Apple Accentuates The Positive In Q1 Report; Group FaceTime Goes Dark

Apple CEO Tim Cook warned early this month that its first-quarter results would be worse than anticipated, and yesterday he laid it all out on the display screen: iPhone revenue was down 15%, and the device had its worst holiday-season performance in more than a decade. On the bright side, he emphasized, revenue from all other products and services grew 19%. 

“Cook chalked up the iPhone sales decline to a mix of factors, including foreign exchange rates, a popular battery replacement program and the decrease in carrier smartphone subsidies,” Seth Fiegerman writes for CNN Business. “Cook also noted ‘more severe’ macroeconomic conditions in China, once one of Apple’s most promising new markets, reiterating a point made in the stark warning to investors this month.” 



The stock market liked what it saw, abetted no doubt by Cook’s gloomy guidance on Jan. 2 and upbeat resolve yesterday.

“Apple’s stock leaped 6% in after-market trades late Tuesday after the tech giant delivered iPhone sales that -- while terrible by Apple’s usual standards -- nevertheless beat expectations,” Nicolas Vega  writes for the New York Post.  

“The CEO, who is usually reluctant to discuss future products, said the company has a strong pipeline of products and services with new announcements slated for later this year,” Tripp Mickle writes for the Wall Street Journal

“Apple innovates like no other company in the world and we are not taking our foot off the gas,” Cook declared.

“‘It’s not in our DNA to just stand around and wait for macroeconomic conditions to improve,’ Cook also said, as he began outlining some of Apple’s strategy and tactics ‘to improve our results,’” Aaron Pressman writes for Fortune

Indeed, at the end of the analysts’ call, which has been transcribed by Seeking Alpha, the company played Lauren Daigle’s song “Look Up Child,” Pressman tell us, pointing out “it was likely no coincidence” that the event ended “with a strong reminder about the power of resiliency and optimism.”

Shira Ovide, writing for Bloomberg Opinion, isn’t quite buying it. 

“Apple wants investors to care about a 19% increase in what it calls its ‘services’ business -- a grab bag that includes the company’s share of revenue from iPhone app sales, Apple’s device warranty program, payouts Apple collects from Google, Apple Music subscriptions and more. It wants investors to focus on the 33% growth in add-on products like the Apple Watch, AirPods headphones and the HomePod voice-activate speakers,” she observes.

“The problem is nothing Apple does can fill the iPhone-sized hole in its revenue. Apple’s iPhone revenue fell $9.1 billion in the first quarter from a year earlier. Gains from all of the company’s other products rose by a cumulative $5.1 billion,” she goes on to point out.

Indeed, iPhones now represent more than two-thirds of the company’s sales. 

“Customers have been reluctant to pay up for flagship iPhones that have risen in starting price by more than 50% in recent years to nearly $1,000. Demand for the iPhone XR, a lower-priced option released in October, has fallen short of the company’s expectations, forcing it to slash production,” the WSJ’s Mickle remind us.

Like many a parent looking at a 10th grader’s report card, Apple also blamed its poor performance in China on video games -- but in this case, it was the government’s temporary ban on approving new titles last year.

“The ban came seemingly out of nowhere and has been strictly enforced. Back in March, China swiftly stopped approving new video game releases, meaning titles in development could not make it to the public’s hands. Then in August, Beijing officially cemented the ban just days after President Xi Jinping gave a speech about myopia and authorities recommended curbing video games as one of the solutions. The ban was strictly enforced until the last days of December, when China approved 80 new video game titles, with more trickling in this month,” reports Shannon Liao for The Verge.

Adding to Cook & Co.’s woes yesterday were headlines such as this one in the New York Times: “Apple Was Slow To Act On FaceTime Bug That Allows Spying on iPhones.” 

“On Jan. 19, Grant Thompson, a 14-year-old in Arizona, made an unexpected discovery: Using FaceTime, Apple’s video chatting software, he could eavesdrop on his friend’s phone before his friend had even answered the call,” Nicole Perlroth explains. He told his mother, an attorney, and Michele Thompson then spent more than a week trying to get the attention of someone at Apple about the “major security flaw.”

Yesterday, news about the software bug went viral on Twitter, Eli Blumenthal reports for USA Today.

“Apple finally disabled Group FaceTime late Monday night. The company said in a statement … that it is ‘aware of this issue and we have identified a fix that will be released in a software update later this week,’” Blumenthal writes.

That’s obviously not the kind of innovation Cook was touting earlier.

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