Apple seems to have adopted the strategy of raising the average selling price of its main hardware, i.e., iPhones, iPads, and Macs. Next, the company wants to make more money from its services.
From the figures released during Q4 earnings call by the tech giant, it is clear that the company is keener to raise ASP of its flagship devices. Even as the sales remain stagnant in the fourth quarter of current year, Apple registered $62.9 billion in revenue, marginally more than the $60-62 billion it earlier estimated, as well as $14.1 billion in profit, up from $11.5 billion in the previous quarter.
Apple’s Revenue from the Service Business Reaches New Height
Speaking from the sidelines of earnings call, Apple’s chief executive officer Tim Cook said, “We’re thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our two billionth iOS device, celebrated the 10th anniversary of the App Store, and achieved the strongest revenue and earnings in Apple’s history”.
In the last quarter of 2018, Apple sold 46.8 million iPhones, 9.6 million iPads, and 5.2 million Macs. Interestingly, the numbers indicate a 14% hike in iPhone sales compared to the last quarter, and it is the same number of iPhones sold during the fourth quarter last year. Even as sales remain stagnant, Apple achieved a 29% rise in revenue, and this is due to price hike in iPhones.
Unlike the popular belief, Apple’s revenue increase comes from the sales of iPhone X, which was released last September Apple event. iPhone Xs and Xs Max contributed only a fraction of those sales to the revenue rise as these devices were released late this year.
Overall, the average sale price of an iPhone is increased from $618 in the same quarter last year to $793 this year. There is a whopping $175 rise in the ASP of iPhones, and this has benefited Apple.
Coming to the services offered by Apple, the company achieved a new milestone in the last quarter of 2018 with $10 billion in revenue. If we compare the two quarters, it is a 27% rise from the previous quarter. Apple services contributed the most are iCloud, Apple Music, App Store, and others which brought in $7.9 billion in revenue.
About the continuous growth of Apple’s services, Luca Maestri, the chief financial officer said, the company believes in “exponential trajectory” for its all service business from Apple Music to Apple Store to Apple Pay.
Apple enjoys “very large and growing” install base currently. As a large number of consumers have become part of the Apple ecosystem, it is time to capitalize on Apple’s services and improve its existing services. Apple has also plans to add new services like Apple’s Search Ad business on its App Store.
Apple’s revenue rise is also backed by Mac sales, which brought in 39% more revenue than last quarter. This is because of MacBook Pro units and back-to-school season.
On the grim side, Apple witnessed a slump in the sales of its iPads, which were down 16% from the last quarter. iPad revenue fall was down 14% as well.
Meanwhile, ‘other products’ category of Apple also painted a beautiful picture for the company as products like Apple Watch, AirPods, Apple TV, HomePod, and others registered a 13% sequential increase and a 31% increase from the fourth quarter 2017.
According to Cook, Apple Watch Series 4 has seen “overwhelmingly positive” response. Now, all eyes are for the first quarter of 2019 as festival times are coming up and Apple and investors expect revenue to be between $89 and $93 billion in Q1 2019.
The bottom line is Apple pays more attention to the average selling price of its main hardware to raise the revenue. The company might have adopted this strategy as consumers use their iPhones for nearly three years.
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