Clouds are gathering over Apple. In April, the tech giant reported its first drop in sales since 2003. And while third-quarter earnings – released on 26 July – beat expectations, they were hardly stellar. Both revenue and profit were down on the same period last year.
Hardware sales are falling, with iPhones, iPads and Macs showing declines of between 9% and 15%. The Apple Watch hasn’t taken the market by storm. And China – where growth often makes up for contractions elsewhere – has come off the boil. It was the worst-performing region, with revenue down by 33%. The only market to show grow was Japan.
The one saving grace for the company is “services” – which includes iTunes, apps, Apple TV and Apple Pay – where revenue growth is up by 19% to just under $6bn. “In iTunes,” says The Washington Post, “Apple has an amazing golden goose.” Apple TV is also likely tobe an increasing source of revenue in the future.
Chief executive Tim Cook remains upbeat, claiming there were “encouraging signs”. Investors took heart from the better-than-expected results, with shares shooting up by more than 6%. And analysts remain bullish: out of 51 polled by the Financial Times, just one rated Apple a “sell”.
But whether it’s a long-term buy depends on how well it can make the transition from selling hardware to services.