Instant Reaction: Apple Beats on Sales and Earnings

Bloomberg Audio Studios, podcasts, radio news. Apple second quarter revenue 0:00:10.119 --> 0:00:12.879 ninety point seventy five billion. That's slightly better than the 0:00:12.920 --> 0:00:15.760 forecast of ninety point three to three billion. iPhone revenue 0:00:15.960 --> 0:00:18.600 forty five point ninety six billions, slightly above the estimate 0:00:18.600 --> 0:00:21.279 of forty five point seventy six billion. The company here's 0:00:21.280 --> 0:00:23.600 a big one to buy back additional one hundred and 0:00:23.720 --> 0:00:27.800 ten billion dollars worth of shares and boosting its quarterly dividend. 0:00:28.080 --> 0:00:30.280 That's the Apple playbook, and it is now up two 0:00:30.320 --> 0:00:33.920 point three percent. Initial reaction here in the after mark, Yeah. 0:00:33.760 --> 0:00:35.519 I was going to say, who cares about those other numbers. 0:00:35.560 --> 0:00:37.720 It's that buyback of additional one hundred and ten billion 0:00:37.760 --> 0:00:40.560 dollars of shares and boosting that quarterly dividend that certainly 0:00:40.600 --> 0:00:44.640 has investors expected. Some additional color here. Second quarter Greater 0:00:44.760 --> 0:00:48.479 China revenue Carol sixteen point three seven billion. Even though 0:00:48.479 --> 0:00:50.639 that was a decline of over eight percent year over year, 0:00:50.680 --> 0:00:53.160 it still did beat estimates of fifteen point eight seven 0:00:53.280 --> 0:00:56.040 billion dollars. Second quarter revenue coming in above estimates at 0:00:56.120 --> 0:00:59.080 ninety point seventy five billion. Estimates are for ninety point 0:00:59.120 --> 0:01:02.080 three to three iPhone revenue also coming in above estimates 0:01:02.120 --> 0:01:05.080 forty five point nine to six billion. Estimates were forty 0:01:05.080 --> 0:01:07.080 five point seven six billion dollars. 0:01:07.120 --> 0:01:10.640 Apple raising that dividend to twenty five cents a share 0:01:10.680 --> 0:01:13.600 from the previous dividend of twenty four cents a share. 0:01:13.640 --> 0:01:16.360 So just to keep in mind that we start, you know, slowly. 0:01:16.400 --> 0:01:19.000 We've seen all of these big tech companies, the Magnificent 0:01:19.040 --> 0:01:21.320 seven offering up things like a dividend and so on. 0:01:21.400 --> 0:01:24.399 Our own Mark German all over this story. Here's his take. Initially, 0:01:24.600 --> 0:01:27.440 Apple sales decline less sharply than feared last quarter, held 0:01:27.480 --> 0:01:30.679 by stronger than expected demand in China, sparking optimism that 0:01:30.760 --> 0:01:33.920 the company slow down, maybe easing. Apple also set it 0:01:33.959 --> 0:01:36.200 expects three turned sales growth in the current period, with 0:01:36.280 --> 0:01:39.000 revenue climbing by a percentage in the low single digits. 0:01:39.200 --> 0:01:43.240 That's according to Luka Maistri, the company's CFO. He told 0:01:43.319 --> 0:01:45.600 ut Bloomberg Television's Emily Chang in an interview. 0:01:45.720 --> 0:01:47.920 All right, so let's get some analysis right now. Our 0:01:47.960 --> 0:01:50.680 own Ana Agrana is standing by of our Bloomberg intelligence 0:01:50.720 --> 0:01:53.680 team on RAG. You've got the numbers, and of course 0:01:53.720 --> 0:01:56.200 the additional big buy back of one hundred and ten 0:01:56.240 --> 0:01:58.920 billion dollars worth of share, boosting its quarterly dividend. But 0:01:58.960 --> 0:02:02.040 it looks like, you know, they came in either online 0:02:02.080 --> 0:02:04.200 or better than expected. But what's your smart take on this? 0:02:05.280 --> 0:02:07.480 Yeah, I would say anything. The number that stands out 0:02:07.520 --> 0:02:10.520 really is that the decline in China was not as 0:02:10.600 --> 0:02:14.200 bad as I guess it was communicated before, so slightly 0:02:14.400 --> 0:02:18.079 better than before, but it's still overall still a negative number. 0:02:18.320 --> 0:02:20.160 There is no and then you know, we will find 0:02:20.160 --> 0:02:22.680 out on the conference call whether they make a comment 0:02:22.800 --> 0:02:24.480 or not, or what kind of guidance they give for 0:02:24.600 --> 0:02:27.399 next quarter. But overall, I would say the results were 0:02:27.520 --> 0:02:30.720 okay compared to I'd say going into the quarter when 0:02:31.080 --> 0:02:33.000 the pessimism is very high. 0:02:33.040 --> 0:02:35.840 What's the big headline here? Is it the boarder proving 0:02:35.880 --> 0:02:37.720 plans to buy back an additional one hundred and ten 0:02:37.720 --> 0:02:40.360 billion dollars worth of company stocks? Is it Apple increasing 0:02:40.400 --> 0:02:42.760 its dividend four percent to twenty five cents a share? 0:02:43.040 --> 0:02:45.160 Are those the numbers that investors should be focused on 0:02:45.240 --> 0:02:45.600 right now? 0:02:46.639 --> 0:02:49.200 I would have been expecting, you know, them to buy 0:02:49.200 --> 0:02:51.440 at least one hundred million dollars of stock every year. 0:02:51.520 --> 0:02:54.120 So that's you know, to me at a table stake 0:02:54.160 --> 0:02:56.560 ten billion. Yeah, it's just it's just normal. I really 0:02:56.639 --> 0:02:58.600 need to know where the growth is going to come from, 0:02:58.919 --> 0:03:01.000 and you know, how our things shaping up for the 0:03:01.000 --> 0:03:03.839 second half of the year. And but most importantly, what 0:03:03.919 --> 0:03:06.440 are they doing in the AI of you know, arena 0:03:06.480 --> 0:03:08.760 at this point and what kind of features should we 0:03:08.800 --> 0:03:09.760 expect going forward. 0:03:10.280 --> 0:03:13.720 So remind us to Honora, this company typically doesn't release 0:03:13.880 --> 0:03:16.079 the outlook in their call. I forget. I mean you 0:03:16.160 --> 0:03:18.680 talk about it on the call, but not in the release, correct. 0:03:18.440 --> 0:03:20.440 Yeah, that's not in the release. They're going to give 0:03:20.520 --> 0:03:23.519 some indication about each of the product lines on the call. 0:03:23.720 --> 0:03:25.880 So when we look at these results, you know, services 0:03:25.960 --> 0:03:29.760 is good, you know, iPhone modestly better, you know overall, 0:03:29.800 --> 0:03:32.480 I would say, in line to slightly better quarter. But 0:03:32.639 --> 0:03:35.880 it all boils down to the commentary on the conference 0:03:35.880 --> 0:03:38.880 call about how the things shaping up in the current quarter. 0:03:39.120 --> 0:03:43.120 So if they are talking down China in particular, or 0:03:43.160 --> 0:03:45.800 revenues or overall, that is going to get you concerned. 0:03:46.640 --> 0:03:48.720 Yeah, I mean that is going to you know all 0:03:48.720 --> 0:03:50.840 the all the you know, the current you would say, 0:03:50.880 --> 0:03:53.440 the minor beat will be all offset by if there 0:03:53.480 --> 0:03:57.040 are any comments negative comments about you know, continued weakness 0:03:57.120 --> 0:03:59.800 of the iPhone in the third quarter, because remember, if 0:03:59.800 --> 0:04:03.320 we consensus right now, iPhone revenue for next quarter is 0:04:03.400 --> 0:04:06.240 supposed to be down two percent. Now, remember in this 0:04:06.360 --> 0:04:08.680 quarter was down ten percent, So we need to know 0:04:08.720 --> 0:04:11.600 whether that two minus two percent holds true or are 0:04:11.600 --> 0:04:14.040 we going to see better than that in line or worse. 0:04:14.560 --> 0:04:16.440 Shear's higher in the after hours right now by about 0:04:16.480 --> 0:04:19.440 four percent. Fair to say, we're seeing this reaction as 0:04:19.480 --> 0:04:22.240 a result of just expectations being so low going into 0:04:22.240 --> 0:04:22.800 this exactly. 0:04:22.920 --> 0:04:25.680 Yeah, yeah, absolutely, this is this is a true game 0:04:25.760 --> 0:04:28.400 of where pessimism has been so high and they go 0:04:28.880 --> 0:04:30.840 out and you know, beat by a slight amount. But 0:04:31.160 --> 0:04:33.880 again I will give you my final verdict after the call. 0:04:34.080 --> 0:04:36.160 Yeah, and we're also seeing where we said Greater China 0:04:36.200 --> 0:04:39.880 revenue better than expected, it was still about a billion 0:04:39.880 --> 0:04:42.680 and a half low a year ago. Sales are down considerably. 0:04:42.760 --> 0:04:45.200 Also in Japan, the rest of Asia Pacific, and in 0:04:45.200 --> 0:04:47.599 the Americas. The lone bright spot seems to be some 0:04:47.760 --> 0:04:50.839 minor growth in Europe. You know, it's interesting on surveillance 0:04:50.839 --> 0:04:54.440 this morning, Ana Rag Tom Keane asking one of his guests, 0:04:54.480 --> 0:04:56.559 is this a growth stock? Is this a value stock? 0:04:56.600 --> 0:04:57.960 How do you think about it? I know you don't 0:04:57.960 --> 0:05:00.840 give stock recommendations, but in terms of the growth metrics, 0:05:01.160 --> 0:05:04.359 it's always big numbers. But is it big growth numbers 0:05:04.360 --> 0:05:05.640 anymore when it comes to Apple. 0:05:06.800 --> 0:05:08.800 No, we don't think it's good growth numbers for Apple 0:05:08.839 --> 0:05:11.880 at all, only because I think the big spike we 0:05:11.920 --> 0:05:14.479 saw during the pandemic, people buying a lot of iPads, 0:05:14.560 --> 0:05:17.760 computers or AirPods, all of that is now, you know, 0:05:17.839 --> 0:05:20.920 basically you could say haunting them. We are coming into 0:05:20.960 --> 0:05:23.000 a world where Apple's growth rate is going to hover 0:05:23.120 --> 0:05:25.640 somewhere between zero to five percent for at least the 0:05:25.720 --> 0:05:28.360 next two to three years. Now that's a good case. 0:05:28.880 --> 0:05:31.320 We really need to get make sure that the China 0:05:31.720 --> 0:05:35.479 situation is handled, even if even before we can make 0:05:35.520 --> 0:05:38.159 that claim. Otherwise it's going to be closer to that 0:05:38.279 --> 0:05:40.839 zero to two percent rather than closer to five percent. 0:05:40.960 --> 0:05:44.400 Honor Ragaran Mark German on the lifeblog, making the point 0:05:44.440 --> 0:05:47.280 that the company declined nearly across the board on an 0:05:47.279 --> 0:05:50.080 annual basis, despite the fact that they beat Wall Street estimates. 0:05:50.120 --> 0:05:53.479 So that's overall revenue the iPhone buy a lot, the 0:05:53.520 --> 0:05:57.320 iPad buy a lot, Wearables, home and accessories, buy a lot. 0:05:57.560 --> 0:05:59.520 The bright spots are growth and services and for the 0:05:59.560 --> 0:06:02.000 Mac to the M three due to the M three 0:06:02.000 --> 0:06:05.440 Mac book care. Let's talk services. This is a category 0:06:05.480 --> 0:06:07.880 that was fair to say, was really created under Tim 0:06:07.960 --> 0:06:10.880 Cook and it's just been an incredible growth over the 0:06:10.960 --> 0:06:14.120 last few years. What are the bright spots within services? 0:06:14.880 --> 0:06:17.479 So in our view, services is really what's holding Apple 0:06:17.520 --> 0:06:20.400 together only because it gives you in the ecosystem field. 0:06:20.480 --> 0:06:23.200 It's not easy to get out of the ecosystem and 0:06:23.279 --> 0:06:25.880 leave Apple for another product. And which is why you know, 0:06:25.960 --> 0:06:29.279 the numbers over here are truly important because you know 0:06:29.320 --> 0:06:32.040 this time they grew around close to fourteen percent if 0:06:32.080 --> 0:06:35.320 I remember correctly, that's that's better than what the company 0:06:35.320 --> 0:06:38.560 had initially you know indicated. So this is this is 0:06:38.560 --> 0:06:41.760 a growth driver. This is what provides value to the ecosystem, 0:06:42.080 --> 0:06:43.840 and we are hoping that they're going to come out 0:06:43.839 --> 0:06:46.560 and you know, talk good things about the next quatter 0:06:46.600 --> 0:06:48.919 also from services, because this is the only growth drivate 0:06:49.000 --> 0:06:49.599 left of this point. 0:06:49.600 --> 0:06:52.039 Hey Anna rok, how much of now it's just under 0:06:52.120 --> 0:06:54.279 a four percent gain here in the aftermarket for shares 0:06:54.279 --> 0:06:56.719 of Apple. How much of it is at a relief 0:06:56.720 --> 0:06:59.200 that it wasn't worse than expected, especially when it comes 0:06:59.240 --> 0:07:01.640 to what's going on in China, but also that big 0:07:01.680 --> 0:07:03.880 boost in terms of buyback and the dividend. 0:07:04.720 --> 0:07:06.960 Yeah, it is a big relief, frankly, because again, this 0:07:07.080 --> 0:07:09.840 is the one company everybody has been concerned about over 0:07:09.840 --> 0:07:12.040 the last twelve months. Now, that's why I'm saying, this 0:07:12.120 --> 0:07:15.040 is not like you know, Amazon or Microsoft beating their 0:07:15.040 --> 0:07:17.640 cloud numbers by a big amount. It's just you know, 0:07:17.720 --> 0:07:20.320 somebody saying, oh my god, it's not bad enough, It's 0:07:20.480 --> 0:07:23.480 just okay. So it's a very different sentiment. But again 0:07:23.560 --> 0:07:27.360 that's the way market behaves, Frankly, it's a game of expectations. 0:07:27.560 --> 0:07:28.960 But I mean, how much of the jump in the 0:07:29.000 --> 0:07:31.200 aftermarket is it mostly just that it wasn't worse than 0:07:31.280 --> 0:07:33.000 is expected? Or is it also a big check of 0:07:33.000 --> 0:07:33.480 the buyback. 0:07:34.320 --> 0:07:35.960 Now, the buybacks, as I said, they do about one 0:07:36.000 --> 0:07:37.680 hundred million dollars a year, so one hundred and ten 0:07:37.680 --> 0:07:38.720 billion is not a big deal. 0:07:39.480 --> 0:07:42.480 Go to quarterly dividend increasing penny. 0:07:42.800 --> 0:07:45.280 Yeah, But once again, you know, this is a technology stock. 0:07:45.360 --> 0:07:47.640 We really need to see the growth for this company 0:07:47.720 --> 0:07:49.840 to actually see their valuation go up. 0:07:49.920 --> 0:07:51.800 Okay, so what has you concerned here? 0:07:53.120 --> 0:07:55.080 I mean, I just want to know what's happening in China. 0:07:55.120 --> 0:07:58.040 Frankly we don't. This report has not has told me 0:07:58.120 --> 0:08:00.320 that the things in China are not as bad as 0:08:00.440 --> 0:08:02.680 what the street was looking at. But that doesn't mean 0:08:02.720 --> 0:08:03.800 it's still a decline. 0:08:03.880 --> 0:08:05.520 How much of an issue is it? And again Mark 0:08:05.560 --> 0:08:08.560 Krman pointing this out, Wearable's Home and Accessories a big decline, 0:08:08.600 --> 0:08:11.480 dipping nearly a billion dollars. He says it's shocking because 0:08:11.480 --> 0:08:13.520 it's the same quarter that Apple launched the Vision Pro, 0:08:13.600 --> 0:08:16.280 which is included in that category, its first major new 0:08:16.280 --> 0:08:19.440 product in nearly a decade. Bad news for Vision Pro. 0:08:20.360 --> 0:08:23.960 Yeah, we were never expecting any major contribution from that device. 0:08:24.000 --> 0:08:26.800 Think about it, three five hundred dollars. Even if you 0:08:26.840 --> 0:08:29.280 sell four hundred thousand units the entire year, which is 0:08:29.520 --> 0:08:31.720 very big, you're not going to get that much revenue 0:08:31.720 --> 0:08:35.040 boost from it. So it's not really a needle mover. 0:08:35.360 --> 0:08:37.760 The thing that actually surprised me more was that the 0:08:37.800 --> 0:08:41.000 IPID decline was very sharp. Now, this is something that 0:08:41.120 --> 0:08:44.240 I think they're going to have to explain on the call, 0:08:44.600 --> 0:08:47.199 and they're launching a new series next week. So seventeen 0:08:47.200 --> 0:08:49.640 percent decline is what I remember, you know, briefly from 0:08:49.920 --> 0:08:53.120 a couple of minutes ago. That's a big decline in iPads. Also, 0:08:53.320 --> 0:08:54.280 all right, gonna lead there. 0:08:54.280 --> 0:08:56.800 We know you've got lots going on, so appreciate your 0:08:56.840 --> 0:09:01.079 immediate response to Apple earnings. Our own Ragrana, who follows 0:09:01.120 --> 0:09:03.800 Apple for a Bloomberg Intelligence team. Apple shares, by the way, 0:09:04.120 --> 0:09:07.240 continuing to move up in the aftermarket, up about three 0:09:07.280 --> 0:09:09.679 and a half percent. We've got another great voice for 0:09:09.760 --> 0:09:13.680 us on this, Dan Morgan, senior portfolio manager at Sonova's Trust, Dan, 0:09:13.679 --> 0:09:14.920 which jumps out for you here. 0:09:16.679 --> 0:09:18.640 Well, I'm trying to come up with some great ideas 0:09:18.640 --> 0:09:21.679 different than what you've already talked about. Again, it was 0:09:21.760 --> 0:09:23.760 kind of a mixed report, I think. You know, as 0:09:23.800 --> 0:09:26.040 you were talking about earlier. The big things that stood 0:09:26.040 --> 0:09:29.760 out to me were obviously the better than better than 0:09:29.800 --> 0:09:35.000 expected numbers in China. You know, obviously iPhone a slight beat, 0:09:35.240 --> 0:09:38.360 which is a positive. But you know, Carol Timo, it's 0:09:38.440 --> 0:09:41.199 kind of interesting. I've been following Apple stock for about 0:09:41.200 --> 0:09:44.640 thirty years, and I can remember back in twenty fourteen, 0:09:44.760 --> 0:09:48.400 they had a very similar situation where everybody was very negative. 0:09:48.440 --> 0:09:51.560 They were having issues in China and the stock was 0:09:51.559 --> 0:09:52.360 really floundering. 0:09:52.400 --> 0:09:53.360 And then they came out and. 0:09:53.320 --> 0:09:55.560 They did a seven for one stock split, they raised 0:09:55.559 --> 0:09:58.520 a dividend, and they started buying more shares and everybody 0:09:58.559 --> 0:10:01.840 went crazy. So it's kind of interesting in this scenario, 0:10:01.960 --> 0:10:04.439 we see the dividend going up, and we see, as 0:10:04.440 --> 0:10:07.200 you were talking about before, an announcement of one hundred 0:10:07.200 --> 0:10:10.400 and ten a billion dollars are going to purchase at stock. 0:10:11.000 --> 0:10:12.559 It'd be interesting to see if they call up thing 0:10:12.559 --> 0:10:15.000 else on the conference call in terms of, you know, 0:10:15.040 --> 0:10:18.920 financial engineering to try to kind of reinvigorate interest back 0:10:18.960 --> 0:10:19.520 into Apple. 0:10:19.920 --> 0:10:22.240 Well, you know, I'm kind of glad you went there 0:10:22.320 --> 0:10:24.439 because I mean, and this maybe just gets to how 0:10:24.440 --> 0:10:28.080 do we classify Apple. I mean, this is a behemoth, 0:10:28.640 --> 0:10:31.000 and I feel like whenever the numbers come across, maybe 0:10:31.040 --> 0:10:33.959 the growth rate isn't there, but I mean, revenue above 0:10:34.080 --> 0:10:36.400 ninety billion dollars every time, we have to kind of 0:10:36.440 --> 0:10:38.719 dissect these numbers, Dan, and we've done it a lot 0:10:38.720 --> 0:10:40.520 of times with you. I mean, this is a company 0:10:40.559 --> 0:10:44.600 that's very entrenched globally, kind of in the consumer space, 0:10:44.760 --> 0:10:47.840 and I just I think is that enough to continue 0:10:47.960 --> 0:10:49.840 just by selling a lot of stuff? As long as 0:10:49.880 --> 0:10:51.880 they continue to sell a lot of stuff, even if 0:10:51.880 --> 0:10:56.120 the growth trajectory isn't there, still makes it an interesting 0:10:56.120 --> 0:10:59.000 and engaging company for investors. 0:11:00.080 --> 0:11:02.000 Did on the button, Carroll, I mean, just think about 0:11:02.000 --> 0:11:04.640 the new vision pro I mean, they're supposed to do 0:11:04.720 --> 0:11:08.800 four hundred million dollars in revenue alone just on that product. 0:11:09.280 --> 0:11:11.560 And I heard you just mentioned that the wearables missed, 0:11:12.559 --> 0:11:14.880 so it's kind of itching. That's more than some companies 0:11:14.920 --> 0:11:17.480 generate toil a revenue. And you're right. I mean, they 0:11:17.480 --> 0:11:20.640 have what one point five billion users you put together 0:11:21.240 --> 0:11:23.360 the whole house, it's close to two billion when you 0:11:23.400 --> 0:11:26.080 look at all the different services that they have, and 0:11:26.280 --> 0:11:29.760 it's just a tremendous cash generator. I'm sure you've talked before, 0:11:30.360 --> 0:11:33.079 what one hundred and seventy two billion dollars with marketable 0:11:33.120 --> 0:11:36.080 securities and cash. They generate free cash flow about one 0:11:36.160 --> 0:11:39.520 hundred and five hundred and seven billion. So those numbers 0:11:39.960 --> 0:11:42.240 are kind of going back to the Warrant Buffett school 0:11:42.320 --> 0:11:44.720 kind of the old security analysis they teach out to 0:11:44.720 --> 0:11:47.920 your Chicago and you know there's value in that, and 0:11:48.000 --> 0:11:51.160 even though we want to see an incredible new AI 0:11:51.280 --> 0:11:53.920 product that's just going to be like the next iPhone, 0:11:54.360 --> 0:11:55.120 it's probably not. 0:11:55.120 --> 0:11:55.720 Going to happen. 0:11:55.760 --> 0:11:57.120 And I think we just have to kind of accept 0:11:57.200 --> 0:11:59.840 that and look at the company just for what it 0:11:59.880 --> 0:12:01.760 is is and it doesn't mean they can increase your 0:12:01.800 --> 0:12:04.680 stock price through these other avenues. Does that make sense? 0:12:04.920 --> 0:12:07.160 Yeah, that makes sense. Dan, Hey, I want to keep 0:12:07.240 --> 0:12:09.319 you because I also want to bring in Markerman, Bloomberg 0:12:09.360 --> 0:12:13.480 News chief technology correspondent, who was fresh off the live blog, 0:12:13.559 --> 0:12:15.920 has the write up that you need to read about 0:12:16.160 --> 0:12:18.560 these earnings. But I do want to start at the top. 0:12:18.640 --> 0:12:20.800 Mark big picture, what sticks out to you. We've been 0:12:20.800 --> 0:12:22.800 discussing this NonStop for the past twelve minutes. 0:12:23.800 --> 0:12:26.280 Yeah, so a big picture here is that Apple's doing 0:12:26.280 --> 0:12:28.880 a little bit better than feared. Right, you still see 0:12:29.240 --> 0:12:32.040 declines across all of their segments other than the MAC 0:12:32.120 --> 0:12:34.280 and services, but a little bit better than what we 0:12:34.320 --> 0:12:36.480 had anticipated, or not what we had anticipated, but what 0:12:36.520 --> 0:12:40.400 had some it anticipated. In China, certainly a lot of 0:12:40.400 --> 0:12:44.480 optimism around artificial intelligence. But you know, the big picture 0:12:44.520 --> 0:12:46.800 here is that Apple is no longer in growth mode. 0:12:46.840 --> 0:12:50.120 They're a stable company generating as much revenue as they 0:12:50.160 --> 0:12:51.760 did the past year and the year before that and 0:12:51.800 --> 0:12:54.880 the year before that. So nothing is necessarily broken here, 0:12:54.920 --> 0:12:56.360 but they do need to figure out a way to 0:12:56.400 --> 0:12:58.880 grow in the future, and just it's very unclear how 0:12:58.880 --> 0:12:59.440 that's going to happen. 0:12:59.520 --> 0:13:01.439 Okay, that was next question for you, Mark, What is 0:13:02.320 --> 0:13:04.600 going to return Apple to growth mode? And give us 0:13:04.600 --> 0:13:06.319 a little Apple history here, like when was the last 0:13:06.360 --> 0:13:08.240 time Apple found itself in this position and what did 0:13:08.280 --> 0:13:09.560 they do to get themselves out of it. 0:13:10.880 --> 0:13:12.880 Yeah, so I'm gonna answer this question this way. The 0:13:12.920 --> 0:13:15.440 scariest line that you're going to see in Apple's press 0:13:15.480 --> 0:13:19.040 release is the wearables, home and Accessories number. That's about 0:13:19.080 --> 0:13:23.719 an eight hundred nine hundred million dollar annual decline, pretty considerable, 0:13:23.720 --> 0:13:25.920 about a ten percent decline there for that business that 0:13:25.960 --> 0:13:29.640 covers Airpod's, Apple Watch, appel TV, HomePod, you name it. 0:13:30.040 --> 0:13:32.480 Why is that so concerning? Because this is the launch 0:13:32.559 --> 0:13:35.600 quarter of the Apple Vision pro which is supposedly their 0:13:35.640 --> 0:13:38.360 future and their savior for growth. And if you're going 0:13:38.400 --> 0:13:40.640 to have that category of the Vision pros and have 0:13:40.720 --> 0:13:43.120 one of its biggest declines ever in the launch quarter 0:13:43.200 --> 0:13:45.520 of your new product. Clearly things are not going so 0:13:45.600 --> 0:13:49.640 hot in what you're betting your future on. The last 0:13:49.640 --> 0:13:53.000 time that Apple was sort of stuck in terms of 0:13:53.080 --> 0:13:56.240 lack of growth was really before the iPhone came out. 0:13:56.280 --> 0:13:59.520 So it has the company has been growing for a very, very, 0:13:59.760 --> 0:14:03.000 very long time. Right at some point momentum runs out. 0:14:03.040 --> 0:14:05.360 The momentum has run out. The good news is that 0:14:05.400 --> 0:14:07.160 it's not like they're you know, creating. 0:14:07.840 --> 0:14:10.040 Hey, Mark, real quick, I did bring that up. I 0:14:10.040 --> 0:14:12.280 saw you wrote wrote that about that in the our 0:14:12.320 --> 0:14:14.800 great live blog. Everybody should check that out as they're 0:14:14.800 --> 0:14:17.080 listening to this. And I brought that up to Honor 0:14:17.160 --> 0:14:19.120 rog and he made he made the point that, you know, 0:14:19.440 --> 0:14:22.320 the Vision pro is still very expensive, and even if 0:14:22.320 --> 0:14:25.160 they sold a ton of them, then it wouldn't have 0:14:25.200 --> 0:14:29.040 a huge impact just because it's still relatively early in 0:14:29.080 --> 0:14:30.960 the product life cycle. Why is it still so scary 0:14:31.000 --> 0:14:31.400 to you though? 0:14:32.760 --> 0:14:34.560 Oh well, I mean I look at it differently. It 0:14:34.600 --> 0:14:36.280 is so expensive, and so if they do sell a 0:14:36.280 --> 0:14:38.280 ton of them, that should generate you know, a good 0:14:38.280 --> 0:14:40.480 amount of revenue. Right and we're talking We're not talking 0:14:40.600 --> 0:14:43.200 hundreds of billions of dollars here, We're talking about an 0:14:43.240 --> 0:14:45.520 eight nine billion dollar category, So an eight hundred million 0:14:45.520 --> 0:14:49.120 dollars percent is actually quite a lot. And so if 0:14:49.120 --> 0:14:52.080 they're if they're if they want to bet a lot 0:14:52.120 --> 0:14:54.000 on this product, it's just going to have to start 0:14:54.040 --> 0:14:57.160 creating some momentum. But it's done nothing to date, and 0:14:57.360 --> 0:15:00.000 sales for these types of devices, especially at this price point, 0:15:00.400 --> 0:15:02.960 you're getting the bulk of those sales very early on 0:15:03.040 --> 0:15:05.560 in the process. You're getting them this quarter. So it 0:15:05.600 --> 0:15:08.400 only really goes down here downhill from here for the 0:15:08.480 --> 0:15:11.200 Vision Pro until they make major improvements on price. 0:15:11.400 --> 0:15:12.720 And wait, hey, still with us. 0:15:12.760 --> 0:15:14.600 We're talking with our own marker and in Bloomberg News, 0:15:14.640 --> 0:15:17.600 chief technology correspondent Dan Morgan, still with us, senior portfolio 0:15:17.600 --> 0:15:20.680 manager over at Sonovas. As we are looking at Apple 0:15:20.720 --> 0:15:22.640 shares up about six and a half or set here 0:15:22.680 --> 0:15:26.600 in the aftermarket as their second quarter revenue tops estimates 0:15:26.600 --> 0:15:28.640 and they also boost their buyback. Dan Morgan, come on 0:15:28.680 --> 0:15:30.680 in on it. You've been listening to the conversation thoughts 0:15:30.680 --> 0:15:33.200 when it comes to wearables and the Vision Pro. 0:15:34.880 --> 0:15:36.440 Yeah, I mean that was one of the mark was 0:15:36.480 --> 0:15:38.280 mentioning that was kind of one of the catalysts that 0:15:38.320 --> 0:15:41.640 people are looking out for that. Potentially Apple could start 0:15:41.680 --> 0:15:44.320 to get some momentum back in the stock. We know 0:15:44.360 --> 0:15:46.360 they've got a new tablet that's supposed to come out 0:15:46.800 --> 0:15:50.240 I guess next week in May. They've got the big 0:15:50.280 --> 0:15:52.440 Developers conference in June, and then of course they come 0:15:52.440 --> 0:15:57.040 out with iPhone sixteen and the new iOS eighteen in September. 0:15:57.080 --> 0:15:59.640 So there are going to be some opportunities down the road, guys. 0:15:59.680 --> 0:16:02.320 I know this reports as exciting as we would have 0:16:02.320 --> 0:16:05.720 hoped for for Apple to kind of reinvigorate, you know, 0:16:06.560 --> 0:16:09.000 interest in what they're doing obviously along that road. Hopefully 0:16:09.000 --> 0:16:11.720 they'll lay out some sort of AI roadmap that's a 0:16:11.720 --> 0:16:13.680 little more specific than what they have so far on 0:16:13.680 --> 0:16:16.640 the conference calls. But again, I think this is just 0:16:16.720 --> 0:16:18.960 kind of a quiet period right now for Apple, and 0:16:20.000 --> 0:16:21.360 I don't think we have to hit I don't think 0:16:21.400 --> 0:16:23.360 you'd hit the panic button if you hold chair. Let's 0:16:23.360 --> 0:16:25.840 just see how this thing plays out. Hey, Mark Germott, 0:16:26.320 --> 0:16:28.760 not everybody's in video, Mark. 0:16:28.640 --> 0:16:31.360 Germant, I'm wondering if you have a question for from 0:16:31.440 --> 0:16:34.080 Dan Morgan, who's been following you know, Apple for thirty years, 0:16:34.080 --> 0:16:36.040 seeing times when you know a lot of investors gave 0:16:36.120 --> 0:16:38.000 up on this company only to see it come roaring back. 0:16:38.000 --> 0:16:39.200 Do you have a question maybe for Dan? 0:16:41.320 --> 0:16:44.200 That's a good question. I don't have a question for Dan, 0:16:44.280 --> 0:16:46.080 but I'd love to engage in a back and forth 0:16:46.520 --> 0:16:49.840 with Dan on this. I mean, you know, I agree 0:16:49.840 --> 0:16:52.120 with you. There is no reason to panic here, Dan, 0:16:52.320 --> 0:16:54.800 especially if you're a shareholder of Apple, right. I mean, 0:16:54.800 --> 0:16:56.920 you put money into Apple. It's kind of like a bond. 0:16:57.600 --> 0:16:59.880 You're not going to lose all your cash there, right, 0:17:00.080 --> 0:17:02.320 But you're also not going to get those in Nvidia 0:17:02.520 --> 0:17:04.960 like returns. At this point. The question is how long 0:17:05.280 --> 0:17:07.760 our investors willing to wait until there's a next big thing? 0:17:08.440 --> 0:17:10.719 And what I will say is I don't anticipate there 0:17:10.760 --> 0:17:13.960 being any new next big thing on the horizon anytime soon, 0:17:14.080 --> 0:17:15.560 so we'll be looking out for that. 0:17:16.320 --> 0:17:18.240 Dan, do you anticipate any next big thing being on 0:17:18.240 --> 0:17:18.760 the horizon? 0:17:20.200 --> 0:17:22.520 I would agree with Mark one hundred percent. I mean, 0:17:22.640 --> 0:17:25.720 I remember, guys, Carol, probably I don't want to date us, 0:17:25.760 --> 0:17:27.520 but we've been around a while. You've brought up in 0:17:27.520 --> 0:17:30.920 the nineteen nineties, when you know, we made the migration 0:17:31.040 --> 0:17:34.159 from a client server environment and we went to the 0:17:34.160 --> 0:17:37.399 IBM compatibles, and everybody was into Gateway and Dell and 0:17:37.600 --> 0:17:40.920 HP and all the big PC makers were going crazy, 0:17:40.960 --> 0:17:43.600 and Apple was almost ready to go bankrupt. I mean, 0:17:43.600 --> 0:17:46.600 they had a very you know, very niche group of 0:17:46.600 --> 0:17:48.960 people that bought Max and then in two thousand and 0:17:48.960 --> 0:17:50.880 seven they came out with the iPhone, and a couple 0:17:50.920 --> 0:17:52.640 of years before that they came out with the iPod 0:17:53.160 --> 0:17:56.400 and the rest is history. So Apple's been down before, 0:17:56.440 --> 0:17:59.680 and Apples had setbacks and been through periods of time 0:17:59.800 --> 0:18:03.040 with when people kind of film aside and you know, 0:18:03.119 --> 0:18:04.639 we'll just see where they are ten years from now. 0:18:04.640 --> 0:18:05.360 That's all I can say. 0:18:05.880 --> 0:18:07.440 Hey, I just want to end with Mark on AI, 0:18:07.600 --> 0:18:10.120 because ten years from now, I know that Apple would 0:18:10.160 --> 0:18:11.520 love to be a leader when it comes to. 0:18:11.480 --> 0:18:13.280 AI, I will be replaced by AI. 0:18:13.400 --> 0:18:16.520 Hey maybe, Mark, what's the vision? What's the vision that 0:18:16.640 --> 0:18:19.000 internally they're talking about it Apple when it comes to AI, 0:18:19.160 --> 0:18:20.000 lay it out for us. 0:18:20.960 --> 0:18:24.680 The vision of AI is integration, deep integration into hardware, 0:18:25.119 --> 0:18:29.720 privacy and security, and really not an Apple designed chapot 0:18:29.800 --> 0:18:35.480 like you've seen from Chat, GPT, open AI, Google, Gemini, Microsoft, 0:18:35.560 --> 0:18:38.280 you name it. This is about integrated into the phone. 0:18:38.400 --> 0:18:40.760 I'll give you an example. We're on this call, my 0:18:40.840 --> 0:18:44.280 phone's in my pocket. I probably missed twenty notifications depple 0:18:44.320 --> 0:18:46.320 earning season. I'll take my phone out of my pocket 0:18:46.359 --> 0:18:48.639 when this is done, and it'll catch me up with 0:18:48.720 --> 0:18:51.439 some AI and tell me everything I missed. That's the 0:18:51.480 --> 0:18:54.520 type of AI feature to think about if you're when 0:18:54.520 --> 0:18:58.080 you're expecting AI features from Apple summaries, useful day to 0:18:58.160 --> 0:19:02.359 day tools based on artificial intelligence, not sort of twenty 0:19:02.400 --> 0:19:02.959 one questions. 0:19:03.040 --> 0:19:05.760 I mean that's Apple's DNA, right, all about enhancing the 0:19:05.920 --> 0:19:08.320 value of the hardware and getting you to buy that 0:19:08.400 --> 0:19:08.960 next phone. 0:19:09.040 --> 0:19:11.880 Dan Morgan thirty seconds left here, so something like that. 0:19:12.119 --> 0:19:15.399 How does as AI is integrated into the Apple model 0:19:15.400 --> 0:19:18.040 and they figure out, you know, how to monetize it. 0:19:18.240 --> 0:19:21.159 How important is that in terms of maybe making the 0:19:21.200 --> 0:19:24.600 growth trajectory change? And again, just kint about thirty seconds. 0:19:25.119 --> 0:19:27.199 I mean it's huge, Carol. You know, as Mark was 0:19:27.240 --> 0:19:30.200 mentioning when they have taken a dive into the chip space, 0:19:30.240 --> 0:19:33.479 they're creating their own silicon. They do have a product 0:19:33.480 --> 0:19:35.760 they're working on called Ajax, which is kind of like 0:19:35.800 --> 0:19:38.440 a chat GPT, but it's on your phone. So there 0:19:38.440 --> 0:19:40.120 are things they are doing, but as Mark was saying, 0:19:40.160 --> 0:19:43.720 it's all integrated into the iOS, into the phone. It's 0:19:43.720 --> 0:19:46.320 not going to be some new product that we've never 0:19:46.359 --> 0:19:47.919 heard of that just comes out of left field. 0:19:48.000 --> 0:19:50.080 All right, Well, I know I can't live without my iPhone, 0:19:50.080 --> 0:19:53.560 so bring it on, all right, guys, thank you so much. 0:19:53.960 --> 0:19:57.119 Mark German, Bloomberg News Chief Technology correspondent, Dan Morgan, senior 0:19:57.119 --> 0:20:00.159 portfolio manager at Sonva's trust on Apple stock is up 0:20:00.160 --> 0:20:01.720 about six and a half percent here