Apple reports lower Q4 2018 due to decline in iPhone sales

CEO Tim Cook defends company's battery replacement decision, which makes older iPhones last longer

Apple has reported a 5% drop in revenue to $84.3bn for the quarter, which ended December 2018. The company posted a 15% decline in iPhone revenue from a year ago. but it said revenue across the rest of its business grew 19%.

Apple reported revenue for Mac computers grew 9% thanks to the new MacBook Air and Mac Mini, which were introduced in October, while iPad revenue increased by 17% due to the introduction of a new iPad Pro in November.

Analyst firm Strategy Analytics (SA) estimated that Apple shipped 65.9 million iPhones worldwide in Q4 2018, 11.4 million less compared to the 77.3 million shipped in Q4 2017.

“Global iPhone shipments fell sharply, due to high retail pricing, unfavourable foreign exchange rates, intense competition from rivals such as Huawei, battery replacement programmes driving longer ownership cycles, diminished carrier subsidies in some developed markets and flagging demand in some emerging markets,” the analyst noted.

Discussing the lower sales of the new iPhone, CEO Tim Cook said: “Our customers are holding on to their older iPhones a bit longer than in the past,” according to the transcript posted on the Seeking Alpha financial blogging site.

Cook went on to defend the company’s decision to offer battery replacements to its iPhone customers. “For millions of customers, we made it inexpensive and efficient to replace the battery and hold onto their existing iPhones a bit longer,” he said.

“Some people have suggested we shouldn’t have done this because of the potential impact on upgrades, but we strongly believe it was the right thing to do for our customers.”

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When asked about prolonging the life of older iPhones, Cook said: “We design our products to last as long as possible. Some people hold onto those for the life of the product and some people trade them in. And then that phone is redistributed to someone else. It therefore doesn’t necessarily follow that one leads to the other. The cycles – the average cycle has extended.”

The company reported a 19% increase in its services revenue to $10.9bn. “We not only generated our highest global services revenue ever, but we also had all-time records across multiple categories of services, including the App Store, Apple Pay, cloud services and our App Store search ad business,” said Cook.

He said revenue in the company’s cloud business grew 40% compared with the previous year.

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