Quicktake: Is Apple abandoning hope of salvaging iPhones sales?

The smartphones revenue declined by almost 15 per cent in the holiday quarter

epa07330729 An exterior view of an Apple store in Berkeley, California, USA, 29 January 2019. Apple's fiscal first-quarter results showed its iPhone revenue drop by 15 percent.  EPA/JOHN G. MABANGLO

Markets were surprised when at the beginning of this year Apple lowered its revenue outlook for the holiday quarter, the first such forecast in the past two decades. The company on Tuesday released its earnings for the first quarter that ended December 29, raising some questions about its future plans.

Apple reported revenue of $84.3 billion (Dh309.6bn), a 5 per cent year-on-year decline. Earlier this month, Apple had adjusted its revenue estimates to $84bn for the quarter, from an earlier bracket of $89bn to $93bn, citing economic slowdown in China, one of its biggest markets, and weaker demand for its newer products (iPhone).

The National takes a look at what the future holds for Apple in 2019 and beyond.

Does this mark an end to iPhone's supremacy in the smartphone market?

Revenue from iPhone sales, which constitutes nearly 60 per cent of the company's overall income, dropped 15 per cent to $52bn, while total revenue from services and other products grew 19 per cent.

"Apple iPhone performance was disappointing," said Neil Mawston, executive director of wireless device strategies at research firm Strategy Analytics in Boston.
"Global shipments [of iPhone] fell sharply due to unfavourable foreign exchange rates, intense competition from rivals like Huawei, longer ownership cycles, diminished carrier subsidies in some developed markets and flagging demand in some emerging markets."

Is Apple shifting to offering more services?

Revenue from services reached an all-time high of $10.9bn, with revenue from mac, iPad and wearables, home and accessories grew 9, 17 and 33 per cent, respectively.

Apple’s chief executive Tim Cook indicated that the future lies in services.

“Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. It’s driving our services business to new record,”  Mr Cook said.

Is pricing holding back iPhone sales?

The high prices of new iPhones are a concern. The price of Apple’s flagship phone is significantly up now by as much as $600 than it was three years ago.

“Pricing [of iPhone] is an issue in some markets – in a fast-growing market such as India, for example, Apple has barely made a dent, owing to the fact that its phones cost around double that of many competitors,” said Matthew Kendall, chief telecoms analyst at Economist Intelligence Unit.

Is China hurting Apple’s revenues?

Apple’s smartphone shipments to China, the world’s largest market of the devices, dropped by more than 22 per cent to 10.9 million units in the last quarter of 2018.

Analysts say that Apple has been under pressure in China for the past three years as the demand for iPhone has fallen in the past 12 quarters.

“Apple is heavily criticised for its expensive retail prices … it is in danger of pricing the iPhone out of China,” said Linda Sui, director at Strategy Analytics.

In the first quarter, Apple lost nearly $4.7bn in revenue from Greater China market.

“Weak macro conditions in some emerging markets was significantly more severe than we originally foresaw, especially in Greater China," said Mr Cook.