iPhone revenue tanked 15% last quarter, plans to cut prices in response

Apple has recorded its second best quarter on record despite iPhone sales falling off a cliff. Apple iPhone revenue dropped 15 percent when compared with same period last year; however, the company still racked up an astonishing US$51 billion in iPhone sales in the 90 day period. Apple’s total revenue for the for the quarter was US$84.3 billion which represents a decline of just 5 percent from the year-ago quarter. This was in line with its recent, and very rare, earnings warning issued to investors after initially projecting revenue of between US$89-93 billion.

Apple was able to offset the decline iPhone revenue through growth experienced in other areas of its business. Its booming services division pulled in US$10.9 billion (up 19 percent), its Mac and Wearables division was up 9 percent and its Home and Accessories division was up 33 percent. The iPad was also up 17 percent following the introduction of its new iPad Pro models and on the back of the introduction of a cheaper 9.7-inch iPad.

The biggest concern for Apple is the alarming drop of 26 percent in revenue from the Chinese market, which has been a significant factor in driving Apple’s gravy train over the past few years. The trade war between the US and China was cited as a reason by Apple CEO Tim Cook, but undoubtedly the rise of the Chinese smartphone makers is also starting to take a bite out of Apple. 

Most interestingly, perhaps, Apple is actually planning to drop the prices of its iPhones in historically strong markets, but which currently have weaker currencies. In the past, Apple has always adjusted its local pricing to match the margins it makes in the US. This is the first time that Apple is looking adjust its pricing to suit the local market independent of the relative strength of the US dollar. It remains to be seen how much the prices will come down and whether this delivers the bounce in sales Apple expects.