In the third quarter of 2011, Exxon Mobil posted earnings of $10.33 billion. The company cited “a challenging macroeconomic environment” to ward off any negative sentiment about its report and the next day resumed its perpetual exploration and development of oil and gas worldwide. I suspect many of you are asking yourselves what this has to do with Apple, which continues to churn out iPhones and Macs. Well, until yesterday that $10.33B was the 23rd highest quarterly profit of all time. That’s all the companies, around the world, with each quarter broken out individually.
Hold on tight: Tim Cook might not be as carefree these days as when rooting for his beloved Duke, but he has more to smile about than many realize. (Photo by Harry How/Getty Images)
Magic and myth
Let that sink in for just a moment. Now, consider that 5 of the all-time, top-10 quarters also belong to Apple and place what happened for the company in the appropriate context that the business press no longer seems capable of doing. This wasn’t Apple’s worst quarter in 13 years; it has out-earned fiscal Q2 2016 exactly six times in its history. The 51.2 million iPhones the company sold last quarter is the fourth highest total ever posted, bested only by the past two holiday periods and the January-March interval last year when the iPhone 6 and 6 Plus were still fairly new.
Wall Street, of course, is obsessed with growth and Apple for the moment is delivering the opposite of that. But other than the short-term concerns about share price, it’s hard to argue that the company has any sort of serious problem. Does it need to find ways to reinvigorate iPhone sales? Yes, but there’s an argument that last year was the anomaly. Jan Dawson, whose analysis tends to be more sober than what comes out of the finance industry, notes that iPhone sales are mostly on a trend that dates back several years. It was the mind-blowing success of iPhone 6 that sent iPhone into the stratosphere; with 6s things are simply more earthbound. Dawson wrote his post before Apple announced earnings, incidentally and said this: “Anything below 40 million iPhones (or $40 billion in revenue guidance) is a sign that Apple is dropping below its long-term trajectory, and would be bad news. Anything above that is cause for optimism, at least in the short term.”
Apple guided to $41-43 billion for the upcoming quarter. For the moment, the trajectory appears intact.
‘Cause I don’t know what he’s after
Apple CEO Tim Cook could have been reporting any quarter from his tone on the conference call even as he admitted to challenges. Cook looks at iPhone sales in three buckets (1) upgraders (2) Android switchers and (3) first-time smartphone buyers. He noted that upgrades are running ahead of a similar point in the 5s cycle albeit below the comparable point last year when pent-up demand for large screens sent them soaring. With respect to Android, Cook said, “We added more switchers from Android and other platforms in the first half of this year than any other six-month period ever.” And he likes Apple’s chances with latecomers to smartphones, too, pointing out Apple’s India sales were up 56% over last year.
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