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  • Apple Posts Some Surprising Quarterly Results

    August 2nd, 2017

    So it’s nice to have Apple report completely positive financials again, with all of Apple’s tech gear showing sales increases. But before I get to the totals, I want to mention a result that surprised me: The iPad, where sales grew for the first time in over four years.

    According to Apple, iPad sales reached 11.4 million for the June quarter, up 15% from 10 million last year, and 8.9 million during the March quarter. It’s very much the result of introducing three new models, a mainstream 9.7-inch iPad, plus the two iPad Pros. Analyst estimates weren’t even close.

    These results clearly indicate that, by investing in the platform, and adding significant multitasking and file management capabilities to iOS 11, customers will come.

    I’ll get back to the iPad in a moment.

    Overall sales beat Wall Street expectations, with $45.4 billion in revenue, compared to $42.4 billion last year. iPhone sales increased from 40.4 million in the year-ago quarter to 41 million. So despite the constant speculation about an iPhone 8, it’s clear people are still interested in the iPhone 7.

    You’ll want to put these numbers in perspective, because no other mobile handset company does what Apple does with a single product line. According to a USA Today report on Apple’s financials:

    For its chief rival [Samsung], a “really good quarter,” is when it sells 10 million of its Galaxy phones,” notes Gene Munster an investor and analyst with Minneapolis-based Loup Ventures.

    Although one analyst estimate indicated that Mac sales may have declined in the last quarter, they were actually up slightly, to 4.3 million. It helped that Apple refreshed the lineup in June, during the Worldwide Developers Conference. But most of the quarter may have been about expectations of product refreshes, which may have slowed sales somewhat until the new products actually shipped.

    Mac sales may actually show more growth in the current quarter, where back-to-school sales will undoubtedly help. According to Apple, sales this season are off to a great start.

    Apple’s huge cash hoard increased to $261.5 billion, and 94% of that number is held overseas. That has to be a sticking point with the U.S. Department of the Treasury, but Apple is just one company with huge cash reserves located outside the borders of this country. But I’ll avoid speculation about possible repatriation proposals for another time.

    For the current quarter, Apple is predicting revenue between $49 billion and $52 billion.

    During the quarterly call with financial analysts, there was plenty of news to consider.

    So educational sales of the iPad were up 30%, despite the competition from those cheap Chromebooks. According to the NPD Group, Apple has a 55% share of the tablet market in the U.S., and eight of the top 10 models are iPads. Believe it or not, Walmart is evidently using iPads for employee training, and such businesses as Bank of America have deployed the 10.5-inch iPad Pro.

    Nothing was said as to how many iPads are replacing older models. If sales continue to rise, maybe it is also the result of a four-year or five-year replacement cycle.

    Once again, services were the shining star in Apple sales, with revenue up 22% to $7.26 billion. A major factor was the App Store, as Apple reports that it outsells Google Play by two times. Consider, also, that Android’s market share is several times that of iOS, so this remains an especially important development.

    Just as important is the size of that division. It’s the equivalent of a Fortune 100 company, and sales for the last four quarters totaled $27.804 billion. Remember that number also includes revenue generated by iTunes, iCloud, Apple Pay, Apple Music and AppleCare.

    It’s also just ahead of Facebook, the entire company, which reported annual revenue of $27.64 billion for the same period. When you look at that number, you only begin to envision just how large Apple really is.

    But what about President Trump’s claims that Apple is going to open three big and beautiful factories? Where does that stand?

    The closest we got to a hint about what might be coming, during the conference call, was the statement by CEO Tim Cook about an announcement about new possibilities for employment “later in the year.” Does that signify a new plant, or an expansion of production for the Mac Pro at the same plant that’s building them now? Or is it possible that the iMac Pro will also be built there? That combination will surely mean a decent number of additional employment opportunities.

    Or is it something else?

    It’s not the proposed Foxconn plant, announced last week, which is supposed to be built in Wisconsin. That facility, if construction plans really go forward, won’t open until 2020. So what’s happening this year?

    Bear in mind that Apple doesn’t actually own its own factories in the U.S. It contracts with other companies to build gear. So, in addition to the Mac Pro, A-series processors are fabricated in this country, and don’t forget Corning’s Gorilla Glass.

    But even if Apple were to assemble gear at three big and beautiful plants, they may well be built by one of Apple’s manufacturing partners. As a practical matter, it may not matter, so long as more Apple gear is assembled in the U.S.A.

    And, with all the good news, Wall Street took notice. In after hours trading, AAPL stock soared more than 6.1%, and the market cap exceeded $800 billion.

    But that won’t stop the critics from claiming, yet again, that Apple must suffer real soon now because of all the alleged problems rolling out the so-far announced product, the iPhone 8. Or whatever it’ll be called.



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