Sure, Apple beat analyst expectations for its third-quarter earnings. But for two quarters in a row, the company’s sales have been falling. Sales of iPhones, which Apple has come to depend on for some 60% of its total revenue, were off 23% from the same quarter last year. Unit sales were down 15%, further confirming studies showing that consumers are not replacing their iPhones as often as they once did. Unit sales dropped for iPads and Macs as well, although iPad revenue rose.
I say forget the earnings, and instead focus on the long-term. Here are four reasons Apple is still the company to beat in technology.
1) The strong performance of Apple’s services division is a harbinger. For the quarter, revenue from services like Apple Music, iCloud storage, photo printing, and other sources rose 19% to $6 billion. Services accounted for nearly 25% of total revenue, up from 14% the year before. Analysts tend to dismiss this number, because historically it hasn’t mattered very much, and because the margins tend to be thinner than the ones Apple gets by selling its hardware.
On their own, service revenues cannot make up for slowing sales of devices. But they do point to the fact that Apple is not sitting still. It is developing many new revenue streams. Ever since the advent of the app economy, the company has figured out ways to cut itself a slice of the revenue created by the massive world of apps and services built by others on its platform.
Critics who think of Apple only as a device company see heftier services revenue as evidence that the company isn’t as innovative in hardware as it once was. But they are misreading the future of this company. Increasing services revenue isn’t a sign of weakness; it’s a sign that Apple knows how to adapt, which is perhaps the most critical skill for any technology company.
For the Complete article click here:
FAST COMPANY
