WEBVTT - Mark Gurman pn Apple (Audio)

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<v Speaker 1>We had another development today out of the U S

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<v Speaker 1>Commerce Department that puts the relationship, you know, more into

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<v Speaker 1>focus even than it was so. First of all, the

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<v Speaker 1>basic story was that the top US official overseeing export

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<v Speaker 1>controls said he expects to deal with global allies to

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<v Speaker 1>limit further shipments of chip production equipment to China in

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<v Speaker 1>the near term. But what also came out of that,

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<v Speaker 1>and credit the South China Morning Post for splashing this

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<v Speaker 1>across the front page, that the semi conductor export curbs

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<v Speaker 1>would be followed by biotech and AI restrictions and and

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<v Speaker 1>this was the comments coming from Alan Estevez, who's the

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<v Speaker 1>Under Secretary of Commerce for Industry and Security, and he

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<v Speaker 1>is that top official UH in this area at the

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<v Speaker 1>Commerce Department. So it does raise a lot of questions,

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<v Speaker 1>and it also raises some questions about how some of

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<v Speaker 1>those stocks might trade today. Companies like wush Aptech and

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<v Speaker 1>wush Biologics UH the trade in Hong Kong that are

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<v Speaker 1>in that biotech sector in China. Be interesting to see

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<v Speaker 1>how they tread the Nastack, Gold and Dragon Index. By

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<v Speaker 1>the way, the US listed China starts down three point

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<v Speaker 1>six in the session today, alright, nine minutes here before

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<v Speaker 1>the top of the hour. That's a quick snapshot of

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<v Speaker 1>some of the things we're looking at. The media were

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<v Speaker 1>shod to you. Okay, let's find out an Apple. It

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<v Speaker 1>doesn't immuneto a broader slump in tech. In fact, and

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<v Speaker 1>managed to avoid the share slump. But otherwise the company

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<v Speaker 1>did come out and post weaker than expected iPhone and

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<v Speaker 1>services sales, and that's despite an otherwise upbeat earnings report.

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<v Speaker 1>Mark German's Bloomberg Technology reporter, Mark, thanks are joining us.

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<v Speaker 1>It's a I mean, we're looking at the iPhone delivering

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<v Speaker 1>what generating forty two point six billion dollars of revenue

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<v Speaker 1>in the fourth fourth quarter, and Anderson looked at forty

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<v Speaker 1>two points seven that's really a very small miss ultimately,

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<v Speaker 1>but the services site perhaps was more of a concern.

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<v Speaker 1>But let's also not forget that the rest of the

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<v Speaker 1>report was not too bad. So the I thought miss

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<v Speaker 1>was about four million dollars, the services missed was about

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<v Speaker 1>eight hundred million dollars. So we're not talking, you know,

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<v Speaker 1>crater of an issue here, right, But investors analysts always

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<v Speaker 1>looking for more, right, But I think all things considered,

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<v Speaker 1>given what we've seen from Meta from Google, from Amazon

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<v Speaker 1>earlier today. This is a pretty remarkable report from Apple.

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<v Speaker 1>They've clearly dodged the tech route here, but they are

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<v Speaker 1>worry warning about some sort of holiday slowdown, right, So

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<v Speaker 1>the growth rate for Q four from the year ago

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<v Speaker 1>quarter was eight percent Q one. The upcome holiday quarter

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<v Speaker 1>there'll be less than that. They weren't clear if that

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<v Speaker 1>would be the client or just you know, between seven

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<v Speaker 1>percent growth, but clearly that they are preparing investors and

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<v Speaker 1>analysts for not the best holiday quarter that they maybe

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<v Speaker 1>would have imagined otherwise. Very interesting to compare the governance

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<v Speaker 1>of Apple versus Meta. That's a stark difference there. And

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<v Speaker 1>actually Apple's um margins went up, right, So Tim Cook

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<v Speaker 1>is managing the company and and and managing to cut

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<v Speaker 1>some costs as well. That helps the bottom line. I mean,

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<v Speaker 1>the difference between Apple and Meta at a very fundamental

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<v Speaker 1>level in terms of margins right now is Meta sort

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<v Speaker 1>of recalibrating this entire business right there, cre organizing the

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<v Speaker 1>company around augmented in virtual reality with this Reality Labs division,

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<v Speaker 1>right And anytime you boot up a new company, obviously

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<v Speaker 1>that's going to take it's going to be very capital

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<v Speaker 1>capital intensive process. Whereas you know, Apple is not undergoing

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<v Speaker 1>some sort of big transition here. They're popping out new iPhones, iPads, Apple, watches, max,

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<v Speaker 1>you name it, as they have been the last several years.

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<v Speaker 1>So that's the difference of why you see sort of

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<v Speaker 1>the you know, the better margins on the Apple side

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<v Speaker 1>than the Meta side, and Mark just there looking at Apple. Okay,

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<v Speaker 1>as we got into the holiday season as it were,

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<v Speaker 1>you know, they're warning a little bit about that. Perhaps

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<v Speaker 1>that's already in the price to some extent, but you

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<v Speaker 1>know what is the overall read through from these tech

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<v Speaker 1>all these tech companies, including the likes of Google, Will,

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<v Speaker 1>Meta and the like. Yeah, you know, they're all bracing

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<v Speaker 1>for a pretty bad holiday quarter. They're all talking about

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<v Speaker 1>foreign exchange headwinds, specifically on the Google and Meta storefront.

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<v Speaker 1>They're talking about digital advertising. Apples AD business remains very small,

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<v Speaker 1>although they're planning to expand that next year. So I

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<v Speaker 1>think of all the apples in the best shape, right,

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<v Speaker 1>I mean, I think generating nearly at expectations for the

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<v Speaker 1>iPhone in terms of revenue is pretty strong. You haven't

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<v Speaker 1>seen a big creatoring of services revenue despite no more

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<v Speaker 1>stay at home orders, in many parts of the world,

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<v Speaker 1>So I think you're seeing a fundamental difference there. Mark,

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<v Speaker 1>I asked this question to a guest earlier, and I

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<v Speaker 1>want to put it to you. It's a it's a

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<v Speaker 1>sort of broad type of questions. Detected very well after

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<v Speaker 1>COVID hit and really the economy was slammed and everything

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<v Speaker 1>looked dire, but these types of companies did very well,

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<v Speaker 1>and and it's it's not going that way this time.

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<v Speaker 1>What's the chief reason for that? Well, I think we're

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<v Speaker 1>going in the opposite direction, right, I mean of it.

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<v Speaker 1>And Amazon did extremely well because they were offering things

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<v Speaker 1>that you needed from stay at home situations, right shipping services,

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<v Speaker 1>cloud video streaming, prime music, what have you. Google people

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<v Speaker 1>are spending more time online on their computers. They were

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<v Speaker 1>using more Google services. You saw the transition to digital

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<v Speaker 1>infrastructure accelerate pretty significantly as well. That benefited Google. Uh, Facebook, Right, Facebook,

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<v Speaker 1>what they've done over the past two years of sort

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<v Speaker 1>of integrate that transition of a deeper VR and a

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<v Speaker 1>R push. And I think that investors are not really

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<v Speaker 1>going to want to see a capital intensive reboot of

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<v Speaker 1>a company going into a recession. So I think it

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<v Speaker 1>all comes down to timing. Uh, And I think what

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<v Speaker 1>Apple has proven over the last you know, three years

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<v Speaker 1>or so, especially during COVID, that its products are really

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<v Speaker 1>indispensable and the elasticity is you know, maybe stronger than

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<v Speaker 1>people had anticipated for its devices, and I I seem

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<v Speaker 1>to think that will continue despite the you know, the

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<v Speaker 1>poor outlook economically over the next several months. Yeah, it's

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<v Speaker 1>about we've got them putting up the prices of some

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<v Speaker 1>of the services as well. It's chief you Music and

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<v Speaker 1>Apple Plus. So what you've seen them do is they

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<v Speaker 1>raised in the US two dollars for Apple TV Plus

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<v Speaker 1>a month, a dollar for Apple Music. You've also seen

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<v Speaker 1>some of the pricing of their hardware increase internationally as well.

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<v Speaker 1>On the music side, there's things because of increased licensing costs.

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<v Speaker 1>On the TV plus side, because they're saying when they

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<v Speaker 1>initially launched at five dollars a month, it was a

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<v Speaker 1>very limited availability of content. Now there's a lot more content,

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<v Speaker 1>which is absolutely true. And the international price likes on hardware.

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<v Speaker 1>That's of course because the foreign exchange had wins when

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<v Speaker 1>they convert the income there to the US dollar. I

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<v Speaker 1>heard that actually Apple provided something like a ten billion

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<v Speaker 1>dollar hit to Meta because of those privacy changes. Yeah,

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<v Speaker 1>there's you know, an argument to be made about that

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<v Speaker 1>ten billion dollar figure. Meta has argued that the that

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<v Speaker 1>the sales hit there have to do with the Apple

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<v Speaker 1>privacy changes, whereas Apple might argue that the ten billion

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<v Speaker 1>dollar hit is related to the reality Labs push, and

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<v Speaker 1>that ten billion dollar hit was later to be revealed

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<v Speaker 1>by metas the same amount that they're having been impacted

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<v Speaker 1>by because of Reality Labs in v R and a R.

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<v Speaker 1>So it really isn't expect the truth is probably somewhere

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<v Speaker 1>in the middle, as a typical seems to be with

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<v Speaker 1>these types of things. Okay, and we may see some

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<v Speaker 1>better sales out of China coming up. Has China at

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<v Speaker 1>some point has to move beyond COVID, one would think anyway. Mark,

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<v Speaker 1>thanks for joining us, Mark German, Bloomberg Technology. We