By Felicity Duncan
When it presented its results last week, Apple announced a change to its reporting practices – it will no longer be reporting iPhone unit sales. Instead, it will report dollar sales only. It will also start reporting gross margins on hardware and services sales separately.
Investors and analysts reacted poorly to the news. The consensus seems to be that Apple has decided to stop sharing unit sales numbers because they are falling. This is probably true. Statistics show that consumers are upgrading their phones less frequently, and some consumers are starting to baulk at paying sky-high prices that can easily top $1,000 a phone.
But the real issue here is this: in a sense, it doesn’t really matter if iPhone unit sales are falling. Let’s say instead of selling 220 million phones a year, it sells 200 million, but at the same time, it starts to generate $500 of extra revenue per phone through the sale of apps and services. That’s still a good business. It’s not as sexy and shoot-the-lights out as it once was, but its cash generative and profitable, and creates a good base for Apple to invest in researching the next generation of consumer technology (wearables? VR?). The market hates change and uncertainty, but in time, it will adjust.
In Premium today, you can catch the latest episode of The Editor’s Desk – Alec Hogg and I discuss KPMG, Ramaphosa, and the October market correction. You can learn about Warren Buffett’s almost-$1-billion share buyback and what it says about current market conditions.