Apple’s iPhone Sale Slows, But Performance Driven By Services And Wearables Business

While the sale of iPhones of Apple dropped to less than half of the total quarterly revenues of the company for the first time in over seven years, the phenomenon was justified by the company CEO Tim Cook by saying that this change highlights the success of the changed strategy of the company to diversify and to reduce reliance on its hardware sale.

This diversification strategy reaped good results for the company in China which is the largest market for smartphones in the world. Investors were concerned that the market would prove to be a challenge for Apple as they had been expecting the Chinese government and analysts to put up negative shipment data from the market.

There was but only a slight fall in the revenues of Apple generated from sale in Greater China region where the company had reported a huge decline earlier this year. The figures dispelled some concerns about Apple’s performance and business in China, which is one of the most important markets for the company, would be affected significantly because of the ongoing trade war between the United States and China.

In recent years, slowing down of smartphone sales globally had prompted Apple to change focus on promoting business of its accessories such as the Apple Watch as well as in its services segment like its music, apps, gaming and video businesses. Apple is slated to launch a new credit card in August. Cook said that in the fiscal third quarter, here was an increase in the overall number of Apple device users in China which in turn had helped the company to expand the market for its services. The services segment noted an increase in sale revenues of 10 per cent in China.

“We actually grew in mainland China,” Cook told the media. “Non-iPhone revenue grew 17%. We grew in every category outside of iPhone.”

However, there was a drop of 12 per cent in the sale of iPhones globally to $25.99 billion. The company had also reported a drop in global iPhone sale of 17 per cent in the previous quarter.

The company beat market expectations for revenues from its wearables and other accessories business with an almost 50 per cent rise. On the other hand, while the revenues from services business of the company missed growth estimates of the market, registering a growth of 12.6 per cent to $11.46 billion, it was yet a new record for the company.

According to Hal Eddins, chief economist for Apple shareholder Capital Investment Counsel,  the]slowing down of the decline in iPhone sale for the quarter as compared to the previous quarter was a thing of surprise for him.

“You really don’t hear people talk about their phones like they did several years ago,” Eddins said. But, “the key is that when people want to splurge on a phone, they do it with an Apple product.”

It would be useful for Apple to use its huge cash reserves to purchase media properties to fuel its forthcoming television service, believes Trip Miller, managing partner at Apple shareholder Gullane Capital Partners. “You have to have a bigger installed base and have services that people get value from,” Miller said.

(Adapted from Reuters.com)

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