The iPhone 6 Rumor Report in Question (Heck, Any Rumor Claiming an iPhone Launch in October or Later)
Unless new Apple CFO Luca Maestri has, right out of the gate, “committed” a blunder with a near-certainty of an utterly embarassing near-future profit warning – which Apple hasn’t issued since 2000 if I remember correctly – your exceedingly humble correspondent is highly skeptical of MacRumors’ overnight, AAPL-premarket-affecting report citing an October iPhone 6 launch (and any “October rumor” to that effect)
Now, it’s possible that MacRumors’ report could be interpreted in a way that renders it “partially” true – the “most likely” scenario being that iPhone 5.5″-screened “Phablet Edition” which many believe to be not only a lock for this iPhone full redesign, but also delayed. But that’s not the way MacRumors presents it – they’re (essentially) saying (via their source) that no iPhone 6 will ship until October.
This is where a working knowledge of the basics of Apple’s financials might come in handy (or, if nothing else, point directly to where Apple Inc. suddenly took a horribly wrong turn).
The Facts (and Mostly-Facts)
In the year-ago quarter (fiscal Q4 2013), Apple rang up revenues of $37.5B. It guided to a revenue range of between $37B-$40B just last Tuesday…and Apple has never reported revenue even at the midpoint of the range in the 6-quarter history of this guidance methodology.
Yes, it’s not like $40B in revenues represents much in the way of year-over-year percentage growth. But consider that fiscal Q4 2013 was boosted by, at the absolute minimum, over 9 million combined iPhone 5S and 5C units in three days – that’s about 27% of all iPhones sold in the quarter. Considering also that Apple had a few extra days before Q4 2013 ended to sell more iPhones, it’s not inconceivable that the iPhone 5S and 5C combined for around one-third of all iPhones sold in the quarter.
So let’s just say Apple’s year-ago quarter was boosted by 10 million combined iPhone 5S and 5C units at a blended ASP of at least $575. That’s a $5.75B contribution to quarterly results.
What did that multi-billion-dollar rush of iPhones do? Powered Apple to…YOY revenue growth of 4.2% vs. Q4 2012. Turns out, all those iPhones – a YOY delta of around +7 million units – were absolutely essential to Apple growing a “mere” $1.5B in revenues compared to the prior year.
So if Apple doesn’t launch at least one core model of iPhone 6 in fiscal Q4, how can Apple expect to grow iPhone, much less revenues, year-over-year at all?
Maestri’s “Transitional” Remarks
Note also the coy (and CFO-typical) remarks by Maestri during the Q3 2014 earnings conference call:
In reply to Katy Huberty of Morgan Stanley (who asked about gross margin guidance)
“Again, the mix is the normal mix that we see as we continue to move through the product cycle…and obviously in Q4 we’ve got some transition costs because we’re expecting a very busy fall, we’re very excited about what we’ve got in the pipeline…”
And in reply to Huberty’s follow-up on guidance philosophy as it relates to product cycles and whether Apple embeds assumptions from new product contributions to financials:
“We put down numbers that we believe at this point in time with all the information that is available to us [that we will] land within…”
“What you see this quarter is that our guidance range is $3 billion as opposed to $2 billion during [fiscal Q3] just to take into account the fact that we’ve got many moving pieces.”
And from the earnings release, courtesy Tim Cook:
“We are incredibly excited about the upcoming releases of iOS 8 and OS X Yosemite, as well as other new products and services that we can’t wait to introduce.”
Not something a top-tier CEO says if a material portion of those products and services won’t launch until the fiscal quarter after next (fiscal Q1 2015).
Last but not least, consider the product landscape.
Mac is simply incapable of growing at a rate quickly enough to cover for the “loss” of $5B in iPhone revenue.
iPad isn’t growing at all.
There’s no hint of a new product category to surprise and delight millions of customers in the next two months – and there has never been a brand-new Apple product category that’s screamed out of the gate to anywhere near $5B in product line revenues in the quarter of launch.
iPhone 6 seems like the most highly anticipated iPhone (maybe even product) in the history of ever. No amount of channel fill can make up for millions of delayed iPhone 6 units – you certainly won’t find too many takers on China Mobile.
If Apple had an inkling it might report revenues of “even” $37B? It would’ve guided revenues to something more like $34-37B. If there was bitter medicine to take, Apple would’ve taken it by now.
So unless Apple is on the verge of doing something really, really stupid (a “mostly preventable” interim profit warning) – or made a massive miscalculation of some sort within the past week – it certainly looks like one massively popular iPhone 6 or another should still be on shelves with “just enough days” to spare in fiscal Q4.
Of course, I could be hilariously wrong, in which case very serious questions about management arise. We’ll see.