Five More Things to Chew on From Apple’s Earnings Report
Beyond whether one was excited, disappointed or indifferent about Apple’s reported numbers, there was a lot of material to ponder beyond those revenue and earnings figures.
But there was still more of note on the call, some of which we pointed out during our live analysis.
Apple announced plans to enter three dozen new LTE markets, changed the way it provides earnings guidance and rejiggered how it breaks things down by geography and market segment.
Here are several things that stood out to me:
The iPhone 4
It may be the oldest model in Apple’s lineup, but it’s selling better than Apple expected. CEO Tim Cook said on the earnings call that Apple had greater demand for the model than forecast, and was supply-limited during the quarter. Given that Apple also said that the iPhone 5 made up roughly the same proportion of sales that the iPhone 4S did a year ago, it appears that the surprise was the share the iPhone 4 commanded relative to the iPhone 4S in last quarter’s sales.
In the U.S., Apple’s pricing essentially means that the iPhone 4 is free for those willing to sign a new two-year contract, and clearly the prospect of a free iPhone 4 is appealing to budget-conscious shoppers — perhaps even more so than a free iPhone 3GS did a year ago. Cook did say that Apple should be able to catch up to iPhone 4 demand this quarter.
Apple isn’t fully admitting its past practice of sandbagging, but it is acknowledging that the numbers it gave out in the past were targets it was pretty confident it could easily reach. Now, instead of providing those type of forecasts, the company said it is providing a range of revenue within which it is likely to be.
“In the past we gave you a single-point estimate of guidance,” said CFO Peter Oppenheimer. “It was conservative. … We’re now providing you a range of guidance that we expect we can … report within.”
The iPhone 5 is the perfect size and price, until we come out with something bigger and/or cheaper
Cook made comments about how Apple isn’t geared toward maximizing revenue, and is focused on making products that meet customer needs rather than hit a specific price point. In the same vein, he talked later about how the iPhone 5 has the best display on the market and is the best possible screen size in order to still be used one-handed.
One could easily take those comments as a sign that Apple isn’t thinking about a larger-screen or cheaper iPhone.
And they could be hints at that. But perhaps as likely is the possibility Cook is pulling a page from the playbook of late CEO Steve Jobs. Jobs was a master at such head fakes, denying that Apple would do something until just before they did. He talked about the foolishness of flash memory-based music players, video-playing iPods and of entering the phone business — all before entering those markets.
Attention, carriers: iMessage is huge
Text messaging has long been a great business for carriers. The short messages generate billions in revenue and take up relatively little bandwidth on crowded networks. The gravy train has been coming to an end for a while now, thanks to over-the-top services such as Apple’s iMessage that treat such messages as just another small piece of data.
In a sign of just how big iMessage has gotten, Oppenheimer said that Apple now handles more than two billion iMessages each day.
“Our customers love our iMessage service,” Cook said.
Carriers, not so much.
The iPhone 5 speed bump is just beginning
Though the iPhone 5 has had the capability to run on high-speed LTE networks since its release, support for those networks has only been trickling out. It began with support in just a few countries and has expanded to about two dozen. However, next week, Cook said, Apple will support about three dozen more countries, including Italy, Denmark, Finland, Switzerland, the Philippines and several Middle Eastern countries.