Posted on 07/21/2015 2:03:36 PM PDT by Swordmaker
Apple today announced financial results for its fiscal 2015 third quarter ended June 27, 2015. The Company posted quarterly revenue of $49.6 billion and quarterly net profit of $10.7 billion, or $1.85 per diluted share. These results compare to revenue of $37.4 billion and net profit of $7.7 billion, or $1.28 per diluted share, in the year-ago quarter. Gross margin was 39.7 percent compared to 39.4 percent in the year-ago quarter. International sales accounted for 64 percent of the quarter’s revenue.
Wall Street analysts’ consensus estimates called for Apple to report EPS of $1.81 on revenue of $49.31 billion for 31.70% YOY growth.
The growth was fueled by record third quarter sales of iPhone and Mac, all-time record revenue from services and the successful launch of Apple Watch.
“We had an amazing quarter, with iPhone revenue up 59 percent over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch,” said Tim Cook, Apple’s CEO. “The excitement for Apple Music has been incredible, and we’re looking forward to releasing iOS 9, OS X El Capitan and watchOS 2 to customers in the fall.”
Cook told CNBC that Android to iPhone switchers are accelerating and hit the highest rate ever this quarter. Cook also sees Apple Watch as being a big holiday gift. Apple’s cash on-hand has broken above $200 billion for the first time.
Apple Inc. Q3 2015 Unaudited Summary Data
(Units in thousands, Revenue in millions)
(1) Includes deferrals and amortization of related non-software services and software upgrade rights.
(2) Includes revenue from iTunes, AppleCare, Apple Pay, licensing and other services.
(3) Includes sales of Apple TV, Apple Watch, Beats Electronics, iPod and Apple-branded and third-party accessories.
“In the third quarter our year-over-year growth rate accelerated from the first half of fiscal 2015, with revenue up 33 percent and earnings per share up 45 percent,” said Luca Maestri, Apple’s CFO. “We generated very strong operating cash flow of $15 billion, and we returned over $13 billion to shareholders through our capital return program.”
Apple is providing the following guidance for its fiscal 2015 fourth quarter:
• revenue between $49 billion and $51 billion
• gross margin between 38.5 percent and 39.5 percent
• operating expenses between $5.85 billion and $5.95 billion
• other income/(expense) of $400 million
• tax rate of 26.3 percent
Apple’s board of directors has declared a cash dividend of $.52 per share of the Company’s common stock. The dividend is payable on August 13, 2015, to shareholders of record as of the close of business on August 10, 2015.
Apple will provide live streaming of its Q3 2015 financial results conference call beginning at 2:00 p.m. PDT on July 21, 2015 at www.apple.com/quicktime/qtv/earningsq315. This webcast will also be available for replay for approximately two weeks thereafter.
MacDailyNews Take:
Apple CEO Tim Cook
“Otherwise, Apple would still be a company with less 10% market share in the PC business. Kudos to Apple for having this vision and making lemon juice out of lemons — credit due to them.”
Apple has a fantastic, high end and extremely profitable computer business. The are the Mercedes or Lexus. They do not aspire to be the commodity provider at low margin.
As one of the most profitable businesses on earth, it seems they’re doing fine.
Excellent point. Their consumer computers are over priced for the average person. No pretense here.
“Their consumer computers are over priced for the average person.”
I don’t know if I’d say overpriced for the average person. I might say the average person appears to be willing to pay more for a Mac.
It appears to be older people and companies that are locked into certain PC only software that favor PCs.
I’ve used both extensively. I was thrilled when I was able to take the Windows partition off my Mac laptop.
Best to you.
Most programs run across multiple platforms so a person is not locked into Apple any longer.
Likewise, as a consumer, I chose the PC because it is the best value and the only reason I purchased an Apple product was because they made and make a really good music player. The complete solution and the bonus is that the consumer is no longer locked into the Apple file formats and DRM.
Your Lamborghini point is interesting and applicable to handhelds — many Lamborghini owners upgrade their “cars” to the newer model simply because they can afford to. And are not unhappy when their old >perfectly fine and working< “car” becomes “obsolete.” Likewise for cellphones. People seem to be okay with upgrading their phones every time a new model is released. Maybe because of incentives from their provider, maybe because it is fun. But it can be costly.
I am a frugal consumer and am always looking for the best value and to me upgrading every revision is foolish.
“I am a frugal consumer and am always looking for the best value and to me upgrading every revision is foolish.”
I tend to skip at least two upgrades before upgrading my equipment - sometimes more.
My main point remains that Apple has a tremendous profit share of several industries.
“While Apple has just 7% of the share of revenue, it’s grabbing 35% of the operating profit. Deutsche Bank attributes it to the strength of the Mac/MacBook lineup. Other companies are losing profit margins because they have to pay Microsoft for software.”
This is a fantastic business model. The goal of a business is to make a profit by creating value - as judged by the customer.
Against this is a telling statistic:
In 2014, the average profit of a Windows box manufacturer was just $14.87.
(http://bgr.com/2014/01/10/pc-profits-analysis-margins/)
That is a boatload of work and overhead to create $14.87 of profit per machine. This is why you can buy them cheaply. They are a commodity.
In all commodity businesses, only volume will count and average expenses continue to rise - healthcare, salary, operating expenses, fixed expenses. It sucks from a business point of view. It’s like being locked in a death spiral.
As a businessman and investor I will take the high profit margin business model for every business I buy or create. It makes life so much easier and operating the businesses more fun and profitable for us.
As a consumer/employee, I understand why you prefer to buy the commodity platforms. It is also why entire countries have switched to open source platforms.
I wish you the best.
So the Apple software is free versus the MS software costs? Apple is open source? Linux is open source. Ah, you mean BSD. But isn't there a cost for the customized and maintained version of BSD? There is a free version but that is not the same version that is running on Apple computers.
And if there is a cost savings, apparently Apple is not passing this savings on to the consumer because that would be reflected in a lower unit cost which I am not seeing.
Also, it would be hard to believe consumers (or businesses) switching from low cost Windows laptops to very expensive Apple laptops. I know. I considered this option and the bang for the buck just isn't there for me. There is an obvious cost disparity between your typical Apple laptop and an MS/Windows version.
“And if there is a cost savings, apparently Apple is not passing this savings on to the consumer because that would be reflected in a lower unit cost which I am not seeing.”
I believe the only reason to lower cost is to compete when your product is an interchangeable commodity. The market sorts those issues out fairly well - paying or not paying as they see value.
“Also, it would be hard to believe consumers (or businesses) switching from low cost Windows laptops to very expensive Apple laptops.”
I think we agree there. Obviously some must be doing so, since IBM has partnered with Apple on some things.
But clearly there is an effort to win business away from the windows platform. See your previous examples and references. Then again, maybe not if Apple is not willing to price their computers competitively to win said business.
It sounds like Apple really isn't interested in gaining market share. Interestingly, this has always been their business model — high end, expensive computers and low market share.
However, without their music player business, how long would Apple be able to sustain this business model. Probably not long and on the same scale. How well was Apple doing before the introduction of the Ipod?
This is all moot since their music player business is doing very well.
Agreed - thanks for the discussion.
I think their model is creating an eco-system. Computer, ipad, iphone, music, books, software.
Every device brings with it lots of application and music sales.
They are moving into TV.
It would appear they focus on the areas they believe they can transform a user experience and make money.
I don’t know if business use of pcs is growing much these days or not. Certainly the world economy sucks.
In any case, like most markets, it is divided between many players.
best
Interesting. TV?
Seems like an established business. Wondering what new technologies are available? The cable and satellite companies have that business locked up.
Apple might use their itunes and players as leverage and a Netflix type of service. They already have the drm issue understood.
Last time I heard Netflix wasn’t doing that well. And Netflix bandwidth is being throttled by the ISPs.
That was 2010, by 2014 Apple was taking home 51% of all PC makers' profits. . . with only 10% of the world's PC market share.
And what you are saying is that Apple computers cost a lot more than their counterparts in the Wintel arena. Actually, wintel is a misnomer anymore but you get the idea.
Do the math — you sell fewer computers and make more money.
The gory details....
Only Apple sells Apple computers (a monopoly that they protect with a vengeance) however there are at least ten top computer makers that sell the PC. You know: competition and the free market? Funny thing about competition: it drives down the costs to the consumer AND affects profits. Margins are less when you have to be competitive. However, the consumer benefits.
That has always been the business model for the windows PC and the Apple Mac or whatever.
Are Apple computers and software overpriced? IMO, yes. Why, because they can dictate price because of their monopoly and add more profit to their bottom line.
What monopoly?
I'm an educated as an Economist, DHS, and Apple does not have a Monopoly on anything it sells, except Apple products. There is no monopoly that can force prices of Apple products upwards against the Economic Law of Supply and Demand against the will of the willing buyers, Apple's customers, which are the computer and mobile device buying public. There are alternative source computers and mobile devices in both markets at equal and lower price points that consumers can purchase, should they choose. The willing buyers of Apple products are thronging in millions to Apple Stores to buy at Apple's retail list price, without even asking for a discount or "sale" price, because the value is of the purchase is worth it to them.
Ergo, the Apple products are not "overpriced" and in fact may be underpriced because Apple has never bothered testing for price resistance, the price point beyond which the consumers find the product not of value to purchase. Other computer and mobile device makers know theirs resistance levels, because to keep selling, they are forced to deeply discount their products below their resistance Levels, and then some to move them out of inventory!
That is why we don't have a single Apple computer in our business of 150 plus computers. Even our servers are PC based (HP and Dell). I suspect that most businesses are the same. The cost premium demanded by Apple simply isn't worth it.
Someone mentioned that Apple is the Lamborghini of computers and the PC is the Ford or Chevy. This was a perfect analogy. Most people would like an expensive Italian sports car. Heck, I might even test drive one. But I will never buy one. Same for Apple and for me and probably most people. So the people in the Apple store are probably just looky loos or buying music players.
Exactly my point, DHS, I was pointing out the obvious to you, not you to me. . . Apple is not any kind of a monopoly, DHS. Apple commands those prices despite that humungous competition from PCs. . . and they don't even notice it. There's a reason. The Windows PC are not significantly competitive in quality to make a dent in Apple's upper end computer market.
You are upset, trying to complain that for some reason you want Audi to compete for Yugo's customers. . . and that somehow it's a failing of Audi that Yugo buyers aren't buying Audis. Yugo buyers aren't even looking to buy an Audi. You seem to think they are the same because they are both automobiles. Absurd. Both will get you from point A to point B—well, maybe the Yugo will get you there, but no guarantee it will get there as often or as quickly or as carefree as the Audi, or for as long as the Audi—but I assure you there are thousands of qualitative differences.
That is why we don't have a single Apple computer in our business of 150 plus computers. Even our servers are PC based (HP and Dell). I suspect that most businesses are the same. The cost premium demanded by Apple simply isn't worth it.
There you are wrong. . . but for your applications, you chose what was appropriate for you. Fine, Yugos—or Fords and Chevies—work for you. How often are you swapping old boxes for new, DHS?
But that is NOT true for everyone. Google is all Apple on their desktops. IBM is choosing to deploy up to 200,000 Apple laptops per year until they have replaced their entire company's computers with Apple products. They find the Total Cost of Ownership will be far less over the life of the computers and lower cost of maintenance.
Someone mentioned that Apple is the Lamborghini of computers and the PC is the Ford or Chevy. This was a perfect analogy. Most people would like an expensive Italian sports car. Heck, I might even test drive one. But I will never buy one. Same for Apple and for me and probably most people. So the people in the Apple store are probably just looky loos or buying music players.
There's your problem. The Apple products are NOT Lamborghinis, and never were intended to be. . . although they do have a model that may be in the low end of a Lamborghini class machine in the upper end fully decked out Mac Pro Workstation. Apple computers are the Mercedes, Lexus, Jaguar, Cadillac, Audi, and BMW of the Computer market. They also have some mid range cars in those models that allow entry for those who can't afford the upper range.
As for your contention that the people in the Apple stores are "only looky loos or buying music players", you couldn't be more wrong as the average Apple store in a Mall out sells EVERY OTHER STORE IN THE MALL COMBINED, including the so-called anchor department stores! In fact, DHS, Apple Stores have the highest per square footage retail sales of any store in the world, outselling even Tiffanies by about $2000 per square foot.
To get Apple to put a store in a Mall, the mall management has to agree to forego the normal percentage rent it charges all other tenants on their sales on top of the normal space rent in exchange for the foot traffic Apple brings into the Mall! Some malls have granted the space free of charge to attract the Apple Store to their Mall!
You don't have $183 BILLION in annual revenue (2014), and then $74.6 Billion in the first quarter of 2015, by catering to looky loos in Apple's 453 stores.
Sorry, DHS, you are simply WRONG!
BTW the people perusing the Apple store are NOT Audi people. They are average people like me who can barely afford an iphone or a music player.
My background...
I worked for multi-billion dollar computer company that doesn't exist anymore. They had captive customers and were unwilling to open their business and felt that they could do no wrong. They felt that they were entitled and their customers should love their products without question. And their customers did.... until, the price of computer hardware started dropping.
This company was very innovative and developed a lot of the technology that we all benefit from today. But their products were too expensive and they were a bit arrogant.
I am not upset. Just seeing through all of the BS. When you pay $2000 or even $3000 for an Apple product vs a PC for half that or a third, you can hire an army of IT people. I help manage the IT department where I work and everything is very stable. With raid and modern networks we rarely have an issue. Some of the PCs are 10 years old and some are even refurbished and they take a beating. They run 24 hours 7 days a week. Some of the pcs are used to test the products that we build so they are working very hard most of the day. All of the machines have PCs and are all are working very hard and in a very tough environment — high temperature, dust, etc.
Over past 3.5 years, we have lost maybe three, four PCs all due to power supplies which we can repair ourselves. Curious, can you repair your own Apple computers? I remember Apple being a real pain for the DIY person.
Impressive!
Good for Google and IBM. But it doesn't pass the smell test. It doesn't add up. Maybe, IBM or Google negotiated a huge discount so that Apple hardware pricing is inline with PCs. Something that a small business or consumer can't do. It would be impossible for me to convince management to spend 2x to 3x for hardware and software.... because it is Apple.
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