eXtensions - The Wednesday File (55): The Evil Maid; Apple Q2 2018 Results - Before and After

By Graham K. Rogers

A few hours ago Apple announced its Q2 2018 financial results. I look at the build up to this, with an eye to the way Wall Street has persistently been talking Apple down. With a Q1 income of $88.3 billion and a predicted Q2 of over $60 billion, this is not a doomed company. First I look at a new solution for those who have ever had their laptop lids opened by strangers (or nosy friends).

Some late news: as well as the Q2 2018 figures (see below), Apple released an update to iOS, which is now at version 11.3.1. The main purpose of this update was to cover an issue that appeared when some iPhone 8 users had screens replaced with standard parts and the touch input became unresponsive. There are also improvements to security for iPhones and iPads.

Following other financial reports, I would not be surprised if there were more updates and releases in the next week or so.

For many years I have been using TextWrangler for my basic writing. I explain how the bare interface helps me to write more easily as there are no formatting concerns that exist in word processors. My students, who start even a basic shopping list by kick-starting Microsoft Word or (nowadays) the Google equivalent, sort of glaze over and don't quite grasp the idea that working through paper, a text editor, then formatting at the end makes for a better process.

What do I know? They obviously are far better at writing English than me. . . .

With Apple's next update to macOS it is expected that 32-bit apps will no longer run and several of the apps I am currently using will disappear. TextWrangler is one and for a while I have thought about updating to BBEdit, also from Barebones Software, which I had used a long time ago. This week, I bit the bullet and bought the licence ($49.99) which cost me just over 1600 baht in real money. I will be moving my text and html files to BBEdit in the next few days.

Some of us are concerned about security and privacy. I teach about this in an Ethics & Morals class to computer engineers. I am constantly surprised by their innocence and a total unawareness of the real world. I had to rewrite some of the content when Snowden blew the whistle on the NSA, and I have also changed materials in the last year with other revelations: coming thick and fast. Last time, I included the allegations surrounding Harvey Weinstein, Kevin Spacey and others. This year I am trying to work in ethical problems with the current White House; but then we also have the concerns around Facebook and Cambridge Analytica.

I had always included Terms & Conditions as a component. It was clear none of the students had ever looked at these. Apple makes it particularly difficult here with having 5 sets of T&C when a device is started (or macOS updated) with at least one not being in English, so the chances of users - particularly in this part of the world - wading through all that legalese when all they want to do is use a device, are small. I do not know anyone (apart from me) who has read the T&C of Facebook and Twitter. I am holding off examining the most recent updates.

I lock my devices with the software features provided in macOS and iOS, but in a teaching environment (or outside) there is always the chance that someone may try to gain access by opening the lid. Some people do not bother with a password. I knew one lady who wanted to make do with the Enter key (I was aghast). I make it more difficult by creating a user account as well as the Admin account and working only in that User environment. I can still enter the Admin password when needed, but any installation needs me to act rather than simply accept passively.

The lid comment (above) is apposite as last week I read the comments of Ben Lovejoy (9to5 Mac) on a new app from a former NSA staff member who had experienced the feeling of risk when in Moscow. He was not sure if his notebook computer had been opened: the so-called "evil maid" attack. Do Not Disturb is a free monitoring app, but for warnings to be seen on an iOS device, users need Do Not Disturb Companion. I downloaded this and it seemed reasonable enough to subscribe: 35 baht (0.99) for a month or 309 baht ($9.99) annually. I signed up for the annual fee.

The app was easy enough to install on the Mac, and the iOS app, which was needed to complete the Mac installation was also easy. Adding the Mac to the iPhone device used a large QR code and that was (again) simple to do. When the device is paired, the metadata is sent to the iOS app (UUID, Cert ID, CA ID) which would be helpful in the event of a loss. An icon appears in the menubar, but I was able to hide that in the app preferences: no point letting someone know they are being monitored.

Of course I tried it out and the reaction was instant (OK I was sitting in front of the Mac when I did this). I was given options including the use of the camera so I took a picture. I saw that the green light of the Facetime camera came on. A timeline was presented on the app (I guess this is extended in a real case scenario) and when I cancelled the process, the photo was shown. That was not available in the Photos library; nor could it be saved or exported, so there could be some improvement there and I have emailed the developer. A reply later suggested that great minds think alike and this is already under consideration.

Another option on the screen was a button to shut down the computer: perhaps important in some cases. I tried this and the shutdown process started almost the moment I pressed the icon on the iPhone app.

Paranoia is sometimes a healthy approach when it comes to security and privacy. Years ago, I had a burglary and my PowerBook was stolen. Along with it were hundreds of photos that I had not backed up, turning me into a backup evangelist. I did have Undercover security software installed and using the IP number almost tracked it down. The last time it was online, the Thai user was in Dublin, using a spreadsheet. What let me down then was that the PowerMac did not have a camera: that could have made a difference. Do not disturb has this information, but might also benefit from the IP details when the Mac is online.

In its current form, it will be good for me to see if any student tries to have a look (although my guys are pretty good usually) or my own benign maid, or any other odd event: it is the unexpected ones that catch us out.

When I went home later and opened the lid of the computer again, there was a message on the Apple Watch, which really pleased me as this is this is often first time I see I have a message and it saves me going to the iPhone. If I were not expecting such an event, of course, I would access the iPhone app immediately.

The basic information about Apple's Q2 2018 financial report which came out a few hours ago is below. I am sure by now that it is on several other sites. What I have been noticing (as I have commented before) is that after a record quarter last time, Wall Street and many other commentators have once again gone for the "Apple is broken" theme, despite guidance of $60-$62 billion. Many companies would settle for that as annual income. Every report - speculative or factual - has been taken as support for the idea that Apple is broken. That clearly is not the case, although some things might not be going along in the directions that everyone wants.

One of the possible mis-steps (and I do think Apple is wrong here) is the announcement last week that the Airport routers are no longer being produced. I have had a couple of these and, once set up they just keep working. Trying to use the service provider router is fraught with problems (without even thinking about security aspects) and they are out of date.

The company gave me a router capable of 802.11g connections (a specification 15 years old), which did not allow me to synchronise my devices correctly. When I asked the service department, they were unable to understand the difference between a port in a firewall (e.g. 80 and 8088 for web connections) and the physical ethernet port. After a frustrating phone call, when they asked for remote access to my computer (absolutely not), I connected the Airport router (802.11ac) to the supplied device and I had everything as I wanted it. It was only in the last few months that I was provided with a more modern router, but the Airport still goes in the back of that.

That router still works, so the panic that ensued after Apple's announcement, with several articles about replacement devices, seemed a little premature. What I am unsure about is why Apple did this at a time when the Internet of Things (especially HomeKit) is taking off, and HomePod is available in several areas of the world (but not here). I am not alone her as Ben Lovejoy (9to5 Mac) argues convincingly that this is the wrong decision and the wrong time.

I am also still a bit grumbly about Apple's decision to cease development of Aperture which still works, when Final Cut Pro is still being developed (and was updated this week). Photos has improved considerably, but there are still tools in Aperture, like brushes and the Loupe, that I find useful. I have to switch to 3rd party solutions for the extras.

But all this does not mean Apple is failing.

Phone X - Image courtesy of Apple

Some of the reported areas in which commentators have concerns are the HomePod and the iPhone X with some reporting that orders are down, while last week we mentioned that some sites are showing Apple is making large profits with the device (Mike Wuerthele, AppleInsider). There's the problem: Wall Street wants growth, wants market share, wants innovation (holding Apple to different standards there), but Apple works on products and profit.

Despite the doom-laden predictions (how many times does this happen?) Daniel Eran Dilger on AppleInsider reports that Apple apparently saw 32% growth in China, despite the whole market there contracting. And this is when Apple produced its most expensive phones: perhaps they understand the markets better than Wall Street. I am sure Tim Cook will be asked questions about this at the Conference Call. Note that this doomed company produced revenue of $88.3 billion last quarter and expects over $60 billion this quarter.

Also causing some concern are reported low orders of HomePods, with supply chain figures cited as the main problem. Daniel Eran Dilger (AppleInsider) also questions the accuracy of the picture that is being painted. This has been mentioned over and over again and does not always show Apple's true output or sales. As a point, the device is still not on sale in many countries (perhaps never will be) indicating a controlled rollout.

Note that this panic is once again based on supply chain information reported in Bloomberg. It is also unclear where these sales figures are coming from, because Apple does not release them. It is also clear that figures from concrete stores are no longer accurate as more and more people are ordering online. In the last 5 years, for example, all the products I have bought from Apple, apart from a few accessories (and the latest Apple Watch) were online purchases. I am not alone.

I have been concerned over the last couple of years when supply chain figures are cited, proving that Apple is having problems, that these are less about information and more about forcing the share price down, particularly when the timing is taken into consideration. One of those who predicts doom over and over is Toni Sacconaghi. Last week the Bloomberg analyst (and Bloomberg is often negative on Apple) took the reports of weak iPhone sales and predicted lower earnings. The basics of the Q2 2018 report are here:

Apple today announced financial results for its fiscal 2018 second quarter ended March 31, 2018. The Company posted quarterly revenue of $61.1 billion, an increase of 16 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.73, up 30 percent. International sales accounted for 65 percent of the quarter's revenue.

"We're thrilled to report our best March quarter ever, with strong revenue growth in iPhone, Services and Wearables," said Tim Cook, Apple's CEO. "Customers chose iPhone X more than any other iPhone each week in the March quarter, just as they did following its launch in the December quarter. We also grew revenue in all of our geographic segments, with over 20% growth in Greater China and Japan."

"Our business performed extremely well during the March quarter, as we grew earnings per share by 30 percent and generated over $15 billion in operating cash flow," said Luca Maestri, Apple's CFO. "With the greater flexibility we now have from access to our global cash, we can more efficiently invest in our US operations and work toward a more optimal capital structure. Given our confidence in Apple's future, we are very happy to announce that our Board has approved a new $100 billion share repurchase authorization and a 16 percent increase in our quarterly dividend."

Bear in mind that Apple always meets its own earnings predictions, but Wall Street often predicts higher (on what basis?), and is then disappointed when Apple meets its own targets, but not theirs. Note also that international sales now account for 65% of the revenue reported here, and the comment that "Customers chose iPhone X more than any other iPhone each week. . . " and that growth in Asia, both of which would seem to fly in the face of what had been claimed by the experts. Anyone who still reads these experts and thinks they are worth considering may like to buy a bridge I have for sale. Do we expect to see any mea culpas? Not a chance: so these so-called analysts will continue to con their customers.

We also see that apple sold 4.1 million Macs in the quarter, and was especially strong in emerging markets. Over 60% of purchases were customers new to the Mac (MacJournals Tweet).

What was most interesting to me in that report I read (see above) on Sacconaghi's predictions in Seeking Alpha was the comments section. The readers were having none of this, criticising Sacconaghi for his constant negative approach to Apple and for his frequent wrong predictions.

Another on my radar is Ming-Chi Kuo. I fail to understand why his predictions are rated so highly as they are not always as accurate as some claim. Again, they seem to be released in perfect time to cause a relaxation in the share price. Then when it all blows over, the share price rises and (if you timed it right) profits are there to be made. We won't have to worry about Ming-Chi Kuo much more as he is reported to be moving on and will not be covering Apple in the future (Mark Gurman, Twitter).

And of course, now all the analysts are changing their tune to, "Buy."

Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs. After 3 years writing a column in the Life supplement, he is now no longer associated with the Bangkok Post. He can be followed on Twitter (@extensions_th)