Apple Boosts iPhone Prices to Compensate For Lower Sales

Coping with a slowdown
Apple's California campus (Photo: Reuters)

Beset by waning consumer demand for its cash cow, the iPhone, Apple, Inc has resorted to the time-tested strategy of boosting the prices of its phones to compensate for stubborn consumer disinterest.

Apple reported 46.89 million iPhones sold during its fiscal 2018 fourth quarter as against 47.5 million year-on-year, or a 1.3 percent drop. As of Apple's third quarter ending June, iPhones sales were responsible for 56.2 percent of Apple's total revenues.

Apple revealed figures confirming iPhone unit sales were practically flat year-over-year in its earnings report for its fiscal fourth over the weekend. This disappointing piece of news extended the unwelcome trend of only modest growth Apple has seen this entire year.

Apple has increased the price of the iPhone to compensate for the slackening demand. As expected, the net effect of this price hike was to boost the iPhones average selling price (ASP) and overall profit - but now unit sales.

Apple reported an ASP of $793, a 28 percent year-over-year boost. The ASP was well above analyst projections of $750.78.

Analysts said an ASP that high might indicate strong initial sales for Apple's highest-priced smartphone models to date: the iPhone XS (starting at $999) and iPhone XS Max (starting at $1,099). Both went on sale about a week before the end of Apple's September quarter. It also indicates buyer are starting to accept the steeper iPhone prices.

But in an unexpected and controversial move, Apple last week also decided it will no longer report detailed iPhone figures such as unit sales and total sales. This decision provoked speculation among some analysts that Apple has something big to hide.

The fourth quarter earnings report also revealed:

* Earnings: $2.91 per share vs. $2.78 (Refinitiv forecast by consensus estimates)

* Revenue: $62.9 billion vs. $61.57 billion (Refinitiv forecast by consensus estimates)

* iPhone sales: 46.89 million vs. 47.5 million (forecast by FactSet and StreetAccount estimates)

* iPhone average selling price (ASP): $793 vs. $750.78 (forecast by FactSet and StreetAccount estimates)

Apple posted fourth quarter revenues of $62.9 billion, an increase of 20 percent from the year-ago quarter. International sales contributed 61 percent of revenue.

Services revenue reached an all-time high of $10 billion. It grew from $7.9 billion in the fourth quarter of fiscal 2017 to $10 billion in the fourth quarter of fiscal 2018, an increase of 27 percent.

Apple CEO Tim Cook said the company is thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018. He said this fiscal year was one where Apple shipped its two billionth iOS device; celebrated the 10th anniversary of the App Store and achieved the strongest revenue and earnings in Apple's history.

Cook added that Apple concluded a record year with its best September quarter ever, growing double digits in every geographic segment. Apple set September quarter revenue records for iPhone and Wearables and all-time quarterly records for Services and Mac.

It generated $19.5 billion in operating cash flow and returned over $23 billion to shareholders in dividends and share repurchases in the September quarter. This brought total capital returned in fiscal 2018 to almost $90 billion. 

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