Apple’s Q3 2018 Results Break Records Again


(Michael E. Cohen) #1

Originally published at: https://tidbits.com/2018/07/31/apples-q3-2018-results-break-records-again/

Apple has posted yet another record-breaking third quarter, thanks in large part to the iPhone X’s high price tag and the company’s ever-increasing Services revenue.


(Derek Roff) #2

I notice that the first paragraph of the article mentions, and links, Apple’s net profits of $11.5 billion for this year’s 3rd quarter, and $8.7 billion for last year’s quarter 3. My calculator says this is a 32% increase. That figure seems to be absent from your article, and it took me a while to understand and track down the 17 percent increase that is mentioned in the same paragraph.


(Josh Centers) #3

Thanks, we’ve added that percentage and will include it in future articles.


(Adam Engst) #4

Here’s an interesting take on part of why Apple is so successful financially.


(Paul Chernoff) #5

Interesting article. I am bothered by the report that Apple is slow in paying its suppliers. My employer is the opposite.

One item left out is Apple’s investments in buying equipment for its suppliers. While a lot or all oof manufacturing is outsourced my impression has been that Apple will buy equipment for its suppliers if necessary. And Apple doesn’t seem to to jump from supplier to supplier to save a few $$$.


#6

Apple is also bringing more development (esp. chips and batteries) and manufacturing in-house. I remember reading a few months ago Apple purchased a big load of a source material to stockpile for batteries as Chinese manufacturers were driving the price up. I’ve also read rumors about Apple looking into developing their own screens.


(Adam Engst) #7

I was a little perturbed by that as well—we’ve always made a point of paying everyone both promptly and on the schedule promised, and the good relationships that has engendered always seemed like they’d be more worthwhile than the use of the money for a little longer.

Then again, we’re not working in the millions or billions of dollars. :wink:


(Marc Z) #8

As long as the vendors have agreed to that payment schedule, I have no problem with it.

I recently read a book about early Silicon Valley and it had a lot about the start of Apple, particularly about Mike Markula and all he did. One thing I noted was that Mark was impressed with Steve Jobs’ cleverness at getting vendors to give him 90 days to pay – which enabled him to get the parts for the Apple I, build computers and sell them, and then pay the vendors – without having to get loans or have a lot of capital to invest.

Of course, Apple is no longer in such a desperate situation, but if the vendors are okay with it, then Apple has the right to do it.


(Simon) #9

Thanks, Adam. An interesting article indeed.

What has me troubled is this section.

Subscription models to generate predictable revenue. Great for Apple and their stockholders. Sucks for me as a customer.

In the old days Apple had to make great Macs and great software to get me back to buy another Apple product. Now, they try to get me locked in by a “walled garden ecosystem” or by ensuring that somebody would lose all their beloved playlists if they switch to say Spotify. Bottom line, whereas good products used to motivate people to remain customers, now the product quality is no longer the main driver, it’s trying to create a situation where the customer doesn’t really have a realistic alternative to staying “locked in”. Not exactly a situation you can expect to foster most innovation. :frowning:


(Adam Engst) #10

Indeed, although I do think a little less of companies that achieve their success in part by taking advantage of smaller companies that don’t have negotiating leverage. That’s one of the reasons with Take Control that we always paid our authors royalties monthly for the sales in the previous month—as the larger entity in the situation, it would have felt exploitive for us to earn interest on the royalty money for 3 months (the industry standard) before paying it out.

Yep. I’ve written a lot about this over the years, and as a user, I don’t like it either. But from the perspective of the company, as the article says, the walled garden strategy is extremely powerful, which is why Apple is far from the only company to use it. All the tech giants do in some form or fashion.


#11

Simon

    August 8

Thanks, Adam. An interesting article indeed.

What has me troubled is this section.

This restructuring of operations to minimize inventory, move to subscription models (which generate predictable streams of cash) and keep suppliers waiting has become the dominant pattern in large corporations.

Subscription models to generate predictable revenue. Great for Apple and their stockholders. Sucks for me as a customer.

It sucks for me as a customer too, and I totally hate it. But Microsoft, Adobe, and so many other competitive companies moved very successfully to subscription models. My feeling was that stuff like Excel, Word, Photoshop, Illustrator, and so many applications have evolved so much over the years that there no longer many earth shattering features they could build in that would incentive businesses and consumers to upgrade every year or two. And as more and more companies and many consumers moved to cloud storage, getting cloud and app tech support 24/7 is a good thing.

Another big benefit for businesses of all sizes is that the subscription model facilitated expansion to other lines of business. Adobe built Marketing Cloud, a very highly regarded analytics, ecommerce and data and production management suite. (The production stuff pretty much crippled a very nice client I worked with for years.) Microsoft is also growing is moving into Human Resources (one of the reasons they bought LinkedIn), customer relationship management, media management and more.

In the old days Apple had to make great Macs and great software to get me back to buy another Apple product. Now, they try to get me locked in by a “walled garden ecosystem” or by ensuring that somebody would lose all their beloved playlists if they switch to say Spotify.

Neither Apple, Pandora, YouTube, or any other competitor in the streaming music space has any obligation, or even the motivation, to enable the growth of Spotify. And btw, The more free or paid subscribers Spotify has, the more money it looses. Unless they radically change their business model, IMHO, they were doomed from day one.

Bottom line, whereas good products used to motivate people to remain customers, now the product quality is no longer the main driver, it’s trying to create a situation where the customer doesn’t really have a realistic alternative to staying “locked in”. Not exactly a situation you can expect to foster most innovation.

In addition to leading in innovations in communications and music, Apple continues to very diligently to further disrupt the entire entertainment industry. They are working hard to disrupt transportation, wellness and health, robotics and more. Recent announcements about ARKit, Home, fitness tracking, etc., etc. have been keeping TidBits writers very busy.

Apple has thrived because it moved into new lines of business. People aren’t upgrading their personal computers as often as they used to because they are able to do more and more with mobile devices. I quoted something else from this article earlier this week:

https://www.thestar.com/wsj/technology/2018/08/01/diverging-fortunes-high-prices-propel-apple-sink-samsung.html

Just a day earlier, Samsung announced its smartphone profits cratered, as fewer buyers were willing to shell out the nearly $1,000 the South Korean company wanted for its flagship Galaxy S9 handset. Its average smartphone sold for about $220 in the most recent quarter, analysts said, brought down by the lower-cost phones it sells alongside its pricier iPhone competitors.

The results illustrate the diverging fortunes of the world’s most profitable smartphone companies as they sweat out a contracting industry with fewer buyers eager for the latest gadget.

Apple, whose stock was up more than 4% on Wednesday, has navigated the slowing market by leaning on its premium brand, new features and exclusive operating system to command record prices—even as unit growth barely grew, analysts say. But Samsung’s price increasing didn’t stick, as flagship Galaxy S9 sales slipped and unimpressed consumers turned to lower-priced devices from Android rivals.

Adding insult to injury, Apple appeared to gain market share from Samsung during the second quarter, with iPhone share rising to 12% from 11% from a year ago as Samsung dipped to 20% from 22%, said Neil Mawston, an analyst with Strategy Analytics.


(Simon) #12

I agree with that. I guess that’s ultimately what I’m bemoaning. Apple is extremely successful as a company. And that apparently justifies doing what “everybody else is doing”. And so in that sense Apple has now become one of the “bullies”.

For me as a customer that’s a loss. As a customer I was better off when Apple was thinking different, when Apple was the computer company for the rest of us so we had an alternative to bullies like MS. Now where is that alternative? And while I dearly miss Apple in that role, the stock market loves them for essentially having become the bigger and better MS. And since the stock market is always right, it’s no surprise Apple’s continuing along that path.


(Adam Engst) #13

I feel your pain. :slight_smile: It would be a good thing if Apple were a nicer company in more ways. They do fairly well in some, such as by emphasizing privacy, but there are definitely ways in which being rich and powerful lead to forms of exploitation.