00:00What Tim Cook is leaving for John Ternus here is he looks to the exit.
00:04I mean, his last day is September the 1st, and we think of Tim Cook as having such prowess, such
00:08success, managing Apple's supply chain.
00:10How much of what we saw in that report yesterday is attributable to kind of mismanagement on his part,
00:14or is it just by virtue of the fact that there is such widespread demand now for chips in particular?
00:18It's becoming increasingly difficult to manage, even for somebody who has been known for so long as somebody who can
00:23do it so expertly.
00:25Look, well, good morning. Thanks for having me, David.
00:28Look, this is still a strong foundation, right?
00:32And I think, you know, as you look at the results in the quarter, sure, they were a bit in
00:37light of, you know, expectations,
00:39or at least the upside that we've had, you know, the past couple of quarters, and guidance might have been
00:43a bit light.
00:44But if you back out, you know, some of the impacts from supply constraints and FX, the numbers actually look,
00:50you know, still very good.
00:51And so I think, you know, from our perspective, the demand signals continue to be, you know, quite robust.
00:56And so I think the business remains on, you know, firm footing as we head into this next 10 years.
01:02So is it fair to say that Apple does not have a supply chain issue, that the shortage of chips
01:06and the cost of memory is something they'll be able to get through?
01:10Well, without question, they're facing supply constraints, you know, memory price issues that are, you know, impacting, you know, the
01:18broader industry.
01:20But I think that's something to work through with time.
01:22And so, you know, our suggestion is that investors look through that.
01:25But sure, is that something that could create some turbulence, as it has over the last couple of quarters?
01:31Yes, and I think that is something that will continue to impact both supply and, you know, memory cost and
01:39margins as you look over the next, you know, several quarters.
01:42But we're taking the longer-term approach.
01:44And, again, you know, the key for us are the demand signals, which I think remain quite healthy.
01:48Look, when you step back, you know, iPhone, which is a mature business, has now grown north of 20 percent
01:53the past, you know, three quarters.
01:54And you've also now got a, you know, resurgence in Mac as well, you know, to help balance that.
02:00Services business, you know, that's a $100 billion business, you know, growing, you know, low double digits.
02:05So, you know, we remain comfortable with the overall opportunity moving forward.
02:09So let me play this out here.
02:10You mentioned the Mac products and if Apple is able to kind of wade through this 100-year flood, as
02:14Tim Cook put it yesterday, kind of ominously here.
02:17It released this MacBook Neo, this low-end product.
02:20And I'm curious sort of what your takeaway is from the reception that that's seen here over the course of
02:25the last quarter.
02:26I think that Apple for a long time was kind of pursuing the higher end of the marketplace.
02:29There was some resistance, I gather, from our reporting, Mark Gurman's reporting, to kind of going in that direction.
02:34But it does seem from the results we saw yesterday and the demand that you've been talking about here, it
02:38is a niche that they are well-suited to fill.
02:42Well, I think that's exactly right.
02:43I mean, they had basically seated chair, you know, for the Chromebook, you know, market.
02:47And so, you know, really opens up, you know, a new opportunity for them and they're going after that, right?
02:53And you're seeing that demonstrated in the numbers in the quarter with overall, you know, Mac sales up, you know,
02:5927%.
02:59So, again, really a nice resurgence there.
03:02And that's still facing supply constraints as well.
03:05That number probably would have been higher, you know, without those constraints.
03:08And so, you know, the combination of, you know, Neo, Mac mini, and then, of course, you know, the broader,
03:15you know, Mac portfolio, I think, you know, sets them up well.
03:20Certainly, you know, you know, medium term.
03:22Again, you know, not, you know, notwithstanding some of the supply constraints that we just touched on.
03:28Even so, with some of those lower end product offerings, they have raised their prices for their devices, some as
03:33much as 20%.
03:34Do we have any sense to the price elasticity among consumers, whether they are willing to continue to pay more?
03:42Well, I mean, that is a great question, particularly as we get into the next iPhone cycle.
03:45Yeah, because I think the expectation is we'll see, you know, probably some higher prices, you know, there as well
03:50to help offset, you know, some of the supply and memory cost challenges.
03:56Look, you know, our sense is overall demand is going to remain, you know, fairly inelastic.
04:01Now, will there be some impact?
04:02Sure, you know, there's bound to be.
04:05But that is, you know, that is one of the central questions.
04:08You know, I think the results, again, that we're seeing at this point, particularly in iPhone, remain pretty encouraging.
04:13I think, again, the demand signals, you know, have been strong.
04:17And we're going into a product cycle that, you know, we're excited about.
04:20I think consumers will be excited about with the first foldable phone and Siri AI as potential catalysts to help,
04:27you know, drive demand into the back half of the year.
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