00:25:32 · Ed Elson
[00:25:32] S4: Investors were kind of had a meh reaction, it seems like. It seems like there are a few issues. The the the, margins for the next quarter was... Seemed to be a problem, which appears to be a result of the massive increase in the price of memory, which is why Apple has had to increase the price of their own phones, and that seems to be easing into their margins. But, you know, there are also these other issues like the Duo, which we should probably get into, questions about AI, questions about Siri AI. I mean, what do you make of the near future for Apple, and and what do you think investors are are really reacting to after this report?
00:26:13 · Patrick McGee
[00:26:13] S8: For any earnings results, it's always more about the coming quarter than the last results, and that's especially true of Apple because the Christmas holiday season quarter is the biggest quarter by far for the for for the for the entire year. And in a sense, I think we've learned remarkably little. I mean, they offered fairly conservative guidance, so people could say it looks like, you know, things are softening versus the the the quarter that they just had. Right? So 12% revenue growth is what they just had, and I think they projected seven to 10%. And with people expecting something like 12%, that looks disappointing. I would just say, look. Apple's a conservative company that would rather sort of put out a low number and then beat it out of the park. So I basically read nothing into that. The Duo really is a fascinating thing because not only is it like a a a wild change to the iPhone, interface, but it costs $2,000. So if they're able to actually make a whole bunch of these, and and that's a that's a big issue, and then demand is really high, that could really be quite game changing for how much revenue they're pulling in. The problem, of course, is that you have all these cracked screens, basically on social media and then verified through reporting. But we don't know how extensive the problem is in the sense because the iPhone Duo has only been on sale for something like ten days. So, like, in the best case scenario, the problem of the iPhone Duo is an infant mortality problem. In other words, the screen breaks within a day or two of using it. What we don't know is if it might be something like a sleeper cell problem where months down the road, the same problem emerges, later. I suspect it's the former. In other words, if you have a problematic, a defective duo, it emerges as as a problem within twenty four or forty eight hours. But I just don't know that we'll have that data until they've been on sale or in the wild for, let's say, a month.
00:27:53 · Ed Elson
[00:27:53] S4: How bad has the rollout been in in your view? Because, I mean, just from my... I haven't gotten the phone, I haven't seen it, but I hear about it on social media, I see it on my timeline, and mostly it's people talking about it crapped, it breaks. The sense that I'm getting is that it's been a pretty shaky rollout so far, which seems very un Apple like to me. I mean, I think of Apple as the company that only ships products that are literally perfect and have no mistakes whatsoever. This is... This does not seem to be that product. So as sort of someone who's really studied the history of Apple, like, how does this rollout compare to previous product releases?
00:28:38 · Patrick McGee
[00:28:38] S8: Yeah. So, look, Apple really likes to push the boundaries on what's even possible in design and then in manufacturing. And so it's not at all uncommon to have defects in the early process of of of building out and scaling a new product. What's really strange here is that this is happening after they're shipping to consumers. Right? Usually, this is something Apple would have worked out months, before, at least weeks before they're actually shipping to consumers. So that's sort of the the big thing. As far as how big of a problem is this, I kind of think we have literally no data because we're dealing with anecdotes in terms of how many people are on social media. And let's say the number was just orders of magnitude higher than you and I thought. Let's say it's 10,000 defective units. Right? That would be absolutely remarkable. Well, not if they sold 2,000,000 in the first month. Right? Like, that would be a hilariously high yield rate. In other words, like, the number of defects as a percentage would be incredibly low, and yet Apple is just such a sort of, I don't know, iconic company producing such an iconic device that, it can still go wild on social media even if it's not actually that problematic. So, you know, I think where you're gonna see problems is the fact that they are having difficulties actually building these things. I don't wanna say they have... They're having difficulty meeting demands. That's sort of Apple's line, and yet I don't think it's actually clear that there's so much demand for this product. But if you have a defective Duo, you go back to the Apple Store and they frankly don't have one to give you as a replacement, then you've got a real problem on your hands. And that certainly happened in some instances, but in other instances, they just give you a new one. So I think time's gonna tell how problematic this is gonna be. And, of course, we are leading into the most important quarter for the year. So, it could be a major problem, but, honestly, it might just be basically over with. They they could have very well fixed the supplier issue at this point. And, at the end of the day, maybe it's only a few dozen units, and we move on.
00:30:30 · Ed Elson
[00:30:30] S4: Ternus talked a lot about Siri AI, which the new voice enabled chatbot. He also got a lot of questions about AI because this seems to be the most important strategic decision that Apple has made, which is that they have not joined this AI arms race, which every other big tech company has decided to pursue. And so they're getting a lot of questions about it that... A lot of questions that he and the management team didn't really seem to answer. At least they didn't seem to answer those questions very directly. What do you make of that decision at this point? I mean, we know how much money all these other guys are spending on on AI. Hundreds of billions of dollars by Meta, Google, Microsoft, all of these players. Apple's not spending seemingly anything, on on CapEx. Is that the right move?
00:31:18 · Patrick McGee
[00:31:18] S8: You know, when markets are bullish on AI, then Apple looks like it's this old timer who sort of can't keep up with the times. And when markets are bearish on AI, then Apple sort of plays the safety trade, and it and it looks genius. And, of course, right now, the markets are in a bit of a tailspin due to, all the spending and CapEx on AI. So Apple's looking good. So, I mean, this was great timing for John Ternus' first first interview, you know, for earnings. But you're right. Yeah. We learned very little. I mean, that's very typical Apple. You know? If you learn something about John Ternus on the earnings call, it's that it's it's Tim Cook two point o in terms of will we actually hear anything interesting. I mean, very, very tame, in terms of what he was actually saying on the earnings call and and the other executives as well. So, you know, it's gonna be difficult to know because I guess if you are AGI pilled, then it's insane that the world's most iconic company really isn't playing the game of investing loads of money into AI. But if you're not AGI pilled, then it's a genius move to sort of sit back and let people subscribe on their Apple hardware. You know, where Apple's actually doing quite well is with the Mac minis and the Mac studios. Right? These are bits of hardware that are really good at running AI models, and you can download, like, the the open weighted models and have them running on your Mac studio, without a subscription fee fee to the likes of Claude and ChatGPT. As as they continue to iterate on this technology, Apple could have a very, very winning AI strategy, but it's in hardware. And what people are wanting is sort of in software, in Siri, in data centers. And they're not... It's not that they're not playing that game. They're not executing very well. But in times of, sort of panic over how much CapEx is going on, Apple is sitting pretty.