Earlier this week, Apple reported its financial results for the pivotal holiday quarter. And while the company’s overall revenue of $84.3 billion for the three-month period ending December 30th, 2018 was ultimately in line with Wall Street’s latest estimates, it was also down 5 percent in comparison with the same quarter (2017).
There are, as we previously reported, several other interesting and noteworthy takeaways from Apple’s earnings call. But the most obvious variable missing from the set is that we still don’t know exactly how many iPhones the company sold. Executives said only that iPhone revenue accounted for $51.98 billion (or about 61 percent) of the firm’s total quarterly haul.
However, as was expected based on earlier reports, and as Apple’s CEO Tim Cook went on to confirm later in the call, that number is actually down 15 percent relative to iPhone sales during the same quarter last year.
Pushing the Envelope too Far?
What’s interesting is that while Cook stood firm in defense of his company’s iPhone sales strategy, he also appeared to concede, noting that other factors such as higher prices, and the continued, gradual death of carrier subsidies, ultimately explain declining iPhone sales, too.
When pressed further by Wolfe Research Managing Director, Steve
He noted that while international sales did, unfortunately, take a beating due to “amplified” currency exchange (inflation) issues in several developing markets, here in the U.S., there was ultimately a “pretty small difference” in sales compared to last year.
Also a factor, Cook added, is that the continued phasing-out of carrier subsidies has rendered iPhones more expensive than ever before, noting for instance that “if you’re a customer that your last purchase was a 6s or a 6 or in some cases even a 7, you may have paid 199 dollars for it, and now the unbundled world it’s obviously much more than that.”
While Cook says these foreign exchange issues are responsible for iPhone XS and XR pricing disparities between world markets, Apple, in a clear and bonafide bid to bolster iPhone sales in those markets moving forward, announced changes to its international sales strategy this week, which would effectively offset those costs for consumers.
“However, the foreign exchange issue that [CFO] Luca [Maestri] spoke of in the call amplified that difference in international markets […]. And so what we have done in January in some locations and some products is essentially absorb part or all of the foreign currency move as compared to last year and therefore get close or perhaps right on the local price from a year ago.”
Persisting Pricing Problems
Ultimately, and perhaps most telling, is how Cook flat-out stated he believes that, yes, “price is a factor” in declining iPhone sales — as if he’s also trying to say, well, you know, there’s not much that can be done about it anyway, without actually saying that.
- Of course, there are plenty of things Apple can do to help bolster iPhone sales moving forward, not only here in the U.S., but also internationally.
- Cook concluded by noting that Apple will rely on trade-in opportunities and monthly installment plan pricing to help it sell more iPhones moving forward.