(Bloomberg) – Executives at Apple Inc. praise the iPhone's streamlined design and breakthrough technology on Wednesday for more general topics such as installment plans, trade-in programs, and freebies.
This is the reality for the technology group based in Cupertino, California. The smartphone market is saturated and at best grows slowly. Therefore, Apple needs to find new ways to convince consumers to upgrade their iPhones and sell them digital services and accessories.
The results of the fourth fiscal quarter, reported Wednesday, suggest that the strategy starts work. While iPhone sales declined 9%, overall sales increased and the company predicted higher sales growth during the main holiday period.
Sales of services and accessories rose as records, as users of apps for their existing iPhones, connected portable devices such as AirPods and bought Apple Watches and subscribed services such as Apple Music and iCloud Storage.
The plan works only if the installed base of active Apple devices is growing steadily, led by the iPhone. This will be a challenge as consumers do not upgrade to newer phones as often as they used to. In the last three years, according to UBS, the average age of a smartphone has risen by more than three months to 19.5 months. In a survey by the investment bank, respondents said they plan to exchange their devices every 28.5 months, or nearly two and a half years.
During a teleconference with analysts on Wednesday, Apple CEO Tim Cook and Chief Financial Officer Luca Maestri described one possible solution to this upgrade issue: A new feature for the Apple Card that allows users to pay their iPhones for 24 months without interest and Manage the payout program directly from your iPhone.
What we do is make it easier for people to get involved in this kind of monthly finance, "Cook said. "We recognize that there are many users who want such a recurring payment to receive new products."
The CEO bragged about the iPhone's latest camera, but the conversation soon turned to more prosaic topics. Katy Huberty, Morgan Stanley analyst, asked if it was realistic that the iPhone business would grow again in 2020. Cook declined to make a long-term forecast, but said he was encouraged by the initial reaction to the new phones.
Asked about China, Cook said the new iPhone prices, a monthly payment program and exchange offers helped improve the country's performance.
Other analysts asked if they would offer Apple's new TV + streaming service for free for a year with a new one Purchasing devices was the beginning of a broader bundling of hardware and services. Cook said he wanted to quickly expand the TV + audience and saw this as a way to do it. He would not rule out providing another free hardware shopping service in the future.
Maestri said Apple will press ahead with its swap program, allowing users to exchange an old iPhone for credit for a new model. The sales volume under this program is five times higher than in the fourth quarter of last year.
Cook also stated that wearables continue to hold the Apple ecosystem strong. He said three-quarters of Apple Watch purchases in the fourth quarter of the fiscal year came from users who had never bought this device before. The CEO would not say how those sales were driven by existing iPhone owners, but the underlying message was clear: wearables like the Apple Watch and AirPods are tying people to their iPhones and helping Apple earn more money on a product for which there are still problems growing.
To contact the editors responsible for this story: Tom Giles at [email protected], Alistair Barr, Andrew Pollack
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