Speaker 1: We had another development today out of the U S
Speaker 1: Commerce Department that puts the relationship, you know, more into
Speaker 1: focus even than it was so. First of all, the
Speaker 1: basic story was that the top US official overseeing export
Speaker 1: controls said he expects to deal with global allies to
Speaker 1: limit further shipments of chip production equipment to China in
Speaker 1: the near term. But what also came out of that,
Speaker 1: and credit the South China Morning Post for splashing this
Speaker 1: across the front page, that the semi conductor export curbs
Speaker 1: would be followed by biotech and AI restrictions and and
Speaker 1: this was the comments coming from Alan Estevez, who's the
Speaker 1: Under Secretary of Commerce for Industry and Security, and he
Speaker 1: is that top official UH in this area at the
Speaker 1: Commerce Department. So it does raise a lot of questions,
Speaker 1: and it also raises some questions about how some of
Speaker 1: those stocks might trade today. Companies like wush Aptech and
Speaker 1: wush Biologics UH the trade in Hong Kong that are
Speaker 1: in that biotech sector in China. Be interesting to see
Speaker 1: how they tread the Nastack, Gold and Dragon Index. By
Speaker 1: the way, the US listed China starts down three point
Speaker 1: six in the session today, alright, nine minutes here before
Speaker 1: the top of the hour. That's a quick snapshot of
Speaker 1: some of the things we're looking at. The media were
Speaker 1: shod to you. Okay, let's find out an Apple. It
Speaker 1: doesn't immuneto a broader slump in tech. In fact, and
Speaker 1: managed to avoid the share slump. But otherwise the company
Speaker 1: did come out and post weaker than expected iPhone and
Speaker 1: services sales, and that's despite an otherwise upbeat earnings report.
Speaker 1: Mark German's Bloomberg Technology reporter, Mark, thanks are joining us.
Speaker 1: It's a I mean, we're looking at the iPhone delivering
Speaker 1: what generating forty two point six billion dollars of revenue
Speaker 1: in the fourth fourth quarter, and Anderson looked at forty
Speaker 1: two points seven that's really a very small miss ultimately,
Speaker 1: but the services site perhaps was more of a concern.
Speaker 1: But let's also not forget that the rest of the
Speaker 1: report was not too bad. So the I thought miss
Speaker 1: was about four million dollars, the services missed was about
Speaker 1: eight hundred million dollars. So we're not talking, you know,
Speaker 1: crater of an issue here, right, But investors analysts always
Speaker 1: looking for more, right, But I think all things considered,
Speaker 1: given what we've seen from Meta from Google, from Amazon
Speaker 1: earlier today. This is a pretty remarkable report from Apple.
Speaker 1: They've clearly dodged the tech route here, but they are
Speaker 1: worry warning about some sort of holiday slowdown, right, So
Speaker 1: the growth rate for Q four from the year ago
Speaker 1: quarter was eight percent Q one. The upcome holiday quarter
Speaker 1: there'll be less than that. They weren't clear if that
Speaker 1: would be the client or just you know, between seven
Speaker 1: percent growth, but clearly that they are preparing investors and
Speaker 1: analysts for not the best holiday quarter that they maybe
Speaker 1: would have imagined otherwise. Very interesting to compare the governance
Speaker 1: of Apple versus Meta. That's a stark difference there. And
Speaker 1: actually Apple's um margins went up, right, So Tim Cook
Speaker 1: is managing the company and and and managing to cut
Speaker 1: some costs as well. That helps the bottom line. I mean,
Speaker 1: the difference between Apple and Meta at a very fundamental
Speaker 1: level in terms of margins right now is Meta sort
Speaker 1: of recalibrating this entire business right there, cre organizing the
Speaker 1: company around augmented in virtual reality with this Reality Labs division,
Speaker 1: right And anytime you boot up a new company, obviously
Speaker 1: that's going to take it's going to be very capital
Speaker 1: capital intensive process. Whereas you know, Apple is not undergoing
Speaker 1: some sort of big transition here. They're popping out new iPhones, iPads, Apple, watches, max,
Speaker 1: you name it, as they have been the last several years.
Speaker 1: So that's the difference of why you see sort of
Speaker 1: the you know, the better margins on the Apple side
Speaker 1: than the Meta side, and Mark just there looking at Apple. Okay,
Speaker 1: as we got into the holiday season as it were,
Speaker 1: you know, they're warning a little bit about that. Perhaps
Speaker 1: that's already in the price to some extent, but you
Speaker 1: know what is the overall read through from these tech
Speaker 1: all these tech companies, including the likes of Google, Will,
Speaker 1: Meta and the like. Yeah, you know, they're all bracing
Speaker 1: for a pretty bad holiday quarter. They're all talking about
Speaker 1: foreign exchange headwinds, specifically on the Google and Meta storefront.
Speaker 1: They're talking about digital advertising. Apples AD business remains very small,
Speaker 1: although they're planning to expand that next year. So I
Speaker 1: think of all the apples in the best shape, right,
Speaker 1: I mean, I think generating nearly at expectations for the
Speaker 1: iPhone in terms of revenue is pretty strong. You haven't
Speaker 1: seen a big creatoring of services revenue despite no more
Speaker 1: stay at home orders, in many parts of the world,
Speaker 1: So I think you're seeing a fundamental difference there. Mark,
Speaker 1: I asked this question to a guest earlier, and I
Speaker 1: want to put it to you. It's a it's a
Speaker 1: sort of broad type of questions. Detected very well after
Speaker 1: COVID hit and really the economy was slammed and everything
Speaker 1: looked dire, but these types of companies did very well,
Speaker 1: and and it's it's not going that way this time.
Speaker 1: What's the chief reason for that? Well, I think we're
Speaker 1: going in the opposite direction, right, I mean of it.
Speaker 1: And Amazon did extremely well because they were offering things
Speaker 1: that you needed from stay at home situations, right shipping services,
Speaker 1: cloud video streaming, prime music, what have you. Google people
Speaker 1: are spending more time online on their computers. They were
Speaker 1: using more Google services. You saw the transition to digital
Speaker 1: infrastructure accelerate pretty significantly as well. That benefited Google. Uh, Facebook, Right, Facebook,
Speaker 1: what they've done over the past two years of sort
Speaker 1: of integrate that transition of a deeper VR and a
Speaker 1: R push. And I think that investors are not really
Speaker 1: going to want to see a capital intensive reboot of
Speaker 1: a company going into a recession. So I think it
Speaker 1: all comes down to timing. Uh, And I think what
Speaker 1: Apple has proven over the last you know, three years
Speaker 1: or so, especially during COVID, that its products are really
Speaker 1: indispensable and the elasticity is you know, maybe stronger than
Speaker 1: people had anticipated for its devices, and I I seem
Speaker 1: to think that will continue despite the you know, the
Speaker 1: poor outlook economically over the next several months. Yeah, it's
Speaker 1: about we've got them putting up the prices of some
Speaker 1: of the services as well. It's chief you Music and
Speaker 1: Apple Plus. So what you've seen them do is they
Speaker 1: raised in the US two dollars for Apple TV Plus
Speaker 1: a month, a dollar for Apple Music. You've also seen
Speaker 1: some of the pricing of their hardware increase internationally as well.
Speaker 1: On the music side, there's things because of increased licensing costs.
Speaker 1: On the TV plus side, because they're saying when they
Speaker 1: initially launched at five dollars a month, it was a
Speaker 1: very limited availability of content. Now there's a lot more content,
Speaker 1: which is absolutely true. And the international price likes on hardware.
Speaker 1: That's of course because the foreign exchange had wins when
Speaker 1: they convert the income there to the US dollar. I
Speaker 1: heard that actually Apple provided something like a ten billion
Speaker 1: dollar hit to Meta because of those privacy changes. Yeah,
Speaker 1: there's you know, an argument to be made about that
Speaker 1: ten billion dollar figure. Meta has argued that the that
Speaker 1: the sales hit there have to do with the Apple
Speaker 1: privacy changes, whereas Apple might argue that the ten billion
Speaker 1: dollar hit is related to the reality Labs push, and
Speaker 1: that ten billion dollar hit was later to be revealed
Speaker 1: by metas the same amount that they're having been impacted
Speaker 1: by because of Reality Labs in v R and a R.
Speaker 1: So it really isn't expect the truth is probably somewhere
Speaker 1: in the middle, as a typical seems to be with
Speaker 1: these types of things. Okay, and we may see some
Speaker 1: better sales out of China coming up. Has China at
Speaker 1: some point has to move beyond COVID, one would think anyway. Mark,
Speaker 1: thanks for joining us, Mark German, Bloomberg Technology. We