After Apple’s prepared remarks on the Q1FY2022 Earnings call, it was time for Q&A with financial folk.
One number about which I was very curious got talked around on Thursday, though not talked about, exactly. Remembering Apple saying on the September-quarter call that headwinds and supply constraints had hit the company to the tune of $6 billion, and remembering that Apple had said that that number would be bigger last quarter, Evercore analyst Amit Daryanani wanted to know whether he’d missed what that number ended up being last quarter, and if he did - could they repeat it?
He didn’t miss it. And they wouldn’t give it. I seriously laughed out loud hearing Apple’s CEO say-say-say what he said, without answering what AD-Rock asked. His answer:
What we've said in terms of December and March was that it was very difficult to estimate with great precision constraints. But we said that they would be more than the Q4 or more than the September quarter. And we're saying that March will be less than the December quarter. And so that's the kind of verbiage that we place around it.
He didn’t get much further with his second question, though it at least prompted a philosophical response. Daryanani wondered how Apple decides where to throw its research and development money. The basic question: How much goes to evolving current products versus revolutionizing or creating whole new industries?
Not surprisingly, Apple’s CEO would not be tricked into announcing anything new. He did say that what Apple looks for is opportunities at the intersection of hardware/software/services. Rest your heads though. Apple’s CEO says, “there's quite a bit of investment going into things that are not on the market at this point as there always are.”
Raymond James analyst Chris Caso was curious about the sustainability and repeatability of iPhone growth. It wasn’t so long ago that growth seemed over for the device. 5G may have changed that story, but how does growth continue?
CEO Cook’s answer actually seems to be 5G. The install base is at an all-time high and growing. Last quarter saw record upgrades, and switchers from Android to iPhone in the strong double digits. And, while iPhone 13 is the second 5G enabled line of iPhones, we’re still in early innings where 5G is concerned. Looking at non-5G versus 5G models (a ratio Cook was not inclined to share), he said the company still has an optimistic view on iPhone, long term.
Jeffries analyst Kyle McNeely wanted to know what really happened to iPad. Did Apple sacrifice the product last quarter to make sure there were enough iPhones to go around?
A little, but not really seemed to be CEO Cook’s answer. The tightest point has been on legacy nodes, according to Cook. That’s a supplier thing, not an Apple thing. While they might not have pressed hard on iPad for the December-quarter, the real issue was supply constraint, which will be better this quarter.
Shannon Cross of Cross Research had questions about the Mac business, specifically where Apple was aiming for further growth.
Apple’s CEO indicated that growth is - basically - hitting from all sides. The Mac set all-time revenue records in the Americas, Europe, and the rest of Asia Pacific. It also set a December-quarter revenue record for greater China. In short, it’s not limited by geography. The Mac saw a record number of upgraders. Meanwhile, 6-out-of-10 people buying Mac in China last quarter were new to the platform. “Customer satisfaction is off the charts,” according to Cook, who added:
…what I see this as is a product that will be very successful in a number of different markets, from education to business to the creative industry and in all geographic markets.
Morgan Stanley analyst Katy Huberty had questions about 10-minutes from now and 10-years down the line. After two-years of disruption, is it time to rethink the supply chain? CEO Cook says no. The biggest problem has been those pesky legacy nodes, which would have been an issue no matter where the final product was built. As for where that is, it’s a short trip from where the chips are made to actually putting them in devices and getting those out the door. As he sees it, a fundamental change is not necessary.
As for the future, Huberty wanted to know Cook’s thoughts on the metaverse and Apple’s place in it. Calling that a “big question,” Cook said Apple is always exploring new technologies and he has spoken about how exciting and interesting the metaverse is. If you don’t remember that happening, he seems to be putting his past comments on augmented reality into that mix. Pointing out that Apple has 14,000 ARKit apps in the App Store currently, Cook said Apple sees “a lot of potential in this space and [is] investing accordingly.”
P Morgan analyst Samik Chatterjee had a question about subscription numbers about Apple TV+ that Tim Cook chose not to answer. Catterjee also had a question about Apple Pay, which the CEO did entertain. Asked about the biggest opportunities for Apple Pay, Cook said that Apple Card has “a great runway ahead,” and that the growth for Apple Pay has been “stunning.” There’s still a lot of cash out there, so he still sees room for growth. What I found interesting was his insistence that he wasn’t going to answer that question with news of new products. He started the answer by saying, “putting aside any kind of thing that sits on our roadmap for a second,” and ended by saying, Apple Card and Apple Pay look good for the future “whatever else we might do.”
Chatterjee didn’t ask about new products in payments, which made Cook’s “I won’t talk about new products in payments” insistence seem… odd. Then again, he might have been trying to divert from rumors about future updates allowing iPhone to take credit card payments with no need for a dongle.
While Chatterjee’s question about Apple TV+ subscriptions got the stiff arm, Piper Sandler analyst Harsh Kumar’s question about content did not. Has Apple’s emphasis on “socially responsible and healthy” content kept Apple from buying a studio when studios go up for sale? Or is that just a money decision?
Why does everybody want Apple to buy a studio? That wasn’t Cook’s answer. That’s my question. Cook’s answer was:
We don't make purely financial decisions about the content. We try to find great content that has a reason for being and we love shows like Ted Lasso and several of the other shows as well that have a reason for existing and may have a good message and may make people feel better at the end of it. But I don't feel that we've narrowed our universe of things we're selecting from. There's plenty to pick from out there, and I think that we're doing a pretty good job of it as we speak.
Have You Had Enough?
Was there more? Isn’t there always? If you just can’t get, just can’t get, just can’t get enough, you can stream a replay of the call on Apple’s Investor site. It is also available as a podcast. Grab it while you can, though. Apple only leaves the replays and podcasts up for a couple of weeks.
If you’re even more granular than that - I’m not sure whether they use a service or sit there and type feverishly, but iMore provides an invaluable service after every call. Anyway, I find it invaluable. For at least the past year - maybe more, they’ve been posting a transcript of the full call. If you want to read every word of what was said, head that way.
