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Jan 29, 2019

Apple outlook suggests stability after a tough end to 2018

We've seen other phonemakers fall. Apple is no exception: Analyst

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Apple Inc. reported holiday-quarter results and gave a forecast that together suggested the company’s performance has begun to stabilize after a punishing end to 2018.

While iPhone sales fell, revenue from other businesses, such as services and wearable devices, grew from a year earlier. The Cupertino, California-based company said fiscal second-quarter revenue will be between US$55 billion and US$59 billion. Analysts were looking for US$58.97 billion, according to data compiled by Bloomberg.

Apple shares rose more than 5 per cent in extended trading on Tuesday. The stock closed at US$154.68 in New York.

The company had lost about a third of its market value since October on concern about a saturated smartphone market, rising Sino-American trade tension and an economic slowdown in China. Apple sales fell 27 per cent in Greater China and now make up about 15 per cent of total revenue. Earlier this month, Apple Chief Executive Officer Tim Cook warned that the company would miss its holiday quarter sales target, setting a low bar for Tuesday’s results.

“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide,” Cook said in a statement.

IPhone revenue dropped 15 per cent in the quarter from a year earlier, but sales increased for all other product categories, the company said. Revenue from services grew 19 per cent to US$10.9 billion, Mac sales gained 8.7 per cent to US$7.4 billion and iPad revenue increased 17 per cent to US$6.7 billion.

The company, for the first time, specified “wearables, home and accessories” as a product category with sales of US$7.3 billion -- a 33 per cent jump.

Apple also disclosed the gross profit margin of the services division for the first time on Tuesday. That came in at 63 per cent. Four analysts were looking for gross margins of roughly 55 per cent to 65 per cent, according to data compiled by Bloomberg.

"Services gross margins at over 60% is a positive," said Shannon Cross, an analyst at Cross Research LLC.