Modest dip in quarterly profits at Apple due to closure of its retail stores in key markets during the global Coronavirus pandemic
Apple has revealed mixed quarterly results that illustrate the impact the Coronavirus pandemic is having on the technology giant.
Profits at the iPad maker dipped slightly in the first quarter, but revenues rose slightly, thanks to stronger than expected sales of its Apple TV streaming service during the global lockdown.
Many of the factories in China manufacturing the Apple iPhone had been closed during the pandemic, and the firm has warned it will delay full production of its iPhones portfolio planned for release later this year, by about a month.
That news followed Apple’s warning in February that the pandemic had disrupted iPhone supplies and affected its financial outlook for this year.
Last month Apple launched its second ‘most affordable’ iPhone device, officially called the ‘second-generation iPhone SE’.
Apple announced the smartphone at a very competitive starting price of $399 in the United States. The UK starting price however is £419, but lockdowns around the world (and store closures) forced Apple to sell the iPhone SE 2 mostly via online sales.
The launch of that new device came after a collapse in smartphone sales in February, when Strategy Analytics reported that global smartphone shipments had dropped 38 percent year-on-year in that month to 61.8 million devices.
Yet despite all that, it seems that Apple has managed to whether the storm reasonable well.
For the first quarter ending 28 March, Apple posted a slight fall in profits down to $11.2bn, from $11.6bn in the same year-ago quarter.
There was slightly better news on the revenue side, as Apple grew revenues to $58.3bn from $58bn a year earlier.
Apple said iPhone sales were $29bn, down from $30.9bn the year before. Analysts had been estimating iPhone sales would be around the $28.4bn mark.
And while Apple’s financial results did manage to beat Wall Street expectations, Apple shares on Thursday did decline 2.4 percent to $286.56 in extended trading.
“Despite Covid-19’s unprecedented global impact, we’re proud to report that Apple grew for the quarter, driven by an all-time record in Services and a quarterly record for Wearables,” said Tim Cook, Apple’s CEO.
Digging down into the divisional performance at Apple, it seems that sales of subscription services such as iCloud storage and streaming TV content rose to $13.4bn, which some may argue is to be expected with billions of people remaining isolated in their homes at this time.
The overall number of subscribers to paid apps and services on Apple’s devices rose to 515 million, up by 125 million from one year earlier.
However it should be noted that Apple only launched its AppleTV+ service in November 2019, and it was significant that the iPad maker did not reveal how many subscribers were added to AppleTV+ in the last quarter, as it battles stiff competition from the likes of Netflix and Disney+.
Apple’s wearables and accessories segment, which includes Apple’s AirPods and Apple Watch, were $6.3 billion, below analyst expectations.
Meanwhile Apple’s sales in China (one of its key markets) was $9.46 billion, which was down less than a $1 billion from a year ago.
It should be remembered that Apple was first affected by the pandemic in China, where it closed stores in early February before reopening them about a month later.
Its retail stores are now open in China, South Korea, Hong Kong, and Taiwan.
However the Coronavirus lockdowns in Europe and the United States later forced it to shut down stores in the West, and to alter working arrangements at its Silicon Valley headquarters.
This meant that Apple has been reliant on online sales for its iPhones, although it does plan to reopen its retail stores in Austria and Australia in the next couple of weeks.
A small number of US stores are also expected to reopen in the first half of May.
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