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Investors bristle as Apple's iPhone data goes the way of its headphone jacks

By Stephen Nellis

 

FILE PHOTO: Customers walk past an Apple logo inside of an Apple store at Grand Central Station in New York, U.S., August 1, 2018. REUTERS/Lucas Jackson/File Photo

 

(Reuters) - First Apple Inc <AAPL.O> took away the headphone jack on its iPhones. Then it took away the home button.

 

And now, it has taken away a closely watched performance metric that it has disclosed to investors for 20 years.

 

The Cupertino, California-based company on Thursday said that it will stop reporting unit sales data for its iPhone, iPad and Mac computer products, the latter of which it has given out since 1998. Analysts and investors use the figures to calculate the average selling price of Apple's devices and gauge the health of the company.

 

Apple said the data is less relevant to the strength of its business as customers bundle products, such as an iPhone paired with its wireless AirPods headphones, along with paid subscription services like Apple Music to listen to songs and iCloud storage for photos.

 

Analysts were skeptical.

 

"Companies typically stop reporting metrics when the metrics are about to turn. This is not a good look for Apple," said analyst Walter Piecyk from BTIG Research.

 

The move cost Apple dearly, helping to send shares down about 7 percent in after-hours trading. They later settled at $207.81, about 6.5 percent below their previous close.

 

"Apple is a complex company with lot of moving parts," said analyst Ivan Fienseth from Tigress "I think they need to give more transparency to their shareholders and not less."

 

But now, Apple will give cost-of-sales data for both its total product businesses and its total services business, which will let investors evaluate a gross margin for both. In the past, Apple gave only an overall gross margin figure for the company.

 

The new numbers are important for two reasons. First, they will show just how lucrative Apple's hardware business really is. But more importantly, for the first time they give margin information on Apple's services business, which reached $10 billion in its fiscal fourth quarter, up 17 percent.

 

Many of Apple's fastest-growing businesses are subscription based, like its $9.99 a month Apple Music service. And investors tend to value subscription business through a combination of their revenue growth rate and margins - information that Apple investors will now have, said Tien Tzuo, chief executive of Zuora Inc <ZUO.N>, a company that helps subscription businesses track their finances.

 

But one problem Apple investors will face is not knowing what the margin mix is within the services business. Some parts of it, like iCloud storage, are likely lucrative, but others, like Apple Music, are probably less so because Apple has to pay music licenses costs and competes with rival Spotify Technology SA <SPOT.N>.

 

"You would value the music business with one (revenue) multiple closer to Spotify, and the cloud business with a (subscription software) multiple," said Tzuo. "Having some sense of which business is growing faster would be nice."

 

(Reporting by Stephen Nellis in San Francisco; Editing by Lisa Shumaker)

 

-- © Copyright Reuters 2018-11-02

[quandow]

And fanboys gave a united, "Yay, we'll buy anything with an apple logo. Even bad news. Why? Well, cuz it's APPLE!"

[milwaukeeboy]

I was never an "Apple Guy", and these changes assure that I never will be one.

[Nowisee]

  

There's a reason they have a market cap of 1.1T.   

 

 
 

[Grouse]

2 hours ago, Nowisee said:

  

There's a reason they have a market cap of 1.1T.   

 

 
 

Apple win because they put quality at #1, style at #1 and performance at #1.

 

In our family we have 3 apoplectic products each on average

 

I bought my first Macintosh in 1986 and have never regretted it.

 

Hewlett Packard lost their soul trying to compete with low cost PCs. (Their 12c calculator is still the best though!)

[watcharacters]

9 hours ago, quandow said:

And fanboys gave a united, "Yay, we'll buy anything with an apple logo. Even bad news. Why? Well, cuz it's APPLE!"

 

And the haters collectively shout "ya see, told ya so.".

[wwest5829]

38 minutes ago, watcharacters said:

 

And the haters collectively shout "ya see, told ya so.".

Oh, Please let them talk Apple down. I have a buy order when it gets to my target price. Fool that I am, I only bought 4 shares at $150.00 a little while ago. My eldest Son has never forgiven me for selling the stock when they fired Steve Jobs decades ago.

[canuckamuck]

Apple fans are masochists, they love it when Apple takes useful things away. 

[atyclb]

i happily own apple products as well as windows but i hope the "right to repair" bills start passing soon.

 

 

 

[janclaes47]

1 hour ago, wwest5829 said:

Fool that I am, I only bought 4 shares at $150.00 a little while ago.

Wow, you are one of the BIG guys in investing

 

1 hour ago, wwest5829 said:

I have a buy order when it gets to my target price.

You think you will make it 6 this time?

[janclaes47]

[CALSinCM]

Apples hubris and greed will be it's downfall.

[watcharacters]

11 hours ago, janclaes47 said:

Wow, you are one of the BIG guys in investing

 

You think you will make it 6 this time?

 

Well, janclaes47,    at least I can say I've never seen wwest cry about how poor he is as do many posters on this forum

 

 

13 hours ago, wwest5829 said:

Oh, Please let them talk Apple down. I have a buy order when it gets to my target price. Fool that I am, I only bought 4 shares at $150.00 a little while ago. My eldest Son has never forgiven me for selling the stock when they fired Steve Jobs decades ago.

 

Every little bit helps.   After all the splits, I can kind of imagine why your son would be a little perturbed, but it's your money.