AP­PLE’S 4Q, CHANGE IN iPHONE SALES DIS­CLO­SURE JAR IN­VESTORS

Apple Magazine - - Summary -

Ap­ple’s faith­ful cus­tomers aren’t snap­ping up iPhones quite as en­thu­si­as­ti­cally as an­tic­i­pated head­ing into the cru­cial hol­i­day shop­ping sea­son.

But the lat­est mod­els cost­ing $1,000 and more are pop­u­lar enough to keep pro­pel­ling prof­its ever higher for the world’s most pros­per­ous com­pany.

The mixed bag emerged in the quar­terly re­sults Ap­ple re­leased amid jit­ters about how the com­pany and the rest of the tech­nol­ogy in­dus­try will fare in the face of myr­iad threats to growth. Those in­clude in­creased gov­ern­ment reg­u­la­tion, the es­ca­lat­ing U.S. trade war with China and the specter of ris­ing in­ter­est rates crimp­ing eco­nomic growth.

Ap­ple’s per­for­mance for the July-throughSeptem­ber pe­riod and its rev­enue out­look for hol­i­day sea­son ev­i­dently weren’t enough to ease in­vestors’ con­cerns.

The Cu­per­tino, Cal­i­for­nia, com­pany rat­tled Wall Street even more by un­ex­pect­edly an­nounc­ing that it will no longer dis­close the num­ber of iPhones it sells each quar­ter, be­gin­ning with the cur­rent pe­riod end­ing in De­cem­ber.

“This is a bit of a gut punch for ev­ery­one used to more trans­parency,” said Wed­bush Se­cu­ri­ties an­a­lyst Daniel Ives.

Ap­ple’s stock al­most 7 per­cent to $207.67 in ex­tended trad­ing af­ter all the news came out.

Other ma­jor smart­phone mak­ers don’t re­veal their quar­terly ship­ments of their de­vices ei­ther, but Ap­ple has bro­ken down its iPhone num­bers ever since the phone’s de­but 11 years ago. The abrupt change in pol­icy raised sus­pi­cions that man­age­ment might be try­ing to mask a down­turn in the pop­u­lar­ity of the prod­uct that gen­er­ates most of Ap­ple’s prof­its.

The change ap­par­ently was trig­gered by Ap­ple’s frus­tra­tion with in­vestors’ fix­a­tion on its iPhone sales while gloss­ing over other key ar­eas, such as the ro­bust growth in its ser­vices divi­sion that col­lects com­mis­sions on app sales and han­dles sub­scrip­tions to its mu­sic­stream­ing ser­vice.

“The num­ber of (iPhone) units sold dur­ing any quar­ter has not been nec­es­sar­ily rep­re­sen­ta­tive of the un­der­ly­ing strength of our busi­ness,” Luca Maestri, Ap­ple’s chief fi­nan­cial of­fi­cer, told an­a­lysts in a con­fer­ence call.

Although there may be some logic to the ra­tio­nale for the long term, “this is go­ing to be a dif­fi­cult pill to swal­low in the short term,” Ives said. “It’s like sud­denly telling peo­ple (in the U.S.) that they have to start driv­ing on the left side of the road.”

Ap­ple CEO Tim Cook also sought to re­as­sure an­a­lysts dur­ing the con­fer­ence call with an ex­pla­na­tion that in­di­cated the com­pany ex­pects to keep mak­ing more money even if iPhone sales should fal­ter.

“This is a lit­tle bit like if you go to the mar­ket and you push your cart up to the cashier and she says or he says, ‘How many units do you have in there?’” Cook said. “It doesn’t mat­ter a lot how many units there are in there in terms of the over­all value of what’s in the cart.”

An­a­lysts had ex­pected Ap­ple to sell 78 mil­lion iPhones dur­ing the hol­i­day sea­son, but now the com­pany isn’t go­ing to re­veal whether it hit the tar­get or not.

Ap­ple earned $14.1 bil­lion, a 32 per­cent in­crease from the same time last year dur­ing the past quar­ter. Earn­ings per share came in at $2.91, top­ping the av­er­age es­ti­mate of $2.79 among an­a­lysts sur­veyed by Zacks In­vest­ment Re­search.

Rev­enue for the pe­riod climbed 20 per­cent from last year to $62.9 bil­lion.

Ap­ple sold 46.9 mil­lion iPhones in the past quar­ter, slightly be­low an­a­lyst es­ti­mates.

The com­pany Ap­ple re­leased its lat­est iPhones, mod­els sell­ing from $1,000 to $1,500, at the tail end of the quar­ter, and those ap­peared to get off to a strong start. Ap­ple fetched an av­er­age of $793 per iPhone in the quar­ter, up 28 per­cent from the same time last year.

Thanks to last year’s re­lease of the first iPhone to cost $1,000 , the av­er­age price has in­creased by at least 11 per­cent in each of the past four quar­ters. If Ap­ple fol­lows that trend in the cur­rent quar­ter, the av­er­age iPhone price should rise above $800 for the first time in a show of peo­ple’s love af­fair with the de­vice.

But now ev­ery­one will be left to guess whether Ap­ple clears that fi­nan­cial hur­dle dur­ing the hol­i­day sea­son.

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