For once, the iPad and Mac lead Ap­ple’s record fi­nan­cial re­sults

Some in­sight about where Ap­ple is and where it might be go­ing next. Ja­son Snell re­ports

iPad&iPhone user - - CONTENTS -

One of these quar­ters, Ap­ple’s go­ing to an­nounce fi­nan­cial re­sults that don’t re­sult in some sort of record. Per­haps as soon as next quar­ter, even. But last month, Ap­ple an­nounced the re­sults of its fi­nan­cial third quar­ter of 2020 – and they were an all‑time third quar­ter record. Lit­er­ally every mea­sur­able cat­e­gory went up, year over year. It was so sunny a set of re­sults that Ap­ple CEO Tim Cook seemed al­most

em­bar­rassed to be re­port­ing such huge growth amid a global pan­demic and some pow­er­ful so­cial up­heaval in the United States.

In any event, here’s what I gleaned from the re­sults and Ap­ple’s reg­u­lar post‑re­sults con­fer­ence call with an­a­lysts that might pro­vide some in­sight about where Ap­ple is and where it might be go­ing next.

Topsy turvy: Mac and iPad lead the way

This quar­ter’s ban­ner num­bers were led by, of all prod­ucts, the Mac and the iPad. Mac rev­enue was up 22 per cent ver­sus the year‑ago quar­ter. Mac sales were only slightly lower than dur­ing last year’s hol­i­day and back‑to‑school quar­ters, which are gen­er­ally by far the two best quar­ters for Mac sales.

The iPad, mean­while, only had its best quar­ter in four and a half years, since the 2015 hol­i­day sea­son. Sales were up 31 per cent, and Ap­ple made more money on iPads in the last quar­ter than any non‑hol­i­day quar­ter in six years, and in any quar­ter since the 2018 hol­i­day sea­son.

How to ex­plain it? This was a quar­ter where Ap­ple shipped two new lap­tops with good key­boards, prob­a­bly re­leas­ing a lot of pent‑up de­mand. And the iPad had a good key­board story, too, with the re­lease of the new iPad Pro and its ac­com­pa­ny­ing Magic Key­board ac­ces­sory.

But I’d wa­ger that the ma­jor con­trib­u­tor to this sales bump is peo­ple up­grad­ing their work‑from‑home set‑ups in re­sponse to not be­ing able to re­turn to their of­fices due to the pan­demic. Tim Cook sug­gested as much three months ago, based on some ini­tial

sales fig­ures, and now we can see the num­bers that mo­ti­vated him to make that sug­ges­tions.

How­ever, a few of the an­a­lysts on the call with Ap­ple struck some warn­ings about the great quar­ter for the Mac and iPad. Doesn’t this sales bump just mean that Ap­ple pulled for­ward some sales that would oth­er­wise have been made dur­ing the back‑to‑school and hol­i­day quar­ters? Cook says Ap­ple ex­pects strong per­for­mance in the back‑to‑school pe­riod, but his at­ti­tude to­ward the hol­i­day quar­ter seemed a bit more… iffy.

“I think we need to see a vac­cine or a ther­a­peu­tic or both, and, you know, there’s some op­ti­mism around that in that par­tic­u­lar time frame,” he said. “I think that would boost con­sumer con­fi­dence quite a bit if it be­gan to hap­pen.” Un­less Cook has ac­cess to re­ports the rest of us don’t have (and he specif­i­cally said he didn’t), this seems a bit too op­ti­mistic. Given the cur­rent eco­nomic un­cer­tainty, it would not be a bad bet to sug­gest that Ap­ple will face a chal­lenge at break­ing any records dur­ing the up­com­ing hol­i­day sea­son.

Ser­vices and Wear­ables mo­tor on

Back in 2016 Ap­ple set a goal for it­self: dou­ble the amount of rev­enue it gen­er­ates from the Ser­vices por­tion of its busi­ness within five years. Four and a half years later, it has met its goal a bit early. The Ser­vices busi­ness grew by 15 per cent in the past quar­ter, a rate of growth that it has man­aged for about two years now. Ap­ple’s next goal: reach 600 mil­lion paid sub­scrip­tions be­fore the end of cal­en­dar 2020.

The other fast‑grow­ing Ap­ple prod­uct cat­e­gory, Wear­ables, ac­tu­ally had its slow­est growth quar­ter in

three and a half years, though it still grew by 17 per cent. It is hard to keep grow­ing at 20 to 30 per cent every quar­ter, so it is not sur­pris­ing that Wear­ables might cool off a lit­tle bit. Cook also as­cribed some weak­ness in the sales of Ap­ple Watch to the fact that many prospec­tive Ap­ple Watch buy­ers want to try the watch on in a re­tail store and look at watch band op­tions as well – op­tions that were sti­fled in many re­gions due to the COVID‑19 pan­demic clos­ing stores.

More hints of Ap­ple sil­i­con

We’re at the point where we’re pars­ing lan­guage and slides for clues about how fast Macs run­ning on Ap­ple sil­i­con might per­form. So let’s parse this state­ment from Tim Cook: “This two‑year ef­fort will achieve both un­prece­dented per­for­mance for the Mac and a com­mon ar­chi­tec­ture across all Ap­ple prod­ucts.”

Cook, while scrupu­lously stick­ing to Ap­ple’s pol­icy not to dis­cuss fu­ture prod­ucts, did also pro­vide this tit­bit: “What we’ll wind up with is a com­mon ar­chi­tec­ture across all of our prod­ucts, which gives us some in­ter­est­ing things that we can do in prod­ucts, that it sort of un­leashes an­other round of in­no­va­tion…. we can en­vi­sion some prod­ucts that we can achieve with Ap­ple sil­i­con that we couldn’t achieve oth­er­wise.” I’m ex­cited, and yet also frus­trated. Well played, Tim Cook.

Peo­ple like small phones, of course

This quar­ter also brought a lit­tle bit of colour about how well the new iPhone SE is sell­ing. The an­swer is: it’s do­ing well. “We’re see­ing a higher switcher num­ber than we did in the pre­vi­ous year, which we

feel very good about,” Cook said. “And it also seemed to ap­peal to some peo­ple that were hold­ing onto the de­vice a lit­tle longer be­cause they wanted a smaller form fac­tor phone.”

Yes, in­deed, part of the iPhone SE’s ap­peal is that it’s not the size of the other iPhone mod­els. But do I de­tect a lit­tle bit of seed­ing the au­di­ence for a re­ac­tion when Ap­ple an­nounces the new iPhone mod­els this au­tumn? Af­ter all, one of the ru­mours is that among the new iPhone mod­els will be one that’s even smaller than the iPhone SE.

This iPhone SE is sell­ing well

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