Wednesday, February 1, 2017 [Tweets] [Favorites]

Apple’s Q1 2017 Results

Apple (Hacker News):

Apple today announced financial results for its fiscal 2017 first quarter ended December 31, 2016. The Company posted all-time record quarterly revenue of $78.4 billion and all-time record quarterly earnings per diluted share of $3.36. These results compare to revenue of $75.9 billion and earnings per diluted share of $3.28 in the year-ago quarter.

Jason Snell:

There was a time when every quarter was a record for Apple, but after last year’s rough year of regression (following a record-smashing 2015), it wasn’t a sure thing that we’d see more of those for a while. But for the holiday quarter of calendar-year 2016, Apple beat its own advance guidance and reported a record revenue of $78.4 billion.

John Voorhees:

Below, we’ve compiled a graphical visualization of Apple’s Q1 2017 financial results.

Dr. Drang has moving averages.

Jeff Johnson:

Most Apple fiscal quarters are 13 weeks long. Once in a while, however, they need a 14 week quarter. You might call it a “leap quarter”. […] What a difference a week makes! Rather than record revenue, we have another down quarter for Apple. The lone bright spot was services; everything else was a year/year decrease.

Marco Arment (tweet):

Apple and commentators can keep saying the iPad is “the future of computing,” and it might still be. But we’re starting its seventh year in a few months, and sales peaked three years ago.

What if the iPad isn’t the future of computing?

Marco Arment:

I’d say the iPad’s biggest constraints are the OS’ file and window limitations, and the health of apps, both first- and third-party.

Unfortunately, these aren’t quick fixes, and the result of “fixing” them might just be reimplementing the Mac poorly.

The replacement-cycle problem: How many iPads are mostly used for video playback? Will they be replaced with a $300 iPad or $50 Fire Tablet?

Nick Heer:

On the flip side of that coin, what if Apple treated the iPad as the future of computing, instead of upscaling iPhone features to fit the iPad’s display, or hardly paying attention to it for an entire year? Would customers respond to an earnest attempt?

John Gruber:

The peak years (2013 and 2014) were inflated because it was an untapped market. Steve Jobs was right, there was room for a new device in between a phone and a laptop, and the iPad was and remains an excellent product in that space. But people don’t need to keep buying new iPads. I think the replacement cycle is clearly much more like that of laptops than that of phones.

[…]

The other factor is that the conceptual space between phones and laptops has shrunk. iPhones have gotten a lot bigger, and MacBooks have gotten thinner and lighter.

Jason Snell:

The iPad has 85 percent of the market of tablets priced over $200. The important facts here: Apple’s not interested in selling a sub-$200 iPad, and so that means it’s doing spectacularly well in the market. The market’s just contracting. So this isn’t necessarily about the rejection of the iPad—it could be about flagging enthusiasm for the entire category of premium tablets.

[…]

The number of people buying the iPad for the first time is very strong, according to Cook, which means that the tablet market isn’t actually saturated.

Benjamin Mayo:

So many basic computing tasks are convoluted and messy on the iPad we know today. Tasks like tweeting an image embedded into a webpage in Safari, playing background music without getting interrupted, collating a handful of attachments from different recipients and sending them off in a new mail message, and so many other things that people want to do every day. Heck, it’s still not possible to look at two emails side-by-side.

Update (2017-02-02): David Sparks:

In my mind, the issue is that users are not pushing the iPad harder to do more work for them, which would naturally end up in users wanting to buy newer, faster, and better iPads. Put simply, I think the issue is software.

[…]

At last year's iPad Pro event Apple made a big deal about how the iPad is powerful enough to replace a PC laptop. I believe for a lot of people that could be true. But it's not quite there yet because of the software limitations.

Update (2017-02-03): Jeff Johnson:

The inescapable conclusion is that even if the 14th week in FY2017 Q1 was one of the slowest weeks of the past two years, that’s still enough to account for the difference with FY2016 Q1. Ergo, FY2017 Q1 did not in fact represent a “return to growth”, as so many media outlets have incorrectly reported.

Ryan Jones:

Here are the numbers on a weekly basis, with Luca’s $0.6B removed. Big change from positive to negative.

Jason Snell:

We can unravel it more if we like: You can back out a huge settlement benefit that hit the first quarter of FY16, which makes Services look even better (but doesn’t change the overall net). You can start to calculate out the channel and supply constraints and get a better sense of demand. In other words, you can make the numbers tell the story you want to tell, with charts to match, and slice it nine different ways.

But, for better or for worse, the window we get into Apple’s finances is based on its financial statements—and that means the quarters as Apple defines it.

John Gruber (tweet):

I don’t think it’s quite right to ding the quarter by a full 8 percent — the entire last week started with Christmas day — but surely some sort of correction is necessary for year-over-year comparisons.

Update (2017-02-06): Jeff Johnson:

If there was a longer discussion of the extra week during the conference call, I didn't see it, and I think it's safe to say that most people didn't see it. The press release from Apple a half hour before the conference call did not mention the extra week. Naturally, the press all ran with the press release. And after the conference call, I did not see any of the press correct themselves. So if there was a more nuanced discussion of the year-year comparison, that information did not reach the public. The headlines were an all-time record quarter, Apple is doing great, the critics were wrong, etc.

Dr. Drang:

What I can do, though, since the code is basically already written, is take a look backward and forward to see how common it is that an Apple fiscal quarter is something other than 13 weeks long.

Dr. Drang:

What’s surprising to me is how slow iPad software has advanced in the seven years since its introduction. I’ve always thought of the iPad as the apotheosis of Steve Jobs’s conception of what a computer should be, what the Mac would have been in 1984 if the hardware were available. But think of what the Mac could do when it was seven years old[…]

9 Comments

"I’d say the iPad’s biggest constraints are the OS’ file and window limitations, and the health of apps, both first- and third-party."

and

"On the flip side of that coin, what if Apple treated the iPad as the future of computing, instead of upscaling iPhone features to fit the iPad’s display, or hardly paying attention to it for an entire year? Would customers respond to an earnest attempt?"

IMHO, everyone always seems to miss the elephant in the room on the iPad as more than a content consumption device. The damn form factor matters. It really matters.

Replicate the Mac on the iPad as best as you can, and you're still left with the same damn form factor.

The iPad is not the future of computing but mobile is....

And the Apple Watch will not be replacing the iPhone and for those who think so try to surf the net with it if you can.

>Replicate the Mac on the iPad as best as you can, and you're still left with the same damn form factor.

Perhaps Apple should release something like an iPad-based Surface Book.

"Perhaps Apple should release something like an iPad-based Surface Book."

Wouldn't the proper analogy be a Surface Book that runs macOS and also runs iOS apps?

The future of computing is what Amazon's now doing: superseding discrete devices with a smart environment. Devices will still exist, of course, but as task-specific nodes within that larger environment.

Apple's problem is it's still behaving as a devices company that sells services on top; however:

1. People buy devices to get the services, not the other way about.

2. Devices begin as unique luxuries and end as ubiquitous commodities, while services are forever.

So it's obvious where Apple should be going: to dominating all services, everywhere, with their devices providing the glue that binds all these services together better than anything else. The trouble is, it's not.

...

With that in mind, I find it utterly hilarious that Marco (or anyone else) could imagine Macs might be the future of Apple. General-purpose PCs will always be around to serve the small fraction of people who need the total flexibility of a general-purpose computer and are willing to put up with their complexity and obtuseness to get it. But I think Microsoft will secure that comparatively niche market as they become the next IBM; they're just better at it.

Apple can't go backwards, it can only go forwards. The trouble is, sitting atop its iDevice stack isn't progress, it's stasis—the same stasis that Microsoft was in a decade ago when it sat supreme and unchallengable atop its PC stack.

Apple hasn't even tried to break ground on a major new market in years; and now it's ceded that lead to its biggest and most dangerous competitors, Amazon and Google: two modern global-network organizations who understand that it's the network—the integration—that matters. Cos once you dictate the network and where and how it evolves, all the nodes in the network will be designed and sold to fit it. Whereas Apple has never escaped its pre-network discrete boxen model, which makes them particularly vulnerable to being cut out of that network when the time comes.

There's no "Rolls-Royce" boutique future for a "post-Apple" Apple. A Rolls is a Rolls is a Rolls. The value of an iDevice, however, is proportional to the size and richness the ecosystem to which it grants access. Google and Amazon do not need to build a better *Device to beat Apple; they only need to generate a stronger Network Effect to suck away Apple customers to their own exponentially bigger and richer ecosystems.

...

2000s Microsoft was so large that when its fuel suddenly ran out it went red giant. Now it's ceding markets and collapsing down to what will be a long-lived but utterly unremarkable white dwarf senescence.

Whereas today's Apple is so incredibly massive that if/when its fuel supply is choked off it will go full supernova, and only a black hole will be left.

> "The number of people buying the iPad for the first time is very strong, according
> to Cook, which means that the tablet market isn’t actually saturated."

By the way, this is complete BS, and Mac users should recognize it as such, since this is *always* what Apple says about failing product categories. I remember the 90s, Apple's worst days, where they would send out marketing material talking about how "over 50% of people who buy Macs have never owned a Mac before". Later, after the iPod was introduced, they talked about how it was helping sell Macs to new buyers - with the exact same >50% new buyers number. Huh, that kind of doesn't add up, does it?

Without context for what this number should be (maybe the average number for these kinds of products is 60% new buyers, so Apple is actually below average), it's completely meaningless.

Without context for why the number is where it is (do people who already own the product hate it so much that they won't buy another one, thus pushing up the percentage of new buyers?), it's completely meaningless.

[…] Topic du jour is the continuing slow decline of the iPad, and Apple’s priorities with regard to it and the steady-if-boring Mac. Background: Marco Arment’s blog The future of computing, the last two episodes (207 and 208) of Accidental Tech Podcast, and some of the reactions quoted in Michael Tsai’s Apple’s Q1 2017 results […]

[…] Previously: Apple’s Q1 2017 Results. […]

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