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Apple Q3 2013 Sees Revenue Plunge In China To $4.6B, Down 43% On Q2, Amid Weaker International Sales
Amid pressure from low-cost smartphone makers on Android and other platforms, Apple today reported a plunge in its Q3 revenues in Greater China, which includes Taiwan, Hong Kong and the world’s largest smartphone market, Mainland China. In that region, sales were $4.64 billion, down 14% over last year and a whopping 43% on last quarter. It’s a startling contrast to the $8.2 billion reported in Q2, Apple’s best quarter ever in the region, according to CEO Tim Cook at the time, when it was the only region to grow sequentially. Overall, international sales outside of the Americas are now at just under 48%, compared to 56% last quarter and 61% in Q4 2012.
And it shows that while Flurry today noted that Apple is the single most popular brand among active smartphones and tablets in China at the moment, but the earnings out today are a sign that the company may be challenged to hold on to that title in the months ahead.
The rest of Apple’s non-America’s regional categories were down as well — the one exception being Japan, which remains one of the company’s stronger growth markets. Europe — still feeling the pressures of an economic recession on top of low-cost phone competition — was down to $7.6 billion, down 8% on last year and 22% on last quarter. The rest of Asia Pacific outside of China and Japan came in at $2.05 billion, down 18% on last year and 35% on last quarter. Meanwhile, Japan had revenues of $2.54 billion, up 27% on last year but down 19% on last quarter. On the conference call, Apple CFO Peter Oppenheimer noted that in Japan, iPhone sales grew 66%.
One of the big questions for Apple internationally remains how it will continue to fare going forward in emerging markets, where the company will continue to feel price pressure from low-cost handset makers. Even without launching low-cost devices that could potentially impact the company’s margins — something many believe the company will do — the iPhone is already seeing its average selling prices for the iPhone decline and that continues to have an impact on its margins.
As it is, as you can see in the graph below, after several quarters of growth in Greater China, the region is now firmly below Europe in terms of revenue rankings, after earlier looking like it might overtake Europe as the second-biggest region after the Americas, which includes Apple’s biggest and home market of the U.S.
We’re listening to the earnings call now and will update this with any interesting color that the company gives on the international front.
Up Close And Personal With Verizon's New Trio Of Droids
As you may have heard, Verizon unwrapped three new Motorola Droid smartphones in New York earlier today, and to my surprise, they just may be the Droids you’re looking for. Well, some of them, anyway. Fair warning, friends: any of you expecting dramatic differences between the three of these things are going to disappointed, so we may as well start with what these new Droids have in common.
Motorola’s on-site representatives said the three new Droids were “very similar” in terms of power, and that’s the impression I got after fiddling with them a bit. These days you would expect a flagship smartphone to feature a KICKIN’ RAD quad-core CPU like those seen in the Samsung Galaxy S4 and the HTC One, but that’s not the case here.
Motorola may talk up its X8 computing platform (more on that later) and its eight cores, but much of the processing power comes from a pair of CPU cores. Even so, firing up apps, cruising around on the web, watching YouTube videos, and punching out faux text messages was very smooth, and there was hardly any discernible difference between them. Expect some more stringent tests once we get our review units in.
Thankfully, these new Droids are running a version of Android 4.2.2 that’s awfully close to stock. Motorola’s been decluttering for years now — remember the hot mess that was MotoBlur? — and they’ve trimmed a lot of the fat that didn’t actually add much value. Of course, there are more than a few things here that stock Android devices can’t do, and it’s thanks to Motorola’s new X8 system.
The multi-core X8 system lets the Droids do some neat new things — you can ask your phone to call people, pull up directions, and the like by issuing it an “OK Google Now” command. It works reasonably well, though considering how damned loud the room was, I wouldn’t be shocked to learn it’s actually more accurate than what I saw today.
Curious aside: you’re not supposed to be able to activate those touchless controls unless you’re the person who configured them in the first place, but I was able to bring them up on a spokesperson’s device without any setup on my part. Maybe it’s because it was very loud in that crowded room, but a spokesperson didn’t seem too pleased.
You’re also able to activate the camera by giving the phone two quick shakes, but it didn’t seem as straightforward to me as it could’ve been. Tentative flicks don’t seem to do the job, you really need to dial up the wrist action to get the motion to register since the phone tries to ignore movement when it’s in pockets or bags.
I got shot down when I asked if the X8 system would appear in other Motorola devices (since it already seems to be in the Moto X), with a representative dryly noting that the company has invested a lot in the platform… and subtly implying that work would be a waste if it didn’t appear elsewhere. Frankly, considering the near one-to-one correlation between the features seen today and that leaked Canadian video from a last week, it’s near-impossible to think that the Moto X doesn’t have the same setup nestled inside it.
But that’s enough about similarities — let’s talk design for a moment.
First up is the Droid Mini, the smallest of the bunch. I was a bit of a sucker for the RAZR M, Motorola’s original pint-sized Droid — the package was quite handsome with its nearly edge-to-edge display and its tiny frame, but was it was no top-tier device when it came to performance. Motorola thankfully didn’t repeat its earlier mistake, as the Mini seems awfully snappy. Colors on the 4.3-inch OLED display running at 720p were bright without being lurid, and it’s a nice, dense little thing to hold on to. It’s not perfect though — the glossy Kevlar finish that Motorola ran with feels a little off-putting and picks up fingerprints like crazy, a trait it sadly shares with its flagship brother.
Speaking of the flagship, Motorola apparently focused on making it very thin, and they succeeded — it’s a scant 7.11mm thick, and sports a 5-inch 720p OLED screen. Fortunately, the Ultra has some nice heft to it, which helps give the whole package a more premium feel compared to other top-tier smartphones (I’m looking at you Galaxy S4).
To be quite honest, the Ultra is the hardest of the three to write about. Motorola seemed to make the Ultra the foundation that the other two Droids work off of — the Mini is the more pocketable Ultra, and the Maxx is the Ultra with a much better battery — and because of that the Ultra wound up being the least interesting of the three.
The most impressive device I mucked around with today was the DROID Maxx, for perhaps obvious reasons. Back in the day, the Maxx was always the chunky, more utilitarian version of whatever slim smartphone Motorola was touting at the time. Now it’s gotten to the point where it’s just not much larger than any other hot-selling smartphone out there. It’s great that the Ultra is so slim, but the Maxx is so much less of a lump than it used to be that it’s actually a little surprising.
Let’s put that in perspective a bit — my iPhone 5 usually lives inside a very slim case (this one, if you care), and it fits in my pocket as well as you would expect. The Maxx, with its ridiculous 3,300mAh battery, is just about as thick as that iPhone.
Yes, it may seem like a minor thing to get worked up over, but think about it. Companies like HTC and Samsung and Sony like to push the envelope in terms of raw computing power and graphical performance, and one could argue that they’re just trying to give some consumers what they want. But where’s the value in that for the companies who make the devices? It’s mostly in marketing. You get to crow about having the world’s [insert superlative here] phone for a few months until someone else one-ups you. But batteries are different — if smartphone companies started duking it out on battery life instead of screaming clock speeds all the time, we’d finally start getting phones that can keep up with all the seriously crazy things we ask of them.
Apple's No-Growth Q3 2013 In Charts
Apple just reported June quarter results, and as expected, sales were pretty flat — up just 1% from last year to $35.3 billion. It’s been a while since Apple has released any major new products, and it shows.
A few highlights:
- Apple’s iPhone business, which represents a little more than half of the company’s sales, did better than expected. Apple sold 31.2 million iPhones last quarter, up from 26.0 million during the same period last year.
- iPads, however, came up short: Apple sold 14.6 million during the quarter, less than the 17.0 million it sold a year ago. (Last year’s retina iPad had just launched, whereas this year there hasn’t been a new iPad, so that probably makes up some of the difference.)
- Mac sales continued to droop, though the new MacBook Air didn’t launch until June: Apple sold 3.75 million Macs in the quarter, a little less than last year’s 4.0 million. Still, Mac sales have likely peaked for good. (http://www.splatf.com/2013/01/peak-mac/)
Here’s a visual look at Apple’s June quarter, in context with the last several. The big picture: After a rapid growth period when the iPad launched and the iPhone was getting into the swing of things, growth has slowed down. It’s time for something new, and we should start seeing more activity from Apple starting this fall.
Dan Frommer is founder of SplatF (www.splatf.com), a tech news site, and City Notes (www.citynotes.io), a mobile travel startup. He previously helped create Business Insider, where he led Apple coverage. Follow Dan on Twitter at @FromeDome.
Apple's Average Selling Price On iPhones In Q3 Suggest Promotions Are Moving Devices, Older Models Popular
Apple’s quarterly results are up, and the one thing that many of the financial big brains are paying attention to is the average selling price of the iPhone: It currently sits at around $580, compared to $613 last quarter, which is a big change sequentially. There’s a couple of reasons that could be happening, and they aren’t necessarily bad for Apple.
AT&T introduced some considerably aggressive pricing promotions this past quarter, including giving away free iPhone 5 devices with iPhone 4S trade-ins. AT&T said on its earnings call that it sold more iPhones this quarter than in the year ago quarter, even though it isn’t revealing exactly how many it sold. That likely means it did very well, which means it may have given away a lot of free iPhones. Recall also that T-Mobile introduced the iPhone 5 this past quarter, and that it initially began selling the iPhone at a reduced price compared to its competitors (though it isn’t clear who was absorbing the loss).
This could also be a strong indication that Apple is selling a lot of older devices, like the iPhone 4 and iPhone 4S, which are still available. Apple charges considerably less for these, and ASP on those are often lower, too. Walmart discounts on iPhone also began in late June, on iPhone 5 and iPhone 4S models, which would also result in lower ASP.
So why would that be good for Apple? 31 million iPhones is one very good reason. Apple increases its market share by pushing ASP lower, which is a long-term boon for the platform and for its overall device sales, since the company finds a halo effect for iPhone owners who tend to buy other Apple kit. And lower ASP could mean it’s making bigger inroads into new and emerging markets, which is also a long-term benefit for the company. Should it introduce iPhone models that are lower cost and cheaper to produce in the fall, that market could open up further, too.
Still, Apple said on its earnings call that “iPhone 5 remains by far the most popular iPhone,” but also noted that they “were also very happy with our sales of iPhone 4 and 4S.” So promotions, more than older devices, may have been a bigger part of the ASP change.
Apple Beats In Q3 2013 With $35.3B In Revenue, $6.9B In Profit, $7.47 EPS, But Posts Another YOY Earnings Decline
Apple has just released its fiscal Q3 2013 earnings — it reported $35.3 billion in revenue (slightly up 0.9 percent from $35 billion in the year-ago quarter) along with $6.9 billion in quarterly net profit (down 21.6 percent from $8.8 billion in the year-ago quarter), representing earnings of $7.47 per share. Similarly to Q2 earnings, Apple posted a year-over-year quarterly earnings decline (down 19.8 percent from EPS of $9.32).
Apple is still a money making machine, but the company’s growth has slowed. Recently, the Cupertino-based company has tweaked its release cycle a bit. Almost the entire product line was refreshed over the last three months of 2012, pumping sales for Q1 2013 and leaving a void for the rest of the year. The company seems to follow the same pattern this year, aside from the MacBook Air.
As Zach Epstein says on Twitter, Samsung is now the most profitable smartphone vendor in the world, edging Apple with its $8.9 billion in profit. Yet, Samsung recently released its flagship phone, the Galaxy S4, while the iPhone 5 was released ten months ago.
Apple still beat expectations
According to Bloomberg Businessweek, the consensus among analysts was for Apple to report earnings of $7.28 per share on $34.9 billion in revenue. Fortune expected nearly the same with $34.94 billion in revenue and earnings of $7.29 per share.
The company’s cash on hand slightly increased from $145 billion to $146.6 billion.
The company’s cash on hand slightly increased from $145 billion to $146.6 billion. It remains one of Apple’s main asset. It allows the company to spend more time experimenting and preparing new products behind the curtains without having to worry about its resources. Apple beat all of those numbers, even if it means generating less profit.
“We are especially proud of our record June quarter iPhone sales of over 31 million and the strong growth in revenue from iTunes, Software and Services,” wrote CEO Tim Cook in the earnings release. “We are really excited about the upcoming releases of iOS 7 and OS X Mavericks, and we are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014,” he continued.
Guidance from its last earnings release forecasted between $33.5 billion and $35.5 billion in revenue and gross margin between 36 percent and 37 percent. While the company used to be shy about its guidance, this time around it was spot on — it probably won’t scare shareholders away.
iPad sales are down & old iPhones are more popular than ever
Breaking out the numbers, devices sales were expectedly slow this quarter. It was the first time we’ve seen a yearly decrease in iPad sales, at 14.6 million, yet iPhone sales topped 31 million representing 20 percent growth year over year. Mac and iPod sales were slightly down both quarterly and yearly, which is something Apple seemed prepared for as its other iProducts begin to cannibalize the older series of products. Read more about this in our separate post.
Over the past few weeks, many analysts reported an industry-wide slowdown in smartphone sales. Apple keeps selling the iPhone 4 and the iPhone 4S at a lower price, and it hurts the company’s bottom line. Horace Dediu points out on Twitter that the average iPhone price is now about $580 compared to $613 last quarter. That’s one of the reasons why profit is down but revenue still up year over year.
See more charts about Apple’s no-growth quarter.
Q4 2013 and beyond
For Q4 2013, Apple’s own guidance forecasts between $34 billion and $37 billion in revenue (compared to $36 billion in Q4 2012) with a gross margin between 36 and 37 percent (a flat gross margin).
During Q2, Apple didn’t release any product and expectations were pretty low for the company. This time around, the company unveiled a few products during the traditional and long-anticipated WWDC keynote. The MacBook Air was updated as well as the Mac Pro. But the former was released only a couple of weeks before the end of the fiscal quarter that ended on June 30, while the latter doesn’t even have a release date yet.
And of course, the company hasn’t refresh the iPhone and the iPad since September and October 2012. In other words, Q3 was another quarter without any big new product. Cook hinted that it would be the case during the latest earnings call, saying that new products would come this fall. His quote in the earnings release confirms that. Apple unveiled a radically new iOS 7. It gave commentators hope that exciting new products are right around the corner. When it comes to product innovation, Q4 2013 will be decisive with long anticipated releases.
On the stock market side, Apple (NASDAQ:AAPL) has experienced a pretty good month of July so far. After breaking under $400 a share at the end of June, shares have been trading over $420 for the last few days. Apple shares are currently trading up 4.16 percent in after-hours trading, showing that investors were satisfied with today’s earnings.
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