Apple earnings show growing immunity to smartphone's sales slowdown

Apple Inc.’s results confirmed that, while the days of double-digit smartphone industry growth are over, Chief Executive Officer Tim Cook has a plan to withstand the slowdown.

The shares gained in late trading Tuesday after the company reported iPhone sales in line with analysts’ expectations, gave a bullish revenue forecast and highlighted a surging services business. A new $100 billion stock repurchase plan and higher dividend also helped.

The numbers show that Cook’s strategy of selling a growing array of services through a base of more than 1.3 billion Apple devices is working. The smartphone sector saw shipments fall 2 per cent in the past year, according to Strategy Analytics, so the company must evolve beyond its reliance on a device that still accounts for more than 60 per cent of revenue.

“Slowly but surely, [Apple] is morphing into more than just an iPhone story and is displaying ability to sustain revenue growth irrespective of iPhone trajectory,” Amit Daryanani, an analyst at RBC Capital Markets, wrote in a research note.

The company reported iPhone unit sales grew just 2.9 per cent in the fiscal second quarter. While the flagship iPhone X may not have matched the hype from its launch late last year, the device’s $999 starting price helped boost phone revenue growth 14 per cent.

Wide Apple handset lineup makes up for low iPhone X demand

In years past, demand for Apple Inc's latest flagship phone was critical to the company's results over the holiday shopping quarter.

That dynamic might be changing, however, as Apple's widening lineup of devices and services more than makes up for any tepidness in demand this quarter for its lead product, the $999 iPhone X.

On Tuesday, Apple's stock fell 2.5 percent to $170.57 after Taiwan's Economic Daily and several analysts suggested iPhone X sales in the fiscal first quarter would be 30 million units, 20 million fewer than initially planned by the company.

The cut in the forecast was not confirmed, and the stock regained ground on Thursday, hitting $171.82 by midday. The mean revenue estimate for the holiday quarter among 30 analysts remains at $86.2 billion, near the high end of Apple's forecast of $84 billion to $87 billion.

Apple declined to comment.

Part of the support for Apple may reflect a change in its business strategy.

Releasing two new models and keeping older ones have made Apple less dependent on its flagship product. Apple shareholder Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management in Santa Monica, California, said the higher price and better margins on the iPhone X will reduce fears of a sales decline.

"We know that Apple's strategy was different this quarter by releasing two phones, the iPhone 8 and the iPhone X, and I think combined sales will be in line with what people expect," Gerber said.

Apple also has fattened its portfolio of accessories and other devices, from its AirPods wireless headphones to a new Apple Watch with cellular data features.
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Apple shares at record high on better than expected iPhone sales

Apple Inc on Tuesday delivered surprisingly strong third-quarter earnings and signalled that its upcoming 10th-anniversary phone lineup is on schedule, driving the stock up 6 per cent to an all-time high in after-hours trading.

The stock climbed above its intraday record high to $159.10 after the company reported better-than-expected iPhone sales, revenue and earnings per share. The stock price move was expected to help drive the Dow Jones Industrial Average over the 22,000 mark on Wednesday.

Apple also said it hit a milestone of 1.2 billion iPhones sold.

The April-June quarter is traditionally a soft one for Apple as the market waits for the September launch of new iPhone models. But Tuesday’s results show that iPhone buyers may be less inclined than they once were to delay purchases until a new model is out.

The iPad product lines also showed unexpected strength, service revenue continues to grow at a healthy clip, and even the much-maligned Apple Watch showed a 50 per cent sales increase.

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