Apple has long performed like clockwork, growing steadily and producing an ever-growing stream of profit. Not anymore.
On Tuesday, the Silicon Valley behemoth said that its net income had fallen nearly 13 percent and that its revenue growth had slowed to 1 percent in the latest quarter, with iPhone sales continuing to decline and gains in the company’s services business failing to make up the difference.
The latest financial results showed persistent signs of weakness for what has been one of the world’s financial standouts. Apple built its enormous business on the back of the iPhone, but sales of the device have slipped for three straight quarters amid a saturated market for smartphones and the company’s struggle to find new buyers.
Yet the results Apple reported on Tuesday suggested that the company could be starting to halt declines in key areas of its business, including iPhone sales and revenue from the Chinese market.
Apple said net income had dropped to $10.04 billion for its fiscal third quarter compared with $11.5 billion a year ago. Revenue rose to $53.8 billion from $53.3 billion a year ago. Apple’s earnings beat analysts’ estimates of $2.10 a share.
Apple has tried to slow the bleeding in its iPhone business with new financing offers and a trade-in program for owners of older models after finding that people are keeping their iPhones longer. In the latest quarter, revenue from iPhone sales fell nearly 12 percent, to $25.97 billion, from a year earlier. In the company’s previous quarter, iPhone sales fell 17 percent.
Consumers are finding fewer reasons to upgrade their iPhones, analysts said, with newer models offering only incremental improvements. The trend could continue this year, when Apple is likely to unveil a new slate of iPhones. The latest models, which are expected to debut in September, are unlikely to work with the new fifth-generation, or 5G, wireless technology that offers far faster download speeds than current service. Apple is expected to have 5G iPhones for 2020, analysts said.
Apple said previously that iPhone sales were down 15 percent in the final three months of 2018, and it blamed the drop on economic weakness in China. Apple has since cut iPhone prices in China, and Timothy D. Cook, the company’s chief executive, said in April that the move had helped lift business there.
In the latest quarter, Apple’s sales in the region that includes China continued to improve. Sales there fell by 4.1 percent, compared with 25 percent and 21 percent drops in the prior two quarters.
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The Chinese market has emerged as one of Apple’s greatest vulnerabilities. The region is the company’s No. 3 market for sales. This month, Chinese officials disclosed that the country’s growth had fallen to its slowest pace in three decades. Apple also assembles most of its products in China. The company’s supply chain has long drawn the ire of President Trump, who has tried to publicly pressure Apple to build more of its products in the United States.
The company has moved the other way instead, shifting assembly of its new top-of-the-line Mac Pro desktop computers to China from Texas. Apple’s attempt at making the Mac Pro in Texas turned out to be a headache, as production problems and a lack of manufacturing infrastructure in the area delayed the computer’s introduction.
Mr. Trump has placed tariffs on $250 billion worth of Chinese goods, including semiconductors, televisions and ball bearings, as part of a bruising trade war. So far, Apple products have largely escaped the tariffs’ effect.
Last week, Apple filed 15 requests with the United States trade representative’s office asking that certain products it imports from China be excluded from the tariffs, including components used in the Mac Pro desktop like power cables and circuit boards. Apple said in the requests that it cannot find the products outside of China.
On Friday, Mr. Trump wrote on Twitter that Apple “will not be given Tariff waiver, or relief, for Mac Pro parts that are made in China” and that the company should “Make them in the USA, no Tariffs!”
Apple did not comment on Mr. Trump’s tweet. In the past, the company has called itself “an engine of economic growth in the United States.” It said that last year it spent $60 billion with 9,000 American suppliers, helping support 450,000 jobs.
Mr. Cook has encouraged officials in the United States and China to resolve the trade dispute, but the tensions have recently accelerated. And while the countries resumed trade talks this week, hopes for a transformative deal are dwindling.
Apple faces other issues in Washington, including antitrust concerns. Last week, the Department of Justice said it was opening an antitrust review of the Big Tech companies. Apple has come under particular scrutiny for how it wields power in its App Store, where it distributes games, ride-hailing programs and more.
As Apple’s iPhone sales fall, the company has sought to make up the gap in revenue with an expanding business selling apps and services to its existing customers. Apple now offers subscriptions for news, music and TV services and is preparing to launch a gaming service soon. Its services revenue rose more than 12 percent to $11.5 billion.
https://www.nytimes.com/2019/07/30/technology/apple-earnings-iphone.html
2019-07-30 20:31:29Z
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