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00:00Hey, how's it going?
00:05Dave 2D here.
00:06So, Apple just put out a letter to their investors warning them of lower-than-expected earnings,
00:11and it doesn't look good, right?
00:13The revenue is down by like $5 to $9 billion, lower than they expected.
00:17The stock price dropped like 10% overnight.
00:19It was not good news.
00:21But a hit like this does not destroy companies.
00:25A lot of publications are like, this is the end of Apple.
00:28It isn't.
00:29I certainly don't think it is.
00:31Stuff like this happens, right?
00:32Stuff like this happens to big companies, and for a company like Apple, they're still
00:37one of the richest companies out there.
00:38They're still one of the most profitable companies out there.
00:40It's not that this won't have an effect on them, but I think this is going to be a huge
00:43wake-up call for the whole company.
00:46So Tim Cook mentioned a few reasons in his letter as to why the performance was poor,
00:50and I want to touch on a couple of them.
00:52He mentions the slower market in China being a big thing, and he also mentions the battery
00:56replacement program, and the effect that that program had on iPhone sales.
01:00Now, if you'll remember, a little while ago, someone discovered that Apple was reducing
01:04the performance on their iPhones when they were reaching a particular age, or when the
01:08battery had degraded to a particular state.
01:10And that was really controversial.
01:12Some people were like, hey, that's fine.
01:14Apple is trying to maintain the functionality of the phone by dropping the performance a
01:17little bit, but just making sure that it doesn't reboot.
01:20And other people were like, what?
01:23This is essentially planned obsolescence.
01:25They're making these phones slower to encourage you to buy a new one.
01:28Clearly, when you reduce the performance of your older iPhones, more people are buying
01:32new iPhones.
01:33And whether or not they did it with intent, we'll never know, but the fact is, people
01:37bought less iPhones this year because of that battery replacement program.
01:41Because you could just spend $30, and Apple would replace your battery, and now your old
01:45phone suddenly felt new again.
01:47Now as for Tim's comment on the economy in China, it seems that people in China just
01:51aren't buying as many iPhones as they expected.
01:54And Apple is extremely dependent on China to grow their iPhone business, because almost
02:00every other developed market out there is heavily saturated on iPhones.
02:04See, iPhone only sells flagship devices, but there's only so many people in the world that
02:09are willing and able to buy a $1,000 flagship phone.
02:12There's a finite number of people who want to spend that kind of money on an iPhone.
02:17So right now, in our market, phone companies are trying to push new phones on us so hard,
02:23like 5G phones, smaller notches, thinner bezels, better this, better that.
02:27But the truth is, the user experience on our phones hasn't changed, hasn't fundamentally
02:31changed in years.
02:33Like if you're talking about iPhones, the iPhone 5, or no, let's say the iPhone SE,
02:39so like the one that looks like the 5.
02:41That has a very similar experience to the newest, latest, and greatest iPhone XS.
02:46It's a lot cheaper, like the XS is $1,000.
02:49The iPhone SE is probably like $200, $150.
02:54But they both run iOS 12, I still have to charge both of them at night.
02:57Whether you have a $200 iPhone or a $1,200 iPhone, the user experience is fundamentally
03:02the same right now.
03:04If iPhones want to have better business, doesn't matter if it's in Asia, China, or anywhere
03:09else in the world, they either have to make way better phones, or way cheaper phones.
03:14Those are really the only two options, because all these iterative changes they've been doing
03:17year on year just isn't cutting it, and you can see it in the numbers.
03:20Those sale figures do not lie.
03:22Now I want to talk about one last thing, it's the iPhone XR.
03:25This is a phone that launched at $750, and the reviews of it were decent.
03:31No one really ripped on the phone, like the initial impressions were a little weak with
03:33the screen resolution and stuff, but people enjoyed the phone, and I think a lot of people
03:37thought that for $750, you're getting decent value.
03:41The problem is that when people buy iPhones, when people want that Apple luxury brand,
03:46they want the real iPhone.
03:48They don't want the derpy version that they offer once in a while, like the iPhone 5C,
03:52and now the iPhone XR.
03:53People want the good good.
03:54They want the real iPhone, so people just don't buy the B-tier phone, and I think this
03:58is something that Apple will adjust in their game plan going forward, and that's really
04:03the whole message of this video.
04:05The earnings warning is bad news, right?
04:08Obviously no one wants to hear that, but I think Apple's a company that is smart enough
04:13that they're going to make some big moves.
04:15They're going to make some big shifts in the direction of the company, the roadmap
04:17of when they want to release things, how they're going to do things.
04:20They're going to change, because there's no way that they're going to ride on this and
04:23just watch the company tank.
04:25There's no way.
04:26I'm excited to see what they do.
04:28It's interesting that this panned out the way that it did, but I'm interested to see
04:31what you guys think.
04:32Like, is this what you expected?
04:33Is this...
04:34There's...
04:35I personally don't think it's the end of Apple.
04:36I think...
04:37I know some of you guys do, but I'd like to hear your thoughts.
04:39Okay.
04:40Hope you guys enjoyed this video.
04:41Thumbs if you liked it.
04:42Subs if you loved it.
04:43See you guys next time.
04:45Bye.