“We did not foresee the magnitude of the economic deceleration.” Oh dude, starting the year out on the right foot.
On Wednesday after the market closed, Apple released a letter to shareholders in which it said that revenues are going to be a lot worse in the quarter ended December 29 than its guidance two months ago, that iPhone revenues have dropped year-over-year, that China’s economic problems are deeper than expected, and that iPhone revenues are hurting elsewhere too. This confirms a series of revenue warnings from Apple suppliers.
Shares plunged 7.5% after hours to $146. If shares close at this level on Thursday, it would be the lowest close since November 7, 2017. Shares have plunged 38% in three months. Wow, this was quick:
In its “Letter from Tim Cook,” Apple slashed its revenue guidance by 6% to 10% from its prior guidance two months ago, to about $84 billion in the quarter, down from its previous guidance of $89 billion to $93 billion.
Just to get this straight, this revenue guidance of $84 billion represents a 5% revenue decline from the quarter a year ago. The price increases of its new models aren’t exactly helping a lot, it seems.
Here are some of the key points Apple made in its letter (emphasis added):
While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.
China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States.
As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.
Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance…
But it’s not just China that’s responsible for year-over-year iPhone revenue declines. It’s China plus…
Plus, “other emerging markets”
Plus, “some developed markets,” where “iPhone upgrades also were not as strong as we thought they would be.”
In addition to economic factors hitting iPhone sales, such as the harsher-than-expected slowdown in China, Apple believes there are “other factors broadly impacting our iPhone performance,” including:
- “Consumers adapting to a world with fewer carrier subsidies,” and therefore becoming more price conscious,”
- “US dollar strength-related price increases,”
- “And some customers taking advantage of significantly reduced pricing for iPhone battery replacements.”
In other words, these iPhones are too expensive, and consumers are successfully looking for alternatives, such as buying less costly brands and replacing the batteries in their old iPhones to be able to use them for a few more years.
CEO Tim Cook then explained in an interview on CNBC that it’s not the Chinese government pushing down on iPhone sales:
“Well, certainly Apple has not been targeted by the government. So let me take away any kind of doubt of that right up top. There are reports, sort of sporadic reports, about somebody talking about not buying our products because we’re American, maybe a little bit on social media, maybe a guy standing in front of a store or something. My personal sense is that this is small.
“Keep in mind that China’s not monolithic. Just like America’s not monolithic. You have people with different views and different ideas. And so do I think anybody elected not to buy because of that? I’m sure some people did. But my sense is the much larger issue is the slowing of the economy.
In the letter, as well as in the interview, Cook also complained about the trade tensions between China and US.
The letter points out repeatedly that iPhones are the sole problem, and that all other categories are doing great, with the revenues from Services, Mac, iPad, and Wearables/Home/Accessories combined expected to rise nearly 19% in the quarter, year-over-year.
But this is not much of a consolation, given that Apple has become so desperately dependent on iPhones and its strategy of jacking up iPhone prices to overcome weak unit sales. Turns out, there seems to be price resistance after all, even for iPhones. And China may just be ground zero for that price resistance.
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The fate of the world depends on people buying cellphones
We’re doomed
Well you could that the Dutch Empire was dependent on the international appetite for kitchen condiments or that the USSR was destroyed by its inability to manufacture a good color TV set.
Which isn’t to say we’re not doomed.
I lived in the USSR and our color TV, which I think was made in USSR, was fine.
Trying to be witty, I meant ‘Color TV’ as a stand in for consumer goods generally. A major component of the USSR’s economic stagnation in the 70s and 80s manifesting itself in a chronic mismatch between what consumers wanted to buy and manufacturing output, and by the over-all shoddy quality of those goods.
That’s also part of what made the severe depression after the collapse so intractable, households had saved enormous quantities of rubles rather than spend them.
and the two stations were great, too.
but seriously, why would a ground down kicked around chinese everyman buy a 1000 iPhone when he or she can buy a 300 huawei that’s a passably lifted copy?
just sayin’.
You could ask the same question about an authentic Gucci bag vs. a knock-off made in the same plant, or Mac vs. a PC.
It’s the principle question Veblen answers in his Theory of the Leisure Class. The short version is: conspicuous consumption, i.e. products are often popular *because* of their cost rather than *in spite of*.
That’s a long established pattern in civilization, in spite of cultural, philosophical and religious admonishments to modesty and humility. So much so, that it appears that the kernel of that desire appears to be innate in human beings’ social wirering.
Our economies certainly depend now on the masses buying purely discretionary items, in large quantities, when they are told to, and on credit.
Meanwhile, good family farms, real farms, are mostly unviable almost everywhere, if not subsidised as in the EU – and even there it’s damn tough and villages continue to die.
Lest anyone has forgotten, they were always the backbone of society and of the survival of our species once hunter-gathering was no longer adequate.
Yes, I am afraid we are indeed doomed.
The urban elites bleed and are sustained by wealth extraction from the “hinterlands.”
This is true in the USA and even more so in Canada. A full 35% of Toronto’s GDP alone is from wealth extraction from the regions. It is the funnel through which the wealth of the country is sucked out of it. The foreigners that own us find some local dupes, pay them a lot of money so they can ensure that everyone else gets paid little.
That’s why elites in both Ottawa and Washington don’t want to anything about these abuses. When it comes both to the elected elite and the connnected bureaucrat, their retirements are based around New York and Toronto, respectively.
I wouldn’t be surprised if this is a reason for Brexit too. Mark Blyth recounted an incident in a distant region in the UK where a Remain propagandist decried the eventual loss in GDP if Brexit was to come to pass. A heckler then (accurately) called out: “your GDP, not mine.”
Wouldn’t be surprised if this sentiment is a good reason why the Yellow Jackets in France is so pervasive across the regions; why it’s resonating beyond French borders, at that.
It would be healthy to have this debate, just how much economic benefit does the iphone provide? It reminds me of the stock market after it went electronic. Day trading mania! The result was a surge of liquidity which raised asset prices, and created wealth. Before that it was the automobile which its hard to exist without a car, we accept the cost as necessary because without it we have no jobs. Where does the iphone fit in?
Well. In Africa they at least use their smartphones for finding out which market to bicycle 30 km to for selling crops, banking, payments and talking to friends and relatives across heavily mined borders – there are companies like Lebara Mobile which does flat-rate across Africa because tribal and family lines often run across borders so there is a business in connecting them.
In many ways Africans are using them according to what smartphones were supposed to be used for, before the cat- and fail- videos took over.
Most Africans do not have 1000 EUR for an iPhone, they use some Chinese brand.
Apple is a bit unique, as it has been almost a cult among its users/customers. In business terms, Apple was very successful in building a brand and convincing a segment of the customers in the market to only consider buying Apple. This marketing began back with the Mac, and reached its pinnacle of success with the iPhone. When you meet and talk to an Apple person, there is no alternative.
The interesting bit of this story is where Wolf points out that there is finally a price point where even the members of the cult stop buying automatically and consider cheaper alternatives, likely discovering at the time that Apple isn’t really a leader with its technology, but is mainly only a leader in its marketing.
Long term, that’s not good news for Apple. Without the cult status, Apple just becomes another manufacturer of mobile phones. Now they have to scramble for sales and have to give up the large price premiums that had been attached to the Apple name. Once such a status is gone, it is very difficult if not possible to bring it back. At the minimum it would take a new disruptive break through product such as when the iPhone brought smartphones to replace the traditional cell phone. And even then a return to cult status is difficult to achieve.
The device management systems for Apple are very good. This is important to business users, who pay for their IT services.
Those fondle slabs cost about $15 wholesale. It was a bizarre example of an extreme fad that someone was selling them for thousands of dollars. Shades of tulip mania all over them.
Disclosure: My company is designer of smart phone, i.e. “fondle slab” systems and contract developer of related software. My estimate of the wholesale price is very probably high.
The Bill of Goods for an iPhone XS Max is around $443, and the device sells for $1,100. Big markup, yes, but your $15 number is likely for a very low-end device with a slow chip, crappy modem, lousy display and minimal storage.
Here’s a source for the estimate: https://9to5mac.com/2018/09/25/iphone-xs-max-cost-to-make/
Not cellphones, just cellphones at 4X the price. Being a one-trick pony has distinct disadvantages when people review their budgets.
Watch them jack up the price of the battery as a remedy for falling sales …
Supposedly the battery upgrade offer for $29 expired 31 Dec 2018.
That program was for the phones in which Apple finally admitted the software was reprogrammed to run slower to compensate for defective batteries. This followed the normal Apple PR cycle of ‘no problem’, to ‘a small number’ to ‘special price of 29 dollars’ to ‘we’ll fix it for free’.
I just meant that the regular battery replacement price of, I think, 79 dollars, could possibly be increased to induce customers to upgrade to a new phone rather than just replace the battery even thought they were happy with, say, an iPhone 5 or iPhone 6 unaffected by the battery problem, whose battery needed replacement due to the normal cycle of battery life. A lot of people seem to have resisted the upgrade cost to the 1000+ dollar phone if they have no interest in having the latest thing.
It feels like this was one of the more telegraphed misses in recent memory. We’ve been hearing about earnings whiffs from their supply chain for a while.
It was just whether the softness was priced in the drop from 230 to 160.
Maybe offshoring your manufacturing facilities to a hostile power wasn’t the wisest long-term strategy. As the trade war heats up, no nationalistic Chinese will be caught dead with an iPhone.
You did read the article, right?
Tim Cook stated very clearly that there is no adverse action taken by the chinese government!
So why are you making this statement?
And why would the average chinese person not want to be caught owning an iphone?- It is afterall assembled in China, not to mention a status symbol showing that one is successful and made it to the top!
Chinese Communist Party newspaper, People’s Daily:
However, the eye-catching success achieved in the Chinese market may provoke nationalist sentiment if US President Donald Trump’s recently adopted protectionist measures hit Chinese companies hard.
the above quote looks more like a threat, than a prediction. At any rate, what would it look like if Chinese “nationalist sentiment” were provoked?
further from the article:
China is by far the most important overseas market for the US-based Apple, leaving it exposed if Chinese people make it a target of anger. . .
I suppose we know now.
http://en.people.cn/n3/2018/0807/c90000-9488434.html
Kasadour,
You’re citing a Chinese government-owned propaganda outlet, in English for effect on Americans, and you’re spreading this Chinese propaganda via my site? Careful!
I think People’s Daily is technically owned by the Communist Party, since it’s its official organ. Seems reasonable to site it for China’s official take on economic data and policy positions, though I’m not buying theory that their government sabotaged national iPhone sales.
Wolf,
Some thoughts in defense of Kasadour’s comment:
Anybody with a public voice in China seems to fall under intense scrutiny from the government and must appease them or risk being silenced. So is there any “news” in China that isn’t suspect propaganda?
The fact that People’s Daily is controlled by the government may add credibility to its expression of “official” Chinese government opinion. Whatever they publish must be given a nod of approval from some party bureaucrat.
For his part, doesn’t Tim Cook produce Apple propaganda? If Apple released a polished turd as their next big thing I bet he would look a CNBC interviewer in the eye and say it is a great product. And I’m sure he is aware of the consequences for Apple if he publicly criticizes the Chinese government. So of course he doesn’t believe that the Chinese government would ever do anything detrimental to Apple’s success.
I watch several Youtube channels where english-speaking foreigners who live in China talk about their life experiences. Over the last year, there seems to have been a sharp increase in nationalist messaging from the government in the form of new communist statues, monuments, and Soviet-style billboards. These Youtubers complain that they feel anti-foreigner pressure building in China, and some have left the country because of it.
China’s government seems to be on a mission to see Chinese domestic brands supplant foreign ones. The “Made in China 2025” initiative is an example of this mentality. Even if China currently tolerates Apple making boat loads of money in their market, its hard to believe that within the government there isn’t a strategic vision to see domestic brands eat up that market share.
So even if the Chinese government isn’t specifically targeting Apple, it’s hard to believe that the growing nationalist and often anti-American messaging isn’t having an effect on American brands.
Time will tell
I’ve been a bit surprised over the last decade that with Americas constant wars and killing of civilians that brands associated with America such as Coke didn’t face a distinct drop off in sales as their brand goes downhill with the American red-white-blue brand.
I’m not so much reading this as a ‘threat’ as the reality that a brand that is directly associated with a hostile power is likely to take a hit.
For instance, is there any data on the sales of Mercedes Benz cars in the USA during the first half of the 1940’s? I’m guessing that having a business built on selling German cars wasn’t a good business plan in America at that time?
Sure — of course, all those things can change.
Check out what’s happened to Canada Goose since Canada arrested a Huawei executive in Vancouver — Canada Goose is an expensive, upscale brand, particularly among Asian women. It unfortunately also bears a name that is currently dirt in China — stock down 30%.
If Trump insults China, don’t think that’s going to help American brands.
Further to what Nick said:
And this Cook quote, ” There are reports, sort of sporadic reports, about somebody talking about not buying our products because we’re American, maybe a little bit on social media, maybe a guy standing in front of a store or something. My personal sense is that this is small.”
Well, Mr. Cook, this is just the beginning and you’d better get used to it and factor it into your growth estimates. The number of people I have heard in the past two years who have publicly vowed to not buy anything American, or travel to the States is huge, and we’re a supposed ally (Canada). I cannot even imagine how the Chinese people feel as these Trade Wars mimic the recent past, namely, the Opium Wars.
From Wiki: “In 1820, China’s economy was the largest in the world, according to British economist Angus Maddison.[3] Within a decade after the end of the Second Opium War, China’s share of global GDP had fallen by half.[”
Okay, the trade isn’t in an addicting drug, (or is it?….. this electronic mind numbing collection of ‘must have’ products.) And the Apple trade isn’t in Coolie labour anymore, (or is it….when I think of the working conditions the Iphone assemblers are subjected to by Chinese sub-contractors and suppliers.)
The Trump China Trade War will seriously seriously impact the American and Chinese economies and the rest of the World’s as well.
Corporations think/plan in quarterly or monthly earnings reports and forecasts. US poiticians think and plan in 2 or 4 year election cycles. China thinks and plans in centuries, and Xi has a lifetime appointment. Further to that, despite this recent southern border nonsense, the US is composed of a hodge podge of races and nationalities all carrying various blends of self-interest. The Chinese are, well Chinese, and do not tolerate open differences or a desire to see this change. China is a big and tasty market. It would be wise to supply what they want and what they need if you want to be part of it. I don’t imagine they will drop to their knees anytime soon, or buy iphones when so many other options abound.
This is just the beginning unless Trump caves.
Doesn’t China have 10x more to lose if everybody becomes more nationalistic? If US citizens start buying US made, then China will have overcapacity. For this reason, the Chinese government would exercise great caution.
Who cares, the parent company isn’t even Canadian anymore. I have a 20 year old goose down stuffed parka, made in Canada, it’s a work of art. Ofcourse, living in the tropics, it’s in storage.
To Bobber’s point:
To be isolated in a nationalist setting the biggest resource a country has is man power. You can’t rely on trade for income but you can make up for it with labour. In China they can make up money as they see fit and destroy it just as fast, so paying the masses and collecting a tax on the wages is a simple game to play for China.
Now which country has the bigger work force for revenue, the 1.3 billion in China or the 311 million in USA.
Look at the monthly export, import numbers between China and the US. A trade war hurts China much more than the US. Tell me, what is wrong with US producing it’s own steel? Or tires or Aluminum? Sure China corners the market on some precious metals but i’m sure there are workarounds in development. And if they dump US Treasuries, no problem, there are many countries and US institutions that will gobble them up.
“The number of people I have heard in the past two years who have publicly vowed to not buy anything American, or travel to the States is huge”
I grew up in Canada, and this is one of the most ancient of Canadian traditions. Ranting about hating the Americans, how they’re the cause of all that is ill, and how I’m not going to travel/spend/work there.
One of the bigger surprises for Canadians as of late has been when the Americans cranked up the nastiness at the border. For over a decade, Americans crossing to Canada for business meetings have gotten REALLY nasty treatment from protectionist Canadian border guards, up to and including being denied entry because their business meeting was categorized as “working without a visa.”
The Americans only really started applying the same standard with Canadians recently, and the caterwauling in the Dominion has been off the charts… hence the latest “I’m never going there” rants.
“Tell me, what is wrong with US producing it’s own steel? Or tires or Aluminum?”
The United States isn’t very good at producing its own steel, tires or aluminum. The cost for quality American product isn’t internationally competitive.
It was the massive increase in steel and aluminum costs that drove GM to announce all the recent plant closures. When a slow-selling American-made product like the Cruze sees the cost of its inputs go up 30% or more, it becomes unprofitable. Consumers won’t accept a price hike, so the lines became unviable.
The number of jobs being eliminated just by GM alone as a result is around twice the number of jobs “saved” by the steel tariffs.
iPhones are built to Apple design, contracted out to a Taiwanese manufacture (Foxconn), with plants in China. iPhones use components from all around the world.
From what I can tell, smart phone manufacturing has moved to a component design, not unlike PCs in the 90-tees, with different manufacturers using components interchangeably.
That does not mean, the availability is the only thing necessary; brand name and marketing play a major role. However, in an emerging market, price is as important as brand name, and Huawei got all of it, plus phones for half price.
Another big plus is not having a dead weight of Wall Street around your neck, demanding continuous revenue, and profit growth like a clutch of hungry nestlings. What’s an Apple executive to do but price yourself out of competition.
“At present, Huawei has the best camera on any phone in the world, featuring a 10X optical zoom on a camera with imaging quality similar or slightly better than a Google Pixel. In 2018 Huawei released their 10X optical zoom camera but it was less than 20 megapixels. The one Slashgear is reporting is a new one with a 40 megapixel sensor. Other cell phones have a 40 megapixel sensor, however no one has anything that even comes close to what Huawei has accomplished optically. Since the lens is as important as the sensor’s megapixels, having a cell phone company finally successfully tackle the lens problem is going to put Huawei solidly on top. The bottom line is that Huawei has a phone that easily beats the iPhone X.”
“Huawei phones are readily available in Mexico, and they totally kick butt. They receive cell signals better than any other phone. They take better pictures than any other phone. Their sound quality is better than any other phone. Their performance is better than any other phone, especially on the internet where even some of the cheapest (sub $150) Huawei phones can keep up with the perceived performance of a decent PC. That’s what Apple really needs to look at. Will they? Probably not – they will instead try to find ways to protect themselves by keeping Huawei out of the public eye as much as possible.”
“It is laughable to have both Apple and Huawei sue Samsung and win. It is Samsung and not Huawei that should be getting banned on the U.S. market.”
All that said, the US perception that ‘spyware’ was part of many Chinese electronics sold in the US and to the US Military, is no doubt the main factor in the ban on Huawei products, and for good reason !
Will the invisible hand erase tomorrow’s 300 point drop like they did today? Probably.
The reality distortion field of the current Wall Street market crew is strong and determined. How long it can stand up to relentlessly weak economic news is anybody’s guess. I find the thought of a Wall St panic when it finally feels ‘cornered’ to be terrifying.
Bad was good for 10 years. There is no reason it can’t go on forever. And that’s good, bc it HAS to go on forever, for our entire economy to function.
No, it doesn’t have to go on forever. There are other, better ways to lay the foundation for an economy.
No reason? Hoo boy, are you in for a rude awakening.
“we did not foresee the magnitude of the economic deceleration, particularly in Greater China”
Is that greater deceleration across the entirety of the Chinese economy, or more selectively targeting Apple products?
Apple has a confused strategy. If the future of revenue growth is in services, then why are they pushing up the cost of joining the platform from which those services will be purchased?
Phone hardware became ‘good enough’ a couple years ago. The market is ripe for a player to adopt the inkjet printer model – sell a phone at cost to get the customer into your ecosystem and make your money from consumables. Yet Apple is going after 1%ers instead.
Tim Cook has been an autopilot since he took over. Now the company needs to pivot and he is flailing, trying to have a bit each way.
More to the point, Apple thrived under somewhat autocratic visionary leadership provided by Steve Jobs. Usability of all their products from the iPhone (faceID is universally hated), iTunes sucks more with every release, MacBooks are increasingly un-serviceable and are at the pinnacle of the price premium chart for what is essentially commodity hardware as personal computing moves to the cloud..
Tim Cook is far from a visionary, far from an inspired leader, and far from the quality and usability obsessed genius that was Steve Jobs. Like Trump, he inherited the momentum and solid growth of his predecessor, and has slowly arrested that momentum, and now reversed it.
Seems to be the theme of the day.
Agreed on Jobs, but too bad the Fed didn’t pick up on that “momentum” and “solid growth” and move interest rates beyond 0%. Oops…I forgot we got a single .25% hike and then crickets again.
Under Jobs AAPL came close to bankruptcy at least once, and lost ~75% of its stock value twice. Jobs certainly was a visionary, and as with all of them took enormous risk. (I am probably older than the average investor and grew up in NoCal-worked for Silicon Valley suppliers in college).
https://www.macrotrends.net/stocks/charts/AAPL/apple/stock-price-history
I wonder what would they would say if AAPL went down to $50. The equivalent actually happened under Jobs.
The almost bankruptcies happened while jobs was only a part-time CEO and the direct result of his predecessors policies. Jobs saved the company by ending Mac is licensing and simplifying the product lineup. They had to beg him to come back. At the time, he was killing it over at Pixar which he also saved from bankruptcy.
Legend has it that when jobs came back to Apple, he asked to see every product idea that had been killed by the previous regime. He immediately pointed to the drawings of the translucent iMac and said I want to meet the designer of that one. The designer was jony ive. Love ‘eem or hate ’em, jobs was a visionary.
Exactly.
I agree wholeheartedly!
After my recent retirement, I went to Europe and did some window shopping. In Media Markt, the German equivalent to Best Buy, you can buy a french made phone called Wiko for €99 including vat, they also had a nice ZTE phone with a better CPU and screen for €120!
The screen sizes on both were all above 5 inches.
Addendum:
I forgot to mention that both phones that I looked at were roughly equivalent to high end phones like the Galaxy S5 of 5 years ago.
The cameras, RAM, storage and processors seemed -based on specs given- to be about equal.
What was also interesting is that the Wiko phone had a french made processor and the ZTE a chinese one.
This was back in September.
Wiko is actually a 100% owned brand of Chinese smartphone manufacturer Tinno Mobile which after designing and manufacturing phones (ODM) for companies such as BLU and Micromax got into the business themselves. I think the only French connection is the office they have in Marseille because, like most Chinese ODM companies, it’s extremely hard to figure out who the real owners of Tinno are.
Also, how can I put this?, Media Markt (or Media World: different markets have different brands) is pretty damn expensive like most brick and mortar electronics stores worldwide. That same Wiko phone can be bought online for under €80 shipped and if you want the previous version it will set you back at €50, again shipped.
These online prices are similar to those of Tinno mobile phones sold in countries like India and Vietnam and I honestly doubt anybody is losing money even at those prices.
About 12$ to make a smartphone i think
You are most likely very close to the mark.
The manufacturing component of a smartphone is between 45 and 25% of the retail price, with the rest being research, marketing etc and in Apple’s case profit*.
A manufacturer like Tinno, which uses off-the shelf components (both Apple and Samsung use a lot of custom-made parts), can pass on part of the research and development costs to large customers such as Micromax and which doesn’t spend much in the way of marketing can probably manufacture an attractive smartphone for well under $20. It remains to be seen how much they follow their products though, as Android requires close collaboration with Google and this means hiring good to excellent OS engineers which have to work with the bright people at the Android division.
Thank you for your reply.
The only thing I know about what I knew about Wiko was the info on the packaging, which stated made in France by a french company. However, I can’t say I’m surprised that it is owned by some other company, everything else is.
That model is a failure! Just buy a new printer when you need ink. Half the price.
Never mind this. What’s going on with repo? And why is everyone hoarding cash? And why has the U.S. government just issued its second reassurance that the banks are solvent?
My guess on the Trump panic announcement is another attempt to scare the Fed into keeping rates low and slowing the runoff. As we know, our President is one of the most selfish underhanded people on the planet and he would not hesitate to harm all of us if it benefits him.
Piss off
general reduction in liquidity.
some people think it’s great idea.
and then it comes to their home.
I’ve been waiting for this to happen since Steve Jobs died in 2011.
Apple is an unusual company in that it insists on high profit margins and existing at the high end of a heavily competitive consumer industry where change is constant and its products become commodities after only five years or so.
To stay at the top required a true visionary, as Jobs was, to constantly steer Apple in new directions where it could keep making its high margins, and it also required somebody with the iron willpower and a Reality Distortion Field to make the Next Big Thing actually happen
Tim Cook was not that guy, I could tell, and without Jobs, it was just a matter of time before Apple ran out of new products and ideas, and its products would be overtaken by less expensive competitors, just like the first time around in the battle with the PC
Exactly. Jobs used to say that he built BMW’s.
‘Market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.’ – Are there any reliable statistics to enable comparison between Apple and the overall smartphone market in China?
On an individual level always used to buy the best Apple phone annually, but when had the opportunity to experience a high end Hauwei product found they are as good, cheaper and with less built in obselesence, so left Apple brand.
Wolf-
Could Trump’s tariffs have anything to do with China slowing down? I don’t like tariffs but maybe he think he can make them blink….
Dave K.
Not sure. I’m not seeing it yet.
Exports from China to the US have actually risen since the tariffs become a hot topic last year, a sign that Corporate America is trying to front-run them. So in actual trade numbers, it should have helped China over the short term.
But China faces a slowdown of its own making. Credit is in deep trouble, and getting worse. Housing and housing construction (a huge thing) is starting to get into trouble, with builders wheezing. The stock market is in terrible shape. Auto sales started plunging last summer. And on and on. China has lots of problems that have nothing to do with the trade dispute.
BTW, it’s Corporate America (Apple, etc.) that is responsible for the biggest part of the trade deficit with China. It’s Corporate America that has moved production to China, and has moved its supply chain to China, motivated by our tax system and by the lure of cheap labor and cheap production costs in China. So it’s Corporate America that Trump should confront about this – but that’s not going to happen.
China’s balance of trade has declined significantly in the past 10 years.
Even more significant, total exports as a percent of China’s economy has been cut in half in that time–down to under 20% of their economy. Exports to the US are about 20% of the total–so exports to the US are about 4% of the total China economy.
Their problems are not because of tariffs with the US–it’s bigger than that.
it’s expensive running an empire.
Maybe Tim just needs to do a few more share buy backs…..
63 Billion dollars in Apple buybacks in 2018, at up to 222 dollars a share … if a higher share price and earnings per share optics is needed it may be better to just do reverse splits – it’s free! And dividends could be increased, which was actually why people used to invest in olden tymes.
Remember when shares used to be split because the price got too high? And then they’d split again … and companies used to invest in productive assets instead of attempted share price manipulation, which was actually illegal until 1982, when financial engineering took over from wealth creation.
The sad thing is that buybacks have never worked, and have very often been a way to loot the treasury, legally, to mop up excess sweetheart options, sometimes even back-dated options.
http://www.fundamentalfinance.com/opinion/apple-options-backdating-scandal.php
Robt — my feelings exactly on share buybacks. Just a shady tool that serves the greed of rapacious CEOs.
Depends what you mean by ‘never worked’…they work within the framework of executives’ desire for a better strike price for vesting of options, and the desire of ‘activist investors’ who demand short-term gain and care not one jot about the medium to long term – and are not the slightest bit interested in job creation…
In short – the buyback system works in that it meets the neoliberal goal of rewarding those who create the [non-existent] ‘trickle down’ – ie the wealthy stockholder – but no-one else.
It doesn’t even benefit the dreaded ‘wealthy stockholder’ – it robs them, first by stealing dividends they should be receiving for their investment, and second, how does buying back my shares with my own money (i.e. the treasury money), leaving me with less or no shares ‘deliver value’ to me?
That’s what financial manipulation instead of wealth creation is, setting aside the politics of envy.
It seems as though buybacks are mostly done at the top of the market.
The theory is that buybacks are done when management thinks the stock is underpriced. But the reality is that buybacks are done to goose the price up so that the executives can sell their compensation options and RSUs for richer prices (i.e., the shares are overpriced).
Apple executives sold 2M shares of stock in the last 12 months. That’s $350M-$400M, depending on when they sold. So they may be crying all the way to the bank.
Companies in China, especially State Owned Enterprises, have been buying Huawei, Xiaomi, and other domestic brands for their employees to squash Apple sales.
This is the part about FANG being called “TECH” that I do NOT understand. Tech by its definition and implication, means something at cutting edge, an advantage your competitors do NOT have.
So what happens if trump threatens to cut the Chinese off Apple phones? Google search? Face book? Netflix? You guessed it. But if Trump threatens to cut the Chinese off the Intel chips, The qualcomm chips, the Boeing planes and engines, what would be the Chinese response? This so called “Tech” in this cycle in silicon valley is NOT tech, it is service, media and fashion.
I am an Apple fan for its reliability and ease of use, none privacy intrusiveness. Would NOT change my phones and computers to any other brand. If Apple raise price, I will buy refurbished. But stick with Apple until they become unreliable or privacy intrusive.
Sounds like we’ve hit price resistance in several areas at once: autos, housing, and now phones.
And I thought the tariff threat caused an inventory build-up in the U.S.? If so, wouldn’t that cause a short bump to China’s economy instead of a slump?
It appears we are already past peak iPhone.
No wonder Apple decided to stop reporting unit sales.
Last time I spoke about Apple saying their products were overpriced everybody got upset at me. So how about this Apple sells a premium product (an integrated device, software experience) at a premium price. 60% of their revenue is dependent on iPhones if I’m not mistaken. However, that market has stagnated and those willing to pay a premium have dwindled rapidly. Personally, I tapped out when they killed off the iPod. Nonetheless, people continue to buy them and I doubt Apple will suffer a collapse, instead, all producers will suffer some cutbacks. Really what Apple should do is offer a beefy desktop tricked out with a futuristic design that doesn’t make it any more powerful. In fact, building PCs has become very popular and its easy enough a retired guy can do.
The only thing that I’d pay a premium price for is something that will last for decades: best English shoes and tailoring, a European wood stove, first-class hand tools (axes, chisels, saws) , for instance.
But I’m a dinosaur although not a million years old…
It’s clear, however, that the Apple model must break in stressed times. If you want people to buy a new model, at top dollar, every year, well, it really has to be fantastic – and from what people say, their products aren’t that at all.
Oh, and I’d pay whatever my neighbour asks for her lamb, as I say hello to it every day as it grows, and by God it tastes good. :)
I guess I should have commented to balance out your feedback of Apple since I have despised Apple for over a decade. I also miss the Ipod. I still have an old one at home, works fine. But the business model of all current gadgets and electronics is to price the products at “Point A”, then price high priority replacement parts at “Point A less 10%”. Many people buy a printer or a dishwasher or an Ipad and when an important part fails they no longer look to repair the product because they paid less for the item in the first place. This perpetuates the new purchases and new product rotation as these product types don’t survive daily use for more than 3 years.
That’s why I am a PC guy, I can repair my computer over a 10-15 year period before having to retire the unit and start over. I use the same logic with vehicle purchases and my last home was also a fixer upper. Maybe I am just cheap….
Another factor: there is no reason to buy a new phone every 2 years anymore! There isn’t much of a technology leap with every new version. Maybe when 5G is coming there will be a big new cycle, but until then there is no reason to upgrade. Things are likely to get worse!
I couldn’t agree more! I bought a Samsung Galaxy S5 new back in mid 2014 and am very happy with it, purchased it along with an Otter Box, so still in near perfect condition. Only changed the battery.
Am I missing something with the ‘5G Revolution?’ 1G is sufficient to make phone calls–IIRC, it only takes about 50Kbps to support an adequate VOIP connection–so I guess the appeal is more bandwidth for more streaming of video, no? But, most people I see streaming video are doing it in restaurants, doctors’ offices and other businesses and are doing it for free via Wi-Fi with the constraint being the businesses’ broadband support (usually, cable or fiber, occasionally DSL). Are all the providers’ data plans going to expand proportionate to the increased bandwidth available, at no additional cost (answer: no)?
OTOH, as more towers support it people like my mother, who lives in the country and has to connect via really crappy DSL could, perhaps, get decent broadband over a 5G radio connection. But, that would be a relatively small market.
It seems to me 5G is just another tactic to get people to ‘upgrade’ their phones, along with prettier screens, more capable cameras, etc.
People lust after more GHz and GB and MP and DPI without knowing why, so why not more Gs in the radio transceiver too?
It amuses me that my old 3G phone, in fringe areas especially, sometimes gets better reception and performance than any of my co-worker’s 4G LTE phones.
“It amuses me that my old 3G phone, in fringe areas especially, sometimes gets better reception and performance than any of my co-worker’s 4G LTE phones.”
I think–correct me if I’m wrong–that greater bandwidth is accomplished with higher frequency/shorter wavelength signals? Lower frequency/longer wavelength signals travel farther (and require a longer antenna). At one time–don’t know if it’s still true–our subs received orders and news via a very long wavelength frequency–requiring a long trailing antenna–that was the equivalent of about 300bps.
The deal with 5G is probably the same as it was with 4G:
The telecoms get more bandwidth and less power consumption out of their existing infrastructure, the costumers gets to pay for the network upgrade under the influence of “More Shiny”. Win-win!
IMHO, it’s going to take awhile for 5G to be really compelling to consumers. The new modems are going to be expensive and power hungry, and mmWave 5G will require additional antenna modules inside the phone. The added antenna modules and additional modem chip (there’s not yet any integrated 5G SoC’s) mean that the phone will have to get bigger as well.
I’m not sure how many consumers will really notice or care about the speed boost. Even streaming 4K video only requires 10-30mbps. Personally, I have a cheap unlimited data plan from Cricket that’s throttled to 3mbps, and that’s usually enough for me.
Where 5G is more interesting, IMHO, is as another alternative to fixed broadband like cable and DSL.
“Where 5G is more interesting, IMHO, is as another alternative to fixed broadband like cable and DSL.” – Yep, exactly. People underestimate this. I’m not convinced it will work out but if it does I love the idea of being portable across all devices at high speed.
Neither am I but the notion of using a 5G MiFi so I can take Comcast behind the shed and putting a bullet in them warms my heart.
My ATT wireless connection (G4) already outruns my Comcast broadband by a wide margin. Via my smartphone, I can get my network on the internet at 17 Mbps, up and down.
My lousy Comcast broadband provides 3 Mbps down and about 1 Mbps up.
When I do Skype video TV interviews, I use my cellphone connection because it’s much better than Comcast, and produces much better video quality at the other end.
I could upgrade to a faster Comcast service, but I’d have to pay an arm and a leg for it, and my cellphone connection is already there.
Exactly, DF — I would gladly pay AT&T (my current, satisfactory cell provider) another fee to be able to drop Comcast back into the depths of Hell whence it arose.
Alternative to existed fixed broadband is it exactly. That plus IOT – internet of things.
5G is going to take a bit of time to come to full fruition, but the potential is enormous.
Apple sells a great product, but it’s major problem is that it stopped innovating years ago and continues to coast on Steve Jobs’ legacy products. Once the market is saturated with iPhone users, it’s pretty hard to convince someone to spend $1000 on an iPhone X, when the model from 2 or 3 years ago is essentially just as good.
Going from providing a great product to programming obsolence into otherwise perfectly fine iPhones was the final straw for me.
Also, Apple thinks services or subscription pricing schemes are going to be the next untapped revenue stream, but, charging for services that previously were freely provided is a great way to piss of the vast majority of your customers…just ask another much loved company, Electronic Arts!
They’re making mistakes right and left, Cook needs to go….
Agree…since the last software update, I can no longer delete iphone History and Website Data (cookies, I guess). In the past have opted out of automatic updates, but that seems to create problems in email functions that are essential (surprise surprise).
Online help says they haven’t figured out yet how to fix this feature. I mean glitch…
Can’t complain too much, it has worked well for 5 or 6 years. But hear they are now glueing batteries in and working diligently on other ways to make your $1000 phone obsolete in a couple years.
My next smartphone will be a Consumer Reports best value with an easily replaceable battery!
All iPhone batteries I’ve seen were glued, but on older models the glue was actually pretty weak and the battery easily pried exercising some caution.
Starting with the 6 family (cannot remember the exact model, sorry), Apple contractors started using two adhesive stripes behind the battery which really do their job well. Fortunately for us this adhesive still bows to the laws of physical chemistry: an adjustable (not two-speed) heat gun set to 70-80°C will do the trick. Failing that a good quality hair dryer with a narrow nozzle at the highest setting will do. Heat the back of the phone for a little while (YouTube videos will tell you exactly where to maximize the effect) and the glue will melt and you’ll be able to pull the strips from underneath the battery no problem.
I think the 6 family is the easiest to work on to replace screen and battery, and spare parts are easily available and started going down in price over the past three months. The 7 is slightly more complicated to work on and obviously more expensive but it’s not a nightmare like the 5S (worst iPhone Ive had) or the 4S (great phone but do not ask me to replace the screen on one of those things again).
Leader Tim needs to change the narrative, his buybacks aren’t doing the trick any more. Quick, attack Facebook and Google and position Apple as the champion of privacy again, distract the Apple acolytes from the poor numbers.
In three years, it’ll have been a decade since el’ Jobso kicked the bucket.
I think that by then, Leader Tim will no longer be at Apple, eventually historians will coin the Cook leadership the lost decade which started the inevitable demise of Apple. They’ll continue to make billions, but all of it will be milking the existing cash cows and earnings growth will be achieved via financial engineering, something Leader Tim seems to be very good at until it stops working.
Although the cynical part of me thinks that this was all a plan by Steveie J, to show just how irreplaceable he was to Apple. Sure, the first time might have been a fluke, but twice in a roll will be hard to top. The only thing is if there was a Zombie Jobs who took over later on… well, actually that’s just silly.
This reminds me, how long was it that Scully lasted as CEO of Apple after they kicked Jobs to the curb? Oh that’s right, it was about seven years… well, at least Leader Tim has outlasted the last guy who replaced Jobs as CEO.
This is the sharpest tool in the FED’s toolkit of monetary policy in a recession? Apparently so. Indeed there is no question which direction the FED will take at the next financial crisis:
“The size of the balance sheet is not a constraint. If we need it, we could clearly double it and nothing terrible would happen.
If things got really bad, monetary financing of the deficit is something that could work to increase demand.
We have this notion that it is only OK for the central bank to buy assets and not goods. But that’s a restriction we imposed on ourselves.”
Oliver Blanchard
IMF Chief Economist
Boston Fed MP Conference, 8 Sept 2018
Blanchard is a moron hailing from France. France’s central bank used be part of the French government, and that’s how a lot of government projects, including part of its “parc nucleaire,” got funded. The franc got devalued repeatedly. When France committed to the monetary union back in the day, it had to stop this nonsense. Now Blanchard thinks like a French central banker from that era. He has apparently no clue what the Fed is allowed to buy. And no, it’s not allowed to buy old bicycles. It’s not even allowed to buy stocks or corporate bonds. Morons like him shouldn’t be cited. Don’t carry their water. Just because they ended up with a job at the IMF (appointed by an alleged French rapist) doesn’t mean they make sense outside France.
I agree. Unfortunately, Blanchard was invited to speak and to give his opinion at the Boston branch FED monetary policy conference back in Sept. 2018. This clearly demonstrates that the FED must, at the very least, respect his opinion, if not value it. FED governor Neel Kashkari has even expressed similar ideas.
I do apologize for posting the link to People’s Daily. I didn’t do it to upset you, or to propagandize, but to point out the Chinese govt’s intentions regarding to Apple retail products in Greater China if they don’t get what they think they’re entitled to. And here we are.
I agree with you on Kashkari and Blanchard. They may be soul mates.
Kashkari is a failed politician (ran for Gov of California against Jerry Brown, got crushed). He and I already had a run-in after he’d gotten all huffy over one of my Case-Shiller housing-bubble articles some time ago, where I cited him as having said in an essay that there are no housing bubbles in the US, and that even if there were, no one could see that there are housing bubbles, and even if the Fed could see them, it couldn’t do anything about them. I pooh-poohed this and in the article gave him some visuals to show him what housing bubbles looked like. I don’t think he appreciated that :-]
I wouldn’t apologize for saying China might not buy Apple stuff anymore. So what if the info is from China’s government.
The New York Times is absolutely as big a distributor of US government “information” as the People’s Daily.
I don’t see Wolf warning you not to quote the New York Pravda Times, however.
??
Mark,
The New York Times is about as anti-government (current) as you can get. Maybe you’re thinking Fox News?
chinese propaganda in english reflects chinese propaganda in chinese.
it’s easy to encourage huawei purchases by chinese when huawei can swipe whatever they want and compete on price.
ah, never mind.
Seems to me that even inside France, it is still the same garbage.
Lets see if this adds up….
$132 billion to buy back stock..
$400 billion lost in market cap..
Phones selling for $1000…
And no new next big hit in the pipeline…
I am positive that this never would have happened if Jobs were alive…
But with a non-visionary CEO and board this is what shareholders get.
For $132 billion they could have bought Tesla….had 80 billion left over to fund growth and dominated the e-car market like Amazon dominates online….
Steve Jobs just rolled over in his grave…
Tesla is another SV joke. If not for QE and govt tax credits, Tesla would not exist. Now that QE and govt tax credits are gone, start the Tesla death watch.
If you want to see an analog to China not buying iPhones, look at the northern states lack of enthusiasm for Teslas.
You can’t park them outside without running electricity to keep the batteries from freezing. The range stinks in sub freezing temperatures and if it goes to zero Fahrenheit they cannot be charged without getting them all warmed up in a garage so that they will not have the battery pack destroyed.
They only work below the Mason-Dixon line and in California. Otherwise they cannot be left off of a charger.
Neat product, eh?
Funnily enough, they don’t seem to have all these dire problems in Norway.
Is Tesla perhaps doing ye olde Export Car Model scam where the US version of a car has trims that fall off, no corrosion protection and those huge seams around doors for trained circus monkeys to throw them into the hole, whereas the European version of the same model is OK?
fajensen – I liked your post and found it humorous… but to add a more serious response, I doubt Tesla has the manufacturing chops at present to pull this off!
Erle — As a tropics-dweller and Tesla agnostic, I have a question: how is this different from the car heaters I see sticking out of grills when I’m up north (in the summer, of course)? I guess I assume that the typical Tesla buyer has a garage, and don’t they pretty much have to be plugged in overnight anyway? Thanks
response about the cord for Clete:
The block heater can be plugged in on a timer for an hour before start up and is only a suggested use item until below 0 F, then when you reach a destination you do not have to plug it in.
Now the full electric side: The Battery pack is in constant use 24/7 during sub freezing weather, so when you reach destination you have to plug in or you may return to a monster sized paper weight in a parking lot.
One plug in is just in case for us northern climate dwellers – I use mine all of 3 weeks during a very cold winter, the other is a tether keeping us attached to the power grid from November to April.
OT but I’m jonesing for Wolf’s next Tesla article.
There’s been lots of mind-bogglingly rosy press last few days, so I suspect some Apple-esque bad news is coming shortly. Doubt they can replicate those truly miraculous (fake?) numbers from previous quarter.
I have an iPhone 6. Don’t need a new 1000 dollar phone. I got the new battery. I never update the iOS as I am always afraid they put something in there to slow down my phone or brick it. I backed up all
My stuff not on iCloud. Never trust iCloud
What does this say as a consumer?. I am afraid of AAPL screwing me. This phone goes it’s not going to be an Aapl
Try a Hauwei. I have a Mate 9. Superior to any iPhone or Samsung I ever owned and at about 60% of the price of competition. Sold on Amazon. I wondered if the reason Trump rained on them was because some powerful people recognized what they could do to Apple and consequently the stock market. (probably not)
It’s Huawei, and anyone that buys Chinese electronics in mission critical applications is seriously malinformed.
How dare you say anything so misleading and horrible about Huawei, and its founder and his wonderful family. It is a crying shame that there is so little understanding of one of the most generous compaies in the world. As an employee owned company, their leadership treats their employees extremely well. They are a model for how American companies should operate.
For example:
https://www.scmp.com/tech/gear/article/2180657/huawei-punishes-two-employees-using-iphone-send-official-company-happy
Huawei could’ve fired them, but instead, like any good fatherly company, they chose to educate their employees in a productive manner so that they can be happy citizens.
Sorry, if I’m laying it on a little too thick here, it’s because I want to ensure that people understand this is sarcasm.
Leader Tim: “fear not, sir. You are not the product to a company like Apple. You can trust us with your data. You know this because we are charging a premium.”
But we know that whole data market is an over inflated bubble paid for by advertisers.
I’m sure Wolf has done articles on that before, suggesting the efficacy of money spent isn’t quite what is expected.
Bot clicks, and often I get adverts for what I’ve just bought, etc.
Apple has nowhere to run.
They had a good run with a product and now the show is over.
They failed to take best advantage of their lead.
As a marketer, I feel confident in pointing out that the average CMO hasn’t the faintest idea what’s really driving revenue. It’s “throw it all at the wall and hope,” just long enough to get the next job…and anybody who still quotes Wanamaker in this era is disqualified from running a business.
What they failed to take advantage of is to use their monetary power last year to snap up one of the other FANGMAN stocks. I think many people were looking at Netflix, but I don’t think so, removing the N from FANG doesn’t have a good connotation.
I think they buy Tesla in a desperate bid to shore up the leadership gap. Ha ha, can you imagine Elon as the head of Apple, smoking a joint on a talk show all the while talking about buying up a country on the equator so he can have a better rocket launch platform.
The general rule of thumb when a new iOS version comes out is to wait a few days and then check online boards for troubles. If far too many users experience issues, just wait for the next release.
I’d suggest updating to the latest version (12.1.2) as soon as possible: yes, it includes a lot of useless garbage (iTunes U, Keynote etc) but you can delete that quickly and easily and the performance and security upgrades of the operating system over previous ones are well worth it.
Just know for a couple of days battery usage will be pretty heavy as the processes being updated in the background are truly many.
I think one has to look at China’s home market competition like Huawai and Oppo etc.
Perhaps the kindo of people in China that buy Apple have all bought it and now moving on to other manufacturers or not upgrading to a newer model.
I am starting to see in the UK, that people are not upgrading their mobile phone when the purchase contract comes to an end but reverting to a sim only data deal.
I think one has to look at the Chinese propensity for seriously deranged surveillance state behavior.
Enjoy the nice Chinese phone.
– This is a process called “Saturation”. When every man and his dog has an IPhone/a smartphone then who is left to buy another one ?
My phone is paid for by my company. I own the company. I can buy whatever I want .
When I realized the slave labor in China I woke up.
When I learnt that they actively slowed their last model I gasped.
When I noticed (finally) the price I couldn’t believe the gouging.
When Apple banned Alex Jones (not that I listen a lot though occasionally, more the free speech thing) I got rid of everything Apple.
And God do I not miss it.
I use an old IMac with a chess prgram on it, to play chess.
In spite of its pleadings, i will not let it connect to the internet, nor will I upgrade it by any means.
Like a 16 year old who wants the car keys at 10pm. Thanks for the laugh RD!
At the top of the above article it quotes Cook, “We did not foresee the magnitude of the economic deceleration” and then near the bottom it quotes from Cook’s letter, “…all other categories are doing great, with the revenues from Services, Mac, iPad, and Wearables/Home/Accessories combined expected to rise nearly 19% in the quarter, year-over-year.”
So Cook can see rises in demand but not falls, is that what he’s saying?
The irony is, his company has wads and wads of dosh stashed away (was offshore, now onshore, AIUI). I wonder if he’s thought about where it all comes from? Where those that bought iPhones in the past got the dosh to pay for them and, more to the point, where they’ll get some more to give him in exchange for another iPhone? Perhaps it’d help if he (Apple) spent a few wads?
Even inventing new stuff won’t really be much help, if private debt is so high few will borrow to go further into debt, especially with rates rising.
Well, unless the invention makes you money? Like, for instance, running a Raspberry Pi Lightning Network node[1].
PS. Happy birthday bitcoin (3rd Jan).
[1] You have to shell out a few bucks for the Raspberry Pi, of course. But, being a general purpose computer, it can be used to do other things besides process transactions (for various crypto currencies).
Not your keys, not your bitcoin:
proofofkeys.com
The explosion of the Silicon Valley bubble has officially started. An unimaginable number of useless SV startups are in big big trouble. Truth is the world has no need for many of them. This is all the result of stupid people pouring free money into stupid SV startups … this free money entered the system via the world’s central banks QE programs. Some of the smarter people from the Bay area are already running for the hills. A Human Resource friend of mine is seeing their resumes at an aerospace firm in Los Angeles.
“An unimaginable number of useless SV startups are in big big trouble. ”
Probably (though they’re not all necessarily in SV these days) . I really can’t believe so many people need a (free) app to check their credit scores, apparently hourly. How does the app make money?
only so many app millionaires can arise from a coffeeshop hang.
I know a good amount of working class people who own Apple stock “for their retirement.” I work with them when I get part time shifts tending bar, mostly during the Holidays. For me this is part time job, for them it is part of their their full time work at multiple employers.
I noticed some glum faces at my holiday shifts these past months.
“I noticed some glum faces at my holiday shifts these past months.”
Any of them look like Warren Buffett?
No way, Warren B is gonna be buying more Apple, he will buy that stock all the way until it hits zero. muhahahahaha.
Overall, Apple is fine, it’s still got the 2nd… or is it 3rd… or is it 4th largest market cap. But Tim Cook will tell you that it doesn’t matter. Really, Leader Tim means it, it doesn’t matter.
The next step for Apple I predict is to buy a major company to “diversify itself from the phone business.” I know Elon must be rubbing his grubby little hands together like crazy now.
Something tells me Cook knows something much more ominous is coming, and he is having a hard time hiding it. This is a man, who is painfully cringing at how much further his company’s stock has to fall. It’ll be a downright miracle, if Apple stays above $100 per share before Q1 is over.
P.S.Hint: China does not buy nearly as many Iphones as Cook wants everyone to believe. There’s a LOT more behind the change that took place last year about no longer wanting to report unit sales.
As trade and geopolitical tensions heat up between the US and China, no patriotic Chinese will want to be seen using an iPhone or sipping a coffee in Starbucks. Not to mention Apple’s production facilities, not to mention the manufacturing base we offshored to China, can be held hostage to the whims of an increasingly aggressive and assertive PRC leadership.
“… no patriotic Chinese will want to be seen using an iPhone or sipping a coffee in Starbucks.”
Wish it were that easy to ‘swear off’ Chinese products for an American. Lord knows I try.
Precious metals are starting to surge as the flight to quality (and out of the Fed’s Ponzi markets and asset bubbles) begins in earnest.
The best selling iPhone models @ bestbuy are a $200 iPhone-6 and $300 iPhone 7s. That tells ya’ what the customer is willing to buy.
Low demand for $900-$1500 iPhones.
The story isn’t about trade wars, its about the consumer being low on cash.
The stock market pros don’t understand why iPhone-XSs won’t sell any more than they understand why a $75k Escalade won’t sell
“The stock market pros don’t understand why iPhone-XSs won’t sell any more than they understand why a $75k Escalade won’t sell”
Ah, but $75K Escalades DO sell. It’s the other GM products, besides trucks, that don’t.
Q3 2018 GM sold 9533 Escalades, while GM sold 694,698 vehicles total.
Escalades are 1.37% of their sales.
QED – 98.63% of customers do not buy an Escalade ..
numbers here if ya’ want ’em : http://gmauthority.com/blog/2018/10/gm-third-quarter-2018-sales-figures-numbers-results-united-states-q3/
Point taken. I should have been more clear; the ‘large luxury SUV’ market is relatively small, compared to the millions of econoboxes that leave the lots. In the ‘large luxury SUV’ market the Escalade does pretty well:
http://www.goodcarbadcar.net/2018/07/large-luxury-suv-sales-in-america-june-2018/
I suspect the margins on the large SUVs are proportionately larger thanks to the high prices.
Watching the pain on the arrogant wall street portfolio managers who decided to overweight SV and technology names is priceless.
The other side of the story are SV worker bees. Their stock options are evaporating, their salaries are at risk, and their SV homes are falling. I feel sorry for them and their families. This story replays every generation.
Part of this is likely because the communist party in China does not want their citizens to buy Apple phones. They want them to buy Huawei phones or those of another Chinese manufacturer. This is a predictable consequence of our increased level of hostility towards Huawei phones. Since the 1940s, for that matter, the US Government has been in bed with the US telecommunications industry. Aside from that, Apple phones are over priced in Asia.
King dollar all the way.
Apple’s main problem is the same one the PC makers ran into 10-15 years ago: the incremental value of the next new thing has shrunk to nothing, and there is no longer any reason for customers to upgrade.
I only replaced my last PC when Microsoft stopped supporting XP, but even then I kept Office 2003. It does everything I need it to do, and there’s no reason to pay for a newer version.
Apple has the same problem, China or no China. This isn’t going away.
IMHO, that’s the entire technology industry right now. Silicon Valley has created some incredible things in the last couple of decades: google search, AWS, iPhones. But just like iPhones have a diminishing ROI, so does all of Silicon Valley. When your next big thing is taxi service with an app (Uber) or take-out with an app (Blue Apron), the future is decidedly not bright.
AWS of course, was not developed in Silicon Valley.
Sounds like apple finally overplayed their hand and they found the glass ceiling for high margin high cost phone sales in the international markets sooner than expected.
The quality of cheaper alternatives has risen quickly and I think they have over estimated the attractiveness of their “premium” features.
Is Warren Buffet still pleased he had close to a 25% portfolio allocation in Apple stock?
I wonder if Buffet will beg the US Gov. for some Apple relief e.g. end the trade war just like how he was begging the US Gov. for bailouts of his investments in 2008-09
What I find amazing is that according to the latest 13F filing from Sept 2018, Berkshire Hathaway had 27% of is portfolio invested in AAPL. 27%!!!!! They are probably at a paper loss position, and will probably double down going forward. The investment was probably driven by Buffet’s henchmen, either Coombs or Weschler, since Buffett has never felt comfortable with tech investments. Between the troubles of Wells Fargo, and Apple, which in total make up in total about 37% of Berkshire, there must be some real hand-wringing going on, but when will this reality be reflected in BRK-A shares?
Warren has said every now and then Berkshire shares get chopped in half. We might be close to see this happening again. If so, I’m in.
According to the “Stocks” app on my iPhone (the delicious irony) reality has finally started to catch up with BRK-A.
All I can say is thank goodness I didn’t notice how much of a bet Berkshire had on Apple. I knew he bought Apple, but I had no idea it was over 25% of his holdings until I looked it up. I might have bought a big chunk, thinking the Oracle of Omaha must know something that I didn’t.
It just goes to show you that even successful investors have their black eyes along the way. Six months ago, it was considered a savvy trade, now it is looking like amateur hour.
The law of large numbers should not catch any intelligent analyst by surprise. Apples problems were so predictable. Buffet may be losing his touch.
In his sane days, he said price to sales ratio was the most important market valuation guide. Yet last year I heard him say the market was a buy when that ratio was highest ever. You can’t reconcile that.
Lol, its now only 21%. Ooops.
You know one thing I’ve always wondered about 13F filings is how useful they really are. I believe they capture one moment in time, and sometimes, they aren’t necessarily a useful barometer. For example, I wonder how often the two henchmen are actually trading in and out of positions within the period and those do not get reported.
I am also curious to know how Buffet hedges his positions. I am assuming that his underlings do so in some way shape or form to protect their positions.
I think if you’re in China you want to ask, why can’t we make our own iphone, here?
So is Tim Cook still the darling of Wall Street or will analysts call for his head on a platter? Cook is a good at flying to Beijing whenever Dictator Xi’s shoes need polishing, but is he an innovator? How much more money will Cook spend in Apple share buy backs to prop up the stock price? All that money is getting vaporized. Don’t feel too sorry for Tim Cook and Apple. For many years they’ve operated sweat shops in China while selling their phones for $900+.
If I were the head of a global media empire right now, and I’m not, I would consider shuttering my Australian and Canadian housing market bureaus and doubling down on FANGMAN, gold, and crypto. ?
The market is decidedly down today and gold is up. That is a bad sign to me. Big players sensing that something bad is happening?
Perhaps if Apple were to incorporate a BlockChain into its next iPhone things might pick up?
Memo to Mr. Cook, I replaced my IPhone 6 with a $120 Moto e5. Saved myself $880 bucks in upgrading, I get everything I need in my cheapo phone and more, and have never been happier.
No worries hope is coming:
(Bloomberg) — “Bond traders are showing little sign of stepping back from their fight with the Federal Reserve over the path of interest rates and the market is now positioned for cuts on the horizon.
Just over a month ago the market was pointing to a quarter-point hike in 2019, but it’s now factoring in a more than 50 percent chance of a reduction this year. That’s in stark contrast to the median projection of two increases projected by Fed officials last month. On top of that, traders are now fully pricing in a cut by April 2020.”
CEO Cook is blaiming someone else for his problem of increasing the iPhone to an exorbantant price. This is the new way CEO’s keep their jobs I guess. But no wonder the iPhone sales are falling. Prices too high for any bigger benefit. He thought Apple is an unique smartphone and he could charge more than the other guys. Well, Tim you guessed wrong.
And he did not foresee the deteriotation of the Chinese economy. Yes, he cut costs to analyize the economies of the countries he sells his products with, so again he was wrong to not think about spending money to analyize economics and consumer incomes.
I have no respect for this guy. He is simply a financial guy with no insight to how the consumer is affected by his prices.
The price of Apple shares falling is because of his poor insight.
But on the brighter side, I must say Apple has the best customer service of any company I have dealt with. Solved every problem I had to deal with. But does this justify a higher price? Well I guess someone has to pay for all those English speaking representatives who answer the phones, instead of those other companies where you cannot understand what is said and the problems are not solved.
as a matter of fact, it does.
and as to apple stock, i don’t know why i talked myself out of loading up at 85.
You do realize, Jobs was ALL about himself, and thus assured his legacy would be fully in tact long after he was gone, as the choice of him choosing Tim, meant nothing new or innovative or spectacular would ever come out of Apple again. A mediocre CEO at best, and a caretaker at worst. Hey the stock went up for a little while after Jobs, so at least that way, its eventual demise would be blamed on any successor.
Welch at GE did the same thing. He did not pick the ‘best or brightest’ to succeed him. though ‘ beat by a penny’ Welch, only needed GE Capital to keep doing its book cooking for him every quarter, while milking the company dry , and harvesting all its future, prior to 2000. It’ll never recover. It used people, and did not invest in them, tried relentlessly to ‘buy’ its way forward via acquisitions, but then ultimately firing the real talent after sucking the “IP” dry from them, or burying them under the Welch loyalists.
Yep! Help is on the way, dear.
2, 3, 5 yr treasury bonds caught up to the overnight target rate. Fed, no doubt, will abandon its current contractionary policy.
Buffet is looking around the room and can’t figure out who the stooge is in the room….
Maybe now he’ll go all in in Microsoft stock.
Think Apple will get around to finishing the new billion dollar Austin, Texas campus they just announced?
At the collapse of Tech Bubble 1.0, Intel was putting up a new building in downtown Austin. Construction was halted and it set there unfinished for half a decade. Nothing like that could possibly happen again, on an even larger scale, could it? Nah!
‘Apple went too far down, says Jim Cramer
9:12 AM ET Thu, 29 Nov 2018’
Now it’s around 140 so has it gone down too far NOW?
Hell NO!
Now he figures its going to 120.
CNBC; stop embarrassing yourselves. Anyone can screw up in the forecasting game but this guy’s manic pirouettes are almost daily.
It wouldn’t be so bad if he had an area of specialization but NBC seems not to see that no one can opine on the next price of EVERY thing with any confidence.
Maybe he just needs a rest.
Forgot to add: it was 182 when it had ‘gone down too far’
*cringe*
He really needs to give himself a break. Maybe a year. Maybe two.
Maybe forever.
The new Chinese knock-offs are reported to be really good. Why buy an iPhone in China? People are surprised by this?
knock offs. exactly.
Confessions of a 35 year Apple fanboy:
I haven’t been impressed with a MacBook since my late 2012 model. I have two of them which I keep upgrading the internals on. I went to replace my daughter’s three year old MacBook air. Still $900, specs haven’t improved. Got a samsung pixel plus chromebook for $450 instead.
The only reason we are still on iPhones is because the ecosystem for apps is well vetted and the backup process works well. We have three iPhone se’s, which straight talk sells new for $140. They are meh but does anyone care about phones anymore? Carplay is apples only interesting product but Android is ahead of them in that market, too. Google is eating Apple’s lunch and Mr. Cook is at a loss about what to do
““Well, certainly Apple has not been targeted by the government. So let me take away any kind of doubt of that right up top. There are reports, sort of sporadic reports, about somebody talking about not buying our products because we’re American, maybe a little bit on social media, maybe a guy standing in front of a store or something. My personal sense is that this is small.
“Keep in mind that China’s not monolithic. Just like America’s not monolithic. You have people with different views and different ideas. And so do I think anybody elected not to buy because of that? I’m sure some people did. But my sense is the much larger issue is the slowing of the economy.”
I think he doth protest too much. China is still a nation of patriots, even after immigrating most still see China as the mother country. The Chinese will boycott American goods on a personal basis, they will take the financial pain that comes with it with pride. My intuition is that this factor will increase across the full range of American goods available in China. We will never see the same reaction in the US or other Western countries as the level of national spirit has already been eroded too much.
Don’t know about China but down here kids first purchase with their first payday sweeping floors at Walmart is a $2000 financed iphone. It is a status symbol. Everyone from rich executives to their house cleaner on iphone. Not an iphone user myself but would not hesitate to buy one if the price is competitive($150). I think Apple stock could be a good purchase at $20 considering they have a solid reliable distribution network. That and brand recognition are their only real assets.
At that price any Asian company can come in and buy the brand, briefly popping the price up to $30. Opportunity
I either heard it on a podcast or read somewhere that in China tech savy and trend setters + rich folks buy Huawei or other Android phones and that iPhones are mostly bought by people that want to appear richer than they are. I wonder if this is actually the problem with Apple stuff in China and perhaps elsewhere, their products have lost their fresh and inovative edges and became just one rehash of a tired old design philosophy (shock and awe) after another.