Wednesday, May 1, 2019 [Tweets] [Favorites]

Apple’s Q2 2019 Results

Jason Snell:

Apple’s quarterly results are in. The company posted revenue of $58 billion, down 5% from the same quarter a year ago. iPad revenue was up 22% and Services revenue was up 16%, but Mac revenue was down 5% and iPhone revenue was down 17%.

We’ve got lots of charts below, as well as a transcript of CEO Tim Cook and CFO Luca Maestri’s conference call with financial-industry analysts.

John Gruber:

At 20% of the company’s revenue, Services now accounts for more revenue than Mac and iPad combined.

I don’t see how this is good for the quality of the products or, ultimately, for customers. The continual notifications and extra screens to tap through are like the laptop stickers that Steve Jobs hated, and they’re just the smallest example of how the focus on services is shifting the company’s attention and priorities.

Tim Cook:

For our Mac business overall, we faced some processor constraints in the March quarter, leading to a 5 percent revenue decline compared to last year.

This seems like an odd comment, unless it’s just intended to lay more groundwork in Apple’s case for ARM. Are Mac buyers really that worried about processor speeds rather than, say, keyboards? And if slower processors are the problem, isn’t that mostly self-inflicted?

See also: Dave Girouard.

Previously: Apple’s Q4 2018 Results.

Update (2019-05-02): John Gruber (tweet):

I asked an Apple source last fall why it took so long for Apple to release the new MacBook Air. Their one-word answer: “Intel.”

Jeff Baxendale:

I know there’s not going to be a switch given impending ARM Macs, but would have been nice to just have Ryzen Macs instead of complaining about Intel.

They’re a way better deal, nobody buys for “Intel Inside”, and then maybe the integrated GPUs wouldn’t be total garbage 🤷‍♂️

Update (2019-06-03): Kevin Bartlett:

Just read @gruber’s post about Intel constraints on processors holding back Apple. It’s holding back all PC sales. We use Dell at work and have had a month or longer wait times on laptops because Intel can’t get chips to them either.

24 Comments

@Michael "The continual notifications and extra screens"

Are you referring to the steps to configure a Mac or an iPhone (where the user is strongly suggested to use an Apple ID and informed a lot about iCloud)? Or is it more related to Apple Music?

Jobs’ Apple didn’t make products. Jobs’ Apple made markets.

Cook’s Apple not only doesn’t develop new markets, it’s eating the ones it’s got.

They had the world’s finest teacher for 15 years—did no-one bother to take notes?

CM Harrington

I think the reference was to all the nagging the OS is now doing via Notifications Center — notifications you can't turn off (Upgrade to Mojave!, etc). I've owned Macs all my life in part because I didn't want to be up-sold, or deal with nagware. In 2019, we're in an age where there's a nag daemon that was quietly added into the system software.

@someone I’m referring to the Notification Center spam and the constant reminders in iTunes and the Music app to subscribe to Apple Music. I think the latter may finally be fixed, but I can’t tell you how many times I’ve switched to Music—to play some music—to be greeted by the same full-screen ad that I’ve already dismissed.

Someone should make a list of all the services strategy taxes—iCloud storage, App Store search ads, etc.—where they incentivize Apple to do the wrong thing.

I was at Apple at the beginning of the service spam stuff. I filed a bug that at least you shouldn't show me a full-screen ad for a service you already know I use. It came back that it was known and working as intended. :\

And CM Harrington, I'm not sure if you were joking, but there literally was a daemon added for some of this naggy stuff.

"Cook’s Apple not only doesn’t develop new markets, it’s eating the ones it’s got."

Wearables and the surprising growth in that product line seems to undermine that view.

@Clark @has Maybe “platforms” (in the Bill Gates sense) would be the better word?

I think what gets me is the new $75 billion stock buyback, which is $5 billion more than what it would cost to pay tuition for every student at public colleges and universities in the United States.

Even if they wanted to be selfish, Apple could fund education programs that focus on tech, or Apple-centric technologies. They could train up a generation of geeks to deploy on software quality projects at Apple and beyond.

But instead they're just spending $75 billion to buy back their own stock.

@has “They had the world’s finest teacher for 15 years—did no-one bother to take notes”

I thought that was what Apple University was supposed to be. Guess it isn’t, or Tim Cook broke it as soon as Jobs died.

@Michael: OK. I've never seen these notifications but it's probably because I'm still mostly using OS X 10.10.

The part I don't get, regarding Apple's argument that the Mac suffered from processor constraints is that in the desktop world, is that there is basically only one processor supplier: Intel. Maybe I missed something but I haven't seen other PC vendors complaining about this so far.

I'm holding back my purchase of a new MacBook (pro/air/whatever) because of the sorry state of the butterfly keyboard. Still rocking my MBP 2014 (sold my 2017 MB because keyboard was unusable). I hope Apple get their act together. My stationary Mac already is a Hackintosh. Would suck if I had to buy a Thinkpad and install macOS on it just because Apple's too proud to admit that their keyboard design sucks.

@someone I thought that with everyone using the same supplier, processors would cease to be a differentiating factor and so Apple would never be behind again. But Apple keeps choosing to wait for processors that are lower power (and less powerful, support less RAM, etc.) and less available than what other companies are using. So Macs end up arriving later and not performing as well.

More context on Apple's stock buyback: https://www.vox.com/recode/2019/5/1/18525672/apple-stock-earnings-tax-cut-buyback-cook

Like remmah, I have to look askance at this. Seventy five thousand million dollars... to buy their own stock. It's becoming hard for me to separate anything Apple (or any "tech giant," really) does from the current US political situation. The resulting feeling is really demoralizing.

@michael

"But Apple keeps choosing to wait for processors that are lower power (and less powerful, support less RAM, etc.)"

Part of the problem is that Apple has basically given up on the idea of annual spec bumps for their Mac lineup, and Intel no longer issues new CPUs on an annual basis. Other companies schedule their design teams to produce new computers when a new CPU becomes available. For quite a while from the early teens to now, Apple seemed to be scheduling the engineering of Mac refreshes for when they had the personnel free to devote to a low volume low profit product (compared to the Iphone). Which meant they were often out of synch with Intel's release schedule.

But the biggest part of the problem you're complaining about is that Intel Processors are mated at the hip with Intel chipsets these days. And Intel follows a very non-intuitive system of deciding which chipsets are limited in what ways. If you want a mobile chipset, your choices are even more constrained. OTOH, some recent Intel processor generations have completely skipped shipping desktop configurations, IIRC.

For instance, for quite a while the Intel chipset for mobile processors was limited to 16gb of low power RAM. Other vendors were willing to stick non-mobile RAM in their laptops and take a hit on battery life in order to have 32gb as an option. Apple decided to stick with only making laptops that could sleep for a month without draining the battery dry, which meant their laptops maxed out at 16gb. This was due entirely to Intel's purposefully limiting the capabilities of their mobile chipset design.

"The part I don't get, regarding Apple's argument that the Mac suffered from processor constraints is that in the desktop world, is that there is basically only one processor supplier: Intel. Maybe I missed something but I haven't seen other PC vendors complaining about this so far."

Most PC makers have multiple lines and then multiple options within each line. Apple doesn't. That means if there's supply problems on the i9 so that Apple couldn't release the iMac in December like they wanted that the product gets delayed several months. Now one could argue this is a problem with Apple's product matrix and they should be more like PC makers. But Apple has a point that in the past Intel consistently met their forecasts and of late have not. Apple's solution is clearly going to be to get out of the Intel market as much as they can - although we'll see if due to nature of the high end machines (i7, i9, Xeons) that ARM primarily is oriented around the laptop market.

@Clark: Cook’s Apple did not create the wearables market, and neither own nor direct it as they did iPod and iPhone. Besides, wearables is a piddling $20Bn vanity market—“wants”, not “needs”. Any idiot can make shiny baubles. A $trillion company like Apple shouldn’t be rooting around in the dirt alongside the wannabes. Why do they not have Home and InCar markets stitched together with an Apple bow on top by now? They already had the prerequisite pieces in play. Or Education, which they’re blithely losing to Google—along with the rapidly-upcoming next generation of tech-savvy consumers? They just…stopped.

I don't think you can dismiss that market like that Has. First off it's still a product line that is experiencing 50% YoY growth. That's nothing to sneeze at and parallels early iPod and iPhone growth. Second the "wants" versus "needs" fit the iPhone in the early years too when there were cheap flip phones. Finally I think the health tracking aspects, especially if they continue to expand in capability, is taking it out of merely being a bauble for many people (myself included). Most significantly for Apple it's a product line like the early iPhone where users will update regularly as new capabilities are released (and batteries wear out). Finally it's worth pointing out Watch revenues were 5.1 billion. That's larger than iPad revenue and getting close to Mac revenue. So if it's a piddling market that doesn't matter, what does that make the Mac? And heaven knows Macs aren't experiencing 50% growth. One has to expect that for the Christmas quarter than wearables will be significantly larger than Macs for Apple.

>I've never seen these notifications but it's probably because I'm still mostly using OS X 10.10

I've now switched back to using my trusty old 17" MacBook Pro as my main Mac, and it only upgrades as far as 10.11. It's amazing how much quieter this version of OS X feels, compared to more recent releases. There was one Apple cloud login dialog during installation, and then one notification asking me if I wanted to know what was new in 10.11, and that was it. Nothing since then. Feels like I'm taking a vacation.

Also, I thought the 17" had a crappy keyboard when it came out, but compared to what we get in modern Macs, it just feels so good...

>And if slower processors are the problem, isn’t that mostly self-inflicted?

Yeah. If Apple cared about performance, they wouldn't run their computers at >80°C when idle, and immediately throttle them when under load. They'd put in proper cooling, like literally every single other computer company that sells to professional customers.

Ghost Quartz

@Michael

> But Apple keeps choosing to wait for processors that are lower power (and less powerful, support less RAM, etc.) and less available than what other companies are using. So Macs end up arriving later and not performing as well.

I think an argument can be made that the thermal constraints of their laptop designs cause too much throttling, but as I understand it, they are using the best chips Intel has available.

On the 13″ MBP, they’ve been using 28W chips since 2013. They currently use the 8559U and 8259U, which are the first and third fastest 28W chips Intel seems to offer right now.

On the 15″ MBP, they’ve been using 45W chips since 2011. The 8950HK, 8850H, and 8750H are the fastest 45W chips Intel offers aside from the *just* announced Coffee Lake Refresh CPUs. Intel offers a single 65W i7 chip (8700B), but it’s unclear what the benefit of this would be over the faster i9 chip.

None of Intel’s mobile CPUs support LPDDR4, which is what keeps the 13″ limited at 16GB of LPDDR3. Comparable laptops like the Razer Blade Stealth also share this limitation. They relented on the 15″ by switching to DDR4 (non-LP), but I don’t think we’ll see 32GB on the 13″ until Intel ships Ice Lake…

Which brings us to Cook’s comment. I think it was thinly veiled criticism at Intel for slipping 10nm and a real Skylake successor for years. Compare to Apple’s substantial yearly improvements in their A series chips.

I have a 2016 13″ MBP; unlike seemingly everyone else, I like the ports, the large trackpad, the keyboard feel, and the Touch Bar, and I’ve thankfully been spared the need to replace my keyboard. However, I find the internals frustratingly limited. I’ll upgrade the moment they release a 13″ with 32GB of memory. I’m not sure how they can do that without Intel shipping Ice Lake or them ditching Intel. Here’s hoping the next few months bring us Ice Lake and new keyboards.

Bill Scheffler

In regards to Tim Cook's comments about Intel, I believe he was referring to the Intel Core i5 processor shortage the past few months:

https://www.tomshardware.com/news/intel-14nm-cpu-shortage-amd,38782.html

We've been affected by it at work (can't get new HP laptops in stock for faculty anytime soon) and I knew of a few people who ordered the 2017 MacBook Airs from Apple directly and had to wait 5-6 weeks for delivery back in March. They almost canceled out of the anger in waiting. I feel Tim Cook is correct they could've sold more Macs if it weren't for Intel's issue.

@someone + Michael — the CPU constraints Apple is talking about relate to Intel's difficulty keeping up production to meet demand over the past year.

Here's a recent article with context: https://www.extremetech.com/computing/287445-intel-cpu-shortage-could-worsen-in-q2-2019-arm-amd

@Clark I guess it’s a different i9, but my recollection is that you could get i9 PCs for a year or so before the iMac finally got it.

@remmah @Bill Thanks for the links about the CPU shortage. I’m surprised to see that since I don’t recall reading any stories about Mac shipments being delayed.

Michael, even at Christmas there were well documented shortages on i9 chips. Lots of places were out of stock. There were a few places you could get them but there was typically a big markup. Considering the volumes Apple needed that wasn't really an option. I was suprised Apple waited until March with the iMac as they were available by late January. Although again the issue likely was volumes and then getting the sufficient volume to the manufacturing facilities and then the turn around of making enough iMacs to meet projected demand. As late at the end of January news sites were still discussing Intel shortages. i.e. https://www.pcworld.com/article/3336444/intel-addresses-processor-shortages-ceo-hunt-after-reporting-disappointing-fourth-quarter-results.html

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