood out to me ties into the cost of the phone. Since the phone prices continue to climb and subsidies are declining, many people are holding on to their phone longer. Someone that upgraded to the 6S probably only had to pay $199 and the rest of the cost was built into the monthly cell phone bill.
Someone looking to upgrade from that 6S would be confronted with a much more expensive phone – $649 without a trade in deal.
Apple also did two things this year that were great for customers but not great for the bottom-line: battery replacements and iOS 12.
In late 2017, people found out that Apple had been slowing down phones as the battery degraded. The problem really had been that they never told anyone. As a response, Apple lowered the price of getting a new battery in 2018 to $20.
If you had an older phone and could get it back to pretty great performance speed for $20, that would make much more sense than upgrading to the newer phones. It was cheaper after all.
A new battery combined with the updates in iOS 12 which helped make those same older phones work better definitely had an impact on older phone users. It was one more reason to hang on to those phones.
Cable Should Be Worried
An investor asked Tim about the upcoming streaming service and in a rare moment, Tim actually mentioned upcoming plans. Tim said that Apple plans to break up the cable bundle – or the death of cable is coming.
Tim seems to think that more and more people will be cutting the cord and ditching cable this year; more than ever this year. He thinks that Apple will be there. That’s one reason why Apple started to add in AirPlay to third-party television sets. Apple wants to help break up that cable
Tim actually says that they have original content coming that will help break up the cable bundle. He didn’t say much else about it, other than more information will be coming later.
I think the only real reason he mentioned this at all at this time is that they couldn’t hide all the money that they’ve already spent on this original content.
Apple still profitable
With all the doom and gloom that was predicted with the lack of iPhone sales this quarter, Apple still posted it’s second most profitable quarter ever.
Apple is still a juggernaut.
They freaked out the entire world by announcing they wouldn’t hit the guidance that they had posted. The stock dropped. People calmed that Apple was doomed.
While the iPhone may be down, the company is still doing great. Services are way up, the iPad is selling, the Apple Watch is selling. The company is going to be okay.
Apple is doing great.
The iPhone is still the golden child, but its growth might have slowed. That doesn’t mean that Apple is doomed. Apple is still making money a fist-full at a time.
I think we’ll see some great new things (none computer) sometime this year and I would expect them to spread AirPlay 2 with video
The company is going to be fine, the end isn’t near.