Apple Will Be Part of the Breakdown of the Cable Bundle, Says Tim Cook

Tim Cook, Apple CEO, announced that Apple plans to participate in changes disrupting the cable bundle with Airplay 2, Original Content, Apps and More.

On Tuesday January 29th, Tim Cook shared some of Apple’s approach to television and original content without offering specific details. Apple’s CEO said that Apple has noticed "huge changes" in customer behavior, which Apple believes will "accelerate as the year goes by." Cook pointed out that Apple expects an accelerated breakdown of the cable bundle.

Image via Apple

Apple intends to be part of this change, including the Apple TV that offers app support so that customers can watch television using apps as they wish and with AirPlay2 that will be offering support to third-party television sets, which will make for a “better” living room experience, according to Cook. He also explained that third-party video subscriptions available on the App Store offer Apple a way to "accelerate in the future" and help customers who wish to buy multiple services. Apple is working on its own original content, with some content available for free and other content available via streaming services and its TV app. Apple has also numerous television shows in the works currently and been signing deals with well-known industry talent such as Jason Katims and Justin Lin.

“Finally, original content, where we will participate. We’ve signed a multi-year partnership with Oprah. Today I’m not really ready to extend that conversation beyond that point. We’ve hired some people we have a super amount of confidence in, and they’re working really hard. We’ll have more to say on that later.”

— Tim Cook, Apple CEO

Apple is expected to have its streaming television service available for launch by the middle of April this year.

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Apple Music Offers 50 Million Songs on American Airlines

Apple Music subscribers can benefit from access to over 50 million songs, playlists and music videos on domestic American Airline flights equipped with Viasat satellite WiFI without Wi-Fi purchase.

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“Our guests want to make the most of their time when flying us. That’s why we’re investing in faster Wi-Fi, a variety of entertainment options, and why we’re so excited to introduce Apple Music to more of our customers. Providing customers with more ways to stay connected throughout each flight is one way to show we value their business and the time they spend with us.”

— Janelle Anderson, VP Global Marketing, American Airlines

American Airlines is the first commercial airline to offer exclusive access to Apple Music through complimentary inflight Wi-Fi. To connect, just open the complimentary inflight Wi-Fi and open Apple Music. Listen to your library, the Beats 1 Global Livestream or curated playlists. Sit back, relax and enjoy your flight. applemusic.com/americanairlines

Image via Apple

““For most travelers, having music to listen to on the plane is just as important as anything they pack in their suitcases. With the addition of Apple Music on American flights, we are excited that customers can now enjoy their music in even more places. Subscribers can stream all their favorite songs and artists in the air, and continue to listen to their personal library offline, giving them everything they need to truly sit back, relax and enjoy their flight.”

— Oliver Schusser, VP, Apple Music

Apple Music subscribers can enjoy exclusive content access such as in-depth artist interviews and live music via Beats 1 global airstream. Apple continues to grow Apple Music with new acquisitions such as Platoon in London. Customers who do not have Apple Music subscriptions, can sign up during the flight and receive free access for three months. Apple Music is now available on iPhone, iPad, Apple Watch, Mac, Apple TV, PC, Android, CarPlay, HomePod, Sonos and Amazon Echo.  

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Apple Reported $84.3 B Earnings for 2018 Holiday Quarter, with Lowered iPhone Sales

While iPhone Revenue Took a 15 Percent Hit, Apple’s Active User Base Increases to 1.4 B devices and Service Revenue is Booming

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Last week, Apple reported its financial results for the 2018 holiday season and last quarter, ending in December. While the company warned that the earnings would be less due to declining iPhone sales of 15 percent less, Apple nonetheless posted its second-best earnings and revenue in history.

Highlights include:

• Revenue $84.3 billion (of which $52 billion was from iPhone sales).
• Earnings per share (EPS) increase to $4.18.
• Services revenue continues to grow, up to $10.9 billion.
• 1.4 billion active devices installed by users by end of quarter.
• Apple Music has over 50 million paying subscribers.
• App Store sets new single-day record with $322 million processed on New Year’s Day.
• 1.8 billion Apple Pay transactions in last quarter (up more than 2 times the year prior).
• Apple Pay coming to Target, Taco Bell and Jack in the Box stores (now available).
• Apple News has over 85 million monthly active users in US, UK, and Australia, setting new record.
• Apple News is launching in Canada in English and French this quarter.
• Apple has 360 million paid subscriptions across its services.
• Apple expects to surpass 500 million paid subscribers across its services in 2020.
• Apple remains on track to double its fiscal 2016 services revenue by 2020.
• Gross margin was 34.3% for hardware products and 62.8% for services.
• Apple ended the quarter with $245 billion in cash plus marketable securities.
• Apple’s wearables revenue is driven by Apple Watch and AirPods. Wearables category is "approaching the size of a Fortune 200 company."
• iPhone XR is best selling iPhone model, followed by iPhone XS Max and then iPhone XS.

During the call, Apple CEO Tim Cook said, “I do think price is a factor” in declining iPhone upgrades as users are more likely to hold on to their devices now for longer periods of time. To address pricing concerns abroad as a strong U.S. dollar has made newer models out of reach for many consumers abroad, Apple is offering a different pricing model for consumers in certain countries. While the earnings were less than last year’s with an earnings per share of $3.89, the newest earnings report did show an increase in earnings per share to $4.18. Thus, the figures reveal a year-on-year decline of 5 percent on revenue with an increase of 7.5 percent on earnings per share. 

Services revenue continues to grow, up to $10.9 billion, up 19 percent from the year before. Mac revenue hit an all-time high of $7.4 billion, growing 9 percent year-over-year, while the "wearables, home and accessories" category reached $7.3 billion, up 33 percent from 2018. Revenue from iPad also grew to $6.7 billion in the first quarter, up 17 percent year-over-year. 

Interestingly enough, Apple's new "Wearables, Home and Accessories" segment, now pulls in more revenue than Apple's iPad business and will soon surpass the Mac. This new segment formerly called “Other Products” includes the Apple Watch, AirPods, HomePod, Apple TV, Beats, iPod touch and other accessories.  

“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide. Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.”

— Tim Cook, Apple CEO

Apple had taken the unusual step to warn investors about the expected loss of revenue on January 2nd, predicting quite accurately, expected revenue of $84 billion instead of the previously anticipated $89-$93 billion figures laid out in November of 2018. The stock had taken a beating as a result. Nonetheless, right before Apple’s announcement of its actual earnings report, consensus on Wall Street from Morgan Stanley to Macquarie Research, JP Morgan,  TF Industries, Alliance Bernstein, UBS, Goldman Sachs, Bank of America, Merrill Lynch, Piper Jaffray, Canaccord Genuity, Loup Ventures and BTIG, was that an earnings per share of around $4.17 could be expected.

This was also the first quarter where Apple’s new policy of no longer providing sales figures for the iPhone, Mac and iPad, is in effect. Apple continues to provide details regarding sales growth, revenue, and guidance, but no longer uses the iPhone or other product unit sales as the predominant indicator of the company’s growth and fiscal success. The company has expected to have multiple offerings such as Services and expected new income via subscriptions such as Apple Music, Apple News and new video content in 2019 and beyond. Apple will provide an update on its capital return program in March earnings report.

“Three things stand out long term: loyal and satisfied customers, large and growing active installed base, and deeply engrained culture of innovation. ”

— Tim Cook, Apple CEO

For the first fiscal quarter of 2019, Apple predicts revenue of $55-$59 billion with a gross margin of 37-38 percent and operating expenses of $8.5-$8.6 billion and a tax rate of 17 percent. Download consolidated statements here.

Live streaming of Apple’s investor call is available at www.apple.com/investor/earnings-call/ for approximately two weeks after the announcement on January 29th.

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