Apple Inc to focus on mobile apps as iPhone sales dropped 15 percent

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Computing giant Apple Inc announced second quarter profits down 27 percent as iPhone sales dropped 15 percent compared with the same period last year. It has announced a focus on mobile apps and online services.
Apple Inc sold 40.4 million iPhones in the last quarter, the California based company announced on Tuesday after US stock markets had closed. That is 15 percent down from the year-ago quarter but slightly more than the 40.02 million analysts, on average, had expected, according to research firm FactSet StreetAccount.

The drop in iPhone sales contributed to a fall in revenue for a second-straight quarter after a 13-year run of growth for the world's largest information technology company by revenue and by total assets. Sales growth in China has declined as the company faces a number of aggressive competitors, such as Huawei. Apple's overall revenue fell 15 percent to $42.4 billion (38.5 billion euros) for the three months ending June 30.

But as the sales decline was less than expected, shares rose 7 percent after closing at $96.63 as the company gave an upbeat revenue outlook for the current quarter. Apple shares had fallen 22 percent over the past year before Tuesday's results were announced.

Mobile apps and online services
A 19 percent increase in sales for the company segment that includes iTunes, Apple Music, the App Store and services such as Apple Pay and iCloud storage brought in nearly $6 billion in sales for the last quarter. That represents more than the total for iPad and Mac sales.
The business model allows Apple to keep 30 percent of sales from its online App Store passing on 70 percent to the app developer. It also collects fees on individual purchases of extra iCloud storage and from banks for credit card users using Apple Pay. According to estimates from Credit Suisse, there are 600 million owners of Apple devices and they each spend an average of $68 on apps, music and other services each year.

"We expect this business will continue to grow" even if Apple sells fewer devices in a particular quarter, Chief Financial Officer Luca Maestri said. "It's becoming a very meaningful portion of what we do." However some of the services, such as iTunes, are being challenged by streaming apps such as Spotify.

The company sold fewer Apple Watches in the last quarter. Sales come under the "Other Products" section of the report where revenue fell 16 percent on the quarter.

While the company sold fewer iPad units, Mac computers and Apple Watches in the last quarter, iPad revenue increased due to the introduction of higher-priced iPad Pro models.