Why Tim Cook is still optimistic after Apple’s growth stalled in Q2 2016 – Macworld

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So, that was quite a quarter Apple had–and not in a good way. But just after the raw financial results, Apple gets a chance to tell its story, to add “more color” to the proceedings, in an hourlong conference call with financial analysts. Here are the highlights from this quarter’s party line with Apple CEO Tim Cook and CFO Luca Maestri.

Tim Cook: Cockeyed optimist

If I had to describe Tim Cook’s attitude during the call, it would be “optimistic.” But only because he referred to his optimism eight different times over the span of an hour. (Maestri added another three on his own.) Then again, when your company just broke a 13-year streak of year-over-year revenue growth, expressing your optimism about the future is probably a smart move.

Here’s what Tim is optimistic about:

  • That the macroeconomic environment will improve: “We’re very optimistic that this too shall pass, and that the market, and particularly us, will grow again.”

  • That the iPhone 6s upgrade cycle is doing better than the 5s: “The reason that we’re optimistic is, we look at the three places that iPhone sales come from, and from an upgrade point of view… we compare favorably [to] the iPhone 5s…. With the iPhone SE… we’re optimistic about attracting even more customers.”

  • That future Apple product are going to be awesome. “We also look at our pipeline and are very excited about what’s in our pipeline. And so all of those things make me optimistic.”

  • That the iPad is going to be fine. “We haven’t had an issue in customer satisfaction on the iPad, it’s incredibly high, and we haven’t had an issue with usage of the iPad, the usage is incredibly high. But the consumer behavior there is, you tend to hold on for a very long period of time before an upgrade. We continue to be very optimistic on the iPad business.”

  • China: “I think China is not weak, as has been talked about, I see China as, may not have the wind at our backs that we once did, but it’s a lot more stable than what I think is the common view of it. And so we remain really optimistic on China.”

  • Corporate tax reform: “I think there are a growing number of people in both parties that would like to see comprehensive reform, and so I’m optimistic that it will occur. It’s just a matter of when.”

Is Apple still a growth company?

If you’re an investor, you’re generally not looking for profits, you’re looking for growth. Apple’s got lots of profits, but its growth has stalled. Simona Jankowski of Goldman Sachs asked Cook point blank, “With the smartphone market now reaching a pretty mature growth phase, how does Apple think of itself going forward? Is it as a growth company, or as a more mature tech company?”

iphone se review mrv 010 37 Adam Patrick Murray

One way to adjust to a maturing market is to fill in price point gaps—the iPhone SE wasn’t included in this quarter’s results. 

Cook didn’t give her a good answer. He did address the concept that the smartphone market is pretty mature–in other words, not having a lot of room for big growth–by expressing his optimism that emerging markets such as India were growing rapidly and that switchers from Android were at an all-time high. He was also sunny about the possibility that the iPhone SE can reach new buyers because of its price, the lowest ever for a brand-new iPhone.

Left unanswered was the core question. Can Apple keep growing, or has it reached the limits? Presumably when Apple investigates entirely new markets like cars, it’s searching for ways to spur growth. But the smartphone is a unique product, and the transition of billions of people all over the world to the smartphone can only happen once–and it already happened. Can Apple cobble together enough growth from switchers and emerging markets to satisfy Wall Street’s need for growth?

I can see why Tim Cook avoided answering that one.

What’s up with China?

China has been a banner market for Apple for a while now. In the long run, Apple expects it to be the company’s largest market, even more than the U.S., and recent growth there has been spectacular. But this quarter, sales in China were down 26 percent compared to the same quarter last year. So what happened?

Why Tim Cook is still optimistic after Apple’s growth stalled in Q2 2016 – Macworld