Apple: Service revenues up; iPhone sales way down

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Apple has announced financial results for its fiscal 2019 second quarter ended March 30th 2019. The tech giant posted quarterly revenue of $58 billion (€51.6bn), a decline of 5 per cent from the year-ago quarter, and quarterly earnings per diluted share of $2.46, down 10 per cent. International sales accounted for 61 per cent of the quarter’s revenue.

Sales of Apple’s iPhones dropped by 17 per cent – its steepest decline ever – compared with the same period a year earlier, to $31 billion. Services revenue rose to $11.4 billion from $9.8 billion in the same quarter last year.

“Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for Services, and the strong momentum of our Wearables, Home and Accessories category, which set a new March quarter record,” said Tim Cook, Apple’s CEO. “We delivered our strongest iPad growth in six years, and we are as excited as ever about our pipeline of innovative hardware, software and services. We’re looking forward to sharing more with developers and customers at Apple’s 30th annual Worldwide Developers Conference in June.”

“We generated operating cash flow of $11.2 billion in the March quarter and continued to make significant investments in all areas of our business,” added Luca Maestri, Apple’s CFO. “We also returned over $27 billion to shareholders through share repurchases and dividends. Given our confidence in Apple’s future and the value we see in our stock, our Board has authorised an additional $75 billion for share repurchases. We are also raising our quarterly dividend for the seventh time in less than seven years.”

Apple will finally launch its streaming service this autumn as it attempts to shift its reliance on the iPhone towards services.

Apple is providing the following guidance for its fiscal 2019 third quarter:

• revenue between $52.5 billion and $54.5 billion
• gross margin between 37 percent and 38 per cent
• operating expenses between $8.7 billion and $8.8 billion
• other income/(expense) of $250 million
• tax rate of approximately 16.5 per cent

Reacting to the earnings, eMarketer Principal Analyst Yoram Wurmser, said: “The long-term growth in services and, to a less extent, other devices depend on having as many users as possible in the Apple ecosystem, and that’s still primarily about the iPhone. So, it’s worrisome that iPhone sales fell 17 per cent YoY.  Moreover, sales in China fell 22 per cent, so the issues in that market remain. Services did rise 16 per cent and wearable, home and accessories grew a strong 30 per cent, but the long-term growth of the company still depends directly and indirectly on iPhone sales.”


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