Apple Provides Q1 2019 Guidance Revision

Today Tim Cook sent a letter to investors. The letter contains some adjustment to their first quarter guidance for 2019. At the last investor call, in October, Apple issued guidance of $89 to $93 billion in revenue and grow margins of between 38 and 38.5 percent. This has been reduced to $84 billion in revenue, with gross margins of approximately 38 percent.

The adjustment is $5 billion less than the low end of their projection, and a full $9 billion below the high-end of their estimate. This range is 5.6% to 9.6% less than the overall guidance. There is no doubt about it, it is bad news. How bad this will ultimately be, will only be told in time.

This is not the first time that Apple has issued this type of guidance, but it is not done often. The last time this type of guidance was given was in June 2002.

In 2002, Apple’s reduction was given at $1.4 billion to $1.45 billion. This was down from $1.6 billion. This was a reduction of 9.38% to 12.5%. So, on the bright side, this year’s revenue reduction is actually better, even though the revenue is more than 50 times greater. Let us look at the reasons for this decline.

The Reasons

Apple provided a few reasons as to why they believe their initial guidance was off.

Staggered iPhone Launches

The iPhone X came out later than the iPhone XS and iPhone XS Max, so Apple indicates that it was difficult to determine how much of an impact this would have on quarterly revenue.

Foreign Exchange rates

A stronger U.S. Dollar means that devices purchases are more expensive in other countries, which will impact revenue.

The larger number of new products

Apple has indicated that the larger number products to sell lead to supply constraints for some products, like the Apple Watch Series 4 and the iPad Pro. Along with these, the AirPods and MacBook Air were also constrained. A supply constraint means that Apple could not sell more of the products, because they could not manufacture enough to meet demand. These supply constraints were throughout the quarter. The AirPods and Apple Watch are still supply constrained.

Emerging Market Sales

According to Apple, this is the biggest factor. In particular, revenue Greater China. To quote the letter

In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.

In Q1 2018, revenue was $88.3 Billion. The revised guidance given is $84 billion in revenue. The difference between these two is $4.3 billion. So the statement above, to me, reads that Apple lost more than $4.3 billion in revenue in Greater China. The reasons provided are that China’s Gross Domestic Product, or GDP, has had its lowest growth in quite a while.

Positives

Not all of the information in the investor note is doom and gloom. The install base of Apple devices is 100 million more than in 2018, meaning it is currently 1.4 billion devices, because the install base in Q1 2018 was 1.3 billion.

Another positive is that revenue outside of iPhone is up 19%, which is definitely a good thing as Apple tries to become a services company. Speaking of services, services alone generated $10.8 billion in revenue, and all regions saw growth. Wearable revenue grew 50%. This is fueled by Apple Watch and AirPods.

Closing Thoughts

There will likely be a lot of takes from this investor note. It is not surprising that Apple would add some positivity to the note, in addition to the reduced guidance provided. A single quarter where guidance is reduced will not break Apple. Apple has over $130 billion of cash on hand, so Apple will be fine overall.

There is one thing to keep in mind. As stated within the letter,

While it will be a number of weeks before we complete and report our final results, we wanted to get some preliminary information to you now. Our final results may differ somewhat from these preliminary estimates.

This means that we could see better, or worse, results when Apple provides its final results at their quarterly conference call. The conference call will be on January 29th, 2019. As one last note, starting with this quarter, Apple will not be providing unit numbers for any of their products.

Source: apple.com

iOS 12 and macOS Mojave e-book sale

In celebration of the holidays my two latest e-books, iOS 12, tvOS 12, and watchOS 5 for Users and Developers, and macOS Mojave for Users, Administrators, and Developers are on sale in the Apple Books store. Each title is $2.99. The titles are on sale until 12/31/2018. The books make a great companion to those who might be getting an iOS device or a new Mac for the holidays.

Glitter Package Trap

This time of the year is often when many people order gifts for others. Unfortunately, there is a segment of society that feels as though taking other people’s packages is acceptable (hint, it’s not). One former NASA engineer decided to get creative and he devised a trap that harassed some package thieves. Make sure to check out the video to see just how he did it.

Apple’s ECG watchOS App In-depth

At their September event Apple announced a new health-focused watchOS app, an Electrocardiogram, or ECG, detection app. At the time Apple indicated that it would be available “later this year” and would be available only in the United States, at launch. With the release of watchOS 5.1.2, the ECG app is now available. I thought I would go through the setup and features of the ECG app.

Before we dive into the features and set, there are some requirements in order to use the app. The first requirement is that you have a Series 4 Apple Watch. This is because the sensors are only available on the latest Apple Watch. The second requirement is that the Apple Watch is running 5.1.2. This is the version that has the ECG app. The last requirement is that the iPhone paired with the Apple Watch must be running iOS 12.1.1, build 16C50.

Once you have met all of these requirements, you should have the ECG app available on the Apple Watch. When you tap on app you will be presented with an image like the one below, that indicates to do setup in the Health app on the iPhone. If you open the Watch app on the iPhone, and tap on the “Heart” app, you will see something similar to the screen below. This provides a quick link to open up the Health app.

Once you open the Health App you will be presented with a popup that asks if you want to setup the ECG app. If you press “Set Up ECG app”, you will be prompted for your birthdate. This is needed because the ECG app is not designed to work for anyone under 22. This is because it is the ECG app is not considered a pediatric app. 

After you set your birthdate and click on the “Continue” button. The next set of screens will provide information about what an ECG is and how the app works, the results you will see, and what the app cannot tell you. Let us start with what the test cannot tell you.

What it can detect

The ECG app can provide a few different types of results. These results include the Sinus Rhythm results, Atrial Fibrillation (AFib), Low, or High, heart rate, or an inconclusive result. A Sinus Rhythm result indicates that the heart rate is consistent. 

If Atrial Fibrillation is detected, it means that your heart is beating with an irregular rhythm. 

If you receive a High or Low heart rate result, it means that the ECG app cannot do proper detection and the test should be re-done at a later time after your heart rate has come back into normal range.

An inconclusive result means that something went wrong with the detection, typically the Apple Watch is too lose or you moved your arms too much during the testing.

What it CANNOT detect

The ECG app is limited in what it can tell you. It cannot tell you if you are having a heart attack. The ECG app cannot detect a blood clot or stroke. Additionally, the app cannot detect other heart issues, like high cholesterol, congestive heart failure, or other forms of arrhythmia. If you are experiencing any symptoms, you should see your doctor.

Limitations of the ECG app

How the app works

The ECG app works by using a pair of sensors. These sensors are  the electrical heart sensor on the back and the digital crown. To use the actual app, you open the app on the Apple Watch you are presented with an animated heart icon. The text below the heart says “Hold your finger on the crown.”, meaning the Digital Crown.

When you place you finger on the digital crown it creates an electrical circuit between the back of the Apple Watch and the digital crown, with your body as the conductor between the two. When you place your finger on the Digital Crown you will need to keep it in place for 30 seconds. During this time it is best to not move your arms so that an accurate reading can be obtained.

Once the test is concluded you will receive results on the Apple Watch. The results will be one of the ones mentioned above. If it is a Sinus Rhythm result, your heart rate for during the test will be displayed on screen. 

After the results are shown on the screen you can add some additional information, like symptoms you may be experiencing. This is a nice addition to be able to add any symptoms so that you can later look at it to recall how you were feeling when you took the ECG reading. When your results are finished they will be added into the Health app. Here you can see all of your past results as well as export the results into a PDF to provide to your health care provider. 

Closing Thoughts

The ECG app on the Apple Watch is a great addition to add to the health aspects of the Apple Watch. While the ECG is currently only available on Series 4 Apple Watches that have been purchased in the United States, it is possible it will be available in more countries after they get regulatory approval in those countries. 

The fact that a device on your wrist can detect a heart condition that you may not have been previous aware of, means that you may become aware of an issue before it becomes a serious problem. There has been one reddit user who has already experienced this and the doctors indicated that it was a good thing that the user came in when they did, otherwise they might not be around to tell the tale.