WTF? Apple iPhones shrank by more than $22bn in fiscal '19

Proud CEO Cook hails a 'remarkable year'... perhaps for all the wrong reasons

Tim Cook, photo by JStone via Shutterstock

Apple has always been able to conjure magic of sorts – be it hardware, software or services based – that captures the imagination and the wallets of its loyal users. But in fiscal '19, Apple performed an altogether different kind of act, a vanishing one: it managed to make $5bn of sales revenue disappear.

This was always going to be something of an annus horribilis for Apple after the world's most valuable maker of shiny stuff reported a Q1 – historically the busiest period of its year - that was below seasonal norms. China wasn't playing ball and the channel had failed to shift the expected number of iPhones.

Things didn't improve in Q2; came in flat on an annual comparison in Q3 (PDF); but showed some signs of improvement in Q4 (PDF) numbers that were released last night.

Revenue for Apple's final quarter of the financial year ended 28 September edged up 2 per cent to $64.040bn. Product sales were $51.53bn, down from $52.3bn and services – a strategic focus for Apple – grew to $12.51bn from $10.6bn.

For the quarter, the problem area of iPhones fell yet again, this time by more than 10 per cent to $33.362bn; Macs were down 4.75 per cent to $6.991bn; iPads jumped 14.4 per cent to $4.656; wearables, home and accessories (W,H&A) swelled 35.2 per cent to $6.52bn; and services ballooned to $12.51bn, up 15 per cent.

CEO Tim Cook described the September quarter was the "high end of our expectations" and a record, "even in spite of a predicted foreign exchange drag of almost $1bn".

He said if (if being the operative word) investors discounted the destabilising impact of the iPhone on total revenues, Apple's revenues were actually up 17 per cent. In any case, the Teflon exec said, the latest phone models were "strongly popular" and "unmatched" by prior models, and there was a "significant upswing in demand".

Previously in Apple's Q1, Cook blamed China for the slowdown in iPhone sales but there was no such update last night. Apple this year trimmed the prices of its phones to spur demand.

On Services – Apple's way of harvesting more cash from its expansive user base – the App Store, AppleCare, Music, cloud services and the App Store search ad biz all played a role in the double-digit growth.

Elsewhere in Services, Cook also confirmed Apple Card customers will be able to use it to purchase a new iPhone and "pay for it over 24 months with zero interest". They'll also get 3 per cent cash back on that phone purchase and pay no fees.

Apple Arcade was launched last month so remains in its infancy, and of course there is Apple News and Apple TV+ too.

W,H&A was lifted by the Watch, AirPods and Beats headphones. The iPad was boosted by the Pro version, and may be helped further by the iPadOS, which shares the same foundation as iOS.

Net profit came in at $13.68bn, down from $14.12bn, in part due higher R&D spending, along with increased selling, general and admin (S,G&A) costs.

And the fiscal year?

All of this is well and good, but movements for the entire fiscal were a lot more dramatic: annual revenue fell by more than $5bn to $260.174bn, down 2 per cent. By division, iPhone revenue dived 13.68 per cent to $142.38bn; Mac edged up slightly to $25.74bn from $25.198bn; iPad brought in $21.28bn versus $18.38bn the previous year; (W,H&A) generated $24.48bn, up 40 per cent; and Services reached $46.29bn from $39.74bn.

Cook said: "We are incredibly proud of our accomplishments over the course of a remarkable fiscal 2019, a year where we crossed $100bn in revenue in the United States for the first time."

It was also a year when its biggest seller started to flop, and where business in Greater China, Europe and Japan shrank. Not a vintage one Tim, not a vintage.

The bottom line slipped to $55.255bn, down from $59.531. Again, a surge in overheads including R&D and S,G&A played a part here, as did falling sales.

As for the next quarter, Q1 – a key one for Apple – revenues are forecast to reach between $85.5bn to $89.5bn, higher than the $84.3bn reported in the year earlier period. Cook will be hoping it kickstarts something of a better fiscal '20. ®

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