At its first earnings call of the year today, the company did damage control addressing the $9 billion shortfall in revenue that occurred in the last quarter – sticking to the script and avoiding mention of a few key things that consumers actually want to know more about like the AirPods 2 or Apple streaming service.
In the company's defense, Apple announced just after New Year’s Day that its revenue in the last quarter of 2018 would be lower than expected, but failing to address the bigger challenges and upcoming milestones in today's call was a major misstep.
The first glaring omission is the FaceTime bug revealed yesterday that made it easy for anyone to eavesdrop on whoever they called and peek at them through their front-facing camera. Apple crudely blocked the vulnerability by temporarily shuttering Group FaceTime entirely, promising a proper fix would come later this week – but the company might have been made aware of the issue over a week ago.
Apple didn’t address this during the earnings call. Instead, CEO Tim Cook stuck to a script of impressive numbers, countering the 15% drop in iPhone sales with higher revenues in all other product families (everything but phones grew 19%).
The case of Apple's missing products
Uncomfortable security vulnerabilities aside, Apple also didn’t say anything about a couple other long-awaited products: the AirPods 2 wireless headphones and AirPower wireless charging mats.
Recent rumors have pegged the second-gen AirPods for release in the first half of 2019, and they may even come with some sort of biometric monitoring capability – which is in line with the company’s expansion into medical monitoring.
Apple has kept very quiet about its AirPower wireless charging mats, a concept the company introduced alongside the iPhone X and hasn’t set a release window for after missing its pledge to release in 2018. A tip earlier this month, supposedly coming from within Apple’s supply chain, claimed the product has entered mass-production. But we still haven’t heard anything official.
What about Apple's shiny new streaming service? CEO Tim Cook chose not to get into specifics. “We will participate in original content world,” he said, “[But] we're not ready to extend that conversation today … we'll share more on that later.”
Disappointing, but expected
Considering Apple rarely (if ever) announces products outside of their carefully-scheduled events, these omissions aren’t surprising. Cook spent time shoring up public confidence in the company’s product lines, which makes sense, given Apple stock dropped 9% after its iPhone shortfall announcement early in January.
And realistically, it’s valuable to get any numbers whatsoever from Apple. The company had several positive announcements it cherry-picked for this call, including hitting 50 million paid Apple Music subscribers; last we heard a year ago, that number was at 36 million, per The Washington Post.
So it was unlikely we'd hear about the AirPods 2 and AirPower mats, though it's interesting to note that they may avoid the obstacles Apple ran into with iPhone sales this past quarter. On the call, Cook noted that a trifecta of issues primarily lowered smartphone revenue: fewer subsidies, more low-cost battery replacements extending device lifespans and currency fluctuation.
In the Q&A session, Cook answered challenges that the iPhone XS, iPhone XS Max and iPhone XR were perhaps overpriced; the executive noted that carriers and others were offering fewer subsidies, pushing the pricey flagship phones out of reach of some consumers.
In response, Apple is considering adjusting its smartphone prices in other markets, per Reuters (via The Verge): in today's earnings call, Cook described a 33% depreciation in the lira, Turkey's currency, which resulted in a $700 million drop in revenue from the country compared to this point last year. Preserving iPhone sales is crucial, as that product category raked in $51.2 billion in revenue for the company in Q4 2018, or roughly 61.6% of the company’s earnings, according to an Apple fact sheet.
Even if they come out this year, the AirPods 2 and AirPower mats won’t singlehandedly make up that deficit; heck, their category (Wearables, Home and Accessories) revenue only modestly increased from $5.4 billion in Q4 2017 to $7.3 billion in Q4 2018, largely driven by multi-generational Apple Watch sales.
In any case, Apple’s priorities are clear: Company executives spent much more time talking about the growth of services, which raked in $10.9 billion last quarter, up from $9.1 billion during the same period in 2017. Apple’s services reached 360 million subscribers all over the world, over 100 million gained from the same point a year ago, which synchronizes with all the payment methods it’s expanding (including, obviously, Apple Pay).
Who knows when we’ll see those phantom accessories appear, but given the services focus on the earnings call, we know what we’ll likely see first. Especially since rumors emerged today whisper about a mid-April launch date for Apple’s content streaming service…
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