Apple iPhone revenue falls 15% but services business grows

Jermaine Castillo
January 31, 2019

Cook's comments suggest that Apple will roll back the 20 percent price hike that it enacted this year on its latest iPhones, a strategy I previously labeled "Apple Jacks."

iPhone revenue is down 15 per cent year-on-year to $51.9 billion thanks to lower-than-expected sales over the usually buoyant Christmas period.

Now, CEO Tim Cook is grappling with his toughest challenge since replacing co-founder Steve Jobs 7 years ago.

Apple's sales in China fell considerably.

The results were largely in line with a preannouncement Apple provided earlier this month. That compares to its closing price of $157.92 on January 2, when Apple lowered its revenue projections for the quarter.

"This is the defining moment for Cook, " said Wedbush Securities analyst Daniel Ives.

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Despite slower iPhone sales last quarter, Apple unseated Samsung Electronics to become the world's largest smartphone vendor with a 19.8 per cent market share on shipments of 71.7 million units, according to data from research firm Canalys.

Apple has diversified its revenue streams in recent years with a number of new offshoots such as its digital wallet service, Apple Pay, which facilitated more than 1.8 billion transactions in the quarter, more than twice the volume it had a year ago.

The win was despite the significant decline in sales nearly on previous year's level with nearly 19,97 billion dollars.

Cook used the tightening of local regulations in Japan to demonstrate his point about carriers being restricted in subsidising iPhone sales as part of a services contract.

The stock closed down one per cent on the Nasdaq at US$154.68 but climbed in extended trading.

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The issue, he said, was in global markets thanks to foreign exchange rates and disappearing carrier subsidies.

Still, the iPhone remains the centerpiece of Apple's product lineup, so some analysts remain disappointed by the company's performance in a crucial market for growth.

What do Apple's Q1 results mean for their share price?

Here, Apple was able to increase sales by 8 percent. The iPhone X allowed Apple to increase the Average Selling Price (ASP) but it appears as though its bid to appeal to more market segments with the iPhone XR has fallen flat.

Among them are higher prices - Apple's most expensive iPhone now costs $1,350 - for models that aren't that much better than the previous generation, giving consumers little incentive to stop using the device they already own until it wears out.

In addition to the company's iPhone and iPad models, Apple is working on an augmented reality headset it plans on releasing alongside the two devices in 2020.

However, Apple, for the past year, has scrambled in an effort to prepare for the day these losses will be even worse.

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"The upgrade cycle has extended, there is no doubt about that, " Cook conceded. Unlike the straightforward metric of how many iPhones Apple has sold in a given quarter, gross margins are harder tea leaves to read.

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