Analysis: Apple’s results get thumbs up

Apple’s iPhone sales are still falling but Tim Cook is taking an upbeat view

Apple's iPhone sales may have fallen for the second quarter in a row, but chief executive Tim Cook remained reasonably upbeat.

The flagship smartphone sold more than 40 million units in the third quarter of Apple’s fiscal year. Although it was a decline of 15 per cent, analysts had been predicting a drop in sales of up to 20 per cent, meaning Mr Cook and his team came out of the earnings release with a position that looked a bit more solid.

The firm's revenue was right in the target range Apple had issued in April, and although the number of iPads being sold was down, the amount of revenue the tablet generated in the last quarter was higher thanks to the more expensive iPad Pro models. Second-quarter revenue fell almost 15 per cent to $42.36 billion (€38.55 billion). Net profit fell 27 per cent to $7.8 billion (€7.10 billion) in the quarter.

Apple’s business in China was better than the figures implied, Mr Cook told an earnings call, with Apple facing a tough comparative period in 2015, when sales rose more than 112 per cent. Its iPhone install base there has grown around 34 per cent in the last year, and in the first nine months of the year, revenue from the greater China area was in the region of $40 billion.

READ MORE

Apple has just opened its 41st retail store in the greater China area, and it doesn’t plan on giving up without a fight.

It can’t afford to. China has been a significant market for the company, racking up some serious growth figures, and although things have started to slow down a bit, it still presents a good opportunity. Markets in the US and Western Europe are saturated, so Apple has been turning to China and trying to crack India instead.

But it was the services business that came in for some heavy praise. Revenue in this part of the business, which includes the App Store, Apple Pay, iCloud storage and Apple Music, is up 19 per cent to almost $6 billion, a long way off the revenue generated by the iPhone, but nothing to be sniffed at either.

Mr Cook was certainly painting a rosy picture, saying the it would be the size of a Fortune 100 company by 2017.

Analysts are already looking ahead to the impact that the iPhone 7 - or whatever it ends up being when Apple holds its now-expected phone launch in September - may have on the company, in the hole that it will persuade some of the handset holdouts to start spending on hardware again.

How successful it will be soon become evident.