Apple Profits Slide Again, As Wearables, Services Grow

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iPhone slowdown. Revenues from wearables and services helped offset another slump in iPhone sales during last quarter

Profits at Apple have declined again as a slowdown in iPhone sales continued in the latest quarter, but there was also good news as revenues from wearables and services surged.

The iPhone smartphone has been Apple’s cash cow for some time now. In the second quarter of this year iPhone sales fell 17 percent, and now in the third quarter iPhone sales dropped to less than half of quarterly revenue for the first time in seven years.

It should be remembered however that Apple is contending with a moribund global smartphone market, as well as trade tensions between the US and China, as well as rising competition from Chinese manufacturers and a slowdown in demand from Chinese consumers.

Profit slide

On the surface, Apple’s latest financials paint a picture of a company in rude health. It is still highly profitable and is generating strong revenue figures.

But digging a little deeper, we can see that profits at the firm declined for the second straight quarter.

For the third quarter ending 29 June, Apple posted a net profit of $10bn, down from $11.5bn in the same year-ago quarter.

Apple did managed to arrest its Q2 revenue slide however, after its third quarter revenues rose just percent to $53.8bn from $53.3bn a year earlier.

Breaking down the financials, Apple’s Product sales dipped to $42.3bn from $43.1bn a year earlier, reflecting the slowdown in iPhone sales.

Indeed, iPhone sales globally fell 12 percent to $25.9 billion, after dropping 17 percent in the previous quarter. But Wearables and other accessories (i.e. AirPods etc) revenue rose nearly 50 percent to $5.53bn from $3.7bn a year earlier.

Service revenues for the third quarter rose $11.4bn from $10.2bn a year ago.

“This was our biggest June quarter ever – driven by all-time record revenue from Services, accelerating growth from Wearables, strong performance from iPad and Mac and significant improvement in iPhone trends,” said Tim Cook, Apple’s CEO.

“These results are promising across all our geographic segments, and we’re confident about what’s ahead,” said Cook. “The balance of calendar 2019 will be an exciting period, with major launches on all of our platforms, new services and several new products.”

Apple’s results showed that it is successfully diversifying away from relying upon a single product, coupled with its outlook going forward, pleased investors, and consequentially shares in the company rose 4.2 percent in after hours trading.

Diversifying strategy

Part of Apple’s diversifying strategy can be evidenced from a number of recent acquisitions.

Last week Apple confirmed what many were expecting, that it is to purchase Intel’s smartphone modem business, in a deal valued at $1bn (£804m).

This is Apple’s second largest acquisition after its 2014 purchase of headphone manufacturer Beats Electronics for $3bn (£1.8bn). But this modem chip unit acquisition from Intel had been widely expected.

Last October, Apple also acquired parts of the business of UK-based Dialog Semiconductor.

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Author: Tom Jowitt
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