six colors

by Jason Snell & Dan Moren

By Jason Snell

Three more observations about Apple’s conference call

Over at Macworld on Wednesday I listed five interesting items from Apple’s conference call with analysts, but those were far from the only interesting items to come out of Apple’s quarterly financial-disclosure ritual. Here are three more.

Apple Watch and Apple TV get some love

Though Apple Watch and Apple TV don’t get broken out in Apple’s overall sales and revenue reports — they’re not big enough, yet, to merit inclusion — Apple CEO Tim Cook and CFO Luca Maestri both made points of mentioning the products and giving them little boosts.

The key line from Maestri: “Revenue from other products grew strongly, up 62 percent over last year, thanks to the growing contribution from Apple Watch, as well as the successful launch of the new Apple TV, both of which established new all-time quarterly records. We expanded Apple Watch distribution significantly over the course of the quarter, and we experienced especially strong results during the holiday buying season.”

The message there is that both Apple TV and Apple Watch did better during the first fiscal quarter of 2016 than at any point in their past. Given that Apple Watch skeptics were claiming that an early sales spike would be followed by a decline at the product crashed and burned, that’s important. “Especially strong sales in the month of December,” according to Cook, point to a successful first holiday season for the Apple Watch.

Apple TV has been around for a long time. But the introduction of the fourth-generation product (and, I’ll grant you, all the pent-up demand for a new Apple TV) was the best “by far,” according to Cook.

The iPad and Mac have issues

After several quarters of explaining how bullish he was about the iPad, Cook didn’t really discuss Apple’s tablet device this time. It’s understandable why—iPad sales have declined year-over-year for the last eight quarters.

Still, some of Maestri’s opening statements did try to take a stab at spinning the state of the iPad. He highlighted the iPad’s market-share success “in the segments of the tablet markets where we compete,” most notably the iPad’s 85 percent share in the over-$200 tablet segment. Maestri also cited high customer satisfaction rates for the iPad Air and explained the large number of corporate buyers who are satisfied with the iPad and intend to buy more. Including Eli Lilly, which is outfitting its entire U.S. sales force with iPad Pros.

The message there is: People who buy non-cheap tablets are buying iPads, and everyone loves their iPads. There are plenty of reasons why iPad sales might be down, most obviously the fact that the iPad seems to have a long usable life cycle, but it’s still winning in the (relatively quiet) tablet market, and there are no issues with dissatisfaction. In a period of rough sales figures, these are the arguments Apple reaches for. (Also, some perspective: even now, the iPad is a $20 billion per year business. Nothing to sneeze at.)

Then there’s the Mac, which ended a two year period of positive year-over-year sales growth. During the first fiscal quarter of 2016, Mac sales were down (slightly). Again, this is a situation where the overall market the product is in might say a lot: As Apple pointed out, analyst firm IDC estimates that the global PC market was down 11 percent, meaning that the Mac’s four percent sales drop means that the Mac continued to gain PC market share.

A bright spot for the Mac was China, where Mac sales were up 27 percent year-over-year. So while Mac sales aren’t exactly exploding, the Mac is doing well in a very difficult market—and remains a $25 billion per year business for Apple.

Did you hear that?

In my Macworld piece I mentioned Tim Cook’s coy not-a-denial answer to analyst Gene Munster’s question about virtual reality. (I’m even willing to admit that Tim was probably not just trolling Munster, and Apple is actively researching VR.)

But there was another little slip that was very interesting to me. It probably means nothing, but when Maestri listed off Apple’s four major product platforms, he said this: “We’ve built a huge installed base around four platforms: iOS, Mac OS, watchOS, and tvOS.”

Officially, that second platform is still “OS X.” But calling it Mac OS instead sure fits better, doesn’t it?

[Want more Apple financial charts? They’re all here.]

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