Hold the Phone

It's Not Time to Hit the Apple Panic Button Yet

Sure, iPhone sales are disappointing, but it's not all doom and gloom.
Updated on
Photographer: Don Mason/Getty Images
At Closing, February 23th
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I have some bad news, and some probably-not-terrible news about Apple Inc.

The bad news was Apple didn't have a terrific holiday season for its most important product. Apple said Thursday that it sold 1.2 percent fewer iPhones in the three months ended Dec. 30 than it did in the same period of 2016. Analysts had expected those unit sales to increase by a few percentage points or so.

Even though Wall Street had been bracing for some weakness, and Apple's trumpeted iPhone X was on sale for only two months of the quarter, it's not a great sign that unit sales fell. Shares initially dipped a bit in after-hours market trading, but then recovered, in part because Apple seems poised to return piles more cash to stockholders. 

Holiday Blues

Apple sold fewer iPhones in the December quarter of 2017 than it did a year earlier

Sources: Bloomberg and Apple

Note: Apple's fiscal year ends in September.

There are two points of less-bad news that should encourage investors -- or at least leave them feeling the worst predictions won't come to pass. Apple's average sale price for each phone hit a record of $796. That's likely thanks to those $1,000-and-up iPhone X models. The higher price tags helped Apple's total revenue jump 13 percent -- more than analysts had expected.


Apple sold each iPhone for an average of $796, reflecting a lift from the high-priced iPhone X

Source: Bloomberg

And better yet, it's clear Apple's quarter ending in March won't be the disaster that pessimists feared. (Although it doesn't look that great, either.) 

Apple predicted its revenue for the March quarter would be $60 billion to $62 billion for the March quarter. That is far lower than expectations of $66 billion, according to the average of estimates compiled by Bloomberg.

But a feared iPhone apocalypse may not come to pass. Before Thursday, analysts thought iPhone unit sales would decline about 24 percent from the December to March quarters. If that holds up -- and the dour holiday season sales mean those expectations may be wrong -- Apple could sell about 59 million iPhones in its fiscal second quarter ending in March. That would be a jump of about 16 percent from the same point a year earlier. 

Expect some debate about the trajectory of iPhone sales in coming days. Mizuho said that Apple's revenue guidance seems to imply 50 million iPhone units sold in the March quarter. That would be roughly flat from a year ago. Apple executives said iPhone revenue would increase by a double-digit percentage in the March quarter. Again, that could mean relatively flat or meek increases in iPhone device sales, but revenue would perk up because of higher prices for those smartphones. 

All in all, the picture is not terrible for Apple. Based on early information, unit sales of iPhones aren't likely to grow like a weed this year, but higher prices are making up the difference. Revenue also rose about 11 percent in the region that includes China -- Apple's most important market.

It seems Wall Street's rethinking of Apple's prospects in recent months were accurate. The company may not be able to sell far more phones than it ever has before, but each one is fetching a higher price. That doesn't sound too bad, or at least it sounds pretty good now that investors are warming to this less highflying but still steady version of Apple. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Shira Ovide in New York at sovide@bloomberg.net

    To contact the editor responsible for this story:
    Daniel Niemi at dniemi1@bloomberg.net

    Before it's here, it's on the Bloomberg Terminal.