Apple CEO Tim Cook says company saw an 'uptick across the board' in late April thanks to stimulus and work from home - CNBC | Canada News Media
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Apple CEO Tim Cook says company saw an 'uptick across the board' in late April thanks to stimulus and work from home – CNBC

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When Apple reported second-quarter earnings on Thursday, company executives didn’t provide financial guidance for the quarter ending in June.

CEO Tim Cook said in an interview with CNBC’s Josh Lipton that the company made that decision because “it’s hard to see out the windshield to know what the next 60 days look like.”

But both Cook and Apple CFO Luca Maestri gave quite a bit of color on a call with analysts about what they’ve seen economically in response to Covid-19 and how Apple has fared so far, as world economies brace for a lockdown-related slowdown and China starts to economically recover from its period of quarantine.

An ‘uptick across the board’

Apple executives discussed how the timing of lockdowns around the world affected demand for Apple products.

“If you look at what happened in China, we were having a really good January, the lockdown started there toward the end of January, as you know. February we saw steep decline in demand. We closed our stores in February. As the lockdown completed in mid-February, towards the second half of February, we began to open stores,” Cook said. 

Cook said store traffic in China was up from February but not to where it was before the lockdown started there. 

When the lockdowns started in the rest of the world in mid-March, Apple saw a sharp decline in demand outside of China, Cook said. But he struck an optimistic note about impending recovery, noting that things started looking a lot better in the second half of April. 

“The real thing for the rest of the world happened in March when the shelter in place orders went in and the work from home began. For those two, three-week period, at the end of the quarter we saw a sharp decline in demand,” Cook said. “If you now step out until April and look at that, early April started like the end of March, but in the second half of April we’ve seen an uptick across the board.”

Cook also gave two possible reasons why: Stimulus packages and a shift to working from home.

“A part of it is due to the stimulus programs taking effect in April. And then a part of it is probably the consumer behavior of knowing this is going to go on for a little while longer and getting some devices and so forth lined up to work at home more,” Cook said. 

iPads and laptops are in, headphones and iPhones will be hurt 

Some of Apple’s products will fare better in the marketplace than others during the pandemic, executives said.

Apple’s more powerful computers, which include the Mac and iPad lines, could have a strong quarter as people need computers at home.

“We believe that iPad and Mac are going to improve on a year-over-year basis during this quarter and that’s customers that are either taking online education or working remotely,” Cook said. 

However, sales of mobile devices like iPhones, headphones, and Apple Watches will likely take a hit, executives said. 

“On iPhone and Wearables, we expect a year-over-year revenue performance to worsen in the June quarter, relative to the March quarter,” Maestri said. 

“During the last three weeks of the quarter, as the virus spread globally and social distancing measures were put in place worldwide including the closure of all our retail stores outside of Greater China on March 13, and many channel partner sales around the world, we saw downward pressure on demand, particularly for iPhone and Wearables,” Cook said.

Maestri said that people were holding onto their older iPhones for longer. “While we did see a slight elongation in our replacement cycle towards the end of the quarter which we attribute to the widespread point of sale closures, our active installed base of iPhones has reached an all-time high.”

Cook said on the call he doesn’t see Apple’s customers trading down to less expensive devices with less storage or power.

Other product lines likely to be hurt by the pandemic include Apple’s warranty program, AppleCare, which is often sold at stores along with new computers and phone; and Apple’s relatively small ad business, which includes search ads in the Apple App Store, ads inside the Apple News App, and “third party agreements,” Maestri said.

Remote work and school could be big

Apple executives repeatedly talked up the company’s education and enterprise sales and software, suggesting that it sees significant opportunity as people around the world work and go to school from home.

“I think many people are finding that they can learn remotely and so I suspect that trend will accelerate some,” Cook said. “I think that’s probably also true about working remotely in some areas, in some jobs.”

Maestri discussed some of Apple’s enterprise clients like IBM and SAP and what they’ve done to enable work from home, including being able to manage company machines remotely and deploying new machines easily.

“We’ve seen countless examples of new products and deployments implemented in just a few hours. For instance worked with our New York teams. Peloton, for instance, worked with our New York teams to deploy an entire fleet of Macs overnight so their team could work remotely,” Maestri said. 

Apple said that it’s delivering large orders of iPads to school systems, including 100,000 in Los Angles and 350,000 in New York. 

Cook says that as Apple works from home, some of his employees are more productive, but it’s not across the board. 

“Everybody’s getting used to the work at home,” Cook said. “In some areas of the company people may be even more productive, in some other areas they’re not as productive. So it’s mixed, depending upon what the roles are.”

Manufacturing in China is back at ‘typical levels’

Apple’s execs were clear on the call on Thursday: its supply chain is going back to normal, which has implications for new product launches through the end of the year, which Cook called the company’s “lifeblood.”

Apple’s devices are complicated computers with hundreds of different parts from different suppliers, many of whom are based in China. Apple’s final assembly is mostly done in China as well. 

While China shut down in January, cities have re-opened and people are going back to work. 

“While we felt some temporary supply constraints in February, our operations team, suppliers and manufacturing partners have been safely returning to work and production was back at typical levels toward the end of March,” Cook said on the call. 

Apple’s CFO said that he didn’t anticipate production or supply issues with the new products Apple has released during the pandemic, including a new low-cost iPhone and high-end iPad. 

“We are in a typical supply position including our usual ramp associated with new products recently launched,” Maestri said. 

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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