Hacker News Reader

Comment by Samuel_Michon | Hacker News Reader

Official Apple press release: http://www.apple.com/pr/library/2013/04/23Apple-Reports-Seco...

65% more iPads sold and 7% more iPhones sold than in last year’s FQ2. Mac sales remain stable, while the rest of the PC market continues to shrink.

Profit margin decreases as Apple offers cheaper tablets (iPad mini) and phones (iPhone 4 & 4S). Profit margin on Macs is also lower because of retina screens, but Mac sales represent only a small part of Apple's income, it’s not significant on the whole.

View on HN

Perhaps the most important thing to remember from today - the CFO said that Apple, for the first time, will take on debt.

In a nutshell, a company with around $100bn in cash (and equivalents) held offshore[1] would rather raise debt and pay interest on that debt, than repatriate funds to the US and pay corporate income tax.

[1] http://www.zerohedge.com/sites/default/files/images/user5/im...

That's because the cost of borrowing money is a lot cheaper than the tax hit that the company will incur if they repatriated cash back to the US. In most cases the tax rate is as high as 35%[1]. Microsoft, for example, reported that it would owe $19.4 billion if it repatriated its $60.8 billion in offshore holdings[2]. using the same numbers, Apple will have to pay $35 billion in taxes if they repatriated $100 billion in offshore profits earned (and already taxed) in foreign countries.

[1]http://appleinsider.com/articles/11/02/16/apple_lobbies_for_...

[2]http://www.bloomberg.com/news/2013-03-08/offshore-cash-hoard...

Companies do this all the time.

"Google Borrowing $3 Billion In First Ever Bond Offer"

http://www.businessinsider.com/google-bond-offering-2011-5

Notably: this is exactly what the investor set expected when the mini was announced. Remember all the hand-wringing about why Apple's stock price dropped? The investors were right -- the market wanted cheaper hardware that Apple couldn't make as much money on. And, of course, Apple was right to give it to them.

>And, of course, Apple was right to give it to them. How was Apple right? The market always wants cheaper hardware.

They devalued their products by competing on price. It will be a short term gain but a long term loss.

The iPod mini, nano, and shuffle didn't devalue the iPod brand. The Mac mini didn’t devalue the Mac brand. Apple didn’t simply slash the prices on iPad 10" devices, with the iPad mini they added choice. The iPad mini isn’t underpowered and plasticky, its build quality is at least as high as the larger model. The move is very much like how Apple introduced the iPod mini, 2 years after the first iPod.

Do iPhone 4/4S sales actually result in significantly lower profits for Apple? Those devices are sold at $200 off or $100 off the price of an iPhone 5, and I would imagine the cost of manufacturing the older devices must have dropped significantly by now. (the iPhone 4 is going on 3 years old at this point!)

Also, one would expect a drop in sales of the '4S' (or '3GS') model when the "completely redesigned" iPhone 5 (or iPhone 4) is announced, relative to sales of the iPhone 4 when the 4S was released, or sales of the iPhone 3G when the 3GS was released. The release of the iPhone 5 makes the 4S look especially old, while the release of the 4S didn't really do that for the 4.

"Do iPhone 4/4S sales actually result in significantly lower profits for Apple?"

Not lower profits, lower profit margins.

Edit: a really basic example that shows the difference in profit and profit margin is the calculation below.

(Profit Margins) X (Revenue) = Profits.

Check your math. If Apple made $100 on both a $400 item and an $800 item, the profit margin on the cheaper item would be twice that on the more expensive item.

There's nothing wrong with my math. It's still profit margin (25%) times revenue ($400) equals profit ($100). You're confusing a different concept with what I'm writing about.

25% x $400 = $100

Mac sales are critical in that they are also development machines used internally as well as their "partners" who create and sell apps for the platform. Apple will never abandon the Mac platform even if it looses them money.

I wrote that income from Mac sales is not significant, looking at the whole of Apple’s income. That’s not to say that Mac’s aren’t critical to Apple’s philosophy. It’s hard to see the ’Digital Hub’[1] without Mac computers.

[1] The Digital Hub (2001): http://www.youtube.com/watch?v=9046oXrm7f8

China Mobile (703 million subscribers) doesn't carry the iPhone (yet), India, T-Mobile, etc. lots of room to grow.

One of my main reason I got long Apple 4 weeks ago.

it's actually impressive that they sold 37.4M iPhones this quarter considering they sold an amazing 47.8M iPhones last quarter. Compare that to last years numbers.

Q1 2012 = 37M iPhone, 15.4M iPads

Q2 2012 = 35.1M iPhones, 11.8M iPads

Q1 2013 = 47.8M iPhones, 22.9M iPads

Q2. 2013 = 37.4M iPhones, 19.5M iPads

Really just mind-boggling numbers. Just the ability to ship that many. Mind you they are smaller-sized consumer products, still need a lot of factories making them though.

I don't see how it is all that impressive. Nokia has been shipping a million plus phones a day from a long time ago.

A few things here are impressive.

You have cleverly made the distinction of phones, rather than smartphones, in your assertion that Apple's supply chain isn't impressive in the act of shipping 0.6m iPhone/iPad devices each day for a quarter.

When all unit shipments are considered Nokia actually ships slightly fewer than 1m phones per day (2012 it was approx 340m units shipped) or 0.93m per day.

Apple doesn't manufacture phones, they manufacture smartphones. Same for a huge portion of Samsung's unit shipments. Same for a small portion of Nokia's shipment, but the real grist here is in how much easier it is to make a dumbphone than a smartphone. It's practically prefabbed for you.

Here's a dumbphone teardown: http://www.formymobile.co.uk/3310disassembly.php

Here's an S5 teardown: http://www.ifixit.com/Teardown/Samsung+Galaxy+S+4G+Teardown/...

Manufacturing and assembling a dumbphone is easy, comparatively. Fewer components overall. Nothing fragile or fiddly requiring human QA (wifi). Nothing expensive (gorilla glass, capacitive screen) which hasn't had 20 years of mass-production driving its margins up.

So that's impressive.

Also impressive is shipping different devices in these quantities each year. Apple currently manufactures and sells iPhone 5 (16, 32, 64GB), iPhone 4S (16, 32, 64GB), iPod Touch (16, 32, 64GB), iPad (16, 32, 64, 128GB) and iPad Mini (16, 32, 64GB). Judging by revenue ($180 per iPod sold), a big portion of the 5m iPods sold in the quarter were iPod Touch.

Also impressive, I think, is that every two years, Apple ignores what its supply chain can do and goes back to the same 10-15 people to ask what they can do to improve on an already high quality device. Then they gut the supply chain and build it again from the ground up to make the better device.

They're in a tock rather than tick year for a new iPhone, but that just means that their supply chain managers and fabrication designers are in a tick year, preparing factories for what it will take to build iPhone 6 whilst iPhone 5.1 is still being shipped to 37 million people each quarter.

In brief, the impressiveness here is in the complexity of the devices; the breadth of different devices being manufactured; and the philosophy that leads to innovation not just in design but manufacture.

This is also true of Samsung. They are accomplishing astonishing things with their supply chain and, unlike Nokia, genuinely do ship well over 1m phones a day, of many more varieties than Apple.

Possible causes for the longer momentum: Apple added several carriers last Fall[1], added LTE service for more than 40 carriers[2], and more countries where iPhones can be bought unlocked[1].

The iPhone 5 was announced 3 weeks earlier in the season than the iPhone 4S was the year before, but Apple was better prepared to deal with the demand. That meant that during the holiday season, you could actually buy a new iPhone in stores.

[1] http://support.apple.com/kb/ht1937

[2] http://www.apple.com/iphone/LTE/

Reply on news.ycombinator.com