Apple Loop: iPhones Up, iPads Down, Apple TV In, And It's Time To Get Your Wallet Out

Apr 25 2014, 5:48pm CDT | by

Taking a look at the highlights of the Q2 earnings call, the new Apple Store chief, stock splits, Siri signs up for Apple TV guest appearance, and recruitment patterns hint at Apple’s Wallet being opened. Apple Loop is here to remind you of the important highlights and news around Apple over the last seven days.

Apple Release Strong Q2 Results And Q3 Guidance

Apple released their Q2 2014 results this week, and the reaction has generally been positive. Forbes’ Mark Rogowsky covered the earnings call and subsequent Q and A session with CEO Tim Cook. null  Earnings expectations were surpassed with Apple reporting $11.62 per share, against a forecast around the $10.22 mark.

Q3 2014 guidance is slightly up on Q3 2013. Apple is calling for $36 – $38 billion compared to $35 billion on the previous year. The EPS guidance range is $7.75-8.73, using 860 – 870 million shares. Last year’s Q3 EPS was $7.47.

The iPhone Leads The Way…

With sales of $43.7 billion, the iPhone was the biggest contributor to these numbers. Q2 2014 was the third biggest quarter ever for the iPhone, after Q1 2014 and Q1 2013. As always, no breakdown was offered on which lines were the best performing, but the typical 5S/5C/4S triplet follows a similar pricing strategy to triplets in previous years.

…While The iPad Numbers Might Point To A Slowing Tablet Market.

The iPad numbers need a little bit more explaining. On the call Tim Cook took pains to point out that the drop in numbers could be partly down to reducing the inventory in the channel. Once you look at the sell through of Apple’s tablets, iPad sales in Q2 2014 were only  3% down on the same period in 2013. That’s still a drop, but not a severe as the headline numbers might indicate.

It could also indicate that the appetite for tablets is slowing down. The iPad continues to dominate the sales, traffic, and usage stats. The world hasn’t suddenly fallen out of love with the iPad, so I’m watching carefully to see if the other tablets show the same signs of a saturating market.

And the Macs Stay Steady.

No surprises with Mac sales… Analysts predicted 4.1 million, Apple declared 4.14 million. Numbers were down on Q1 as expected, but up 5% year on year.

Apple Store’s New Boss Starts Next Week?

It’s also worth noting that Apple’s new Senior Vice President of Retail and Online Stores will be starting in the very near future, likely next week. Although Angela Ahrendts has worked out her six month notice period with Burberry (where she saw the coat and rainwear maker become one of the biggest names in fashion), she was expected to stay on until a share rewards event on June 8th.

It looks like Tim Cook brought the schedule up, although there is no official word from Burberry on the appointment, or form Apple on the compensation being offered. Retail has been reporting directly to Tim Cook since John Browlett left Apple in October 2012

Why Go Banana Splits On your Stock?

Following on from the Q2 results. Apple has announced an expansion of the capital return program, and expect to utilize $130 billion of cash by the end of 2015 in the process. Funds for the share repurchase program has been raised by $30 billion to $90 billion. Funding for the program will come from the public debt markets, not because Apple is out of cash, but because it is cheaper than repatriating money to US accounts from overseas./>/>

Apple is also doing a seven for one stock split, bringing one share of Apple down to a price in the region of $75. The reason why Apple has decided to do this is not clear, but I like Matthew Yglesias’ theory on Vox:

One reason is that to the extent that small-time retail investors have the ability to buy and hold shares, that should push Apple’s overall market capitalization somewhat up and create value for existing large shareholders. This should not be a large effect, but for a well-known consumer brand with a large following it could be something.

Another issue, unstated but perhaps relevant, is that a split could make Apple eligible for inclusion in the Dow Jones Industrial Average.

As Apple moves from the hockey stick growth of the last few years into a more mature and established company that significantly contributes to the US and world economy, being part of the Dow Jones IA is less about vanity and more about projecting Tim Cook’s desired image of the company.

Speak Up, Siri Is No Longer A Hobby

When something is turning over a billion dollars it’s no longer smart to call it a hobby. Apple TV has long been a footnote in earning calls and Apple’s presentations, but there’s been a renewed interest in the set-top box this week, spurred on by some close examination of the code in iOS 7.1 and iOS 7.1.1 (confirmed by 9to5 Mac).

While Siri’s resource file has always referred to device family 1 (the iPhone) and device family 2 (the iPad), the latest code has added in references to device family 3. While there is no confirmation what devices this would refer to, occurrences of family 3 in other Apple products has always pointed to the Apple TV.

Given the rise of voice control in many consumer electronic devices, especial large screened television from companies such as LG and Samsung, the addition of  Siri to Apple TV is an obvious UI improvement. It would certainly act as a strong signal to consumers that ‘the hobby just graduated’.

What’s In Apple’s Wallet For You?

As always with Apple’s future intentions, there are a lot of smoke and mirrors mixed in with the signals. That’s the case with Apple’s wearables strategy, but also extends to other areas of potential growth. One of those is in mobile payments. Tim Cook has already indicated this is an area that Apple is experimenting with (during the first quarter earnings call this year, Cook said “The mobile payments area in general is one that we’ve been intrigued with, and that was one of the thoughts behind the Touch ID. But we’re not limiting ourselves just to that.”

That said, Apple is looking for a new head of product and head of business development with a focus on mobile payments (reports Jason Del Rey at Re/Code). There are a number of platforms already looking to make mobile payments a success, such as Google Wallet, ISIS, and Square, so Apple’s entry into a crowded space would not be unexpected. The question will be which challenge will they choose to address, and in what manner.

I’m sure the fact that Apple has almost 600 million iTunes users who have registered their name, address, and credit card details is a very nice starting point.

That’s it for this week on the Apple Loop, have a great weekend, and see you here next week! Forbes’ previous Apple Loop column can be found here.

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