Comment by chollida1 | Hacker News Reader

Comment by chollida1 | Hacker News Reader

Notes:

- for first time seeing analysts excited about other products, watch and airpods as being real drivers of bottom line revenue!!!

- interesting note from Bloomberg tech reporter "Apple’s new revenue strategy isn’t a bad one. It’s, basically, sell the customer an iPhone every three to five years, and make a bunch of money in the years between by selling them a new Apple Watch or AirPods (which only last about three years tops before you need a new pair -- batteries!) and services. If a user subscribes to all of Apple’s services for two years straight, that’s about equal to revenue from a new iPhone. So in those cases, if that user doesn’t buy a new iPhone for a couple years, it’s not a big deal."

- apples done so well lately that the average analysts has a target price 5% below what apple is currently trading at

- they manufacture iphones 400 km from the center of the coronavirus outbreak, see if this is mentioned, also about 18% of apple revenue so China matters

- want to see what their effective tax rate is

Numbers:

- stocks almost back to record highs before reporting, after reporting it shot way past!!

- 1Q Revenue is $91.8B vs estimates of $88.38B!!!!!!

- 1Q EPS is $4.99 vs estimates of$4.56!!!!!

- wearables was $10 vs $7.3 last year( apple just continues to create $10+ billion dollar business every 3-5 years. Use to be that only MSFT could do that and GOOG spent heavily trying to do that

- iphone revenue for 1Q is $55.97

- service revenue for 1Q is $12.72

- declines in both mac($7.1 vs $7.4 last year) and iPad sales($6 vs %6.7 last year)

- iphone sales up everywhere except Japan

Numbers that really impress

- Cash/Equivalents have doubled from last year, that funds a lot of money loosing streaming shows

- keeping in mind they bought back $37B in stock this year

- almost $100B in term debt

Supply Chain:

- Qurvo up 1%

- Skyworks up 1%

- Cirrus up 3%

A lot of these were expected? Still good to see it now as fact. I have jokingly made the prediction on in 2016 that Apple will reach 1B iPhone User by 2020, turns out we are very close judging from the 1.5B Active Base.

iPhone in Japan - For those not aware iPhone has 80%+ Market Share in Japan ( Usage, not Sales ). And majority of iPhone user prefer smaller handset, that is the iPhone 4.7" or smaller like the iPhone SE size. So Apple hasn't really had any update for that market in 2019. Another point was Japan has passed a law that ban the subsidise phone selling with carriers. Making the cost of iPhone higher. Face ID is also not as well liked comparatively speaking, so replacement cycle are longer.

But Mac not so Good. I only posted this yesterday[1]. Basically more Mac users are leaving the platform. The Churn rate is possibly the highest in the past 10 years. I am not sure if this is because casual users are generally leaving the PC platform as a whole, or they are leaving to Windows or Linux.

[1] https://news.ycombinator.com/item?id=22170080

"sell the customer an iPhone every three to five years"

Aren't lots of people on monthly plans now with "free" annual upgrades?

I'm on this plan (the zero interest loan plan designed to drive an annual upgrade) and it isn't exactly free.

The loan is absolutely zero interest, but I get ~$200 in fees when I upgrade from AT&T. It's enough where I didn't upgrade from the X to the 11.

I have also since switched to Google Fi and don't know if that same fee exists with them ....

What fees are you getting from AT&T?

I've been a part of the iPhone upgrade plan since it started and haven't been charged any fees by AT&T.

He’s talking about the fees associated with AT&T’s lease plan, not Apple’s.

No. AT&T started charging an upgrade fee, regardless if you went through a 3rd party or not. This started in 2018 iirc.

line access and sim card fee?

$200 sounds a bit insane. Is this across many devices on a multi-device shared plan? AT&T charges me $40-$50 each time I upgrade the device. Anything > $0 still seems silly, but $200!

Those activation fees for devices you own are bullshit, and I can’t believe the government allows it. $30 to do NOTHING.

Why would your carrier charge a fee for phone upgrades? I'm with T-Mobile, and during an upgrade I pop the SIM card out from the old phone and put it in the new phone. Everything works now. The one time I lost the SIM card, I was charged just $10 for a replacement.

I think it’s fees to front the costs of the phone, so you can pay monthly

No. There’s an upgrade fee even when you buy your phone through the iPhone upgrade program now.

That seems outrageous to me. Replacing my device, whether purchased outright or through Apple's upgrade program, shouldn't be of any concern for my provider.

I get ~$200 in fees when I upgrade from AT&T

Ouch. Maybe it's your plan?

When I upgrade iPhones (financed through Apple) on AT&T, the fee is $35.

"Line activation fee" or some such lie. Why do I have to pay a fee to activate a line that's already active?

Because Verizon also has the same fee.

How do you get hit with this fee? I've not done any financing, but I've updated iPhones several times on Tmobile (2013-2016) and Verizon (2018-2019) without even having to tell the carrier...

If you use the Apple upgrade program, all the mobile networks charge an activation fee.

The only way to avoid the activation fee is to swap the SIM by yourself, I think.

We didn't get an activation fee from T-mobile. We also didn't swap the sim.

Maybe I'm wrong about Tmobile, I can't find anything via searching about it, but Verizon and ATT of course charge it. I thought I had heard Sprint and Tmobile do too since the SIM comes with the phone and they have an excuse to charge, but they might be nicer than Verizon and ATT.

If you go into the Apple Store and use the financing option then they will register your phone as a convenience to one of the big 4 carriers. I imagine you could finance and "activate" it later yourself and maybe avoid the fee if you have a physical sim card. But the new phones are eSim so that may play a role. I was told I could not participate in the iphone upgrade program if I wasn't on one of the big 4 carriers. I was on a big 4 but then I went MVNO with no issue. I haven't upgraded since tho.

The $35 I think is an activation fee. I do believe you might also have to pay sales tax which on a $1200 device might be $100.

Just call them when the transaction hits your statement and ask them for a refund. I’ve done this every year they tried to charge me and have been successful. The rep likely also knows it’s a bs fee as well. If not just hang up and speak with another until you get someone who will.

Thank you so much. I'll give this a whirl next time.

I also wonder, when a phone is financed, who is fronting the cash?

Is the inventory already on the books of the cellular provider?

Is there a third party? Is it securitized?

This business model seems similar to leasing a car.

Apple uses Citizens One as the bank for the upgrade program loans.

If it's via the Apple Upgrade Program, it's essentially leasing.

You take out a loan with Citizens One, and the phone is paid for (from Apple's perspective) outright. You then pay the loan down. However you can't get another upgrade until you've paid at least half of the installments, and then if you trade in the old phone the remaining balance of the loan is deleted.

There's also a new (similar) program integrated into their Apple Card. Not sure how exactly that works.

The inventory comes from Apple. You do not buy/lease/whatever the phone from any carrier. Once you purchase it, you have the option to activate it with whichever of the big carriers in store. You could also walk out and install your own SIM from elsewhere. AUP phones aren't carrier locked.

So, the carriers do not own any of the physical Apple phone inventory?

Not sure about "lots". Probably "lots" are on such plans, but lots more are not.

That program is available only in a limited number of countries (I’m guessing wherever Apple can make it an interest free loan). It may be the one triggering continuous upgrades in countries like the U.S. and adding to the volumes.

>1Q EPS is $4.99 vs estimates of$4.56!!!!!

I'm constantly reading on HN about the deceiving nature of stock buybacks on earnings. Is this not an example? Net income was down year-over-year on "record" per share earnings.

I wonder. If you're an investor, all you really care about is how much your shares are earning you. If the amount of earnings per share goes up, then the value of that share also goes up.

> all you really care about is how much your shares are earning you

Properly you care about more than that: you want to know how the business is faring; the thing that actually has to support the EPS. You want to know that you're not watching a dwindling scenario, where you're losing the business and the buybacks are getting you just a bit more than treading water. That's where EPS juicing can be a dangerous camouflage.

If juicing EPS with buybacks comes at the cost of longer term growth, it's a disaster for long-term shareholding. Incorrect capital allocation sinks a lot of ships.

IBM, as one infamous example, played (is playing) an aggressive financial engineering game where they were seeing their business contract every quarter for years, yet juiced EPS through buybacks.

It did absolutely nothing for the stock, which hasn't moved in ten years (Adobe is now worth more than IBM + the former Red Hat, ouch). All those profits shoveled into buybacks and it did nothing to drive consequential returns for shareholders. If shareholders are lucky they've yielded three or four percent per year the past decade, with inflation + buybacks + dividends (while a lot of other prominent tech companies have generated epic returns in that time). It could have gone into building a better cloud business which would have provided growth, which would have rewarded them with a PE ratio that isn't a dismal 13 (Apple has a multiple 2x that with very modest growth). In four or five years AWS will be as large as IBM's entire business (it's already nearly as profitable now). Shareholders have seen some EPS boost while the business gradually vanishes out from under them.

Is it more likely that IBM's profits were better spent on buying shares back or driving business growth? You could have rolled up a massive cloud business for $50 billion in acquisitions between 2008-2018 (and ideally not stupidly paid twice what Red Hat was actually worth, near the peak of a stock market bubble).

The value of your shares goes up, in current terms, but your future expectations of growth should go down, which should temper the multiple.

That’s simply false. You’re assuming a scenario where the company does buybacks because they’re losing market share, and then implying causality.

To put it simply, wherher a company performs buybacks does not tell you what the future growth will be. All it tells you is that the company’s management believes shares are undervalued, or alternatively that they are irrational (to your point, I would characterize most share buybacks as irrational, but _certainly_ not apple’s)

If a company habitually buys shares back, then yes, that does tell you something about future growth prospects, in comparison to share buybacks.

It's a pretty clear sign of management saying "We see no better opportunity than to buy shares at the current price."

This may be because management believes shares are undervalued. But it may also be because they have no alternative plans.

And continued buybacks would seem to indicate the latter.

It’s not deceptive to show that they beat the Wall Street estimates for eps because the analysts who guessed were aware that there were buybacks ongoing.

They beat a number that was supposed to have factored in the effects of buybacks.

Blame the tax code for incentivizing buybacks over dividends.

These days, EPS contains a blend of past “dividends” payed out as buybacks.

The math works out so that when you buy the stock, you’re essentially paying the previous shareholder past dividends would have happend if they hadn’t been replaced with buybacks.

Anyway, none of that should change the way you reason about P/E. The main impact is that EPS trends over time aren’t comparable to net income trends, etc.

I'm not sure they are inherently a bad thing. Though when companies take on debt to finance them it seems dubious.

So great news for the environment and relatability.

What a joke.

Seems like Apple is making money from creating disposable rubbish and trashing the Earth.

Maybe I’m wrong and they recycled all? I hope this is the case.

Longer buying cycles on the phones would be quite beneficial. And Apple has quite a good track record on longevity compare to others, in notebooks for example. They also lead on recycling, and were among the first to reduce and eliminate a bunch of toxins from their processes, and to aggressively cut back on packaging.

In perspective (to Elon Musk‘s products, for example) Airports are completely irrelevant, as long as they are not powered by enriched uranium: they are just too small.

Yes but it sounds like their strategy is changing to having things which are disposable in the middle of these cycles to make extra revenue.

That's the uncool part.

Apples Macbooks are the leading the way for creating mountains of needless waste. We had multiple sent back because of their horrible keyboards failing repeatedly. And unlike on other brands where you could pop off a key and remove the whole keyboard without any tools, Macbooks have the keyboard secured with about 90 rivets so unless you want to spend hours and hours plucking out rivets and then threading the holes, the entire bottom case becomes useless which has glued to it the trackpad, speakers and battery.

How environmentally friendly! Recycling is a corporate greenwashing tactic to make it seem like you can buy endless product and do the planet a favor because someone in china burned off all the non metals and grabbed the remaining aluminum.

Don’t you think Apple will recycle every MacBook top case that is sent back? Whether as refurbished or in material, either way it’s probably very efficient or they would lose so much more on all these free repairs

What are you talking about? Apple has been caught making their products slower and unusable as they get older. They are designed not to last in every aspect.

> Apple has been caught making their products slower and unusable as they get older.

That's FUD.

Apple was indeed "caught" doing that, in one very specific and generally customer-friendly sense.

Apple throttled the phone CPU as the battery aged to avoid spikes that could cause the phone to die. When people complained about it, they introduced a toggle to allow that behavior to be disabled.

Broadly speaking, Apple has had an excellent record relative to the rest of the industry. They provide day of release OS updates for years-old devices, they have shipped major new releases which have actually improved performance on older devices, and they will often block new features on older devices when those features are likely to cause severe performance degradation.

You mean clocking down the processor to reduce power draw from the batter, increasing the lifespan of the device...

Don't question it. Just consume product and then get excited for next products.

This is the direction I feel like most of HN is hoping I go with.

https://www.apple.com/recycling/nationalservices/

Nobody notices and nobody cares. Notice they downvote you and your text gets harder and harder to read and washes away. I wonder what it will take for iPhone sales to crash? Is it people starving in the streets? How many dead bodies will it take? Lots of interesting questions.

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