Apple Reports Earnings: Future Still Bright

On Tuesday, January 29th 2019, Apple reported their earnings for the last 3 months. Apple warned investors on January 2nd 2019 that the quarter was going to be worse than initially forecast, the numbers actually came in quite good.

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Photo by Medhat Dawoud on Unsplash

1. The Present

Compared to last year’s quarter, net income was flat (-0.5%), quarterly revenue declined (-4.5%), iPhone sales declined (-15%), and Services increased (+19%).

Although there are serious sales declines for the product category, these are mainly attributable to lower iPhone sales in China. The positive results for services show that Apple is focusing on a transition from products to services. These numbers should invigorate confidence in that transition.

Important to note is that the whole smartphone industry’s revenue was down (-6%) last quarter, and Apple actually overtook Samsung in smartphone shipments. Sales for Apple-wearables even increased (+33%).

2. The Future

Apple has always been seen as a hardware company. Now, seeing the commodification of the smartphone, Apple is placing itself in a position to become a service provider. Many companies have made this transition (Cisco, IBM, etc.), some with success, others not so much. The question is if Apple can distinguish itself from competitors.

In this regard, the future might be quite bright for Apple. Youngsters are fond of the brand, which bodes well for its future. Adults are already familiar with the brand. And Apple is no startup company. They are in business since 1976. They have been able to adapt to market needs, and sometimes even create market needs. If Apple can move into services with the brand reputation they have, they can become a major player.

Then there is Tim Cook. A great CEO who has been able to steer Apple far ahead of its competition. During the past 7 years Cook has been able to:

  • More than double yearly revenue from $100 bil. To $265 bil.
  • More than double yearly net income, from $26 bil. to $60 bil.
  • Increase EPS from $3.95 to $11.91
  • More than double operating cash flow, from $37 bil. To $77 bil.
  • More than double free cash flow, from $30 bil. To $64 bil.

The familiarity of Apple, the reputation of its offerings, the abundant cash that they possess, and their R&D budget might give them an edge when it comes to the services industry. All in all the future seems bright for this behemoth.

3. The Numbers:

Totals Last Quarter 2018 Last Quarter 2017 %-Change
Sales: Products 73,435 79,164 -7%
Sales: Services 10,875 9,129 +19%
Sales: Total 84,310 88,293 -4.5%
By Category Last Quarter 2018 Last Quarter 2017 %-Change
Sales: iPhone 51,982 61,104 -15%
Sales: Mac 7,416 6,824 +8.6%
Sales: iPad 6,729 5,755 +17%
Sales: Wearables 7,308 5,481 +33%
Services 10,875 9,129 +19%
Total: 84,310 88,293 -4.5%
Sales By Region Last Quarter 2018 Last Quarter 2017 %-Change
Americas 36,940 35,193 +5%
Europe 20,363 21,054 -3.2%
Greater China 13,169 17,956 -26%
Japan 6,910 7,237 -4.5%
Rest of Asia Pacific 6,928 6,853 +1%
Total: 84,310 88,293 -4.5%
Last Quarter 2018 Last Quarter 2017 %-Change
Net Income 19,965 20,065 -0.5%

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