Apple’s earnings call yesterday was an upbeat one, and with good reason. The company reported that the holiday quarter saw it earn $88.3B in revenue and make $20B in profits – both all-time records. Revenue grew 13% year-on-year, earnings per share were up 16%,
Questions about how well the iPhone X has been selling were also answered, albeit somewhat obliquely. While Apple never breaks down iPhone sales into models, as that’s information it doesn’t want competitors to have, CEO Tim Cook did say that the iPhone X has been the top-selling model every week since its launch …
It also comes at a time when Strategy Analytics reported the iPhone as the top-selling smartphone in the quarter, pushing it ahead of Samsung and back into first place.
IDC later backed that up.
The iPhone X effect was also very much in evidence in the average selling price: Apple boosted iPhone ASP from $695 to $796. A rise in ASP of $101 in one year is a truly staggering achievement.
Some bad news
Anyone seeking out bad news might have pointed out that while iPhones sold better than competitor phones in the quarter, the smartphone market as a whole declined – and Apple’s sales with it. Apple’s total iPhone sales were down year-on-year, despite launching the phone it said was setting the firm’s direction for the next ten years.
But as Apple pointed out, that’s not a fair comparison: the quarter was 13 weeks this year compared to 14 weeks last year. Additionally, its flagship phone was on sale for less time.
The genuine bad news was Apple’s guidance for the current quarter. Analysts had worried that anticipated revenue of $66B might be pushed as low as $60B – and that’s almost exactly what happened. Apple’s Q2 guidance is for revenue of $60-62B.
That tallies with reports of Apple asking its suppliers to cut back production of the iPhone X.
Business Insider’s Jim Edwards noted something else interesting. Tim Cook usually proudly touts net switchers from Android to iOS; this time, he declined to do so.
The bigger picture is positive
But while Apple’s Q2 predictions may have disappointed the market, it seems to me that the bigger picture here is a very positive one. Apple gambled that there was a market for a smartphone with an entry price just a dollar short of four figures. Many were skeptical – but Apple has just proven its point.
Additionally, the most radical shake-up of an established iPhone design has been a success. It wasn’t just the price that caused concern. Some were worried about the loss of Touch ID – long a headline feature. There was also concern that losing the Home button altogether, and requiring users to learn a new UI, would prove a barrier to purchase.
In the event, none of these concerns seem to have been realized: the iPhone X became the company’s best-selling model.
So yes, perhaps Apple is seeing a faster drop-off in iPhone X purchases than it had expected this quarter, but it has successfully transitioned the company to a new iPhone design – and added a hundred bucks per phone to its selling price. To me, that’s a big win.
