Three things you need to understand about Apple's Q3 2018
Apple just finished its Q3 2018 financial results call and, while much of it is pro forma, there's always at least a few interesting things that slip in. This quarter was no exception.
The smartphone market is mature but it's still massive
Expectations aren't about what you've done in the past or what you just did today but about what you can do in the future. If you launched your Lambo from 0-100 in 3 seconds, good for you. What's next? If you got it to 200, fine. Great. But why haven't you gotten it to 300? Law's of physics? What are those! We demand growth. Infinite growth.
Everyone on earth have an iPhone? Why don't they have two. And why haven't you opened stores on Mars yet?
Apple's been adding new hardware features like better cameras, new software features like Animjoi, and new services like Apple Music, to make iPhone more valuable, extract more value from customers, and encourage more and faster upgraders and switchers.
Still, Apple's CEO, Tim Cook doesn't seem too worried about the law of large numbers:
Mac and iPad numbers were down BECAUSE they were out
The moment the numbers hit and iPad and Mac were obviously down year-over-year, you could hear the vultures squawking overhead. And by squawking, I mean Tweeting. In full on Schadenfreude mode.
But here's the thing. Last year, by Q3, Apple had launched new Kaby Lake MacBook Pros, 12-inch MacBooks, and iMacs, and new A10 iPad Pros. Both lineups were locked and loaded.
This year, so far, Apple has only launched new Coffee Lake MacBook Pros with Touch Bar. And only a couple of weeks ago.
To spell that out, last year customers had a ton of new Macs and iPads to spend money on. This year, not so much.
It's what makes the direct compare so dangerous. It's easy if you're lazy, but it's so embarrassing if you don't dig any deeper.
Here's Apple's CFO, Luca Maestri:
The Watch has its own halo
Apple still doesn't break out Watch sales the way it does iPhone, iPad, and Mac, and it's continued use of Bezos-numbers consternates a lot of analysts. (Others simply track their own numbers.) What's interesting with Watch, though, is that the more it grows, the more it finds its own appeal: Be it fitness tracking for people who want to get or stay in shape, life saving for people who have accidents or previously hidden conditions, or notifications for people who can't carry their phone at work but still need to stay in touch.
And since Apple Watch only works with iPhone, it's beginning to have its own halo effect. In other words, people who want watch are also switching to iPhone just to get it.
It's not too different from people switching to get on iMessage with their friends, or the App Store to get some of the early or exclusive releases, or because privacy now is beginning to feel like security back in the Windows 98 and XP days. When you round out the ecosystem, each piece starts to have its own gravity.
Or, as Tim Cook put it:
Your move, Q4.
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Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.
By Kevin Lynch