Given what we know now, is Apple still a ‘smartphone’ company?

31 Jul 2019

Image: Vividrange/Depositphotos

The iPhone makes up less than half of Apple’s business as the company begins to diversify. So can it still be described as a ‘smartphone’ company?

The latest earnings report from Apple demonstrates that the iPhone, one of the core products that catapulted the company to global dominance, is no longer its primary driver of sales.

The Q3 announcement paints a complicated picture of the firm’s current outlook. It posted quarterly revenues of $53.8bn, which represents an increase of 1pc year on year, bringing an end to the company’s multi-quarter revenue slide. It roughly aligns with Wall Street projections, which anticipated the company would generate around $53.5bn for this quarter. Investors are seemingly buoyed by the news – Apple’s closing share price increased by roughly 4pc.

Yet its net income dropped to $10.04bn for this quarter, down from $11.5bn a year earlier, a decline of nearly 13pc. Its quarterly diluted earnings per share came in at $2.18, down 7pc, though exceeded analyst’s expectations.

Apple CEO Tim Cook lauded it as the company’s “biggest June quarter ever”, praising in particular the accelerating growth from its wearables and services businesses. However, for the first time in more than five years, iPhones constituted less than half of the tech giant’s net sales.

Cook has said that when the wearables, services, home and accessories divisions are combined, they approach the size of a Fortune 50 company. Apple, though in flux, remains massive.

The diversification that the company seems to be going through is likely a necessary reaction to changing trends in how consumers buy phones – namely, that they upgrade less often, meaning new iPhone launches don’t inspire sales as they once did.

Therefore, services such as Apple Music, Apple Pay, iCloud and the App Store have taken on new relevance for the company and may go on to be even more significant revenue sources in the coming years.

Apple’s next financial quarter will likely be the real test and will draw considerably more attention as it will be the first to include sales from this year’s iPhone line-up and, potentially, a handful of new subscription services.

Apple store. Image: Vividrange/Depositphotos

Eva Short was a journalist at Silicon Republic