Tid­bits from Ap­ple’s quar­terly fi­nan­cial re­sults

A deeper look into Ap­ple’s record quar­ter rev­enue.

Macworld (USA) - - Contents - BY JA­SON SNELL

Months ago, Ap­ple boldly as­serted that the hol­i­day quar­ter of 2017, its first fi­nan­cial quar­ter of this fis­cal year, would be the com­pany’s big­gest in his­tory. It wasn’t wrong. Ap­ple’s hol­i­day quar­ter gen­er­ated $88.3 bil­lion in rev­enue ( go.mac­world.com/883b), blow­ing past even the high side of Ap­ple’s es­ti­mates.

By just about any way you mea­sure it, this was a great quar­ter for Ap­ple. But of course, the devil’s in the de­tails, whether it’s line items in the cor­po­rate re­ports ( go. mac­world.com/arfq) or in tid­bits re­vealed dur­ing the com­pany’s reg­u­lar phone call with an­a­lysts ( go.mac­world.com/toaq). So

here’s a look at four tid­bits we learned about Ap­ple’s big quar­ter.


Ap­ple’s pre­vi­ous hol­i­day quar­ter (which was in fis­cal year 2017, but cal­en­dar year 2016) saw solid re­sults, with slight sales growth. But as many ob­servers pointed out at the time, Ap­ple was buoyed by a slightly longer quar­ter ( go.mac­world.com/arcq). The hol­i­day quar­ter for cal­en­dar 2016 was 14 weeks long, mean­ing that the slight growth was re­ally a slight de­cline if you con­sid­ered the weekly av­er­ages.

That quirk of the cal­en­dar worked to Ap­ple’s ben­e­fit last year, goos­ing its re­sults. But it also meant that for the hol­i­day quar­ter of 2017, the bar would be that much higher—the com­pany’s sales would have to beat a longer time pe­riod to show quar­terly growth.

It turned out to be quite good tim­ing for Ap­ple, be­cause the com­pany did beat last year’s num­bers in most ar­eas. In one area, how­ever, it didn’t: iphone unit sales. Ap­ple CEO Tim Cook de­clared the quar­ter’s sales “the high­est num­ber ever for a 13-week quar­ter,” and pointed out that “Av­er­age weekly iphone sales were up six per­cent com­pared to the De­cem­ber quar­ter last year.”

In other words, Ap­ple sold more phones per day than last hol­i­day quar­ter… but last quar­ter had seven more days. And Ap­ple wants to make sure that you know it.


If you see a story that says iphone sales in the hol­i­day quar­ter were dis­ap­point­ing, check to see if they men­tion the num­ber of weeks in the quar­ter, or if they cite over­heated an­a­lyst es­ti­mates. Be­cause the num­bers make it clear that this is a strong val­i­da­tion of Ap­ple’s some­what

risky strat­egy to re­struc­ture the con­tents of its most pop­u­lar prod­uct line.

In terms of sheer num­bers, Ap­ple sold 850,000 iphones per day on av­er­age dur­ing 91 days in late 2017, com­pared to 798,000 iphones per day dur­ing 98 days in late 2016, mean­ing that unit sales went “down” by in­creas­ing by 6.5 per­cent.

But look a lit­tle deeper: In terms of rev­enue, the iphone gen­er­ated $61.6 bil­lion, com­pared to $54.4 bil­lion in the year-ago quar­ter. That’s a 13 per­cent rev­enue in­crease…or a 22 per­cent in­crease if you cor­rect for the week dis­par­ity.

How to ex­plain this? Pretty sim­ple: The iphone X strat­egy, to re­lease an even higher-end iphone above the “stan­dard” iphone 8 and iphone 8 Plus mod­els, worked. The av­er­age sell­ing price of a hol­i­day-quar­ter iphone jumped by $100. “Since the launch of iphone X it has been the most pop­u­lar iphone every week since, and that is even through to­day ac­tu­ally, through Jan­uary,” said Cook. (Keep in mind that iphone X only started ship­ping in Novem­ber, so it could only im­pact the quar­terly re­sults for a por­tion of the time.)

In ad­di­tion, the iphone 8 and 8 Plus ap­pear to have con­tin­ued to sell well. “In ur­ban China and the U.S., the top five smart­phones last quar­ter were all iphones,” Cook said. Sales were not, ap­par­ently, slowed down by the late ship­ment of the iphone X. Some peo­ple bought the iphone 8, other peo­ple bought the iphone X, and Ap­ple cashes the checks.


One of the huge bits of in­for­ma­tion in the con­fer­ence call with an­a­lysts was Cook’s re­veal that Ap­ple now has an in­stalled base of 1.3 bil­lion de­vices, which is “an all-time high for all of our ma­jor prod­ucts” and a 30 per­cent growth in two years.

So, there are more ipads, iphones, and Macs cur­rently in use than ever be­fore. How does that work? One rea­son—and

Cook didn’t shy away from men­tion­ing it—is the long prod­uct life of Ap­ple prod­ucts, and the re­sale mar­ket. When Ap­ple sells a new iphone, the old iphone it’s re­plac­ing of­ten goes to some­one else.

“The re­li­a­bil­ity of iphone is fan­tas­tic,” Cook said. “The pre­vi­ously-owned mar­ket has ex­panded in units over the years. And you see in many cases car­ri­ers and re­tail­ers hav­ing very vi­brant pro­grams around trad­ing an iphone in, and be­cause iphone has the largest resid­ual rate on it, it acts as a buf­fer for the cus­tomer to buy a new one, and it winds up with an­other cus­tomer some­where else that is per­fectly fine with hav­ing a pre­vi­ously owned iphone. And so I view all of that to be in­cred­i­bly pos­i­tive. [The] more peo­ple on iphones, the bet­ter.”

While Ap­ple doesn’t nec­es­sar­ily make money di­rectly from the sale of a used iphone, it ben­e­fits by hav­ing more peo­ple in its ecosys­tem, as ev­i­denced by the con­tin­ued growth in Ap­ple’s Ser­vices cat­e­gory. That per­son on a used iphone still buys apps, rents movies, and maybe even sub­scribes to Ap­ple Mu­sic.


Piper Jaf­fray’s Mike Ol­son ap­par­ently drew the short straw at the An­a­lyst Club meet­ing this quar­ter, so he got to be the one to vainly at­tempt to get Tim Cook to spill se­crets about fu­ture Ap­ple prod­ucts, which Ap­ple, never, ever does.

“I know you don’t talk about fu­ture prod­ucts, which is of­ten the pref­ace to ques­tions about fu­ture prod­ucts, and I’ll give it a shot,” Ol­son said. “When you think con­cep­tu­ally about the path for iphone X–style de­vices go­ing for­ward, is there any rea­son the roadmap wouldn’t con­sist of mul­ti­ple de­vices, as we’ve seen with past iphone up­grades?”

Good try, Ol­son. And to be fair, Cook threw him a bone—by re­stat­ing some­thing that was said at the iphone X launch last fall.

“As we said when we launched it, we were set­ting up the next decade,” Cook said. “So you can bet that we’re pulling that string.”

You heard it here, folks: There will be fu­ture iphones and they’ll build on the iphone X. Aren’t you glad you asked, Mike? ■

While Ap­ple doesn’t nec­es­sar­ily make money di­rectly from the sale of a used iphone, it ben­e­fits by hav­ing more peo­ple in its ecosys­tem, as ev­i­denced by the con­tin­ued growth in Ap­ple’s Ser­vices cat­e­gory.

iphone av­er­age sell­ing price went way up thanks to the iphone X.

Quar­terly iphone sales were slightly down year-over-year, but only be­cause the quar­ter was shorter.

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