Apple is a victim of its own success
Apple reported its first revenue decline in 13 years, noting the upgrade cycle for the iPhone 6s has not been as robust as the upgrade cycle for the blockbuster iPhone 6 a year earlier. The 6s was released early last fall, and then in late March Apple released the smaller, less expensive iPhone SE. That phone had only been on the market for a few days when Apple closed the books on its second fiscal quarter, which ended March 26.
Apple reported $50.6 billion in revenue for the quarter, down 13% from last year. This is the company’s first year-on-year sales decline in 13 years. Apple CEO Tim Cook noted the strong dollar is partly to blame, and said in “constant currency” Apple sales for the quarter were only down 9%. In China, which is Apple’s biggest market, sales were down 11% in today’s dollars and down 7% in constant currency.
The company sold 51.2 million smartphones during the quarter, which was actually more than analysts were expecting. Cook said there are now more than one billion iPhones in use around the world.
Focus on the future
With an installed base of more than one billion iPhones, Cook sees a clear opportunity for Apple to grow its services business separately from its device business. Cook said services represented Apple’s second largest revenue source during the quarter, ahead of the Mac, the iPad and the Apple Watch.
Apple’s services revenue rose 20% year-on-year to $6 billion for the quarter, excluding the impact of a patent settlement Apple received during the quarter. Cook said revenue from the company’s App Store rose 35% and Apple Pay is signing up one million new users per week. Cook also trumpeted the success of Apple Music, which he described as Apple’s first subscription business.
“Our music revenue has now hit an inflection point after many quarters of decline,” Cook said. Apple Music has a claimed 13 million paying subscribers and this week Drake’s highly anticipated album is set to be released exclusively on Apple Music and iTunes.
“The services business is powered by our huge installed base of active devices, which crossed one billion units earlier this year,” Cook said. “Those one billion plus active devices are a source of recurring revenue that is growing independent of the unit shipments we report every three months.”
Job outlook
Apple is still hiring, but it’s spending less money on recruiting new talent. According to Venture Beat, the company has sharply curtailed incentive pay for staffing professionals. Several full-time Apple recruiters may soon be looking for jobs themselves, as the company is expected to eliminate some of these positions. The report also says Apple is eliminating its contract recruiters. In a sign the company may be planning to rely more heavily on digital recruiting, Apple posted a job opening this week for an “HRWeb Editor” to “oversee content development and updates for all global HRWeb properties.”
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