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Continuity, cannibals, and Apple Pay: 6 key takeaways from Apple's Q4 earnings

Susie Ochs | Oct. 23, 2014
The news was nearly all sunshine during Apple's fourth-quarter 2014 earnings call on Monday, with sluggish iPad sales the one black spot on the otherwise blazing sun of record-setting revenue.

"I know that there's a popular view that the market is saturated, but we don't see that," Cook continued. He explained in the top six revenue-generating countries, as of the end of the June quarter, the majority of people buying iPads have never bought one before. Of customers who are first-time iPad buyers, the range in those six countries goes from 50 percent to more than 70 percent. "When I look at first-time buyer rates in that area, that's not a saturated market. You never have first-time buyer rates of 50 and 70 percent. What you do see is that people hold onto their iPads longer than they do a phone. Because we've only been in this business four years, we don't really know what the upgrade cycle will be for people. And so that's a difficult thing to call. What we do know is that people always respond to [us making] great products, and we feel really great about what we introduced last week."

Don't fear the cannibals
Another thing that could be affecting iPad sales this quarter? New iPhones and those pesky record-setting Mac sales. "There are obvious cannibalization things that are occurring," Cook said. "I'm sure that some people looked at a Mac and an iPad and decided on a Mac. I don't have research to demonstrate that, but I'm sure of that just looking at the numbers. And I'm fine with that, by the way."

And don't forget how close the iPhone 6 Plus is in size to the iPad mini too. Said Cook: "I'm sure that some people will look at an iPad and an iPhone and decide to get just an iPhone, and I'm fine with that as well." Especially since features like Continuity give users easier ways to spread tasks between devices, starting on one and finishing on another--to Apple it shouldn't really matter which device customers start with, as long as they have a good enough experience that when they decide to buy another thing, they reach for something with an Apple logo.

Continuity is coming to your house
Obviously, Apple employees never give away what they're working on until they're good and ready. But it wouldn't be a Q&A without someone asking. This time, good old Gene Munster from Piper Jaffray wanted to know, since investors think of Apple as a product company, what are the exciting things to be focused on as an investor?

Cook's answer was pretty great. He said, "Look at what we've done and what we've delivered. ... But more important than all the stuff that you see is to look at the skills within this company. I think it's the only company on the planet that has the ability to integrate hardware, software, and services at a world-class level. That in itself allows Apple to play in so many different areas, and the challenge becomes one of deciding which ones to say no to and which to say yes to. ... We always have more ideas than we have resources to deal with."


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