U.S. Commerce Secretary comments on Apple’s earnings miss (video)

Apple’s warning had nothing to do with U.S.-China trade talks, Wilber Ross tells CNBC.

I don’t think Apple’s earnings miss had anything to do with the present trade talks. Think about it. There have been no tariffs put on Apple products. So that’s not it.

Cue the video:

Secretary Ross: Talks with China are at the appropriate level from CNBC.

My take: In remarks that will be carefully parsed in Beijing, Ross acknowledged that the trade talks have had an effect on China’s economy.

7 Comments

  1. Gregg Thurman said:

    Eh, let me see, Ross acknowledges that tariffs have slowed the Chinese economy, but that has nothing to do with Apple’s warning or the rest of the stock market’s decline.

    Sounds like new math to me.

    4
    January 7, 2019
  2. David Emery said:

    I don’t think any of the negative Apple commentators anticipated a Chinese government/’patriotic’ attack on Apple products! That’s the most unexpected contributor to Apple’s bad quarter. Those who would have bought an iPhone are under social and employer pressure to buy Chinese.

    With 20-20 hindsight, this is not a surprise. China’s policy has long been to get their population to buy home-grown consumer products as much as possible.

    2
    January 7, 2019
    • Gregg Thurman said:

      Here’s what strong government backing ($) and institutional IP theft will get you in 25 years: 25 years ago I had offices in Beijing and and manufacturing in Chengdu, the Chinese couldn’t get enough “American” products. Sentiment was that foreign was so much better (it was).

      The Chinese government back then encouraged foreign investment, as long as there was technology transfer to a Chinese “partner”. Our short term greed has come back to bite us in the ass.

      0
      January 7, 2019
      • Gregg Thurman said:

        Two comments:

        #1. When autonomous vehicles became a reasonable vision I drew a cursory business plan that did the same calculations as Horace did in his analysis of Apple’s business model. Fixed expenses were nominal with variable costs directly attributable to the number of vehicles in the fleet. The decision to add more “units” (vehicles) was a case of utilization demand. Fixed costs did not appreciably expand with increases in the fleet.

        At the time I was 70, I’m now 72, and as much as I believed then that the model would be very profitable I no longer have the fire in the belly to execute it.

        #2. Horace didn’t discuss the addition of future services for offer to the installed base. In that regard we have a partially opened window into Apple’s intentions with the moves it is making in movie content. We just don’t know how Apple intends to differentiate its content from the competition. My guess is that differentiation will include Apple TV (hardware/software), iTunes, HomePod and VR, all tightly integrated into Apple’s hardware and software ecosystem.

        FY2018 Services revenue was $37 Billion (including about $5 Billion from Google). That means ~$27 Billion was generated from a base of 1.3 billion active users, or if we assume an attachment rate of 10%, then the revenue per active user is presently about $200 per year.

        Expand the active base to 1.5 billion users, the attachment rate to 15% and the Services consumption rate to $250/year, and Services annual revenue could reasonably surpass $60 Billion by FY2021. That’s nearly 300% Services growth by September 30, 2021. From there it gets crazy.

        All this is possible because Apple hardware is designed and engineered to last longer (effective economic life) thereby decreasing the amortized hardware cost of ownership.

        Who else is positioned to accomplish this?

        0
        January 7, 2019
        • Gregg Thurman said:

          I wrote the above on my iPad. After posting I found an error I wanted to correct. My iPad wouldn’t give me access to the post. What did I do? I went to my Mac Mini before the allotted edit time expired and made the changes there. Name another computer, smartphone, tablet triad that is as closely/tightly integrated as Apple’s.

          3
          January 7, 2019

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