Apple reveals first sales drop in two years as Tim Cook hints at cheaper iPhones

(qlmbusinessnews.com via telegraph.co.uk – – Wed, 30th Jan 2019) London, Uk – –

Apple has revealed its first sales drop in more than two years and warned of further falls in the coming months as it confirmed that its iPhone business had gone into decline.

The company revealed that revenues in the final three months of 2018, its traditionally lucrative Christmas period, had fallen by 5pc to $84.3bn (£64.5bn). 

The decline was most pronounced in the iPhone business, which makes up the majority of Apple’s profits. Sales of the iPhone fell by 15pc, with much of the drop due to waning demand for its products in China. Profits, at $20bn, were flat on the same period a year ago.

Tim Cook, Apple's chief executive, suggested that consumers outside of America could benefit from cheaper iPhone prices in future as he said the company could reverse a policy of pricing its phones in dollars, rather than local currencies.

The falling pound in the last two years has pushed up the price of the most expensive iPhone in Britain from £789 in 2015 to £1,449 today, an 83pc increase. In comparison, the price in dollars has risen by just 52pc over the same period. “When you look at foreign currencies and then particularly those markets that weakened over the last year those (iPhone price) increases were obviously more,” Mr Cook told Reuters.

Shares in the company rose  after the results, with the revenue figure marginally better than investors had expected. However, Apple warned that sales in the next quarter, the first three months of 2019, would decline again.

The news served as more evidence that iPhone sales may have peaked as the global smartphone market saturates and existing users upgrade their phones less regularly. Consumers are holding on to their old devices for longer as newer versions of the smartphone offer fewer of the must-have features they once did.

Apple became the world’s first public company to be valued at more than one trillion dollars last summer but its shares have sunk since amid growing signs that sales of its most popular product, the iPhone, have ceased growing.

The company pre-empted the sales fall earlier this month, when it announced its first profit warning in 17 years due to an unexpectedly large decline in iPhone sales. The drop, which sent shares falling by 9pc at the time, was pinned largely on a stuttering Chinese economy, although Mr Cook admitted that consumers elsewhere were not upgrading their phones as regularly as the company had hoped.

Tuesday marked the first set of results since Apple decided to stop revealing how many iPhones, iPads and Mac computers it sells in each quarter, a move that had been interpreted as a sign that sales were in decline.

The company now merely gives revenue figures for each category, disguising whether the number of devices it sells has gone up or down.

While revenues from the iPhone fell, those from the iPad tablet and Mac computers rose, as did sales at Apple’s burgeoning wearables division, which includes the Apple Watch and its AirPod headphones.

Apple is hoping that revenues from its App Store and a growing investment in video streaming will serve as a new source of growth as iPhone sales stutter. Its services division, which also includes Apple Pay and its Apple Music streaming business, grew by 19pc year-on-year, a slightly slower growth rate than investors have become used to.

The iPhone continues to account for more than half of revenues, however.

The company predicted that sales in the next quarter would be between $55bn and $59bn, meaning they will fall again against the same period last year, when revenues were $61bn.

It came the day after Apple suffered a major privacy setback when it emerged that a group video-calling feature on its devices was transmitting people’s audio or video feeds before they had answered the phone call.

The Irish Data Protection Commissioner, its primary privacy regulator in Europe, said it had been in touch with the company over the matter.

By James Titcomb