Echo: maybe Apple should buy Netflix?

February is the month when most companies sum up their financial results.

Content

Short line

About Facebook

The social network unexpectedly hit the jackpot by announcing the results of the fourth quarter. Analysts had expected 16.4, but received $16.91 billion in revenue. Everyone was very happy, and the shares rose. Only this moment (table below) confuses me, and this is taking into account the fact that the number of users does not increase.

< td>2017 < td>30 925

Year Revenue, $mln Expenses, $mln
40,473 20,451
2018 55,838
Height 18/17 38% 51%

About Samsung

Samsung also reported on the results. The main direction of DS (Device Solution, that is, semiconductors, screens) and Mobile sank. 40% and 30% respectively. Total operating income was 10.8 trillion won. Interestingly, semiconductors bring Samsung 78% of all profits. Someone can compare with Apple, which iPhone also brings 60-70% of profits, but there is a difference. Everyone needs memory. But the demand for it in the near future will be low. We analyzed this point here. Samsung said that the first quarter of 2019 will not be better, but it is likely that traction will appear in the second quarter. Mobile phones didn't work either. Q4 2018 can be called perhaps the worst (after the Note 7 recall) in the last 8 years.

I like Samsung reports because they write everything clearly, as it is. You can even not analyze, but quote selected fragments:

  • About memory. The main customers do not buy, because they cannot understand how much is needed and whether it is needed at all, because it seems that the crisis.
  • About NAND-memory (SSD, flash drives). The market has increased supply, while demand has decreased.
  • About screens. Strong demand for flexible OLEDs (!), but regular OLEDs are competing hard against LTPS LCDs. In the next quarter, the situation will worsen as competition continues to grow. The company plans to work more closely on detuning from competitors, offering a unique design and new features (just a plus for ordinary consumers).
  • Demand for chipsets has fallen. The smartphone market is slowing down, and mining chipsets are even more so.
  • About smartphones. The market is stagnant. They plan to solve the problem with the launch of the Galaxy S10, which will be significantly different in design (and, of course, the technical specifications are just superb). So, in 2019, the line of flagships is waiting for changes. New design, new products. Samsung also plans to pay more attention to the middle price segment and the lower-middle segment. The company began to suspect that competitors in these segments have better hardware, so Samsung will improve performance and generally reorganize current lines.
  • But TVs and refrigerators are fine. They bring little, but they grow. The demand for premium models is on the rise. They especially love the magnificent Family Hub refrigerators, which I also wrote about in “Things” last January.

The last quarter is marked in brown on the chart.

Echo: Should Apple buy Netflix?

Microsoft

Overall results

Every time I worked with Microsoft's financial statements, I complained that the company could not bring it to a digestible state. It used to be a Word file. Apparently, Microsoft remembered that they know how to do cloud-based Office, since now reporting is a set of Word, Excel and PowerPoint files, as well as cloud-visualized data in Power BI. It is interesting that Microsoft reformatted all previous reporting according to a new model. Everything seems to be fine, but terribly unusual. Actually, this phrase, in my opinion, can characterize the entire activity of the corporation.

So, the company has three main categories that make a profit.

  1. Productivity and Business Processes (all Office, Microsoft Dynamics, LinkedIn)
  2. Intelligent Cloud (all server and cloud products including Microsoft SQL Server, Windows Server, Visual Studio, System Center, CALs, Microsoft Azure, GitHub)
  3. More Personal Computing (Windows, Xbox, MSN plus Surface devices, etc.)

Despite the fact that the largest revenue in the "More Personal Computing" section, this is the least profitable segment. The main profit of Microsoft is brought by cloud services. These are Office 365, Dynamics 365 and Azure. These categories have two-digit growth.

Interesting Notes

  • In general, we can say that Microsoft is now making money on all of its products. Even LinkedIn grew by 29% in money (revenue).
  • I continue to quote the things Nadella said at a meeting with journalists in mid-January. When asked about his plans, Nadella made an interesting remark about the Surface, which suggests that Microsoft is putting in a lot of effort to make Surface into a brand so that people have a special connection with the device (that is, that they really enjoy using Surface). And before that, in one of the podcasts, I heard how the hosts mentioned that developers in the USA love the Surface and even abandon the MacBook in favor of the Surface. And the results that we see in the reports confirm this. Microsoft separately emphasized that the demand is from both commercial structures and private users.

As you can see in the chart below, Surface sales were relatively stable at $1 billion per quarter, and just in the last quarter, revenue jumped to $1.9 billion. During the meeting, Surface was simply told that "sales exceeded expectations." Allegedly, the Surface Pro 6 and other new devices launched in October 2018 hit the market.

Here we can say that, firstly, 1 billion per quarter is about 1.5 million tablets, and 1.8 billion is 2.5 million (assuming the cost of an average Surface for $ 700). In general, such growth is possible, since the initial base is low. Even 2.5 million Surfaces is less than 4% of the PC market.

I haven't found confirmation anywhere, but there is a strong suspicion that Microsoft, which promotes the synergy of its solutions, somehow sells Surface as a bundle with other solutions (like bought Office 365 - take a tablet computer at a discount).

  • The company is implementing helper solutions in Office. This mode can be enabled in Excel or PowerPoint, and while you work, Excel will analyze the numbers along the way, look for trends and offer charts.
  • Microsoft is moving Edge to the Chromium engine. This also aligns with the current stated strategy: if we can't offer something unique, we get rid of the product.

Instead of a conclusion, we can say that Microsoft is doing well. Services are growing. Perhaps not as fast as investors and analysts would like (that's why the shares sank after the publication of the financial statements), but it is clear where the company is heading. And most importantly, it is clear how these plans will be implemented. Here with Surface it is not clear why it suddenly began to grow. But these are trifles.

Apple

About the results

In a past issue, Echo wrote why Apple, Samsung, and other companies issue advance notices when the plan doesn't match the fact. The reason is to spread the straw, to give the market time to digest the information.

Look at the chart, it clearly shows when Timothy Cook issued a letter to investors, but on January 30, the official result comes out (which is slightly better than stated in the letter), and the market no longer pays attention.

Echo: Should Apple buy Netflix?

Initially, it was predicted that the result would be 89-93 billion dollars. On January 2, the forecast was reduced to 84 billion, and in fact it turned out to be 84.3 billion dollars, or minus 4.5% compared to the previous first quarter.

Whatever one may say, but in terms of money, the result is still impressive. The main reason for the "shortage" is, of course, the iPhone. The chart below has two tabs. On the first - only the iPhone, on the second - all other products. Divided, as the iPhone accounts for 61% of the company's revenue. For comparison, in 2012 the iPhone accounted for 52%, in 2018 - 70%, and now - 61%. 70% is a clear imbalance, when you could say that Apple is a one-product company. Unfortunately, things improved this quarter, not because Apple made an effort, but because the iPhone sold worse than expected.

Please note that in money terms, the iPhone fell back to the position of 2016, that is, the iPhone 6S. However, the 6S started at $650, while the iPhone XS started at $999. There is a decline in sales in pieces.

The main reason for the decline is China, but it's important to note that the iPhone sold worse in all other markets as well.

The graph shows that it seems that Apple really overestimated its strength, not having thought through everything to the end and not paying attention to the global economic situation. It seems that the whole world has been measured by the home market. Please note that in America, the iPhone sold well. We have already discussed this point:

“This is especially typical for the USA, where most devices are still purchased locked for a specific operator and buyers do not pay the entire amount. For example, at Verizon, the difference between an iPhone X and an XS is less than $5 a month, or one latte at a Starbucks coffee shop."

Echo: Should Apple buy Netflix?

But outside the US, buyers usually have to pay full price for the devices. I really liked how Timothy Cook lamented that the operators are no longer willing to subsidize the purchase of iPhones in Japan:

“For various reasons, iPhone subsidies are becoming less common. In Japan, for example, iPhone purchases have traditionally been subsidized by carriers and tied to service contracts. Today, local laws significantly limit these subsidies. As a result, less than half of the iPhones sold in Japan in Q1 this year were subsidized compared to about three-quarters a year ago, and the total amount of these subsidies has also decreased.

(For various reasons, iPhone subsidies are becoming increasingly less common. In Japan, for example, iPhone purchases were traditionally subsidized by carriers and bundled with service contracts. Competitive promotional activity frequently increased the amount of subsidy during key periods.

p>

Today, local regulations have significantly restricted those subsidies as well as related competition. As a result, we estimate that less than half of iPhones sold in Japan in 1 of this year were subsidized compared to about three quarters a year ago and that the total value of those subsidies have come down as well).

It's funny, because in reality, Apple has been twisting the arms of local suppliers for a long time, forcing them to subsidize their products. Until in July 2018, someone snitched on the Japan Fair Trade Commission, which was able to reason with Apple. The commission began investigating cases of subsidies starting in 2016. According to the FT, they did without fines, only a harsh conversation, after which Apple dutifully agreed to revise the terms of cooperation.

It's also funny that Tim Cook said that they didn't set too high prices, but the dollar strengthened while the local currencies sank. In Europe and Japan, however, currencies were stable. iPhone sank in all markets where its sales were not subsidized.

And the fall in China was especially strong. I already wrote that in China the iPhone is valued for its brand, luxury component. Chinese users don't care about the operating system. Android or iOS - everything is the same, the main thing is that there is WeChat. Sales data from Apple confirms the thesis. If you look at absolute numbers, then everything is fine (this is the second tab on the chart), but if you compare sales from period to period, the picture is strikingly different. The main message is that iPhones sell well in China, which clearly show that this is a new iPhone, that is, the design plays.

So, compared to the 4S, the iPhone 5 (new stretched design) sold 60% better in China. And 5S in relation to the "five" - ​​only by 30%. iPhone 6 (new design) - and immediately an increase of 70%. Further, the price begins to leave a certain imprint. The iPhone 7 (if we don't talk about Jet Black) didn't look much different either, and the price went up. Result: -12%, to 6S sales. But the iPhone X, despite the first space price tag, sold very well: + 11%. The old design and even higher price tag made the XS fly by in China.

As a conclusion, we can say that the iPhone sells well if it is subsidized. But where users are forced to pay full price, it became clear that Apple crossed the invisible line by setting too high a price tag.

And for China, Apple needs a special strategy that takes into account local realities. There, the new device should be significantly different from the previous one. It is important that it is clear from a distance that this is a new iPhone. Neither Huawei, nor Xiaomi, nor Oppo, namely the iPhone. For some reason, Ralph Lauren polo shirts came to mind. Laughter with laughter, but quite a solution:

Echo: Should Apple buy Netflix?

Other thoughts after the Apple report

After Apple said that it would no longer provide sales figures in units, it became sad. Many were quick to say that the company "fell down" and wants to hide it. There is some truth in this. Apple is trapped in the success of the iPhone. And it is still perceived as a one-product company. This is bad.

Apple decided that they would no longer talk about things, but began to show the marginality of their products and services. The total gross margin is 38%, and the service margin is 62.8%. A year earlier, the service figure was 58.3%.

Apple, like almost everything on the market right now, wants to be a service company. By showing marginality, the company demonstrates that, firstly, it can earn. Unlike other manufacturers that enrich Google first, Apple makes money on its products after the sale (apps from the App Store, Apple Music, iTunes, iCloud, etc.).

Second, note that Apple named its installed base, that is, the user base. It is 1.4 billion devices, of which "more than 900 million" are iPhones.

If Apple continues to provide this data on a regular basis, then it will be possible to consider such an indicator as the average revenue per user. This parameter takes into account, for example, Facebook.

Apple Conclusion

Apple's situation is, frankly, difficult. Lately, the company has focused too much on making money to please shareholders. In this regard, she increases prices and tries to cut the "costs". The boss has already written that the company saves on screens (refused to laminate, so the screen crumbles if broken), and the company apparently also saves on engineers. The same bug on the iPhone that allows eavesdropping, or the clever Facebook and Google that quietly put banned apps in the App Store are all side effects of not having enough testers or enough time to test. For Apple, a careless approach is fatal, since the company claims the protection of user data as one of its advantages.

I think it's obvious to everyone that the company needs new growth points. Discussed this moment in edition. The idea was expressed that Apple needs to release a budget smartphone, restart the SE. I do not agree with this position. I have repeatedly written the idea that Apple users are ready to consider buying only flagship devices. It can be either the current flagship, or the flagship of past years, such as the "five". According to her, it is not clear when a person bought it, recently or a long time ago, and he just likes it. Also, the release of cheap iPhones may have a short-term positive impact on financial performance, but in the end it will lead to such a speculative phenomenon as the destruction of the Apple brand as a company that does not produce products for everyone.

One of the results of the report at Apple was the announcement of the amount of 285.1 billion dollars, which is stored in the company's accounts. And the easiest option, given that Apple plans to develop in the field of services, is the purchase of Netflix. The idea is so obvious that I wrote and went to Google to look. It turned out that an hour before of this, a note came out that JP Morgan also recommended Apple to acquire Netflix.

Echo: Should Apple buy Netflix?

The price of Netflix is ​​148 billion plus 7 billion of debt. JP Morgan went even further, recommending at the same time to buy Sonos and Blizzard. But this is already redundant, since Apple has never been a platform for games, as well as about sound. But buying Netflix would be a great opportunity for the company. As a result, developing your service will become more expensive than buying Netflix.

Conclusion

For us, as consumers, all the perturbations of companies from the text are only a plus. Samsung plans to surprise and improve the line of devices in the lower price segments. The company also wants to sell more interesting screen solutions. And that's great too.

Microsoft is actively involved in development. Moreover, the example of Surface demonstrates that the company does not forget about ordinary consumers. We are also looking forward to the launch of the xCloud gaming service and remember that Microsoft wants to become the “Netflix of the gaming world”.

Apple is also teasing the launch of a new, unknown service. And the situation on the market forces to reduce prices, which is also a plus. Timothy Cook should shift the focus from shareholders to products. And perhaps it's time to spend the huge fortune that Apple has in the accounts. Well, or at least open an Apple bank so that the money works. There will be the most stylish bank in the world.

Echo: maybe Apple should buy Netflix?

February is the month when most companies sum up their financial results.

Content

Short line

About Facebook

The social network unexpectedly hit the jackpot by announcing the results of the fourth quarter. Analysts had expected 16.4, but received $16.91 billion in revenue. Everyone was very happy, and the shares rose. Only this moment (table below) confuses me, and this is taking into account the fact that the number of users does not increase.

< td>2017 < td>30 925

Year Revenue, $mln Expenses, $mln
40,473 20,451
2018 55,838
Height 18/17 38% 51%

About Samsung

Samsung also reported on the results. The main direction of DS (Device Solution, that is, semiconductors, screens) and Mobile sank. 40% and 30% respectively. Total operating income was 10.8 trillion won. Interestingly, semiconductors bring Samsung 78% of all profits. Someone can compare with Apple, which iPhone also brings 60-70% of profits, but there is a difference. Everyone needs memory. But the demand for it in the near future will be low. We analyzed this point here. Samsung said that the first quarter of 2019 will not be better, but it is likely that traction will appear in the second quarter. Mobile phones didn't work either. Q4 2018 can be called perhaps the worst (after the Note 7 recall) in the last 8 years.

I like Samsung reports because they write everything clearly, as it is. You can even not analyze, but quote selected fragments:

  • About memory. The main customers do not buy, because they cannot understand how much is needed and whether it is needed at all, because it seems that the crisis.
  • About NAND-memory (SSD, flash drives). The market has increased supply, while demand has decreased.
  • About screens. Strong demand for flexible OLEDs (!), but regular OLEDs are competing hard against LTPS LCDs. In the next quarter, the situation will worsen as competition continues to grow. The company plans to work more closely on detuning from competitors, offering a unique design and new features (just a plus for ordinary consumers).
  • Demand for chipsets has fallen. The smartphone market is slowing down, and mining chipsets are even more so.
  • About smartphones. The market is stagnant. They plan to solve the problem with the launch of the Galaxy S10, which will be significantly different in design (and, of course, the technical specifications are just superb). So, in 2019, the line of flagships is waiting for changes. New design, new products. Samsung also plans to pay more attention to the middle price segment and the lower-middle segment. The company began to suspect that competitors in these segments have better hardware, so Samsung will improve performance and generally reorganize current lines.
  • But TVs and refrigerators are fine. They bring little, but they grow. The demand for premium models is on the rise. They especially love the magnificent Family Hub refrigerators, which I also wrote about in “Things” last January.

The last quarter is marked in brown on the chart.

Echo: Should Apple buy Netflix?

Microsoft

Overall results

Every time I worked with Microsoft's financial statements, I complained that the company could not bring it to a digestible state. It used to be a Word file. Apparently, Microsoft remembered that they know how to do cloud-based Office, since now reporting is a set of Word, Excel and PowerPoint files, as well as cloud-visualized data in Power BI. It is interesting that Microsoft reformatted all previous reporting according to a new model. Everything seems to be fine, but terribly unusual. Actually, this phrase, in my opinion, can characterize the entire activity of the corporation.

So, the company has three main categories that make a profit.

  1. Productivity and Business Processes (all Office, Microsoft Dynamics, LinkedIn)
  2. Intelligent Cloud (all server and cloud products including Microsoft SQL Server, Windows Server, Visual Studio, System Center, CALs, Microsoft Azure, GitHub)
  3. More Personal Computing (Windows, Xbox, MSN plus Surface devices, etc.)

Despite the fact that the largest revenue in the "More Personal Computing" section, this is the least profitable segment. The main profit of Microsoft is brought by cloud services. These are Office 365, Dynamics 365 and Azure. These categories have two-digit growth.

Interesting Notes

  • In general, we can say that Microsoft is now making money on all of its products. Even LinkedIn grew by 29% in money (revenue).
  • I continue to quote the things Nadella said at a meeting with journalists in mid-January. When asked about his plans, Nadella made an interesting remark about the Surface, which suggests that Microsoft is making significant efforts to make Surface into a brand so that people have a special connection with the device (that is, that they really like using Surface). And before that, in one of the podcasts, I heard how the hosts mentioned that developers in the USA love the Surface and even abandon the MacBook in favor of the Surface. And the results that we see in the reports confirm this. Microsoft separately emphasized that the demand is from both commercial structures and private users.

As you can see in the chart below, Surface sales were relatively stable at $1 billion per quarter, and just in the last quarter, revenue jumped to $1.9 billion. During the meeting, Surface was simply told that "sales exceeded expectations." Allegedly, the Surface Pro 6 and other new devices launched in October 2018 hit the market.

Here we can say that, firstly, 1 billion per quarter is about 1.5 million tablets, and 1.8 billion is 2.5 million (assuming the cost of an average Surface for $ 700). In general, such growth is possible, since the initial base is low. Even 2.5 million Surfaces is less than 4% of the PC market.

I haven't found confirmation anywhere, but there is a strong suspicion that Microsoft, which promotes the synergy of its solutions, somehow sells Surface as a bundle with other solutions (like bought Office 365 - take a tablet computer at a discount).

  • The company is implementing helper solutions in Office. This mode can be enabled in Excel or PowerPoint, and while you work, Excel will analyze the numbers along the way, look for trends and offer charts.
  • Microsoft is moving Edge to the Chromium engine. This also aligns with the current stated strategy: if we can't offer something unique, we get rid of the product.

Instead of a conclusion, we can say that Microsoft is doing well. Services are growing. Perhaps not as fast as investors and analysts would like (that's why the shares sank after the publication of the financial statements), but it is clear where the company is heading. And most importantly, it is clear how these plans will be implemented. Here with Surface it is not clear why it suddenly began to grow. But these are trifles.

Apple

About the results

In a past issue, Echo wrote why Apple, Samsung, and other companies issue advance notices when the plan doesn't match the fact. The reason is to spread the straw, to give the market time to digest the information.

Look at the chart, it clearly shows when Timothy Cook issued a letter to investors, but on January 30, the official result comes out (which is slightly better than stated in the letter), and the market no longer pays attention.

Echo: Should Apple buy Netflix?

Initially, it was predicted that the result would be 89-93 billion dollars. On January 2, the forecast was reduced to 84 billion, and in fact it turned out to be 84.3 billion dollars, or minus 4.5% compared to the previous first quarter.

Whatever one may say, but in terms of money, the result is still impressive. The main reason for the "shortage" is, of course, the iPhone. The chart below has two tabs. On the first - only the iPhone, on the second - all other products. Divided, as the iPhone accounts for 61% of the company's revenue. For comparison, in 2012 the iPhone accounted for 52%, in 2018 - 70%, and now - 61%. 70% is a clear imbalance, when you could say that Apple is a one-product company. Unfortunately, things improved this quarter, not because Apple made an effort, but because the iPhone sold worse than expected.

Please note that in money terms, the iPhone fell back to the position of 2016, that is, the iPhone 6S. However, the 6S started at $650, while the iPhone XS started at $999. There is a decline in sales in pieces.

The main reason for the decline is China, but it's important to note that the iPhone sold worse in all other markets as well.

The graph shows that it seems that Apple really overestimated its strength, not having thought through everything to the end and not paying attention to the global economic situation. It seems that the whole world has been measured by the home market. Please note that in America, the iPhone sold well. We have already discussed this point:

“This is especially typical for the USA, where most devices are still purchased locked for a specific operator and buyers do not pay the entire amount. For example, at Verizon, the difference between an iPhone X and an XS is less than $5 a month, or one latte at a Starbucks coffee shop."

Echo: Should Apple buy Netflix?

But outside the US, buyers usually have to pay full price for the devices. I really liked how Timothy Cook lamented that the operators are no longer willing to subsidize the purchase of iPhones in Japan:

“For various reasons, iPhone subsidies are becoming less common. In Japan, for example, iPhone purchases have traditionally been subsidized by carriers and tied to service contracts. Today, local laws significantly limit these subsidies. As a result, less than half of the iPhones sold in Japan in Q1 this year were subsidized compared to about three-quarters a year ago, and the total amount of these subsidies has also decreased.

(For various reasons, iPhone subsidies are becoming increasingly less common. In Japan, for example, iPhone purchases were traditionally subsidized by carriers and bundled with service contracts. Competitive promotional activity frequently increased the amount of subsidy during key periods.

p>

Today, local regulations have significantly restricted those subsidies as well as related competition. As a result, we estimate that less than half of iPhones sold in Japan in 1 of this year were subsidized compared to about three quarters a year ago and that the total value of those subsidies have come down as well).

It's funny, because in reality, Apple has been twisting the arms of local suppliers for a long time, forcing them to subsidize their products. Until in July 2018, someone snitched on the Japan Fair Trade Commission, which was able to reason with Apple. The commission began investigating cases of subsidies starting in 2016. According to the FT, they did without fines, only a harsh conversation, after which Apple dutifully agreed to revise the terms of cooperation.

It's also funny that Tim Cook said that they didn't set too high prices, but the dollar strengthened while the local currencies sank. In Europe and Japan, however, currencies were stable. iPhone sank in all markets where its sales were not subsidized.

And the fall in China was especially strong. I already wrote that in China the iPhone is valued for its brand, luxury component. Chinese users don't care about the operating system. Android or iOS - everything is the same, the main thing is that there is WeChat. Sales data from Apple confirms the thesis. If you look at absolute numbers, then everything is fine (this is the second tab on the chart), but if you compare sales from period to period, the picture is strikingly different. The main message is that iPhones sell well in China, which clearly show that this is a new iPhone, that is, the design plays.

So, compared to the 4S, the iPhone 5 (new stretched design) sold 60% better in China. And 5S in relation to the "five" - ​​only by 30%. iPhone 6 (new design) - and immediately an increase of 70%. Further, the price begins to leave a certain imprint. The iPhone 7 (if we don't talk about Jet Black) didn't look much different either, and the price went up. Result: -12%, to 6S sales. But the iPhone X, despite the first space price tag, sold very well: + 11%. The old design and even higher price tag made the XS fly by in China.

As a conclusion, we can say that the iPhone sells well if it is subsidized. But where users are forced to pay full price, it became clear that Apple crossed the invisible line by setting too high a price tag.

And for China, Apple needs a special strategy that takes into account local realities. There, the new device should be significantly different from the previous one. It is important that it is clear from a distance that this is a new iPhone. Neither Huawei, nor Xiaomi, nor Oppo, namely the iPhone. For some reason, Ralph Lauren polo shirts came to mind. Laughter with laughter, but quite a solution:

Echo: Should Apple buy Netflix?

Other thoughts after the Apple report

After Apple said that it would no longer provide sales figures in units, it became sad. Many were quick to say that the company "fell down" and wants to hide it. There is some truth in this. Apple is trapped in the success of the iPhone. And it is still perceived as a one-product company. This is bad.

Apple decided that they would no longer talk about things, but began to show the marginality of their products and services. The total gross margin is 38%, and the service margin is 62.8%. A year earlier, the service figure was 58.3%.

Apple, like almost everything on the market right now, wants to be a service company. By showing marginality, the company demonstrates that, firstly, it can earn. Unlike other manufacturers that enrich Google first, Apple makes money on its products after the sale (apps from the App Store, Apple Music, iTunes, iCloud, etc.).

Second, note that Apple named its installed base, that is, the user base. It is 1.4 billion devices, of which "more than 900 million" are iPhones.

If Apple continues to provide this data on a regular basis, then it will be possible to consider such an indicator as the average revenue per user. This parameter takes into account, for example, Facebook.

Apple Conclusion

Apple's situation is, frankly, difficult. Lately, the company has focused too much on making money to please shareholders. In this regard, she increases prices and tries to cut the "costs". The boss has already written that the company saves on screens (refused to laminate, so the screen crumbles if broken), and the company apparently also saves on engineers. The same bug on the iPhone that allows eavesdropping, or the clever Facebook and Google that quietly put banned apps in the App Store are all side effects of not having enough testers or enough time to test. For Apple, a careless approach is fatal, since the company claims the protection of user data as one of its advantages.

I think it's obvious to everyone that the company needs new growth points. Discussed this moment in edition. The idea was expressed that Apple needs to release a budget smartphone, restart the SE. I do not agree with this position. I have repeatedly written the idea that Apple users are ready to consider buying only flagship devices. It can be either the current flagship, or the flagship of past years, such as the "five". According to her, it is not clear when a person bought it, recently or a long time ago, and he just likes it. Also, the release of cheap iPhones may have a short-term positive impact on financial performance, but in the end it will lead to such a speculative phenomenon as the destruction of the Apple brand as a company that does not produce products for everyone.

One of the results of the report at Apple was the announcement of the amount of 285.1 billion dollars, which is stored in the company's accounts. And the easiest option, given that Apple plans to develop in the field of services, is the purchase of Netflix. The idea is so obvious that I wrote and went to Google to look. It turned out that an hour before of this, a note came out that JP Morgan also recommended Apple to acquire Netflix.

Echo: Should Apple buy Netflix?

The price of Netflix is ​​148 billion plus 7 billion of debt. JP Morgan went even further, recommending at the same time to buy Sonos and Blizzard. But this is already redundant, since Apple has never been a platform for games, as well as about sound. But buying Netflix would be a great opportunity for the company. As a result, developing your service will become more expensive than buying Netflix.

Conclusion

For us, as consumers, all the perturbations of companies from the text are only a plus. Samsung plans to surprise and improve the line of devices in the lower price segments. The company also wants to sell more interesting screen solutions. And that's great too.

Microsoft is actively involved in development. Moreover, the example of Surface demonstrates that the company does not forget about ordinary consumers. We are also looking forward to the launch of the xCloud gaming service and remember that Microsoft wants to become the “Netflix of the gaming world”.

Apple is also teasing the launch of a new, unknown service. And the situation on the market forces to reduce prices, which is also a plus. Timothy Cook should shift the focus from shareholders to products. And perhaps it's time to spend the huge fortune that Apple has in the accounts. Well, or at least open an Apple bank so that the money works. There will be the most stylish bank in the world.

Echo: maybe Apple should buy Netflix?

February is the month when most companies sum up their financial results.

Content

Short line

About Facebook

The social network unexpectedly hit the jackpot by announcing the results of the fourth quarter. Analysts had expected 16.4, but received $16.91 billion in revenue. Everyone was very happy, and the shares rose. Only this moment (table below) confuses me, and this is taking into account the fact that the number of users does not increase.

< td>2017 < td>30 925

Year Revenue, $mln Expenses, $mln
40,473 20,451
2018 55,838
Height 18/17 38% 51%

About Samsung

Samsung also reported on the results. The main direction of DS (Device Solution, that is, semiconductors, screens) and Mobile sank. 40% and 30% respectively. Total operating income was 10.8 trillion won. Interestingly, semiconductors bring Samsung 78% of all profits. Someone can compare with Apple, which iPhone also brings 60-70% of profits, but there is a difference. Everyone needs memory. But the demand for it in the near future will be low. We analyzed this point here. Samsung said that the first quarter of 2019 will not be better, but it is likely that traction will appear in the second quarter. Mobile phones didn't work either. Q4 2018 can be called perhaps the worst (after the Note 7 recall) in the last 8 years.

I like Samsung reports because they write everything clearly, as it is. You can even not analyze, but quote selected fragments:

  • About memory. The main customers do not buy, because they cannot understand how much is needed and whether it is needed at all, because it seems that the crisis.
  • About NAND-memory (SSD, flash drives). The market has increased supply, while demand has decreased.
  • About screens. Strong demand for flexible OLEDs (!), but regular OLEDs are competing hard against LTPS LCDs. In the next quarter, the situation will worsen as competition continues to grow. The company plans to work more closely on detuning from competitors, offering a unique design and new features (just a plus for ordinary consumers).
  • Demand for chipsets has fallen. The smartphone market is slowing down, and mining chipsets are even more so.
  • About smartphones. The market is stagnant. They plan to solve the problem with the launch of the Galaxy S10, which will be significantly different in design (and, of course, the technical specifications are just superb). So, in 2019, the line of flagships is waiting for changes. New design, new products. Samsung also plans to pay more attention to the middle price segment and the lower-middle segment. The company began to suspect that competitors in these segments have better hardware, so Samsung will improve performance and generally reorganize current lines.
  • But TVs and refrigerators are fine. They bring little, but they grow. The demand for premium models is on the rise. They especially love the magnificent Family Hub refrigerators, which I also wrote about in “Things” last January.

The last quarter is shown in brown on the chart.

Echo: Should Apple buy Netflix?

Microsoft

Overall results

Every time I worked with Microsoft's financial statements, I complained that the company could not bring it to a digestible state. It used to be a Word file. Apparently, Microsoft remembered that they know how to do cloud-based Office, since now reporting is a set of Word, Excel and PowerPoint files, as well as cloud-visualized data in Power BI. It is interesting that Microsoft reformatted all previous reporting according to a new model. Everything seems to be fine, but terribly unusual. Actually, this phrase, in my opinion, can characterize the entire activity of the corporation.

So, the company has three main categories that make a profit.

  1. Productivity and Business Processes (all Office, Microsoft Dynamics, LinkedIn)
  2. Intelligent Cloud (all server and cloud products including Microsoft SQL Server, Windows Server, Visual Studio, System Center, CALs, Microsoft Azure, GitHub)
  3. More Personal Computing (Windows, Xbox, MSN plus Surface devices, etc.)

Despite the fact that the largest revenue in the "More Personal Computing" section, this is the least profitable segment. The main profit of Microsoft is brought by cloud services. These are Office 365, Dynamics 365 and Azure. These categories have two-digit growth.

Interesting Notes

  • In general, we can say that Microsoft is now making money on all of its products. Even LinkedIn grew by 29% in money (revenue).
  • I continue to quote the things Nadella said at a meeting with journalists in mid-January. When asked about his plans, Nadella made an interesting remark about the Surface, which suggests that Microsoft is making significant efforts to make Surface into a brand so that people have a special connection with the device (that is, that they really like using Surface). And before that, in one of the podcasts, I heard how the hosts mentioned that developers in the USA love the Surface and even abandon the MacBook in favor of the Surface. And the results that we see in the reports confirm this. Microsoft separately emphasized that the demand is from both commercial structures and private users.

As you can see in the chart below, Surface sales were relatively stable at $1 billion per quarter, and just in the last quarter, revenue jumped to $1.9 billion. During the meeting, Surface was simply told that "sales exceeded expectations." Allegedly, the Surface Pro 6 and other new devices launched in October 2018 hit the market.

Here we can say that, firstly, 1 billion per quarter is about 1.5 million tablets, and 1.8 billion is 2.5 million (assuming the cost of an average Surface for $ 700). In general, such growth is possible, since the initial base is low. Even 2.5 million Surfaces is less than 4% of the PC market.

I haven't found confirmation anywhere, but there is a strong suspicion that Microsoft, which promotes the synergy of its solutions, somehow sells Surface as a bundle with other solutions (like bought Office 365 - take a tablet computer at a discount).

  • The company is implementing helper solutions in Office. This mode can be enabled in Excel or PowerPoint, and while you work, Excel will analyze the numbers along the way, look for trends and offer charts.
  • Microsoft is moving Edge to the Chromium engine. This also aligns with the current stated strategy: if we can't offer something unique, we get rid of the product.

Instead of a conclusion, we can say that Microsoft is doing well. Services are growing. Perhaps not as fast as investors and analysts would like (that's why the shares sank after the publication of the financial statements), but it is clear where the company is heading. And most importantly, it is clear how these plans will be implemented. Here with Surface it is not clear why it suddenly began to grow. But these are trifles.

Apple

About the results

In a past issue, Echo wrote why Apple, Samsung, and other companies issue advance notices when the plan doesn't match the fact. The reason is to spread the straw, to give the market time to digest the information.

Look at the chart, it clearly shows when Timothy Cook issued a letter to investors, but on January 30, the official result comes out (which is slightly better than stated in the letter), and the market no longer pays attention.

Echo: Should Apple buy Netflix?

Initially, it was predicted that the result would be 89-93 billion dollars. On January 2, the forecast was reduced to 84 billion, and in fact it turned out to be 84.3 billion dollars, or minus 4.5% compared to the previous first quarter.

Whatever one may say, but in terms of money, the result is still impressive. The main reason for the "shortage" is, of course, the iPhone. The chart below has two tabs. On the first - only the iPhone, on the second - all other products. Divided, as the iPhone accounts for 61% of the company's revenue. For comparison, in 2012 the iPhone accounted for 52%, in 2018 - 70%, and now - 61%. 70% is a clear imbalance, when you could say that Apple is a one-product company. Unfortunately, things improved this quarter, not because Apple made an effort, but because the iPhone sold worse than expected.

Please note that in money terms, the iPhone fell back to the position of 2016, that is, the iPhone 6S. However, the 6S started at $650, while the iPhone XS started at $999. There is a decline in sales in pieces.

The main reason for the decline is China, but it's important to note that the iPhone sold worse in all other markets as well.

The graph shows that it seems that Apple really overestimated its strength, not having thought through everything to the end and not paying attention to the global economic situation. It seems that the whole world has been measured by the home market. Please note that in America, the iPhone sold well. We have already discussed this point:

“This is especially typical for the USA, where most devices are still purchased locked for a specific operator and buyers do not pay the entire amount. For example, at Verizon, the difference between an iPhone X and an XS is less than $5 a month, or one latte at a Starbucks coffee shop."

Echo: Should Apple buy Netflix?

But outside the US, buyers usually have to pay full price for the devices. I really liked how Timothy Cook lamented that the operators are no longer willing to subsidize the purchase of iPhones in Japan:

“For various reasons, iPhone subsidies are becoming less common. In Japan, for example, iPhone purchases have traditionally been subsidized by carriers and tied to service contracts. Today, local laws significantly limit these subsidies. As a result, less than half of the iPhones sold in Japan in Q1 this year were subsidized compared to about three-quarters a year ago, and the total amount of these subsidies has also decreased.

(For various reasons, iPhone subsidies are becoming increasingly less common. In Japan, for example, iPhone purchases were traditionally subsidized by carriers and bundled with service contracts. Competitive promotional activity frequently increased the amount of subsidy during key periods.

p>

Today, local regulations have significantly restricted those subsidies as well as related competition. As a result, we estimate that less than half of iPhones sold in Japan in 1 of this year were subsidized compared to about three quarters a year ago and that the total value of those subsidies have come down as well).

It's funny, because in reality, Apple has been twisting the arms of local suppliers for a long time, forcing them to subsidize their products. Until in July 2018, someone snitched on the Japan Fair Trade Commission, which was able to reason with Apple. The commission began investigating cases of subsidies starting in 2016. According to the FT, they did without fines, only a harsh conversation, after which Apple dutifully agreed to revise the terms of cooperation.

It's also funny that Tim Cook said that they didn't set too high prices, but the dollar strengthened while the local currencies sank. In Europe and Japan, however, currencies were stable. iPhone sank in all markets where its sales were not subsidized.

And the fall in China was especially strong. I already wrote that in China the iPhone is valued for its brand, luxury component. Chinese users don't care about the operating system. Android or iOS - everything is the same, the main thing is that there is WeChat. Sales data from Apple confirms the thesis. If you look at absolute numbers, then everything is fine (this is the second tab on the chart), but if you compare sales from period to period, the picture is strikingly different. The main message is that iPhones sell well in China, which clearly show that this is a new iPhone, that is, the design plays.

So, compared to the 4S, the iPhone 5 (new stretched design) sold 60% better in China. And 5S in relation to the "five" - ​​only by 30%. iPhone 6 (new design) - and immediately an increase of 70%. Further, the price begins to leave a certain imprint. The iPhone 7 (if we don't talk about Jet Black) didn't look much different either, and the price went up. Result: -12%, to 6S sales. But the iPhone X, despite the first space price tag, sold very well: + 11%. The old design and even higher price tag made the XS fly by in China.

As a conclusion, we can say that the iPhone sells well if it is subsidized. But where users are forced to pay full price, it became clear that Apple crossed the invisible line by setting too high a price tag.

And for China, Apple needs a special strategy that takes into account local realities. There, the new device should be significantly different from the previous one. It is important that it is clear from a distance that this is a new iPhone. Neither Huawei, nor Xiaomi, nor Oppo, namely the iPhone. For some reason, Ralph Lauren polo shirts came to mind. Laughter with laughter, but quite a solution:

Echo: Should Apple buy Netflix?

Other thoughts after the Apple report

After Apple said that it would no longer provide sales figures in units, it became sad. Many were quick to say that the company "fell down" and wants to hide it. There is some truth in this. Apple is trapped in the success of the iPhone. And it is still perceived as a one-product company. This is bad.

Apple decided that they would no longer talk about things, but began to show the marginality of their products and services. The total gross margin is 38%, and the service margin is 62.8%. A year earlier, the service figure was 58.3%.

Apple, like almost everything on the market right now, wants to be a service company. By showing marginality, the company demonstrates that, firstly, it can earn. Unlike other manufacturers that enrich Google first, Apple makes money on its products after the sale (apps from the App Store, Apple Music, iTunes, iCloud, etc.).

Second, note that Apple named its installed base, that is, the user base. It is 1.4 billion devices, of which "more than 900 million" are iPhones.

If Apple continues to provide this data on a regular basis, then it will be possible to consider such an indicator as the average revenue per user. This parameter takes into account, for example, Facebook.

Apple Conclusion

Apple's situation is, frankly, difficult. Lately, the company has focused too much on making money to please shareholders. In this regard, she increases prices and tries to cut the "costs". The boss has already written that the company saves on screens (refused to laminate, so the screen crumbles if broken), and the company apparently also saves on engineers. The same bug on the iPhone that allows eavesdropping, or the clever Facebook and Google that quietly put banned apps in the App Store are all side effects of not having enough testers or enough time to test. For Apple, a careless approach is fatal, since the company claims the protection of user data as one of its advantages.

I think it's obvious to everyone that the company needs new growth points. Discussed this moment in edition. The idea was expressed that Apple needs to release a budget smartphone, restart the SE. I do not agree with this position. I have repeatedly written the idea that Apple users are ready to consider buying only flagship devices. It can be either the current flagship, or the flagship of past years, such as the "five". According to her, it is not clear when a person bought it, recently or a long time ago, and he just likes it. Also, the release of cheap iPhones may have a short-term positive impact on financial performance, but in the end it will lead to such a speculative phenomenon as the destruction of the Apple brand as a company that does not produce products for everyone.

One of the results of the report at Apple was the announcement of the amount of 285.1 billion dollars, which is stored in the company's accounts. And the easiest option, given that Apple plans to develop in the field of services, is the purchase of Netflix. The idea is so obvious that I wrote and went to Google to look. It turned out that an hour before of this, a note came out that JP Morgan also recommended Apple to acquire Netflix.

Echo: Should Apple buy Netflix?

The price of Netflix is ​​148 billion plus 7 billion of debt. JP Morgan went even further, recommending at the same time to buy Sonos and Blizzard. But this is already redundant, since Apple has never been a platform for games, as well as about sound. But buying Netflix would be a great opportunity for the company. As a result, developing your service will become more expensive than buying Netflix.

Conclusion

For us, as consumers, all the perturbations of companies from the text are only a plus. Samsung plans to surprise and improve the line of devices in the lower price segments. The company also wants to sell more interesting screen solutions. And that's great too.

Microsoft is actively involved in development. Moreover, the example of Surface demonstrates that the company does not forget about ordinary consumers. We are also looking forward to the launch of the xCloud gaming service and remember that Microsoft wants to become the “Netflix of the gaming world”.

Apple is also teasing the launch of a new, unknown service. And the situation on the market forces to reduce prices, which is also a plus. Timothy Cook should shift the focus from shareholders to products. And perhaps it's time to spend the huge fortune that Apple has in the accounts. Well, or at least open an Apple bank so that the money works. There will be the most stylish bank in the world.

Echo: maybe Apple should buy Netflix?

February is the month when most companies sum up their financial results.

Content

Short line

About Facebook

The social network unexpectedly hit the jackpot by announcing the results of the fourth quarter. Analysts had expected 16.4, but received $16.91 billion in revenue. Everyone was very happy, and the shares rose. Only this moment (table below) confuses me, and this is taking into account the fact that the number of users does not increase.

Year Revenue, $ million Expenses, $ million 2017 40,473 20,451 2018 55,838 30,925 Growth 18/17 38% 51%

About Samsung

Samsung also reported on the results. The main direction of DS (Device Solution, that is, semiconductors, screens) and Mobile sank. 40% and 30% respectively. Total operating income was 10.8 trillion won. Interestingly, semiconductors bring Samsung 78% of all profits. Someone can compare with Apple, which iPhone also brings 60-70% of profits, but there is a difference. Everyone needs memory. But the demand for it in the near future will be low. We analyzed this point here. Samsung said that the first quarter of 2019 will not be better, but it is likely that traction will appear in the second quarter. Mobile phones didn't work either. Q4 2018 can be called perhaps the worst (after the Note 7 recall) in the last 8 years.

I like Samsung reports because they write everything clearly, as it is. You can even not analyze, but quote selected fragments:

  • About memory. The main customers do not buy, because they cannot understand how much is needed and whether it is needed at all, because it seems that the crisis.
  • About NAND-memory (SSD, flash drives). The market has increased supply, while demand has decreased.
  • About screens. Strong demand for flexible OLEDs (!), but regular OLEDs are competing hard against LTPS LCDs. In the next quarter, the situation will worsen as competition continues to grow. The company plans to work more closely on detuning from competitors, offering a unique design and new features (just a plus for ordinary consumers).
  • Demand for chipsets has fallen. The smartphone market is slowing down, and mining chipsets are even more so.
  • About smartphones. The market is stagnant. They plan to solve the problem with the launch of the Galaxy S10, which will be significantly different in design (and, of course, the technical specifications are just superb). So, in 2019, the line of flagships is waiting for changes. New design, new products. Samsung also plans to pay more attention to the middle price segment and the lower-middle segment. The company began to suspect that competitors in these segments have better hardware, so Samsung will improve performance and generally reorganize current lines.
  • But TVs and refrigerators are fine. They bring little, but they grow. The demand for premium models is on the rise. They especially love the magnificent Family Hub refrigerators, which I also wrote about in “Things” last January.

The last quarter is marked in brown on the chart.

Microsoft

General results

Every time I worked with Microsoft's financial statements, I complained that the company could not bring it to a digestible state. It used to be a Word file. Apparently, Microsoft remembered that they know how to do cloud-based Office, since now reporting is a set of Word, Excel and PowerPoint files, as well as cloud-visualized data in Power BI. It is interesting that Microsoft reformatted all previous reporting according to a new model. Everything seems to be fine, but terribly unusual. Actually, this phrase, in my opinion, can characterize the entire activity of the corporation.

So, the company has three main categories that make a profit.

  1. Productivity and Business Processes (all Office, Microsoft Dynamics, LinkedIn)
  2. Intelligent Cloud (all server and cloud products including Microsoft SQL Server, Windows Server, Visual Studio, System Center, CALs, Microsoft Azure, GitHub)
  3. More Personal Computing (Windows, Xbox, MSN plus Surface devices, etc.)

Despite the fact that the largest revenue in the "More Personal Computing" section, this is the least profitable segment. The main profit of Microsoft is brought by cloud services. These are Office 365, Dynamics 365 and Azure. These categories have two-digit growth.

Interesting notes

  • In general, we can say that Microsoft is now making money on all of its products. Even LinkedIn grew by 29% in money (revenue).
  • I continue to quote the things Nadella said at a meeting with journalists in mid-January. When asked about his plans, Nadella made an interesting remark about the Surface, which suggests that Microsoft is making significant efforts to make Surface into a brand so that people have a special connection with the device (that is, that they really like using Surface). And before that, in one of the podcasts, I heard how the hosts mentioned that developers in the USA love the Surface and even abandon the MacBook in favor of the Surface. And the results that we see in the reports confirm this. Microsoft separately emphasized that the demand is from both commercial structures and private users.

As you can see in the chart below, Surface sales were relatively stable at $1 billion per quarter, and just in the last quarter, revenue jumped to $1.9 billion. During the meeting, Surface was simply told that "sales exceeded expectations." Allegedly, the Surface Pro 6 and other new devices launched in October 2018 hit the market.

Here we can say that, firstly, 1 billion per quarter is about 1.5 million tablets, and 1.8 billion is 2.5 million (assuming the cost of an average Surface for $ 700). In general, such growth is possible, since the initial base is low. Even 2.5 million Surfaces is less than 4% of the PC market.

I haven't found confirmation anywhere, but there is a strong suspicion that Microsoft, which promotes the synergy of its solutions, somehow sells Surface as a bundle with other solutions (like bought Office 365 - take a tablet computer at a discount).

  • The company is implementing helper solutions in Office. This mode can be enabled in Excel or PowerPoint, and while you work, Excel will analyze the numbers along the way, look for trends and offer charts.
  • Microsoft is moving Edge to the Chromium engine. This also aligns with the current stated strategy: if we can't offer something unique, we get rid of the product.

Instead of a conclusion, we can say that Microsoft is doing well. Services are growing. Perhaps not as fast as investors and analysts would like (that's why the shares sank after the publication of the financial statements), but it is clear where the company is heading. And most importantly, it is clear how these plans will be implemented. Here with Surface it is not clear why it suddenly began to grow. But these are trifles.

Apple

About the results

In a past issue, Echo wrote why Apple, Samsung, and other companies issue advance notices when the plan doesn't match the fact. The reason is to spread the straw, to give the market time to digest the information.

Look at the chart, it clearly shows when Timothy Cook issued a letter to investors, but on January 30, the official result comes out (which is slightly better than stated in the letter), and the market no longer pays attention.

Initially, it was predicted that the result would be 89-93 billion dollars. On January 2, the forecast was reduced to 84 billion, and in fact it turned out to be 84.3 billion dollars, or minus 4.5% compared to the previous first quarter.

Whatever one may say, but in terms of money, the result is still impressive. The main reason for the "shortage" is, of course, the iPhone. The chart below has two tabs. On the first - only the iPhone, on the second - all other products. Divided, as the iPhone accounts for 61% of the company's revenue. For comparison, in 2012 the iPhone accounted for 52%, in 2018 - 70%, and now - 61%. 70% is a clear imbalance, when you could say that Apple is a one-product company. Unfortunately, things improved this quarter, not because Apple made an effort, but because the iPhone sold worse than expected.

Please note that in money terms, the iPhone fell back to the position of 2016, that is, the iPhone 6S. However, the 6S started at $650, while the iPhone XS started at $999. There is a decline in sales in pieces.

The main reason for the decline is China, but it's important to note that the iPhone sold worse in all other markets as well.

The graph shows that it seems that Apple really overestimated its strength, not having thought through everything to the end and not paying attention to the global economic situation. It seems that the whole world has been measured by the home market. Please note that in America, the iPhone sold well. We have already discussed this point:

“This is especially typical for the USA, where most devices are still purchased locked for a specific operator and buyers do not pay the entire amount. For example, at Verizon, the difference between an iPhone X and an XS is less than $5 a month, or one latte at a Starbucks coffee shop."

But outside the US, buyers usually have to pay full price for the devices. I really liked how Timothy Cook lamented that the operators are no longer willing to subsidize the purchase of iPhones in Japan:

“For various reasons, iPhone subsidies are becoming less common. In Japan, for example, iPhone purchases have traditionally been subsidized by carriers and tied to service contracts. Today, local laws significantly limit these subsidies. As a result, less than half of the iPhones sold in Japan in Q1 this year were subsidized compared to about three-quarters a year ago, and the total amount of these subsidies has also decreased.

(For various reasons, iPhone subsidies are becoming increasingly less common. In Japan, for example, iPhone purchases were traditionally subsidized by carriers and bundled with service contracts. Competitive promotional activity frequently increased the amount of subsidy during key periods.

p>

Today, local regulations have significantly restricted those subsidies as well as related competition. As a result, we estimate that less than half of iPhones sold in Japan in 1 of this year were subsidized compared to about three quarters a year ago and that the total value of those subsidies have come down as well).

It's funny, because in reality, Apple has been twisting the arms of local suppliers for a long time, forcing them to subsidize their products. Until in July 2018, someone snitched on the Japan Fair Trade Commission, which was able to reason with Apple. The commission began investigating cases of subsidies starting in 2016. According to the FT, they did without fines, only a harsh conversation, after which Apple dutifully agreed to revise the terms of cooperation.

It's also funny that Tim Cook said that they didn't set too high prices, but the dollar strengthened while the local currencies sank. In Europe and Japan, however, currencies were stable. iPhone sank in all markets where its sales were not subsidized.

And the fall in China was especially strong. I already wrote that in China the iPhone is valued for its brand, luxury component. Chinese users don't care about the operating system. Android or iOS - everything is the same, the main thing is that there is WeChat. Sales data from Apple confirms the thesis. If you look at absolute numbers, then everything is fine (this is the second tab on the chart), but if you compare sales from period to period, the picture is strikingly different. The main message is that iPhones sell well in China, which clearly show that this is a new iPhone, that is, the design plays.

So, compared to the 4S, the iPhone 5 (new stretched design) sold 60% better in China. And 5S in relation to the "five" - ​​only by 30%. iPhone 6 (new design) - and immediately an increase of 70%. Further, the price begins to leave a certain imprint. The iPhone 7 (if we don't talk about Jet Black) didn't look much different either, and the price went up. Result: -12%, to 6S sales. But the iPhone X, despite the first space price tag, sold very well: + 11%. The old design and even higher price tag made the XS fly by in China.

As a conclusion, we can say that the iPhone sells well if it is subsidized. But where users are forced to pay full price, it became clear that Apple crossed the invisible line by setting too high a price tag.

And for China, Apple needs a special strategy that takes into account local realities. There, the new device should be significantly different from the previous one. It is important that it is clear from a distance that this is a new iPhone. Neither Huawei, nor Xiaomi, nor Oppo, namely the iPhone. For some reason, Ralph Lauren polo shirts came to mind. Laughter with laughter, but quite a solution:

Other thoughts after the Apple report

After Apple said that it would no longer provide sales figures in units, it became sad. Many were quick to say that the company "fell down" and wants to hide it. There is some truth in this. Apple is trapped in the success of the iPhone. And it is still perceived as a one-product company. This is bad.

Apple decided that they would no longer talk about things, but began to show the marginality of their products and services. The total gross margin is 38%, and the service margin is 62.8%. A year earlier, the service figure was 58.3%.

Apple, like almost everything on the market right now, wants to be a service company. By showing marginality, the company demonstrates that, firstly, it can earn. Unlike other manufacturers that enrich Google first, Apple makes money on its products after the sale (apps from the App Store, Apple Music, iTunes, iCloud, etc.).

Second, note that Apple named its installed base, that is, the user base. It is 1.4 billion devices, of which "more than 900 million" are iPhones.

If Apple continues to provide this data on a regular basis, then it will be possible to consider such an indicator as the average revenue per user. This parameter takes into account, for example, Facebook.

Apple Conclusion

Apple's situation is, frankly, difficult. Lately, the company has focused too much on making money to please shareholders. In this regard, she increases prices and tries to cut the "costs". The boss has already written that the company saves on screens (refused to laminate, so the screen crumbles if broken), and the company apparently also saves on engineers. The same bug on the iPhone that allows eavesdropping, or the clever Facebook and Google that quietly put banned apps in the App Store are all side effects of not having enough testers or enough time to test. For Apple, a careless approach is fatal, since the company claims the protection of user data as one of its advantages.

I think it's obvious to everyone that the company needs new growth points. Discussed this moment in edition. The idea was expressed that Apple needs to release a budget smartphone, restart the SE. I do not agree with this position. I have repeatedly written the idea that Apple users are ready to consider buying only flagship devices. It can be either the current flagship, or the flagship of past years, such as the "five". According to her, it is not clear when a person bought it, recently or a long time ago, and he just likes it. Also, the release of cheap iPhones may have a short-term positive impact on financial performance, but in the end it will lead to such a speculative phenomenon as the destruction of the Apple brand as a company that does not produce products for everyone.

One of the results of the report at Apple was the announcement of the amount of 285.1 billion dollars, which is stored in the company's accounts. And the easiest option, given that Apple plans to develop in the field of services, is the purchase of Netflix. The idea is so obvious that I wrote and went to Google to look. It turned out that an hour earlier there was a note that JP Morgan had also recommended Apple to acquire Netflix.

One of the results of the report at Apple was the announcement of the amount of 285.1 billion dollars, which is stored in the company's accounts. And the easiest option, given that Apple plans to develop in the field of services, is the purchase of Netflix. The idea is so obvious that I wrote and went to Google to look. It turned out that an hour before At the same time, it was reported that JP Morgan also recommended Apple to acquire Netflix.

The price of Netflix is ​​148 billion plus 7 billion of debt. JP Morgan went even further, recommending at the same time to buy Sonos and Blizzard. But this is already redundant, since Apple has never been a platform for games, as well as about sound. But buying Netflix would be a great opportunity for the company. As a result, developing your service will become more expensive than buying Netflix.

Conclusion

For us, as consumers, all the perturbations of companies from the text are only a plus. Samsung plans to surprise and improve the line of devices in the lower price segments. The company also wants to sell more interesting screen solutions. And that's great too.

Microsoft is actively involved in development. Moreover, the example of Surface demonstrates that the company does not forget about ordinary consumers. We are also looking forward to the launch of the xCloud gaming service and remember that Microsoft wants to become the “Netflix of the gaming world”.

Apple is also teasing the launch of a new, unknown service. And the situation on the market forces to reduce prices, which is also a plus. Timothy Cook should shift the focus from shareholders to products. And perhaps it's time to spend the huge fortune that Apple has in the accounts. Well, or at least open an Apple bank so that the money works. There will be the most stylish bank in the world.