Thursday, 02 February 2017 19:28

Apple's 2017 1st Quarter Results as Viewed Outside the Reality Distortion Field Featured

Apple has been a money printing press for the last decade. At the behest of the late Steve Jobs, they have had one key, core ability that no other company has been able to match. No, it definitely wasn't innovation or engineering. It was... the RDF. The Reality Distortion Field! For some reason, when normal people look at Apple hardware or financials, they don't see reality, they see Reality Distooooorrrrtion! But before we get to that, let’s see what all of the smart people in the financial world had to say...

Apple Q1 117 earnigns google search

Apple’s 1st quarter 2017 earnings were horrendous, and I mean horrendous. This was called an “earnings report”, no? Not a revenue report, or an earnings per share report, but and “earnings” report. The franchise is slowing, and its slowing rapidly - despite the gratuitously lucky demise of its largest competitors flagship device, the Samsung Galaxy Note 7. This is bad!

This wasn't the first time the Apple RDF field took effect around earnings time. This was 3 years ago,..

They Couldn’t Outperform, Even With the Competition Gone!

Apple’s major nemesis, and the only other vendor that competes closes with it in volume was forced to recall its flagship device very early in the quarter. That means that Apple had free reign in the space save some of the much smaller Android brands and the near non-existent Windows Phone and Blackberry.

As you can see below, that recall hurt Samsung materially.

 

 

The Note 7’s absence is also visible in the global rankings of handsets shipped and market share. Here, you can see Apple took the lead, albeit ever so slightly.

And therein lies the rub. Why is Apple’s lead “ever so slightly” when they were running a races against a one-legged man. Samsung didn’t even have a flagship model for the season and they still almost matched Apple. That means if the Note 7 didn’t get recalled, they would have spanked Apple in both handsets shipped and global market share.

That is a NOT a good sign!

Now, let’s take a look at Apple’s specific performance for the quarter. Before we go on, remember the gushing statements you found when Googling “Apple’s earnings”? Record quarter! Most revenue ever! Record earnings! Well, I don’t know what earnings report those guys read, but the one I read was horrible!

Net sales are up YoY, that’s good. They finally broke that losing streak (although they maybe didn’t since they didn’t have their traditional competitor), but…

  • Cost of sales are up!

  • Gross margins are down!

  • Operating income is down!

  • Pre-tax income is down!

Actually, the only things that are up (besides revenue boosted from a lack of competition) is share buybacks and dividends.

And that’s how Apple was able to fabricate the story of record earnings (per share).

Subscribers can access an extended version of this document that goes into these issues in a little more detail, here . You can subscribe to our services here.

The following are legacy BoomBustBlog research reports on the topic.

  1. pdf Mobile Computing Vendor Long List Note WIP (734 KB)
  2. spreadsheet IPhone Margin worksheet blog download (91 KB)
  3. spreadsheet IPhone Margin worksheet blog download (91 KB)
  4. pdf Apple Margin Strategem WIP (405 KB)
  5. pdf Apple Earnings Guidance Analysis (255 KB)
  6. pdf Apple business model note (1.70 MB)
  7. pdf Apple 4Q2013 preliminary update (2.77 MB)
  8. pdf Apple 4Q2012 update professional & insitutional (657 KB)
  9. pdf Apple 1Q2013 update Pro & Institutional (1.41 MB)
Last modified on Friday, 03 February 2017 11:28

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