Apple Sees Strong End to 2018, Despite Flat or Declining Unit Sales

Originally published at: https://tidbits.com/2018/11/01/apple-sees-strong-end-to-2018-despite-flat-or-declining-unit-sales/

Apple had yet another record-breaking quarter even though unit sales for the iPhone and Mac were flat, and the iPad’s unit sales declined. The increase in revenue seems to have come from higher selling prices and increased Services revenue.

Apple is starting to strangle itself with higher prices and less unit sales. Sure the new iPhones look nice but the price just isn’t worth it for a lot of us that bought iPhones since their inception and are feed up with adding to Apple’s bottom line. Having the latest and greatest isn’t as appealing as it use to be. All we really need is a phone, not a bunch of apps that are turning more and more into the subscriptions.

Thanks, Michael & Josh. I really enjoyed this brief article. It could have been just boring numbers or Apple spin regurgitated. Instead, it offered a balanced and critical interpretation of what is going on. Nice job!

Thanks! I also made a video afterward that explores the numbers and makes some predictions.

iweir

    November 2

Apple is starting to strangle it’s self with higher prices and less unit sales. Sure the new iPhones look nice but the price just isn’t worth it for a lot of us that bought iPhones since their inception and are feed up with adding to Apple’s bottom line.

Unfortunately, Apple exists to make money for its shareholders, the people who own the company. The bottom line is what matters to them. The price hike strategy has been extremely successful, and iPhone revenues were up about 30%. Most of the company’s revenues have been coming from iPhones for some time now.

Having the latest and greatest isn’t as appealing as it use to be. All we really need is a phone, not a bunch of apps that are turning more and more into the subscriptions.

Apple has made it quite clear that they build iPhones to last. In the last announcement they made it quite clear that iPhones tend to be active in the wild for years longer than their competitors. Over $700 for the XR isn’t cheap, but Apple’s lowest price iPhone is getting great reviews and from what I’ve read, seems to pack more punch than similarly priced Androids.

And the growth in Apple’s services revenue continues to exceed expectations, so there are clearly hundreds of millions, if not billions, of people who are paying for them. Services also contribute greatly to locking people into the Apple ecosystem.

The recently announced US tariffs will drastically affect Apple, as well as many of their competitors, and they will be effective soon. Selling prices will be affected, probably across the board. Apple’s rapidly growing revenue from services will likely become increasingly important to earnings going forward as they are born in the USA.

Expensive iPhones and services are continuing to be very successful for Apple.

Unfortunately, Apple exists to make money for its shareholders, the people who own the company. The bottom line is what matters to them.

Agreed. And judging by today’s price action, shareholders aren’t happy.

To be sure, today’s stock price actions are largely a reaction to Apple’s forecasts for next quarter, not the last quarter’s results, and Apple has historically been conservative in its forecasts.

Shareholders are VERY HAPPY that Apple’s pricing strategy is once again delivering record dividends. They are unhappy with revenue guidance for the next quarter, which reflects the impact of the new tariffs. But Apple has a history of exceeding guidance.

Thanks for the link to that video, Josh. I’m usually not too big on video blogs, but I really liked your analysis.

I like how you contrast the good news for investors with the declining sales as an indicator for “what is the computer of the future?”. Like you, I’m more pessimistic when it comes to iPad than I am for the Mac. Also, like you, I believe there’s not a whole lot of wiggle room on the Mac. You can’t increase selling price forever to compensate for lack of unit increase (or even unit decrease as we just saw).

I think you make a good point with free iCloud storage, but I still hope you’re not right on that one. :)

My predictions are often pessimistic, so I’m happy to be proven wrong. :slight_smile:

The problem is that increasing prices and decreasing sales eventually reach a turning point where the higher prices do not compensate for the loss of sales due to the higher prices.

If and when it looks like this would become a trend, I’ll Apple won’t raise hardware prices as much. And when the 25% taxes take effect, it will affect Apple and other hardware manufacturers; the other companies would have to raise prices as well. The looming increases might be why Apple has upped its development spending to grow service options.

I would be willing to believe that sales could pick up again (or at least not drop) if Apple keeps Macs updated and attractive. I’m quite certain their recent drop in Mac sales is related to their lackluster Mac efforts. Leaving product lines to just wither (same price while the specs become more and more outdated) will certainly do that for you eventually.

If they stay committed I wouldn’t be surprised to see that trend change. The real question to me then becomes if Apple really has smartened up or if this was a one-off and they eventually let some lines again become totally uninteresting.

Simon

    November 5

davidmorrisonann:
The problem is that increasing prices and decreasing sales eventually reach a turning point where the higher prices do not compensate for the loss of sales due to the higher prices.

I would be willing to believe that sales could pick up again (or at least not drop) if Apple keeps Macs updated and attractive. I’m quite certain their recent drop in Mac sales is related to their lackluster Mac efforts. Leaving product lines to just wither (same price while the specs become more and more outdated) will certainly do that for you eventually.

They definitely will keep updating Mac hardware and software, but not with the frequently back in the “just about every year” days. People just don’t upgrade computers nearly as often as they used to, PCs or Macs. Data storage is moving into the cloud more and more for the past few years. Apple has made a point of stressing that Macs are built to last, and they just announced they have lengthened the time they will support older models by a few years. Clock speeds, camera improvements, slight upturns in battery life, etc., are no longer reasons to dump a perfectly good Mac for a new one, so consumer and businesses replacement cycles are getting longer.

People are spending more and more personal and business time, as well as money, on mobile phones and tablets, which are rapidly becoming more capable, versatile and speedier. Autonomous vehicles, VR and AR, and services promise much faster growth in the near term, and demand for mobile innovation grows, I think we can expect to see more new product introductions on this end. But Macs still are, and will be, a linchpins of the Apple ecosystem. But don’t expect mind boggling Mac upgrades for every model every year.