Apple's retail boss and former Burberry CEO Angela Ahrendts will be leaving the company “for new personal and professional pursuits,” Apple announced Tuesday, and now Tim Cook has issued an internal memo to retail employees announcing the management shakeup.
At the end of the calendar 2018 holiday quarter, the Cupertino technology giant had a whopping 1.4 billion active devices worldwide and its iPhone installed base hit 900 million handsets, marking the first time the company has disclosed the latter number.
Apple previously reported the number of total active devices in usage, but this is definitely the first time it's disclosed the number of active iPhones out there.
Luca Maestri, Apple's finance chief, said on the conference call:
Our global active installed base of iPhone continues to grow and has reached an all time high at the end of December. We are disclosing that number now for the first time and it has surpassed 900 million devices, up year over year in each of our five geographic segments, and growing almost 75 million in the last 12 months alone.
While the definition of an active device is somewhat murky, Apple only counts the devices which actively use iCloud or have accessed App Store recently.
With 1.4 billion devices in the wild, of which 900 million are iPhones, we can infer that there are now about half a billion iPads, iPod touches, Macs, Apple TVs and Apple Watches in active use.
In August 2017, for example, Apple announced selling 1.2 billion iPhones cumulatively (it sold its billionth handset on July 26, 2016). Keep in mind that the total number of active devices can be misleading because Apple fans tend to own multiple products.
Cook at an all-hands meeting celebrating a billionth iPhone sold.The iPhone installed base is incredibly important because it tells us how many iPhone-using customers are out there as very few people own multiple phones.
To mollify investors further, Maestri added that Apple plans to provide information on iPhone installed base, as well as total installed base, "on a periodic basis."
This was also Apple's first quarter without unit sales, taking away the yardstick everybody measured its business with. However, the replacement might be better: the Cupertino firm now focuses on the amount of revenue it generate through sales of devices and services.
Unit sales—the key metric to judge Apple's growth—is no more.Now sales are split between products and services for the first time. Both Apple's press release announcing the earnings and remarks on the conference call strongly emphasize services.
"Not only is our large and growing installed base a powerful testament to the satisfaction and loyalty of our customers but it's also fueling our fast growing services business," Cook said.
Still, the burgeoning services business—growing by 19 percent to a record $10.9 billion—isn't without pitfalls. Squeezing money out of existing customers won't be enough to placate investors unless Apple's installed based, a key driver for Services, continues growing.
Apple's net sales by geography and product typeThe more people own its devices, the more money Apple can make by upselling them to services. In that context, seeing its overall global active installed base growing by a hundred million devices in the past twelve months is a definite positive.
But as the narrative shifts from products to services, Apple could find itself in a precarious position should iPhone sales contract in other key markets, like the US and Europe.
Strategy Analytics estimates that Apple shipped 65.9 million iPhones worldwide during the all-important holiday quarter, representing a 15 percent decline on the same quarter a year ago.
The decline corresponds with Apple's reported 15 percent drop in iPhone revenue during the company's fiscal 2019 first quarter, which covers sales in the three months to December 29.
Aside from woes in China, Tim Cook attributed the sharp fall in iPhone upgrades to high retail pricing, death of subsidies and customers holding on to their phones a bit longer.
Apple is addressing slowing iPhone sales with aggressive trade-in offers.He mentioned a bunch of other factors, like unfavorable foreign exchange rates, strong competition from rivals like China's Huawei and the $29 battery replacement program.
"So where it goes in the future, I don’t know," Cook said. "But I am convinced that making a great product that is high quality, that is the best thing for the customer. We work for the user and so that’s the way that we look at it."
In other Apple earnings highlights, the company revealed a bunch of interesting data points: 50 million paid Apple Music subscribers, 85 million monthly readers on Apple News, 1.8 billion Apple Pay transactions, 360 million paid subscribers across all of its services and more.
You can listen to a replay of the earnings call on Apple's website for a limited time.
Thoughts on these milestones?
Apple's boss Tim Cook has admitted in yesterday's conference call following the latest quarterly earnings report that—aside from China—other factors such as higher prices, death of subsidies in many countries and customers holding on to their handset a bit longer than usual have all contributed to a decline in iPhone upgrades.
Jason Snell has transcribed Apple’s earnings call on Six Colors, here's what Cook said when an analyst pressed him on Apple's pricing strategy (emphasis mine):
Steve Milunovich, Wolfe Research: Some have the perception that you priced the new products, the new iPhones, too high. What have you learned about price elasticity and do you feel that perhaps you pushed the envelope a little bit too far and might have to bring that down in the future?
Tim Cook: Steve, it’s Tim. If you look at what we did this past year, we priced iPhone XS in the US the same as we’d priced iPhone X a year ago. iPhone XS Max, which was new, was a hundred dollars more than the XS, and then we priced the XR right in the middle of where the entry iPhone 8 and entry iPhone 8 Plus had been priced. So it’s actually a pretty small difference in the United States compared to last year.
He continued:
However, the foreign exchange issue that Luca spoke of in the call amplified that difference in international markets, in particular the emerging markets, which tended to move much more significantly versus the dollar.
And so what we have done in January in some locations and some products is essentially absorb part or all of the foreign currency move as compared to last year and therefore get close or perhaps right on the local price from a year ago.
So yes, I do think the price is a factor.
I remember Apple executives arguing in the past that iPhones weren't just for the rich people. But I digress, here's what Cook had to say about the death of the smartphone subsidy.
Secondly, in some markets, as I had talked about in my prepared remarks, the subsidy is probably the bigger of the issues in the developed markets.
I had mentioned Japan, but also even in this country, even though the subsidy has gone away for a period of time, if you’re a customer that your last purchase was a 6S or a 6 or in some cases even a 7, you may have paid 199 dollars for it. And now, in the unbundled world it’s obviously much more than that.
Cook says they have a number of actions to address the decline in iPhone upgrade rates, including the aggressive trade-in offers and and installment payments.
The Apple story is shifting from iPhone units to ecosystems and services.The CEO concluded:
So where it goes in the future, I don't know. But I am convinced that making a great product that is high quality, that is the best thing for the customer. We work for the user and so that's the way that we look at it.
In the press release announcing quarterly earnings, Cook praised other aspects of Apple's business that have experienced healthy growth.
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.
Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.
Apple no longer reports units sales for iPhone and other products, robbing investors of the most important metric as the company transitions its story from one heavily dependent on iPhone to a combined products + services business.
During the holiday quarter, the Cupertino company pulled in $84.3 billion in revenue, a decline of 5% from the year-ago quarter. Strategy Analytics estimates that 65.9 million iPhones were shipped during the quarter, or 11.4 million fewer handsets versus the year-ago quarter.
Despite its revenue miss and revised guidance, Apple has topped financial targets for fiscal 2018 so the company's board has decided to give CEO Tim cook a 22% increase in pay.
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Facebook’s former chief security officer is calling out Tim Cook for his recent speech about privacy and what he calls the steady rise of the “data industrial complex.” While Alex Stamos says he mostly agrees with what the Apple CEO said during his Wednesday speech at the European Parliament in Brussels, Belgium, he suggests Cooks is perhaps being hypocritical because of his company's dealings with China.
In a speech at a privacy conference in Europe, Apple CEO Tim Cook went after companies he says are hoarding personal data for financial gain. Calling it the “data industrial complex,” he suggests new privacy laws are needed, especially in the United States.
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Tim Cook visited "Good Morning America" on Tuesday to discuss the recently introduced iPhone XS and iPhone XS Max. The Apple CEO also discussed the ongoing trade war between the United States and China in a live interview at the ABC show's Time Square Studio in New York.