Yesterday's quarterly earnings report from Apple was mixed. And, oddly, how one views the news depends a lot on one's biases. The naysayers point to the fact that Apple's earnings per share declined compared to last year's March quarter — the first time in 10 years Apple has seen a decline. Apple boosters, on the other hand, saw a lot to like, including record year-over-year iPhone and iPad sales, and record revenue from the iTunes Store. Apple is clearly still growing and expanding its markets and services. And Tim Cook was resolute. Bully for him. He once again emphasized how Apple continues to focus on the long term and won't be distracted by temporary short-term results. Just one thing matters: making great products.
So why the decline in revenue? One reason was the success of the iPad mini. While iPad sales jumped from 11.8 million iPads a year ago to 19.5 million this most recent quarter, a large percentage of those units was the iPad mini. And due to its lower price, it has a smaller profit margin than the iPhone or 9.7-inch iPad.
Of course, the question on everyone's mind is always: what's next for Apple? When are we going to get some cool new gizmo? In the conference call with investors, one market analyst asked that question. As you would expect, Tim Cook was mum.
But he did make some general statements that got me excited, such as: "Our teams are hard at work on some amazing new hardware, software, and services that we can’t wait to introduce this fall and throughout 2014. We continue to be very confident in our future product plans."
We do indeed have something to look forward to, but apparently not until the end of September or later. Further, he said there are surprises in the works: "[We] have a tremendous culture of innovation with a relentless focus on making the world’s best products that change people’s lives. This is the same culture and company that brought the world the iPhone and the iPad, and we’ve got a lot more surprises in the works." I hope those surprises come sooner rather than later.
In this quote he mentions new product categories: "We will continue to focus on the long term, and we remain very optimistic about our future. We’re participating in large and growing markets. We see great opportunities in front of us, particularly given the long-term prospects of the smartphone and tablet markets, the strength of our incredible ecosystem which we plan to continue to augment with services, our plans for expanded distribution, and the potential of exciting new product categories."
There you have it. New stuff is coming, not just new models in existing categories, but new categories. Plus, the quote is a good example of the company's continued focus on the long-term. I really appreciate how clear Cook is on this, and this must be one of the reasons Steve Jobs chose him to run the company. Further, a post on MacDailyNews says according to someone in the know, once we get through the current lull, Apple will be releasing a "blizzard of new products."
And while Cook was tight-lipped about forthcoming products, he said there's one new product we won't see in the near future: a five-inch iPhone. Why? A larger screen entails tradeoffs that reduce quality:
"My view continues to be that iPhone 5 has the absolute best display in the industry. We always strive to create the very best display for our customers. Some customers value large screen size, others value also other factors, such as resolution, color quality, white balance, brightness, reflectivity, screen longevity, power consumption, portability, compatibility apps, many things.
"Our competitors have made some significant trade-offs in many of these areas in order to ship a larger display. We would not ship a larger-display iPhone while these tradeoffs exist."
So the door isn't closed to a larger iPhone, but it will have to wait until the technology improves.
You can read the full text of his remarks and his answers to questions in Macworld.
Cook said he could feel investors' pain at having the stock plunge from 705 to below 400. And to ease that pain somewhat, Apple is going to increase its dividend and buy back some of the stock, both of which sweeten things a bit for investors.