Apple’s iPhone sales down 17% as it shifts to more services

iPhone sales continue to sharply decline, according to Apple's earnings statement for its fiscal second quarter, though its stock and services business are up today.

Apple's iPhone revenue was down another 17% for the quarter ending on March 30, amounting to $31.05 billion. A year ago we saw iPhone revenue at $37.56 billion.

You can chalk continued upgrade resistance to newer, more expensive iPhones. The iPhone XS Max is Apple's most expensive phone ever, the 'budget' iPhone XR is still quite pricey, and the iPhone XS didn't change very much from the iPhone X.

New iPhone 11 rumors point to a triple-lens camera upgrade and ability to wirelessly charge other devices (like the new AirPods 2019), but Apple's isn't expected to offer a groundbreaking smartphone redesign.

How it's stemming iPhone bloodletting

Apple noted that price drops in certain countries did help it see some recovery, so its declines were "significantly smaller later in the quarter," according to CEO Tim Cook during today's Apple earnings call. 

Sadly, Apple no longer releases number for how many iPhone units it sells anymore. Its Mac sales saw a minor dip (Apple blamed on "processor constraints on certain models"), while iPad sales were up and its catch-all Wearables, Home and Accessories category saw a nice bump.

Services are what Apple is touting the most these days, and today's earnings call was no different. It's up to $11.45 billion from $9.85, which Apple touts as breaking new records for Apple Music, the App Store and Apple Pay.

The company just launched Apple News Plus and the forthcoming Apple TV Plus, and Apple Arcade are coming later in 2019. They'll join Apple Music in driving in subscription-based revenue.

"Service account for 20% of our March quarter revenue and one third of its gross profit dollars," according to Apple CFO Luca Maestri during the Apple earnings call.

Of course, Apple's iPhone revenue is still 2.8 times larger than its growing services category and it's becoming a perilous business to be in. Netflix spends about $15 billion on original content, HBO has titan shows like Game of Thrones, and Disney Plus is a waiting in the wings, launching November 12.

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Services really are becoming a bigger part of Apple’s business


We’ve known for a while now that Apple was going to be putting more of an emphasis on services. As the technical leaps from one iPhone/iPad/Mac generation to the next become less dramatic, product revenue has started to shrink; in response, the company is focusing on driving forward on things like the App Store, iCloud, Apple Pay, Apple Music, and its soon-to-launch games and video offerings.

This shift is already playing out in the company’s financials. While product sales dipped a bit year-over-year — down from $51.3B in the quarter that ran from January to March 2018 to $46.6B in the same quarter of 2019 — revenue from the services business climbed from $9.9B to $11.5B.

In this fiscal Q2 quarter of 2018, Apple’s total revenue came in at roughly $61.1B; in the same quarter of 2019, it dipped to $58B. This works out to services accounting for 16.1% of Apple’s revenue in fiscal Q2 2018, but nearly 20% in fiscal Q2 2019. Apple CFO Luca Maestri says services now account for “one third” of the company’s gross profits.

A big part of Apple’s services business is monthly subscriptions — the things like iCloud, Apple Music, and Apple News that make money each month from the hardware they’ve already sold. Tim Cook says Apple now has 390 million paid subscriptions across its services. Cook didn’t dive into how that breaks down service-by-service, but that’s up roughly 30 million subscribers over last quarter. The company says it expects paid subscribers to surpass half a billion by 2020 (presumably fueled by the launch of its gaming/video services.)

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The curious case of Slack’s missing $162 million

Slack has filed its S-1 registration statement with the SEC in preparation for its direct listing. One interesting dataset that usually comes out of these S-1s is the company’s actual fundraising history. Slack has raised eight main rounds (series A-H), and 15 rounds total when including individual tranches since it incorporated on February 25, 2009 according to Delaware records.

Now that we have data, we can ask: how did the tech press do in covering the company?

Arman and I investigated by looking at coverage of Slack’s individual rounds of capital on startup news sites and comparing those reported numbers to the data now offered in the S-1. For the most part, the tech press did decently well, except for one curious, $162 million gap.

The missing Form D

First, though, a note about Form Ds.

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Indiegogo campaign for bizarre Energizer phone with huge battery fails, surprises nobody – CNET

Who knew people didn’t want a nearly 1-inch thick phone!

from CNET News
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Best Apple TV remote cases for less than $10 – CNET

The cheapest way to improve your slippery, easy-to-lose Apple TV remote is to add a case. You read that right: a case for your remote.

from CNET News
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