Case Study

Apple’s Q1 earnings iPhone sales continue todrop.

NEW YORK: Apple Inc iPhone salesdropped to less than half of quarterly revenue for the first timein seven years, but CEO Tim Cook on Tuesday described the change assuccessfully diversifying away from a single product and forecastresults above Wall Street targets.

Apple reported earnings for fiscal third quarter Tuesday. Thecompany reported iPhone revenue of $25.99 billion. Wall Street waslooking for iPhone revenue of $26.31 billion, according toFactSet.

Apple’s iPhone revenue for the quarter was down 12%year-over-year. Apple reported iPhone revenue of $29.47 billion inrevenue on 41.3 million iPhones sold in the year-ago quarter.

CEO Tim Cook said on Apple’s earnings call that he’s “encouragedby in-store trade-in and finance programs” for the iPhone thatcustomers are taking advantage of, and that the “active installbase of iPhone reached an all-time high.” Cook did not provide aspecific number of iPhone users, however.

Apple no longer provides a breakout on iPhone unit sales, whichmeans the revenue figures are the easiest way to get a glimpse atiPhone performance.

The iPhone has struggled in recent years as consumers have shownthey’re not as interested in spending upwards of $1,000 on a newphone, as people continue to hold on to their phones for three orfour years instead of upgrading every one or two years.

Preliminary data on global smartphone sales for Q1 2019 is outfrom IDC and the firm’s iPhone estimates look grim. While theentire smartphone market saw a 6% YoY decline in shipments for thequarter, the data shows Apple shipping 30% fewer iPhones than lastyear.

This quarter’s results are a clear sign that 2019 will beanother down year for worldwide smartphone shipments. The onlyhighlight from a vendor perspective was Huawei, which made a strongstatement by growing volume and share despite market headwinds.

According to IDC’s data, Apple shipped 36.4 million iPhonesduring the March quarter marking a huge 30.2% decline compared tothe same period last year when it shipped 52.2 million of itssmartphones. In addition to difficulty in China, IDC highlightsvery slow sales in the US.

It was the U.S. market that felt the worst of the downturn in1Q19. Smartphone volumes declined 15% year over year during thequarter as replacement rates continue to slow in one of the world’slargest markets. Apple iPhone challenges contributed to theexceptionally poor 1Q19 in the U.S., but they were not alone asSamsung, LG, and other top vendors also witnessed declining volumesduring the quarter.

Apple reported results as U.S. and Chinese trade negotiatorsresumed off-and-on talks. U.S. President Donald Trump has suspendednew tariffs on a final $300 billion of Chinese imports, which wouldinclude iPhones.

Trade tension has slowed down economic growth in China, a majormarket for Apple, which effectively cut iPhone prices in Chinaearlier this year after currency exchange rates had made its phonestoo expensive for many Chinese consumers.

Apple's market share in China declined to 5.8% from 6.4%,according to market research firm Canalys, in part becausesmartphone rival Huawei Technologies Co Ltd gained market share tobecome the top handset seller in the country.

Apple said it returned more than $21 billion to shareholdersduring the fiscal third quarter, including $17 billion in sharerepurchases. It declared a dividend of 77 cents per share. -Reuters

Elaborate on 5 main issues as depicted in thearticle above.

How it happens (relate to the issue in thecase).

Also identify the place, person, activities pertainingto the case situation

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