Tomas Chlebek The most prominent information coming from the day before yesterday Tim Cook's conference call with shareholders is that while Apple isn't growing right now, it's doing better than expected. There are several reasons for this.
iPhone SE demand outstrips supply
Back when the iPhone 5S was current, many people were clamoring for a bigger display. That turned around with the release of the iPhone 6 and 6S. A significant number of users want a high-end smartphone that can be comfortably operated with one hand. So, four months ago, Apple introduced exactly such a device, the iPhone SE.
Its performance, compactness and price ensured it a surprising success. On the one hand, it means that decreased the average selling price of iPhones (see graph), but again it helped to maintain the number of units sold - the year-on-year drop was 8%. Lower than Apple estimated three months ago.
The iPhone SE and iPad Pro effects are moving ASPs for the two categories in opposite directions pic.twitter.com/BLp89J5kdb
— Jan Dawson (@jandawson) July 26, 2016
In addition, iPhone SE sales should improve even more once Apple resolves the problem of insufficient production capacities. Cook said: “The global launch of iPhone SE was very successful, with demand outstripping supply throughout the quarter. We have secured additional production capacities and, entering the September quarter, we are able to balance the ratio between demand and supply."
Cook also hinted at why the success of iPhone SE is important: “Initial sales data tells us that iPhone SE is popular in both developed and emerging markets. The percentage of iPhone SE sold to new customers is greater than we've seen in the first few weeks of new iPhone sales over the last several years.”
Apple's chief financial officer, Luca Maestri, said that while the iPhone SE erodes the company's margins, this is offset by the influx of new users into the iOS ecosystem.
By 2017, Apple's services are expected to be as large as a Fortune 100 company
As the iOS user base expands, Apple's services grow. Services revenue, which includes the iTunes Store, iCloud, Apple Music, Apple Pay, Apple Care, and app and book stores, rose 19% year-over-year to hit a new June quarter record of $37 billion. The App Store itself was the most successful in its entire existence during this period, with a year-on-year increase of XNUMX%.
"In the last twelve months, our services revenue grew nearly $4 billion to $23,1 billion, and we expect it to be as large as a Fortune 100 company next year," Cook predicted.
Fewer iPads were sold, but for more money
The aforementioned decrease in the average selling price of iPhones is also balanced by the increase in the average selling price of iPads. Jackdaw Research has released a chart (again, see chart above) that compares the average price to sales ratio of the two devices. While the relatively cheap iPhone SE lowers the average selling price of iPhones, the arrival of the more expensive iPad Pro increases the average value of tablets sold.
Apple is investing heavily in augmented reality
Piper Jaffray analyst Gene Munster asked Tim Cook about the success of Pokémon GO during a conference call. In response, the Apple boss praised Nintendo for creating an impressive app and mentioned that the strength of the iOS ecosystem played a part in its success. He then went on to praise the game for demonstrating the possibilities of augmented reality (AR): “AR can be really cool. We have already invested a lot in it and we continue to do so. We are interested in AR for the long term, we think it can offer great things to users and is also a great business opportunity.”
Last year, Apple bought a company specializing in motion capture technology, Faceshift, and a German AR company Metaio.
Finally, Tim Cook also commented on Apple's presence in the Indian market: "India is one of our fastest growing markets." iPhone sales in India grew by 51 percent year-on-year.
The iPhone SE is one of Apple's most profitable endeavors in recent times from the customer's point of view. Maintaining a reasonable size and a very reasonable price make it an attractive product. I would also like an iPad Pro with a pencil for drawing (I've already had the privilege). Not having a Wacom Cintiq or the iPad Pro being a third cheaper, I would consider buying it even though it would be a "nice to have" item under the circumstances.