apple, News

Trouble in China, iPhone slump and other Apple earnings surprises

Q2 earnings report for 2017 just barely beat Wall Street’s
expectations when the numbers were revealed this afternoon, but
there are plenty of reasons to still be optimistic about AAPL.

During the
company’s call with investors today, Apple CEO Tim Cook and CFO
Luca Maestri discussed some of the struggles the company
experienced last quarter, from slumping iPhone sales to
economic headwinds in China.

Here are the biggest takeaways:

Trouble in China

China is important to Apple for many
Photo: FullbridgeProgram/Flickr CC

As the
world’s second-largest smartphone market, China has been
Apple’s go-to country for growth the past few years. Overall,
revenue fell in Q2 because the country’s currency got devalued
by 5 percent, but Apple says it’s still “enthusiastically
optimistic” about doing business in China.

Amid the
bad news, some positive signs emerged indicating China could
start booming for Apple again. Mac revenue and services both
grew in the country. Traffic at retail stores in China grew 27
percent year-on-year. And the country houses seven of Apple’s
highest-traffic retail stores.

Ready for India

After what feels like an eternity of teases and rumors, Pandora
is finally ready to take the wraps off its
on-demand streaming service. On Monday, Pandora
revealed Pandora

For $10 per month, Premium subscribers get on-demand access to
Pandora’s music catalog in addition to its popular radio
service. Pandora didn’t announce the size or specifics of the
new service’s music catalog, however.

Premium breaks from Pandora’s roots as an Internet radio
service that proved unusually good at matching songs into a
continuous playlist thanks to the company’s Music
Genome Project. Yet Premium will still rely on the MGP
technology for some of its features.

pandorapremium Pandora

Pandora Premium offers automated playlist generation: You
choose one or two songs and the service creates a full playlist
based on their properties. Other services have similar
features. Apple’s iTunes Genius, for example, automatically
creates playlists from a user’s personal playlist. The
advantage for Pandora, however, is that its ability to match
songs is widely considered superior to what other services can

The “Browse” section of Pandora Premium will also surface
recommendations based on its MGP technology. Current Pandora
users who upgrade to Premium will also see all the songs
they’ve clicked “thumbs up” on during their past radio
listening sessions collected into a single “My Thumbs Up”

The company is also very proud of Premium’s search capabilities
and even managed to throw some shade at other services when
discussing it. “Pandora’s team of curators, music analysts and
data scientists have sifted through tens of millions of tracks
to help you quickly find what you really want,” Pandora said in
its announcement. “No more wading through covers, karaoke
versions or tribute tracks to get to your favorite tune.”
Spotify’s vast catalog includes numerous karaoke, cover, and
tribute tracks that often come up in a search before the song
by the original artist.

As with other subscription music services, Pandora Premium will
also have an offline mode.

The impact on you at home: For anyone
interested in trying it out, Premium is available now on
Android and iOS phones, and is usable with Chromecast and all
the various in-car systems that have Pandora integration.
Listeners on PCs and other devices will see Premium arrive in
the coming months. Starting March 15, Pandora plans to offers
“select listeners” a free trial, and current Pandora Plus
subscribers will get six months of Premium for free.

This story, “Pandora’s new Premium streaming service leans on
personal playlists to compete with Spotify” was originally
published by PCWorld.

To comment on this article and other Macworld content, visit
our Facebook page or our Twitter

</p></div> </div> </div> ” data-medium-file=”” data-large-file=”” title=”Apple India map” src=”″ alt=”india” class=”size-full wp-image-223981″ data-recalc-dims=”1″>Apple is doing all it can to grown in
Illustration: Cult of Mac

the Chinese market souring a bit, Apple is turning its
attention to India to spark iPhone sales. It’s the world’s
third-largest smartphone market, behind China and the United

The biggest
problems in India are the local supply sourcing laws and the
lack of 4G. Wireless networks just started expanding 4G
infrastructure aggressively last year. Once more citizens get
covered with fast 4G, Cook says India will represent a “huge
opportunity for Apple.”

iPhone supply

iphone 7Does your iPhone 7 Plus hiss?
Photo: Apple

Apple saw
its iPhone sales dip to 50.8 million in Q2, down slightly from
the 51.2 million units it sold during the same quarter last
year. Cook admitted that supply chain issues were part of the
problem as the company didn’t expect its larger iPhone to be so
popular. That’s something Apple will have to fix by this fall
if it wants the iPhone 8 to shatter records.

“One thing we did not get right is the mix between the iPhone 7
and iPhone 7 Plus,” Cook said. “Every time we go through a
launch we learn something and you can bet that we are brushing
up our models and applying everything we learn to the next

Cook also blamed part of the sales slump on iPhone
8 rumormongers like us. The Apple CEO said the company is
seeing “a pause in purchases of iPhone,” which he believes is
due to the earlier and much more frequent reports about future

Mistakes make Apple stronger

After noted supply chain wizard Cook admitted Apple screwed up
the mix on the iPhone 7 launch, but he didn’t waste a lot of
time turning that negative into a positive.

Tim’s spin? Supply constraints with iPhone 7 Plus and AirPods —
which remain unavailable in Apple stores — taught Cupertino
valuable lessons. Whether due to Apple pushing a technological
envelope so far that vendors can’t produce parts in time, or a
flawed estimate about how big orders will be, every supply
chain misstep becomes a teachable moment in Cupertino.

“Every time we go through a launch, we learn something,” Cook
said. “And you can bet that we are brushing up our models and
applying everything we learn to the next time.”

Now that’s wizardry.

Apple Watch and AirPods are killing it

apple watchApple keeps pumping fresh updates to
its watch lineup.
Photo: Apple
Because Apple refuses to release actual Apple Watch sales
figures, we still don’t know exactly how well the company’s
wearable is doing. But it sounds like Apple Watch is dominating
the market.

Revenue generated by Apple’s “other” products category climbed
31 percent. Cook said Apple Watch sales doubled, and that if
you created a company selling AirPods, Apple Watch and Beats
headphones, it would be a Fortune 500 company.

“We’re really proud of the growth of the business. The Watch
units more than doubled in six of our top 10 markets, which is
phenomenal growth for a non-holiday quarter,” said Cook. “That
business was well into the Fortune 500. That’s pretty fast to
come that far. The Watch hasn’t been out that long and AirPods
have only been out for three or four months.”

Cook wouldn’t comment on where the product is headed but did
say Apple has a “really great pipeline” ahead.

The Apple ecosystem is a massive moneymaker

apple-musicApple Music boasts over 20 million
Photo: Apple

Just like Cook, we never get tired of talking about getting
sucked into the Apple ecosystem. After years of selling
hardware and software that “just work” together — which Cook
repeatedly claims is something only Apple can do — Cupertino is
totally reaping the benefits of its ever-expanding platforms.

Apple boasts about
having 165 million subscriptions in play. That means services
like Apple Music, iCloud storage, etc., generate a constant
flow of cash, month after month. CFO Luca Maestri wouldn’t
divulge the actual number of subscribers, but said, “It’s very
good for us to see the breadth of subscriptions.”

That number continues to grow rapidly, too. As
Apple approaches a 1 billion iPhone user base, services
will undoubtedly balloon. Essentially, every iPhone or Mac that
gets sold pays off twice — first at retail, then as a perpetual
moneymaking machine.

“People tend to spend more over time,” Maestri said during the

In other words,
sheeple mean mad money for Cupertino. And that’s the
real power of the vaunted Apple ecosystem.

Apple’s weakest products are getting stronger

iPadiPad sales aren’t struggling as bad
as they used it.
Photo: Apple

Both the Mac and iPad businesses performed better than expected
in Q2 2017, with demand for the new MacBook Pro still “very
strong,” according to Maestri.

Mac revenue grew 14 percent last quarter, setting a new March
record with 4.2 million units sold. That’s thanks in part to
demand for the
new MacBook Pro, which is still selling well despite
complaints from long-time pro users disappointed with the
laptop’s shortcomings.

iPad sales fell year-over-year, but Apple saw growth in the
U.S. market during Q2. In total, it sold 8.9 million units,
beating its own expectations.

Mac revenue totaled more than $5.8 billion last quarter, while
the iPad raked in $3.8 billion. They might be two of Apple’s
smallest units, but plenty of rivals would be glad to operate
those business — and they’re only getting stronger.

Additional reporting by Lewis Wallace and Killian


Leave a Reply