Faced with the problems of the iPhone, Apple tries to change the story
Faced with the problems of the iPhone, Apple tries to change the story
Kindle in 2009, noted the online retailer's decision not to report unit sales of its reading device as proof that it was not selling many.
Almost a decade later, Apple follows a similar path. The company said it would stop divulging data on the number of iPhones, iPads and Macs it sells, eliminating the performance metric it has provided since the 1980s.
The change occurs as the growth in the number of iPhones sold decreases, with more and more customers hold onto smartphones for longer. Apple has responded by promoting software and services on their devices and Raising the prices of new gadgets..
Investors opposed the change of information, and in income projections that fell short of the Wall Street estimates. On Friday, the elimination of unit sales data contributed to the stock falling 6.6%, as the company posted $ 71.19 billion in market value in a single day.
"Apple's privacy commitment now extends to the disclosure of the iPhone unit," Amit Daryanani of RBC Capital Markets wrote in a note to investors. In an interview, he said the change means that many shareholders now believe that Apple is hiding something. "It's a monkey on his back," he said.
Mike Levin, co-founder of Consumer Intelligence Research Partners LLC, a market research firm that investigates Apple customers, said the change shows that Apple executives are thinking about their business in a way they have not wanted to say in voice. high.
"When Apple was doing very well, unit sales told a wonderful story, and now that the story is not so good, they say, 'Let's change it,'" he said.
Mr. Jobs could agree. "Usually, if they sell a lot of something, they want to tell everyone," said the Apple co-founder. He told the New York Times nine years ago When criticizing the Amazon Kindle.
Apple continues to be an immensely profitable company and has experienced recent price increases to its best year. Chief Executive Tim Cook told analysts on Thursday that the change reflects better how Apple's business has evolved as a result of its new pricing strategy. When a cashier calls a buyer, the record does not show how many units the buyer buys, only what the buyer spends, he said.
Other companies have also altered the way they report long-standing business metrics.
In April,
General engines
Co.
Abandoned practice of decades to report the monthly sales of vehicles and joined
Tesla
Inc.
In the presentation of these quarterly figures.
Walmart
Inc.
Y
objective
Corp
During the last decade, we have gone on to report sales in the same store quarterly instead of monthly to eliminate volatility.
"This is a new territory," said Peter Bible, director of risk at accounting firm EisnerAmper LLP and GM's former chief accountant. "Whether it's monthly unit sales of cars or unit sales of iPhones or iPads, do you fear it's not favorable?"
Apple finance chief Luca Maestri, who previously worked at GM, said Apple will continue to provide "qualitative comments," such as the sales of flagship iPhones units are solid and attract customers with new features.
Apple will now report gross margins separately for its hardware and services.
The performance of gross margins between hardware and services will become an important metric, said Gene Munster, managing partner of Loup Ventures, an investment and research firm.
Investors will see margins in hardware to determine the status of iPhones. "All Apple has to do is keep the gross hardware margins stable," said Munster, who believes that the changes in the reports are positive for investors due to the recurring revenues offered by the services business.
The change also forces Apple's fast-growing services business to focus on the stage.
Apple has 1.3 billion iPhones and other devices in active use and earns an estimated $ 30 per device annually for application sales, music subscriptions and other offers, according to Morgan Stanley. The firm expects the services to represent around 60% of Apple's revenues over the next five years. In contrast, the iPhone accounted for 86% of sales growth in the previous five-year period, he estimates.
In the last year, services grew 24% to $ 37.19 billion. Still, they accounted for only about 14% of Apple's total revenues of $ 265.6 billion in fiscal year 2018. Apple has not broken down revenue for its various services.
Boosting business progress will test Mr. Cook, an operations expert who turned Apple into a for-profit machine by controlling hardware and inventory costs. Now, the company's management will increasingly depend on the leadership of Eddy Cue, who is in charge of software and Internet services, and Phil Schiller, who oversees the app store.
It could take a year or more before Mr. Cook's team shows that higher-priced services and devices can offset sales of flat or declining units, said David Yoffie, a professor at the Harvard Business School, who He has written case studies of Apple. "Obviously, Apple wants to change the narrative on the street, but less transparency will reduce confidence in the short term," he said.
-Tim Higgins and Suzanne Kapner contributed to this article.
Write to Tripp Mickle in Tripp.Mickle@wsj.com
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