Apple iPhone revenue falls 15% but services business grows

January 30, 2019 09:13
Apple is expected to focus more on growing its services business as sales of flagship iPhone devices slow. Photo: Reuters

Apple on Tuesday reported a 15 percent drop in iPhone revenue in the holiday shopping quarter but said its services business, which includes Apple Music and the App Store, enjoyed sharp growth. 

Revenue from services reached US$10.8 billion in the firm's fiscal first quarter ended December, in line with Wall Street estimates.

Services gross margin hit 63 percent, up from 58.3 percent previously, Reuters reports.

The company said it now has 360 million subscribers to both its own and third-party services, and set a goal to expand that to 500 million by the end of 2020.

According to Apple, it now has 1.4 billion active devices, an increase of 100 million from last year. Of those devices, 900 million are iPhones.

Apple said it would start providing regular updates on the number of iPhones and overall devices in use. The company has stopped reporting unit sales of its iPhones.

Apple counts both subscribers to its own services as well as Apple device users who subscribe to outside apps or services using Apple’s payment systems. The company keeps up to 30 percent of the payments it handles.

In the December quarter, Apple’s iPhone revenue declined 15 percent year over year to US$51.9 billion.

China’s economic weakness hurt iPhone sales in there, CEO Tim Cook said. 

Cook told Reuters that Apple is rethinking how it prices the iPhone outside the United States after largely setting the price in US dollars, which made the phones more expensive in local currencies. 

“When you look at foreign currencies and then particularly those markets that weakened over the last year those (iPhone price) increases were obviously more,” Cook said in an interview.

“And so as we’ve gotten into January and assessed the macroeconomic condition in some of those markets we’ve decided to go back to more commensurate with what our local prices were a year ago in hopes of helping the sales in those areas.”

In other comments, Cook said he believes trade tensions between the United States and China are easing.

“If you were to graph up trade tension it’s clearly less in January than it was in December,” Cook told Reuters. “I’m optimistic that the two countries will be able to work things out.”

For the quarter ended December, Apple reported overall revenue of US$84.3 billion, slightly above analysts’ average estimate of US$84 billion. 

Earnings per share stood at US$4.18 for the quarter, compared with Wall Street’s average estimate of US$4.17, according to Refinitiv data.

For the current quarter, Apple said it expects revenue in the US$55-59 billion range.

Apple shares rose 6 percent to US$163.50 in after-hours trading as investors focused more on the growth in the services business than the slide in iPhone sales 

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