Company / division: Mac
Apple reported its fiscal third quarter / calendar second quarter results today, and they came in at the high end of its guidance and beat analyst estimates. One of the biggest surprises was strong iPad unit growth year on year after four years of declines, and just the second quarter of revenue growth for iPads during that period, thanks largely to sales of the lower-priced $329 iPad introduced earlier this year. But Apple said all its product categories saw year on year revenue and unit growth, with Apple Watch reportedly growing 50% year on year, and Mac and iPhone unit growth up modestly, while the Services business continued on its recent tear, driven largely by the App Store, but also to an extent by Apple Music and iCloud storage plans. iPhone ASPs were up modestly year on year driven by stronger sales of the latest Plus models, and would have been up more if not for the fact that the company sold down its inventory significantly, with almost all the reduction being made up of more expensive phones.
Perhaps more significantly for the longer term outlook, the company provided guidance for the September quarter which essentially guarantees new iPhone hardware in September. I would guess that at the very least Apple will have the successors to the current phones on sale in the usual timeframe and in the usual volumes, while my hunch is that the new higher-end model will also go on sale at the same time but be even more heavily supply-constrained than new iPhones usually are.
Apple continued to talk up performance in mainland China as distinct from the Greater China region it reports, where sales were down 10% year on year, the best result in nearly two years, but still a drag on overall results with other regions all growing, all but Japan at double digit rates. Tim Cook also addressed the issue of VPNs in China which I wrote about yesterday, and defended Apple’s stance, which is a combination of following the law in each country where it operates, and believing that it’s better to engage and stay in a country than leave, even where it disagrees with policy (my notes on this portion can be seen here).
Overall, Apple’s management on the call seemed as bullish as they have for some time, clearly looking forward to what they expect to be a strong finish to the year in both product and financial terms. Tim Cook wasn’t drawn the slightest bit on new iPhones, but did hint at new products this fall, talked about the role of autonomy beyond vehicles and Apple’s big project in this area, raved about ARKit and the potential of AR, among other things. There’s clearly a good mix of products coming to market in the near term and investment for the long term which Apple’s management is also happy about. That’s no guarantee of a strong performance in the September or more importantly the December quarter, but I continue to be pretty bullish on what’s coming over the next few months from Apple.
Apple Reportedly Updating MacBook Line at WWDC (May 16, 2017)
Apple’s results for calendar Q1 (its fiscal Q2) were out today, and they largely continued the trends from the December quarter. Revenue growth continued and actually accelerated despite the lack of the extra week which made last quarter’s numbers slightly harder to parse, but the connection between iPhone growth and revenue growth was broken as iPhone shipments dipped slightly (though a change in inventory patterns from last year eliminates some of the dip). Notably, Tim Cook said Apple is starting to see a pause in iPhone buying ahead of a big anticipated upgrade this Fall, which is bad news in the short term but potentially feeds the super-cycle narrative that’s become so popular lately if Apple is able to deliver. Other things worth noting: continued rapid iPad declines, though entirely in the Mini size (revenues from the rest of the lineup grew); strong Apple Watch sales, up nearly double year on year (likely around 3.2-3.5m), with total wearables (Watch, AirPods, and Beats sales) likely around $6 billion for the last four quarters combined. Services continues to be the strongest growth driver by far, up 18% for the second straight quarter driven by 40% App Store growth and likely strong Apple Music revenue growth too. Overall, this is a solid quarter for Apple, with nothing out of the ordinary or too unexpected – all the existing trends are ticking over nicely, with the iPhone roughly flat (up slightly on revenue, down slightly on shipments), and some of the growth drivers delivering well, while the iPad and China continue to be a drag. Next quarter’s guidance is going to be fascinating because it will have to address the issue of what new devices will launch, when, and at what prices without explicitly mentioning any of that!
via Apple (as usual, I live tweeted earnings with tons of charts which you can see in this thread, and I’ll have my earnings deck on Apple up for Jackdaw Research Quarterly Decks Service subscribers in the next little while)
Yesterday, we had IDC’s PC numbers for Q1 2017, and today we have Gartner’s. As usual, they show pretty different trends (IDC the first growth in five years, Gartner the lowest total shipments since 2007), because the companies define the market in different ways. Whereas those IDC numbers were for “traditional” PCs, these Gartner numbers include what some call “detachables” and Gartner calls “ultra mobile premiums” such as the Microsoft Surface. Interestingly, though, whereas in the past those detachable and convertible devices have led Gartner’s numbers to grow faster than IDC’s, the situation now appears to be reversed. That’s interesting, given how hot this category has been and how much it’s helped the overall PC market in the past couple of years. My guess is that the trend will go back to its previous pattern the rest of the year. The two companies do agree on some trends though: HP had a great quarter, particularly in the US, and component shortages are driving some interesting trends. However, whereas IDC saw the latter driving higher shipments in Q1 to get ahead of price increases, Gartner focuses on the downward pressure on shipments the component shortage is likely to cause in the rest of the year due to price increases. IDC and Gartner also agree that the “other” category is suffering badly as the big names consolidate share.
Traditional PC Market Was Up Slightly, Recording Its First Growth In Five Years as HP Recovered the Top Position – IDC (Apr 11, 2017)
This is an impressive rebound for the traditional PC market, which IDC had expected to continue to decline in Q1 but actually grew for the first time since 2012. One of the explanations, though is higher shipments that didn’t necessarily translate into sales, as companies locked in component inventories, so it’s not strictly speaking sales growth. However, it’s worth watching for whether this turns into a longer-term recovery for PC sales or just a temporary blip – my money is still on a long-term decline. When it comes to the individual vendors, Lenovo appears to be struggling despite a pretty decent recent history in PCs, which will further add to its woes given the collapse of its smartphone business over the last year or so. HP did very well, at least on paper, and it will be interesting to watch its next earnings release for signs of what drove the 13% growth it saw. Apple also seems to have done well, continuing the recovery it’s seen since launching new MacBook Pro models late last year. The other big story continues to be the decline of the “other” category as the top five or six vendors continue to scoop up more and more market share and growth, dooming the rest to declines much more severe than the market as a whole.
A few years back, Tim Cook said Apple was doubling down on secrecy, and he’s largely kept to that promise since then, being as secretive as ever about Apple’s future product plans. However, that all changed this week with the announcement of future plans for Apple’s Mac line, an attempt to address vocal dissatisfaction and worry among a small but important community of Mac users. There are several key points here. First, Apple reinforces a point I made a while back, which is that true “pro” users are a small minority of Apple’s Mac base, and those who require Mac Pros are an even smaller minority. These pros are no longer the core constituency of the Mac, which instead is mainstream users. However, they are vocal, and they’re important because they’re disproportionately influential as a result, and Apple has underserved the upper echelon of these pro users, those for whom a maxed-out iMac or aging Mac Pro isn’t enough. This is an unusual concession from Apple that its Mac Pro strategy has been on the wrong track and that it’s boxed itself into a corner (something I’ve suspected for a while), and that it is belatedly trying to get back on the right track, which will take time. On the other hand, those maxed out iMacs and even MacBook Pros are actually enough for many pros – I have several family members who do video editing for a living and they all use iMacs rather than Mac Pros, and I found the MacBook from late last year perfectly adequate for using professional video editing software. But Apple’s statement this week is a sign that it doesn’t want the worrying and griping to go on, and that it needs to both make a more specific commitment to the future of the pro Mac line and to those high-end professional users. That’s a good thing, because it’s a concession that it has made mistakes and will now look to rectify them. This has been one of very few areas where there have been legitimate worries about Apple and its strategy, and fixing this should help to neutralize somewhat the Apple is Doomed narrative.
via Daring Fireball
New LG 5K UltraFine Display models work properly near wireless access points including routers – 9to5Mac (Mar 13, 2017)
Just a short update on this earlier story about Apple’s LG monitor partnership, which I’ve covered here. It’s obviously good news that LG has produced a monitor that’s now unaffected by nearby wireless routers, but still bad news that its first version had this fundamental flaw. That speaks both to LG’s lack of quality and Apple’s lack of quality control as a partner, especially for the first monitor from this partnership after years of Apple making its own monitors. Hopefully this is a one-off for both companies, but future monitors from these two will be subject to that much more scrutiny as a result.
Tim Cook is very fond of talking about Apple’s customer satisfaction ratings on earnings calls – he clearly believes these are both the best indicators of whether Apple is being successful and the best determinants of its future prospects. As such, reviews like this one, which focused on online and phone technical support and service for laptops across the top brands, are good news for Apple, given that it came top of the rankings. It’s also worth noting where others did and didn’t score well – Acer, Lenovo, and Microsoft took the next three spots, while Samsung came near the bottom.
The link here is to the PDF of a report from Jamf, which makes Mac management software for enterprises and educational organizations. It naturally has an incentive to push Mac adoption in the enterprise, so it’s worth noting that context, but the findings are broadly in line with what I’ve seen elsewhere. Some key figures: 91% of enterprises use at least some Macs, while 99% use iPhones or iPads; 74% of organizations have seen an increase in Mac adoption; 44% of companies offer employees a choice of Mac or PC, and at IBM for example 73% of employees want to use a Mac as their next computer. The survey of IT decision makers also has majorities saying Macs are easier to manage, configure, secure, and support than PCs. The enterprise is critical to Apple’s future growth given increasing saturation of global smartphone and PC markets, and already accounts for around 10% of revenue. Enterprises providing Macs, iPhones, and iPads as options for employees is therefore a key enabler of future growth here, and Apple’s recent deals with IBM, Cisco, SAP, and Deloitte are all part of its push to make Apple device adoption by companies easier and better.
via Jamf (PDF)
The desktop PC is finally cool – The Verge (Mar 6, 2017)
I’m pretty sure this headline is using the term PC in its narrower sense, and it could therefore read more specifically: “The Windows desktop PC is finally cool” because I’d certainly argue iMacs have been cool from the beginning. But this also feels part of a broader shift in the fortunes of Windows PCs – for years they seemed the utilitarian counterparts to the various members of the Mac line: often uglier, bulkier, with shorter battery life, harder to use, and all the rest. But that’s really changed in the last couple of years: with help from Intel (and perhaps a bit of a nudge from Microsoft’s own Surface line) Windows PCs have finally started to be really competitive in pure hardware terms with the Mac. That’s a sea change, and it means the competition between Mac and PC is now as much philosophical as it is about performance – there’s no clear edge in hardware for either side, and which platform you choose will be about the respective approaches to subjects like platform integration, touch interaction, and services instead. But of course none of this is happening in a vacuum – this resurgence of the Windows PC is coming just at at time when Apple seems to have taken its foot off the gas for a while with regard to the Mac, and especially the non-iMac desktops. And that raises the stakes significantly. Apple has so far said lots about its commitment to the Mac, but only followed those words up with action in the MacBook Pro line on the hardware side and the professional apps on the software side. For now, it’s asking a lot of people to trust that more is coming, but I’d say the urgency for those changes and updates is growing all the time.
This trend has been a long time coming, with Google becoming very aggressive about getting deeper into schools in the last few years, and having quite a bit of success, while Apple has lost ground despite some good enhancements to its own education offerings, including the Swift Playgrounds app. Apple used to have an outsized share in education thanks to the simplicity of both using and managing its devices, but Chromebooks have some of the same simplicity and manageability benefits at a much lower cost, and are starting to displace products like Macs and iPads in schools. And the education market is much more important than the relatively small amount of revenue it generates in the overall context of the tech industry, because it influences the devices and services kids will continue to use as they grow up. A kid reared on Macs and iPads in school will likely continue to use them when she goes to college, but one raised on Chromebooks and Google Apps will favor those when he graduates. This battle is by no means lost for Apple, but it needs to continue to up its game if it’s to claw back some of that lost share.
via New York Times
I’m linking to this piece from John Gruber rather than the source because he highlights the key point here, which is that for some creatives with high-end computing needs, the current Mac lineup isn’t cutting it anymore, and they’re switching to Windows. When the new MacBook Pros came out late last year, there was lots of complaining from the developer and creative communities about the computers being underpowered, with no recent updates to the Mac Pro either. I’ve written about this, and think there are two separate things going on: firstly, Apple’s base is about so much more than power users at this point, and it has to focus on the majority not the tiny minority; and secondly, it’s very hard to know how representative these one-off anecdotes are of the broader picture. Are lots of creatives really abandoning the Mac, or is it just a handful who are getting lots of attention because they reinforce a narrative? I wish someone would do some kind of representative survey here – I only have my own anecdotal evidence to go on, which is that most video creatives are sticking with Mac for now, but again it’s not representative.
via Daring Fireball
Making More Outside The Mac App Store – Rogue Amoeba (Feb 10, 2017)
Some interesting data points here from Rogue Amoeba, one of the medium-sized Mac app developers which has recently pulled the last of its apps from the official Mac App Store, and has seen roughly similar unit sales and slightly higher total revenues as a result. Although the iOS App Store continues to be the only way to get apps onto an iPhone or iPad, that’s not the case with the Mac, and frustrations over sandboxing, limited business model options, and the lack of formal upgrade mechanisms among other things have driven a number of prominent developers to eschew the MAS for direct sales. It continues to be fascinating how Apple’s approach to the Mac App Store has been so much less successful, in part due to the longstanding existence of alternatives, but in part also due to Apple’s inflexibility and lack of support for key developer requests. For all Apple’s strength and success with developers broadly, its Mac developer story is a lot less compelling.
via Rogue Amoeba
The first ARM-based chip in a Mac arrived with the new MacBook Pro with Touch Bar late last year, but it handled a brand-new function. Bloomberg is reporting that another ARM-based chip could take over functionality currently performed by the main Intel chip, which would be something of a first. Specifically, it’s the Power Nap function in macOS which the ARM chip would handle, something particularly well suited to a low-power, energy efficient chip. Naturally, all of this also enables Apple to continue testing ARM-based chips in Macs as a way of seeing which functions they might take over from Intel over time, with a possible endgame of replacing Intel entirely. Apple has been somewhat frustrated in recent years by its dependence on Intel’s roadmaps and the way PC makers have benefited more from recent upgrades to its chips than Apple has. Reducing its dependence on Intel in its Mac lineup might give Apple more freedom to move faster and differentiate versus PCs, and would also put pressure on Intel to help Apple do the same with its own chips.
Apple Reports December 2016 Quarter Results – Apple (Jan 31, 2017)
This was an important quarter for Apple – it had predicted a return to growth, and it delivered on that promise, though the growth was helped by the extra week in the quarter due to Apple’s quirky reporting calendar. The highlights were iPhone, Mac, and Services growth, with the latter being by far Apple’s most consistent and fastest growing segment. The lowlights were the iPad, Other Products, and Greater China, all of which were down. Both total revenues and iPhone shipments (which are closely tied) have been within a remarkably narrow range the last three years in the December quarter, suggesting at least something about supply constraints and natural limits. The Mac had its best revenue quarter ever, helped hugely by the new MacBook Pros, which are more expensive than the average Mac Apple sells and boosted ASP a lot. Services was mostly driven by the App Store as usual, but music (Apple Music and iTunes combined) grew for the third straight quarter, and iCloud and AppleCare also helped. Apple Watch had a record unit and revenue quarter too, apparently, though we have to guess at the actual numbers. I’d guess it was marginal growth year on year, for around $2.1 billion in revenue and 6 million units. iPad dropped significantly both in unit shipments and revenue (and ASP), though some of that was down to channel depletion, and the large iPad Pro had launched a year ago, boosting that quarter. Overall, a pretty decent quarter for Apple, but no strong growth here yet (especially when you strip out the extra week). Foreign currency isn’t helping either unit sales or reported revenues or profits, and arguably roughly offset that extra week in several regions.
One of the criticisms of Apple which has become loudest lately is that it is increasingly ignoring the professional creatives who use Macs to do their work, and I’ve seen this not just in relation to Apple’s Mac lineup but also a supposed neglect of Apple’s pro apps. However, at the MacBook Pro launch event a couple of months ago, Apple provided a big update to Final Cut Pro, which I’m told by video pros is a big deal, and now we’re seeing a big update to another of Apple’s big creative apps, Logic Pro. While I think some of the Mac criticism is reasonable (though I still think we’ll see an update on the desktops soon), this stuff about the pro apps clearly isn’t true – Apple is still investing in a big way here.
Gartner Says 2016 Marked Fifth Consecutive Year of Worldwide PC Shipment Decline – Gartner (Jan 11, 2017)
This is Gartner’s quarterly press release on PC shipments for the end of 2016 (IDC’s equivalent release is here, with slightly different numbers, and definitions). The thrust is that the PC market continues to decline, with a 6.2% drop for the full year, and a more modest 3.7% decline in Q4 alone. But the other thing worth noting is that there’s a stark difference between the performance of the big players and the rest – the top six grew by 1.4% and the top five by 2%, but everyone but the top six collectively declined by 18.8% over the full year. The big players are mostly doing OK, but at the expense of a plethora of smaller players, and this is the shape of things to come, with the big question being the number of “big” players that will be able to sustain this performance – Asus and Acer saw declines in Q4, while Apple did better thanks to the new MacBooks.
MacBook Pro Ratings Changed – Consumer Reports (Jan 10, 2017)
I changed the headline on this piece, which is a bit of amazing spin. Following serious pushback from Apple on its MacBook Pro battery tests, Consumer Reports provided more information to Apple on its testing process, and it emerged that it had turned off the cache (which consumers never would) and this in turn triggered an obscure bug which drained battery life. Had CR simply given Apple the opportunity to provide feedback on the testing process, this whole thing could have ended a lot earlier and without the unjust criticism. To the extent that anyone saw this story as evidence of slipping standards at Apple, that should now be laid to rest. For what it’s worth, I’ve seen excellent battery life on the MBP the last two weeks while traveling, especially with the screen dimmed somewhat. (See also Apple’s full statement.)