Apple's Cook talks China, Pokemon, acquisitions: live blog recap
3:03 p.m. The earnings call is over. Until the next quarter!
3:02 p.m. Talking about Apple TV, the company's set-top box for streaming media, "We are building the foundation for what we believe can be a broader business over time. Don’t look at what’s there today and think we’ve done what we want to do. We’ve got a foundation to build something bigger on. "
2:55 p.m. Piper Jaffray analyst Gene Munster asks Tim Cook to comment on Apple Pay's growth, and what to make of the huge response to the Pokemon Go app, and it's use of augmented reality.
"On Apple Pay, the growth is astronomical, but the base is very small." For Pokemon, "it’s incredible what has happened there. It's a testament to what happens with innovative apps, and the power of a developer being able to press a button and offer a product around the world. This one hasn’t gone worldwide yet because of pressure on servers, but it shows that AR can be really great. We’re high on AR, it's a great commercial opportunity. Is it a new platform, we’ll see? There's a tendency in our industry to call everything new, and the next computing platform, AR can be huge. We’ll see whether it’s the next platform, but it will be huge."
2:46 p.m. Investors like what they're hearing. Shares are up 7% in after-hours trading.
2:41 p.m. Tim Cook is asked to look at what upgrades might look like for the next iPhone, which he ducked, but pointed out that the customer refresh rates for the iPhone 6 was higher than for the successor, the iPhone 6S. Which would suggest higher sales for the next iPhone. "I'm optimistic about the future."
2:35 p.m. Apple has 2 million apps in the App Store. Not sure if Apple's released this number before, but Cook mentioned it on the call, saying Apple is working to get "more focused on discovery, to bring more apps to the surface."
2:29 p.m. Tim Cook is asked about his take on investing in companies.
"We look for great talent and intellectual property, and we have been buying companies every 3-4 weeks, and continue to dot that. We've made some great choices. Our investment in (China's) Didi...we think there’s some strategic things the companies can do together over time, and we'll learn a lot about the Chinese market beyond what we know. Would we do more investment? Yes, but you won’t see a whole string of it from us."
2:26 p.m. Outlook for the upcoming quarter: revenue at $45.5 to 47.5 billion.
2:24 p.m. Apple says the Services division--which includes iTunes, the App Store and Apple Music--now represents 11% of total revenues, up from 8% in the year-ago quarter. Mac sales weren't as bright--sales fell to 4.3 million computers, from 4.8 million a year ago. Apple was challenged by not introducing new models, the company said.
2:22 p.m. Sales for the iPad are lower, but with Apple charging higher prices for the top of the line iPad Pro, the company is making more money on tablets. Still Apple sold 10 million iPads in the quarter, down from 10.9 million in the previous quarter.
2:17 p.m. "I'm very bullish about our long-term opportunities," says Cook.
2:14 p.m. Tim Cook has just spent 10 minutes plugging new and improved changes to IOS10, the mobile operating system, Siri, Apple Pay, the Apple Watch and more.
2:13 p.m. Moody's analyst Gerry Granovsky's take on Apple's earnings: ""Apple’s slowing growth will place greater importance on the capital return program to support the share price,. Credit metrics will be further stressed if the company continues to raise debt to support the program."
2:10 p.m. Looking at China, Cook said Apple saw nearly $40 billion in revenues for the last 3 quarters, up 55% from the same time frame 2 years ago.
2:08 p.m. Here's Piper Jaffray analyst Gene Munster's take on Apple's earnings announcement:
" Apple reported Jun-16 revenue of $42.4 billion vs the Street's $42.2
billion and iPhone units of 40.4 million vs the Street's 40 million.
The company guided Sep-16 revenue to $45.5-47.5 billion vs the
Street's $46 billion and what we believe was the buy side's thinking
for $44.5 billion. We had previewed an expectation for September
guidance of $43-45 billion, thus we believe the guide implies the
business is perhaps not as bad as expected. Our quick take on the
guide is that it implies 43-45 million iPhone units in the September
quarter vs the Street at 43 million and the buy side thinking of 41
million. We continue to expect a new iPhone in September and, since
investor expectations for the device are extremely low, any meaningful
incremental update could be a positive catalyst for the stock,
particularly any improvements in battery life. We maintain our
Overweight rating."
2:02 p.m. Apple CEO Tim Cook is speaking on the investor call and says he sees several encouraging signs for his business. After touting iPhone sales for the new, smaller model, he moves to Services and notes that sales for the App Store rose 37%. Revenue grew 7% for iPad thanks to the new, expensive iPad Pro.
1:56 p.m. Apple beat expectations with sales of the iPad, at 9.95 million. However, it wasn't that long ago that Apple used to sell 20 million units and up quarterly of the iPad. Apple also sold 4.2 million Macs during the quarter.
1:49 p.m. Apple sold 40.4 million iPhones in the quarter, way down from the 47.5 million iPhones sold in the year-ago quarter. Apple is grappling with the big question--have consumers gotten tired of the iPhone, or smartphones in general? Or have they gotten so good they just don't want to go out and upgrade as often as they once did? Clearly the minor new features offered in the iPhone 6S, introduced in September, didn't resonate with consumers.
1:42 p.m. Even with slumping sales for the iPhone, investors seem happy with Apple's results, since the company beat estimates. Analysts had expected sales of $42.1 billion--Apple came in at $42.4 billion, and earnings per share of $1.42 a share, up from the estimated $1.38 a share.
1:40 p.m. Apple's revenues and earnings fell in the quarter, with $42.1 billion and $1.42 per share, down from $49.6 billion and $1.85 per share in the year ago quarter, as iPhone sales dipped.
A bright spot: the Services unit, which includes iTunes, the App Store and Apple Pay. Services is up 19% year over year.
1:36 p.m.: Apple announced its fiscal 2016 3rd quarter results:
Here's the official release:
"CUPERTINO, California - July 26, 2016 - Apple® today announced financial results for its fiscal 2016 third quarter ended June 25, 2016. The Company posted quarterly revenue of $42.4 billion and quarterly net income of $7.8 billion, or $1.42 per diluted share. These results compare to revenue of $49.6 billion and net income of $10.7 billion, or $1.85 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 39.7 percent in the year-ago quarter. International sales accounted for 63 percent of the quarter's revenue.
"We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter," said Tim Cook, Apple's CEO. "We had a very successful launch of iPhone SE and we're thrilled by customers' and developers' response to software and services we previewed at WWDC in June."
"Our Services business grew 19 percent year-over-year and App Store revenue was the highest ever, as our installed base continued to grow and transacting customers hit an all-time record," said Luca Maestri, Apple's CFO. "We returned over $13 billion to investors through share repurchases and dividends, and we have now completed almost $177 billion of our $250 billion capital return program."
1:34 p.m. CNBC is reporting that Apple beat estimates by analysts, and that shares are trading higher.
We will update as soon as the numbers become available.
Meanwhile: the latest from Apple enthusiast blogs:
--The second generation Apple Watch is expected in the fall, says Apple Insider. A recent study showed smartwatch sales slowed this year, as consumers look to see "what's new?" as an inducement to buy new stuff.
--Looking down the road to 2018, 9to5Mac says eye scanning capabilities will come to the iPhone in 2 years, as a way to unlock our phones.
And here's our earnings preview:
LOS ANGELES — Get used to the new regime for Apple: falling year-over-year results.
When the iconic maker of iPhones, computers and tablets announces earnings late Tuesday, analysts expect Apple (AAPL) to report a 15% revenue drop from the year-ago quarter, to $42.1 billion, from $49.6 billion.
In the previous quarter, Apple's iPhone sales fell for the first time, revenue and earnings slid, and analysts expect that trend to continue in the new quarter.
Earnings per share are forecast at $1.38, down 25% from $1.85 a share, in the year-ago quarter, according to S&P Global Market Intelligence.
However, the upcoming iPhone refresh in September “should help stabilize revenue following recent declines,” S&P analyst Angelo Zino said in a note to investors.
According to several Apple enthusiast blogs, unlike previous years, Apple may not do a major re-design of the iPhone, which it did in 2014, 2012 and 2010.
Instead, Apple may wait for an all-new design to the iPhone for 2017, the 10th anniversary year of the device, and use 2016 to introduce a new and improved iPhone with several upgrade features within the familiar design.
Apple would take a hit on the short term, says Forrester Research analyst Julie Ask, but make it up long term, getting a bigger bang for the buck by waiting for major new features in an anniversary year.
By making the major upgrade cycle longer at three years, instead of two, Apple is "waiting a year to get a bigger pop," she says.
Gene Munster, an analyst with Piper Jaffray, doesn't buy it.
"It would be a big mistake, and I don't think Apple will do it."
Munster expects Apple to announce sales of 41 million iPhones in the quarter. That’s down from 51.2 million in the previous quarter, which was 16% lower than the year ago quarter.
The big question for Apple is whether the iPhone, which represents two-thirds of Apple's overall revenues, has peaked. Sales have declined for a number of factors--consumer indifference to the new features on the 6S models, introduced in 2015, and the fact that the phones have gotten so good, customers have held onto them for longer.
Despite taking a hit for China this year--Munster says revenues there will be down 14% for the quarter, the analyst doesn't believe the iPhone is over for Apple. "There's still a lot of room to grow."
But he notes that Apple is now spending 4.8% of revenues, or $10.5 billion, on research and development, up from 2.5% 5 years ago and that bodes well for new product categories in the future.