While iPhone sales remain stagnant, Apple services hit $10B in revenue | Hacker News Reader

While iPhone sales remain stagnant, Apple services hit $10B in revenue

arstechnica.com

67 pointsdoener108 comments

Given that Samsung just reported a 33% drop in smartphone sales from the same quarter last year, Apple reporting a .4% increase in their smartphone sales vs the same quarter last year sounds pretty good.

https://www.telegraph.co.uk/technology/2018/10/31/samsung-re...

https://www.anandtech.com/show/13540/apple-announces-q4-fy-2...

I think we should attach an important health warning. Samsung release their S9 in March 2018, whereas Apple released the iPhone X in November. So this quarter is the drop from Samsung's first full quarter of their new flagship sales to one year later. Apple's quarter is the drop from the last full quarter before their new flagship to a quarter where they released a new flagship.

Both companies have a similar release schedule every year, which is why we compare to the same quarter a year ago.

Unfortunately for Samsung, falling smartphone sales figures have been an ongoing problem.

>Samsung’s mobile phone sales have been taking a hit this year. It’s a downward trend that started during last year’s holiday quarter and has persisted throughout 2018. Both IDC and Strategy Analytics report that Samsung’s smartphone sales have dipped around 13 percent in the recent quarter. That follows a 10 percent decline in Q2, a 2 percent drop in Q1, and a 4 percent dip in Q4 2017. It’s a clear sign that Samsung’s Galaxy Note 9 and Galaxy S9 devices haven’t been competitive at the high-end

https://www.theverge.com/2018/11/2/18055094/samsung-smartpho...

I don't think that it's fair to say that Apple's release schedule has been similar between now and the previous year. Last year the iPhone X was announced in September and released in November/December (by region) and it was arguably the biggest upgrade Apple made since the iPhone 4. So it's fairly obvious that Q3 2017 was an almost uniquely low year. Compare that to Q3 2018 where Apple announced AND shipped the iPhone Xs in September.

I don't disagree that there's a larger trend going on, I'm just saying that this isn't a particularly good data point because there are other underlying factors.

Apple is one of those companies whose fiscal year doesn't match the calendar year.

The numbers that were just released are for their fiscal fourth quarter which covers sales through the end of September, so we are talking about a couple of days worth of sales in 2017 with only the (then) new iPhone 8 variants for sale but not the iPhone X and a couple of days worth of sales in 2018 with only the iPhone XS variants for sale but not the iPhone XR.

I don't really see any calendar related difference for Samsung's flagships between 2017 and 2018.

I don't see any of that being greatly material when you look to explain the difference between a tiny year on year smartphone sales increase for Apple and a massive year on year smartphone sales drop for Samsung.

The average sales priced for an iPhone increased nearly 30% from $618 to $793. Services now account for 16% of revenue. Apple is gradually shifting from a device maker to an ecosystem company that consumers pay a premium initial fee to enter and pay an additional recurring free to use.

Yet services would be better if units sold gets increased. So cheaper models are a must. So it's so far an excellent strategy milking the high end keeping the units sold not fall.

Services might be better, but I suspect that budget conscious consumers would also spend less on services, compared to customers willing to spend $1200 on an iPhone XS. I imagine their FP&A team has done pretty thorough analysis that the extra sales from fewer products at higher margins will offset the incremental increase in revenue from more (potentially lower value) services subscribers.

This is also true if people keep their devices longer — which seems to be the case from what I’ve been seeing. The low end now seems to be previous generations phones like 7/8.

> Yet services would be better if units sold gets increased.

I'm not sure that follows. Apple's a very different company in many ways. Notably, by being dominant in a relatively deep-pocketed userbase, they don't need to worry about the "our profit margin is near zero and likely to shrink further so we have to grow just to stay alive" red queen's race that so many other tech companies find themselves in.

I think that making it more durable, not cheaper, aligns better with the services strategy. More durable means fewer opportunity windows for competitors.

Or you can just buy that same flagship model 24 months later, still working perfectly well and with many more years of iOS updates, for a fraction of the price. The second-hand market for iPhones and iPads is huge, and iPhone sales in markets like India are primarily or refurbished iPhones brought in from the West at an industrial scale.

Maybe the latest iPhone is good enough, like a 8 year PC is for most people? Either way, to get $$ from services, you need to have people use your devices and platform.

Microsoft went as far as saying, if you're going to pirate an OS, pirate ours. https://www.techrepublic.com/article/microsoft-gives-up-on-c...

But not just any user - Apple users spend a lot more on apps than Android users. And for developers, fewer users means less support.

Indeed, they are determined to milk their cash cow dry while they can.

Why wouldn’t you? Since they don’t really “go dry”, turns out “milking while they can” is how any industrious farmer maximizes milk per cow over the natural life of a milk cow.

Now I’m just imagining baybal2 running a huge dairy farm where none of the cows get milked so they won’t go dry :)

An ecosystem requires a user-base. Shrinking volumes means less users. Short term raised ASPs mean of course they don't suffer in terms of revenue. However, that may be a short term effect.

I mean sure 'Stagnant' means that there was no growth, but it also implies that this is a bad thing, which in this case it obviously isn't. Clickbait title.

How high do you think they can go in term of prices? And do you think they will sell many £1000 smartphones in a recession? Stagnant volumes is not an imminent problem but the share price is a forward looking metric.

A $600 mass phone in 2007 was difficult to imagine. And 2008 was the recession.

Yeah, but that's the point of the market saturation. Apple (or Google for ads) achieved a phenomenal growth despite the recession because they were taking over a market. But now that the market is saturated, there won't be a growth in volume to offset difficult economic conditions.

I’d argue that £1000 phones are less affected by a recession than £400 phones

I think that classifies them as luxury products, which historically tend to be pro-cyclical.

iPhones might be a Veblen good. They could probably release a $5000 or $10,000 model and there would be a market for it. Plenty of people buy $50,000 watches.

Didn't Apple stop making the super expensive Apple watch, though?

The Apple watch is a low-status dorky, uncool watch. The iPhone is a cool, high-status phone.

Patek Philippe or nothing!

So it's a good thing that unit sales haven't risen?

is "unit sales" number the only number in the report?

Of course not. Nobody is saying that revenue is stagnant. Only iPhone sales are. It seems correct to me.

it is also correct to say unit sales are stable. using a word with negative connotation to describe a largely positive event smells bias and manipulation to me.

I think it's fine; not everything needs to keep growing forever.

Nothing physical can keep growing forever.

Except, maybe, the universe itself?

I considered that before posting, but think I'm safe: just don't ask for a rigorous proof!

What word would you have used instead? "Stagnant" is technically accurate.

I don't have a dog in this fight re: spin, just playing the word game.

"consistent" for a positive spin or "steady" for more neutral. "Flat" is fairly uncharitable but also on the table.

For example, I suspect one's wife would rather know her beauty has been "consistent" over the years, rather than "stagnant", despite technically both meaning "stayed the same".

Yep, the wives of the HN userbase and their ongoing obsession with maintaining their beauty.

:eye roll:

Are you saying people(wives included) shouldn't care about their beauty? This seems like a completely unnecessary response to the comment.

No, I’m pointing out that it’s a weird sexist comment that sounds like something from a scene of Mad Men.

I would assert that the genders could be reversed, say, for a husband's handsomeness, or any other quality in any person, and the metric would apply. And of course persons could be removed altogether – that's the point – we started out talking about cell phones.

The purpose of my anecdote, and the reason I chose something with such sentiment, is to highlight the semantic difference between words by placing them in a more emotionally charged context. One likely doesn't think too hard about the praise they bestow upon their iPhone. One hopefully thinks harder about the praise they send their lover. The heightened importance of word choice in situation B makes it easier to understand situation A.

If degrading sexist tropes are your mind's first destination in in the context of this conversation, I believe you are a hammer in search of a nail.

I perfectly understood what you were trying to say. It was just awkward and stereotypical. Again, like something from Mad Men. Like we’re all married men talking about how our wives are obsessed with their beauty.

It’s a mildly anachronistic and sexist trope. I found it amusing so I left the comment. Really not a big deal, and from your closing line, I’m sure there’s zero chance of you examining your behavior or assumptions, and I’m not going to waste time arguing about it. Have a great day!

Capitalism requires growth (or more generally, increased consumption of products/resources), so stagnation is bad by definition.

Or capitalism is bad for requiring it (externalities be damned)

Does it? There are plenty of companies with lower growth that still produce regular profits and dividends.

>lower growth

How many healthy/successful companies out there have _no_ growth? That's my point.

The real story is that from now on Apple will not be reporting unit sales for their products. Next quarter and from there on there will be just the aggregated sales figure for how much physical stuff they sold with nobody knowing whether that was phones, watches, laptops or dongles.

This is their choice and their business. I don't think this is fair on the people that have helped them get to where they are by writing apps, making accessories or even writing web pages that look good on Safari.

Why would a company invest in making accessories for the iPad if they have no clue as to whether the things are selling or not? How do you make the business case to invest in such accessories if you only have anecdotal evidence as to whether the iPad is selling or not?

Third party data.

There isn't also official sales data for Android and Windows devices.

Meanwhile, Google does not reveal their unit sales or even their revenue for the various Pixel devices.

>unlike most hardware manufacturers, Google refuses to share official sales numbers for their phone. Instead, during earning reports they simply bundle the product under Alphabet's "Other Revenues", leaving us in the dark about how successful the product is.

https://android.gadgethacks.com/news/rare-moment-pixels-sale...

Good point. The "stagnant" term is considered to be a very negative concept in capitalism.

Stagnant sales with a much more expensive smartphone, i don‘t think anybody wouldn‘t live to have the same „problem“.

Price hikes and strong dollar should kill them; but it does not.

Many analysts thought higher average selling prices were possible because of demand inelasticity at the forerunner iPhone.

Service revenues would get boosted by lower prices if units sold increase.

Cook is doing a fine balance of prices, sales, services. Very successful so far. Yet I'm afraid the only way is down from here.

You write that it can only goes down, but at the same time you hint that a lower priced devices would boost service revenues.

So isn't the next step a "cheaper" iphone ? (or a better second hand market 'certified by' Apple)

Yes I think so. Apple Management had better data and tools to make the fine decision. Fact is that smartphone market saturates.

Why down? If iPhone sales remain stable, which they should, iPhone customers are extremely loyal; as long as they continue to grow in their Other and Services category, there will be a lot of growth for the company.

Plus whatever device that comes out for AR will be interesting. Apple still continues to understand strategy and the technology landscape better than any other company.

You think customers are going to spend more than their rent into their smartphone?

If they didn't, they wouldn't be customers.

We’re a very long way from that. Do I think customers will continue to buy a smartphone every couple years AND also pay $20-30 per month for various services like music, tv shows, software, etc? Yep.

Well looking at the offering, the new Xs and Xs Max, are not that big of a change from the X so the desire to upgrade may be mooted. With the X Apple introduced a whole new means of authentication and screen technology that was truly a jump from previous phones. This fulfilled two very important categories for sales, the people who love new tech and the people who love being seen with the newest tech; these are not necessarily people who give one with about what it does but are in it for appearances.

If anything the best new product update this cycle has been the watch but its killer app is not yet released nor has a set in stone date (one point ekg)

im seeing more ex-Apple users being woke after using Android. They've tasted endless hours of ad free Youtube + Youtube Music + Play Music. You can download songs to YM and what can I say, youtube has music you can't find anywhere.

It's convenient that while I'm driving I can interact with different apps like maps and switch to music or play it at the same time without touching the phone. Youtube Music lets me play any song I can think of in the car via mobile data.

I'm not clear on what exactly Apple services are, but it's not enticing to Android users to sacrifice access to the biggest video music media entertainment content on the web.

To me the Google products have become a tether to the Android platform, and Google Search combined with Google Voice is something you just can't do well if you are not Google and don't have near monopoly of those service sectors. Search, Streaming Music, Youtube (theres nothing of this sort from Apple). I just don't see how Apple can catch up now since Google has been winning this game forever.

You know Apple has Apple Music for ad-free streaming, right? And it’s all integrated with Siri and everything. It’s also way more popular than Google Play Music (or whatever it’s called this month), and I trust Apple a lot more than Google.

Since we’re trading anecdotes, I know exactly no one switching to Android, and a number of people who have switched back to iOS in the last couple years. Of the few Android users in my circle of family and friends, about half are just sticking with it because of stubbornness, I think, not because they really deeply value anything it provides.

Apple completely dominated the high end smartphone market and won’t be dethroned by Google’s latest foray into having multiple weirdly named internal competing services that collect as much of your data as they can before will being renamed, merged, and ultimately killed off in a few years. No thanks.

Apple services definitely are on an upward trajectory for quality and breadth. Two years ago I thought Siri was a bit of a joke because the voice recognition and accuracy/usefulness of results was not there for me. Different now: about 4 months ago I deinstalled the Google Assistant from my iPhone and now just use Siri. Siri is still not as good but there is the privacy issue. Siri is good enough for me.

I still prefer Google for the Play Music + commercial free YouTube bundled service, and also GCP is my favorite cloud service.

Out of curiosity, what do you use Siri for that it can be good enough?

I use Siri almost exclusively for reminders (e.g., "remind me at x PM to do y" or "remind me when I get home to do z"), and even with this limited use case I often end up with baffling reminders in the future (my favorite reminder is to "make farts"--I never did remember what it was supposed to be.) Beyond reminders I've yet to find a compelling, reliable use case.

It's amazing that I would be having a random discussion and to check a fact, I would ask Google because Google Search Engine.

Google reads the answer in a natural human like way. It works well.

Countless dinner arguments arbitrated by Google via Google Voice by a simple ask. Shit saves marriages I bet.

"wtf you mean the Mongol Empire didn't last long? hold up, lets ask Google about the Crimean Khnate that still kicked ass up till the 17th century"

"i dont fucking believe you, i want a divorce"

"...ey google what year did Crimean Khanate close"

During the 16th and 17th centuries, the Crimean Khanate was an important center of the slave trade. In 1774, it was released as a nationally independent state, following the Russo-Turkish Treaty of Küçük Kaynarca, and formally annexed by the Russian Empire in 1783, becoming the Taurida Governorate

"thank you Google for saving our marriage"

Your welcome.

--goes to work the next morning, sees divorce lawyer ads--

Your marriage is very different than mine. Not just because of what you argue about, but because you think the injection of a fact provided by a robot in the cloud is what’s missing from the path to de-escalation.

wow, that is some seriously good insight.

next time I will marry Google Home

It works well with CarPlay. Siri is great at reading back messages, asking if I want to respond or re read, and decent with voice to text. I think Siri is getting better but I’m similar to you in my use cases, make timers or reminders and send messages.

The fact that non-Apple services are limited on iOS platforms also helps push people to adoption. Other companies just aren't allowed to build the same kind of experience. Good for Apple revenue, bad for us users and free market.

I don't think you understand what a "free market" is. This is a free market. A more regulated market would require open hardware platforms from hardware manufacturers and open systems from operating systems implementors. Only government intervention can force that to occur.

I'm pretty sure pretty much every sentence in your post is false.

I'm talking in context of services provided on iOS, where you cannot have equal competition. Calling that market "free" means you're deliberately ignoring the reason why free market is a good force of society - because it allows the competition between providers to drive down prices and improve on benefits to the user. If some are hamstrung when trying to provide you a service by the platform then free market isn't providing you value.

Just blindly following the holy book of capitalism without understanding why it's good will quickly lead you into corporation lead monopoly which isn't all that different from state dictated socialism.

Following the holy book of a brand, like Apple, will also lead there.

“Services provided on iOS” is not a market in the regulatory sense. “Services provided to mobile devices” is possibly a market in that sense, and there is indeed competition there.

Apple would have to have a monopoly on mobile devices for there to be a concern that the market is not free.

> Google for the Play Music + commercial free YouTube

easy to sell to a demographic that pursues perceived luxury over dollar to value ratio but you are right that Google has built an economic moat around their monopolies that unfortunately Apple or Microsoft can ever overthrow.

Google realized the value of services which Apple is way too late to the party. Kudos to them for trying. But I doubt the same number of people would still buy iPhones if Google one day decided to block Youtube.

5 years ago, I might have had to seriously consider the iPhone but Android tbh has gotten so good that Apple no longer feels all that special. Samsung Galaxy S8 and up are all luxurious beasts. Apple will also probably copy Samsung's DeX, I see this to be the next battleground-mobile desktop phones.

Use your phone and plug it into a monitor to use as desktop. Samsung is not graceful with UI and this is where I think Apple can expand.

YouTube, yes. But I think it’s highly debatable that Google Play is anything remotely close to a monopoly or has anything resembling a moat. Both Apple Music and Spotify are superior and far more popular.

Maybe if the price of an iPhone wasn't MORE than buying a decent a laptop then their sales wouldn't be stagnant.

stagnant /ˈstaɡnənt/ – showing no activity.

so they're selling 0 iphones? really?

Wiktionary says

> 1. Lacking freshness, motion, or flow; decaying through stillness.

> 2. (figuratively) Without progress or change; stale; inactive.

A stagnant pond isn't empty, the water just isn't moving or changing. Same with sales numbers here.

Stagnant is not a fair way to describe selling 46.8 million iPhones.

Stagnant does not mean anything in absolute, it describes a relative trend.

I'm amazed at how many people in this comment section have taken issue with such an innocuous word.

It's not really innocuous, it is fairly typical for a headline though. It's designed to draw you in. No doubt the use of stable instead of stagnant would produce less clicks.

Stagnant implies it's not growing, not that it's not selling.

steady, level, imply the same thing but as a positive. I think it's just a matter of perspective whether Apple needs to grow its iPhone sales.

That said they must surely decline, the number of people who are going to continue to drop 1k+ on the new iPhone every few years is going to be limited by the resale value of last years phone, a market which (anecodtally) appears is droping precipitously.

Stagnant carries a connotation of some dark, oxygen-deprived mire that suffocates fish and smells horrible. It invokes images of death and decay. Not exactly the idea I had in mind when I hear of the sales numbers.

Not exactly the idea I had in mind when I hear of the sales numbers.

The global market size for mobile phones is still growing. If Apple's sales aren't growing at least in line with the size of the market then their market share is shrinking. Selling a lot in a stable market is great. Selling a lot in a growing market is ... less great.

What market are you talking about? Apple is only in the premium phone market.

Apple is only in the premium phone market.

I must have been talking about the premium phone market then, obviously.

Which premium mobiles are getting growing volume right now then?

Is Apple even looking to ship huge volumes of new units to emerging markets? An alternative strategy would be to preserve their cachet in order to preserve their cachet and remain an aspirational product.

Once your brand starts taking on the characteristics of a Veblen good, the rules start to work a bit differently. It hasn't, thus far, been a losing strategy for Mercedes Benz to not have a direct competitor to the Honda Civic.

Negative connotation, try telling your partner their attractiveness has stagnated if it has stayed the same.

A fairer way would be to state the iPhone sales have simply not grown.

Do you think Apple should be concerned about the lack of growth?

If previous sales were about the same numbers, it's a perfectly fair way.

Impressive, amazing numbers maybe, but still stagnant, if they didn't improve over the last ones.

Stagnant has a very negative meaning attached to it. The author could have used words like "constant" (neural) or "steady" (positive). He chose to use "stagnant" and deserves to be called for it.

The use of stagnant is correct, as for negative the share price affect is immediate as it includes an expected growth.

Apple’s P/E of 20.13 does not suggest people expect significant growth. Inflation + 5% returns is a reasonable investment even without increased unit sales.

Why?

Stock price plummeted after the results, and I doubt market analysts were influenced by that specific article.

The market clearly agrees on the assessment that the sales are "stagnant", negative connotation included. Which is not surpising since the stocks are priced taking into account potential growth, rather than present results.

"Constant" or "steady" I would expect from Apple PR wording...

(And I have no beef with Apple, my brother works there and I'm a satisfied customer, for all that matters).

Apple takes a 30% commission on any revenue passing through the store, and 15% on subscriptions.

These fees are exorbitant - they are merely ringing a credit card, transmitting a few megabytes of data, and performing a basic examination of the app itself. The oligopolistic position that they hold is their main point of value.

Not entirely true. Stores are also the first point of contact for support and warranty. I know Apple resellers nearby also offer (free) courses to get acquainted with apple devices and applications.

beerlord is referring to the app store

Which still has terrible search.

It’s nice that it’s a bit prettier than it used to be. But it still has terrible search.

I wouldn’t mind the 30% if the store made it easy to find relevant apps. But it utterly fails at useful high quality discovery.

Its also ironic apple are suing Qualcom regarding licensing fees which are paid as a percentage of the hardware cost, as they believe that this means Qualcom profit from apples innovation unfairly, you could argue that Apples policy is the same with the App Store - why do they get a percentage? They add no extra value for high value transactions, surely a low fixed fee would be more aligned with apples values :)

Because most of the R&D that Qualcomm does (and as a fabless, IP is their real business) ends up on Android phones, while Apple pays the biggest slice.

Therefore, they are getting their chips from Intel.

Apple doesn't have anything to do with Qualcomm anymore, they get the package from Intel.

Qualcomm can battle Intel in court if they want. Good luck for them...

I guess I mean the principle that a percentage is taken - why should apple take more of a higher price transaction when there are no material differences in cost to them?

They control access to the customer. If you don’t think this is a valuable service, try selling stuff sometime. I sell on Amazon and they take 15% just for originating the sale, plus another 15% for FBA. If Amazon wasn’t around to charge me 30% to sell on their platform, I wouldn’t have a business.

What about the cost of maintaining iOS and all the sdks.

It's all about the #donglelife and getting everyone to pay for having an ios app.

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