What We Learned From CNBC’s Tim Cook Interview
Here are 6 things we learned from Tim Cook’s interview on CNBC with Jim Cramer:
- Expect “new services” this year. As we’ve predicted, and in-line with expectations, we expect Apple to launch a new, branded video streaming service in 2019. The service will support an estimated $1.4B in spending on original content this year. Apple’s acquisition of Texture is also ripe for a relaunch with Apple’s full marketing muscle behind it. In the years to come, we also expect a combination of services and hardware related to health care. This is based on our beliefs around the company’s long-term trajectory and Tim Cook’s comment today that, “if you zoom out into the future, and you look back, and you ask the question, ‘What was Apple’s greatest contribution to mankind,’ it will be about health.”
- The China trade war is moving towards resolution. Cook commented, “I think a deal is very possible. And I’ve heard some very encouraging words.” (Presumably from people working on a trade deal.)
- iPhone trade-in bonuses will likely continue. The offer that began in the Dec-18 quarter with Apple giving a more generous trade-in value on previously owned iPhones may continue beyond its current “limited time” status. Our expectation is based on Cook’s comment that Apple is “allowing them to trade in their current phone, which begins to look like a subsidy that the carrier may have previously provided. And it offsets some of the cost of the new phone.” If the offer were to end soon, we think Cook would have avoided the topic. In our view, Apple is doubling down on trade-ins as a demand generation tool.
- Revenue from wearables is already over 50% more than iPod was at its peak. This data point confirms our existing estimates. It implies Apple Watch is about 5% of sales growing revenue at 45% y/y and AirPods is about 1% of sales growing revenue at 87% y/y.
- India is now just under 1% of total sales but did not grow in CY18. Apple is committed to growing in the region. Growth in India will be supported by two initiatives: 1. producing iPhones in India; 2. opening new retail stores in the country.
- On the Qualcomm litigation: Cook suggests Qualcomm unlawfully discriminates against Apple by charging “exorbitant” prices. Apple refuses to pay these prices and believes they have the legal upper hand.
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