Apple announced their quarterly results and as expected they iPhone sales slowed down. This wasn’t as big as many thought it would be because Apple is telling investors not to focus overly on the iPhones. Why? Because iPhones are in the past and that’s not where Apple expect their growth to come from going forward.
Apple prepared investors for a gloomy quarter when they announced that they were going to miss revenue expectations. They did miss the expectations by $4 billion but Apple also had their second best quarter ever in terms of revenue, so it’s not as gloomy as it looked earlier.
Why were iPhone sales lower?
Apple CEO Tim Cook credited a number of things for the slowing down of iPhone sales:
- The on-going trade tussle between USA & China does not bode well for iPhone sales.
- The currency fluctuations relative to a strong US Dollar also had an effect on sales.
- iPhone owners aren’t upgrading as frequently as expected. AKA the smartphone market is saturated…
- The battery replacement program also means consumers are holding on to their phones much longer.
All these factors led to reduced iPhone sales and the knock-on effect of that was revenue falling 15% Year on Year.
So what will they do moving forward?
Apple is just going to adopt the more popular business models making the rounds right now: the as-a-service model. This will mean that subscription services such as Apple Music, Apple TV, the App Store will be where Apple expects to get most of their “peas” going forward. Apple has been putting a lot of investment in a Netflix competitor scheduled for 2019 and apparently, they are also working on a Netflix for games that will be part of the app store in future.
To show how serious Apple is about monetizing users after they buy the phones, Apple informed investors the global user install base for iPhone for the first time; 900 million iPhones.
Tim Cook did say an interesting thing to investors during the call:
We don’t measure our success in 90-day increments. We manage Apple for the longterm
This is an important statement that should deemphasize the media panic around quarterly trends when some seasoned investors say trends are more impactful over longer periods.