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Apple entered the iPhone era but still can’t get rid of the iPhone

Although Apple’s third-quarter service sales reached a record $11.5 billion. Wearables such as Apple Watch also performed strongly. However, they still can’t completely get rid of the dependence on the iPhone, and are still closely connected with the iPhone.

According to foreign media reports, Apple released today’s fiscal year 2019 fiscal third quarter earnings report. The revenue from the iPhone is less than half of the quarter’s revenue. This is the first time the iPhone revenue has been less than half of the quarter’s revenue since 2012. It also shows that Apple’s development cycle has surpassed its flagship product iPhone.

Although Apple’s third-quarter service sales reached a record $11.5 billion, wearables such as Apple Watch also performed strongly. However, they still can’t completely get rid of the dependence on the iPhone, and still closely connected with the iPhone.

All of the company’s main services, as well as wearables including Apple Watch and AirPods, are needed or best used with the iPhone. Services such as Apple App Store, Apple Pay, Apple News+, and upcoming tours are still primarily used on the iPhone.

Apple said that despite third-quarter revenue growth compared to the same period last year, the two independent product lines of the iPhone, which are not related to the iPhone, add up to only 20% of total revenue. In the next few years, Apple will also develop a headset with mixed reality capabilities. However, it is likely to continue to rely on the iPhone.

Diversification

In order to make products other than the iPhone a success, Apple will need to continue to sell the iPhone, or make its music, digital payments, video and other services available and good enough for competitors’ mobile devices to use Apple services.

The financial report showed that smartphone revenues in the quarter fell 12% year-on-year. In contrast, Apple executives said in a conference call that the company boosted iPhone sales this year through product discounts, offering consumers more installment options and trade-in programs.

Luca Maestri, the company’s chief financial officer, said the stimulus plan “shows a huge momentum of development”. He also added that the iPhone’s trade-in rate has reached five times that of a year ago. Apple CEO Tim Cook said the company has seen “strong customer feedback.”

The optimism of executives also extends to Apple’s forecast for the next quarter of the new iPhone. Apple expects revenue to reach $61 billion to $64 billion in the next quarter. This is higher than analysts’ average estimate of $61 billion.

Bloomberg analyst John Butler wrote after the earnings report: “Apple’s strong third-quarter sales of non-iPhone products are encouraging. It highlights the company’s diversification and reduction of the iPhone. Progress has been made in terms of reliance.” “With the strong sales of Apple Watches, revenues for wearables, homes and accessories have increased by 48%.”

Opinion from the Company’s CEO

Mr Tim Cook said that he still has confidence in Apple music, video and other services. He said that by 2020, the annual revenue of Apple’s music, video and other services is expected to reach 50 billion US dollars, which is the goal set by the company in 2016.

Cook was also asked if Apple plans to reduce the dependence of its services on its own hardware. However, he did not answer questions positively. He mentioned the availability of services on Apple TV and Apple music on the Android mobile operating system. Considering the upcoming technological advances, Apple may eventually make its own Apple Watch and AirPods headset independent of the iPhone, or more compatible with other hardware manufacturers’ smartphones. However, the company does not seem to intend to extend any new services to other platforms.

Although Apple has a large user base, its new service usually only supports iPhones sold in the past three years. This means that if a customer wants to buy the latest service, they need to continue to purchase equipment from Apple every few years.

Dan Ives, an analyst at Wedbush Securities, said: “The iPhone is still Apple’s core gene. The march to services and wearables suggests that the company may undergo a transformation. Think of this quarter as the basis for achieving this goal.”

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