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Growth potential is phenomenal in India, says Apple's Tim Cook during the earnings call

Apple today announced the financial results for its fiscal 2019 second quarter ending March 30, 2019, and posted quarterly revenue of $58 billion, a decline of 5 per cent from the year-ago quarter

twitter-logo Nidhi Singal        Last Updated: May 1, 2019  | 15:28 IST
Growth potential is phenomenal in India, says Apple's Tim Cook during the earnings call
Apple reported a decline in sales of iPhones as well as Macs during the quarter under review.

Apple today announced the financial results for its fiscal 2019 second quarter ending March 30, 2019, and posted quarterly revenue of $58 billion, a decline of 5 per cent from the year-ago quarter. There has been a decline in the sales of the iPhone as well as Macs. However, the company has registered a record growth for iPad with revenue up 22 per cent a year ago. Even the services revenue reached $11.5 billion.

Apple says that the company grew year-on-year in developed markets and has posted record March quarter results in major markets including the United States, Canada, the United Kingdom and Japan. However, it did experience a revenue decline in emerging markets. Yet, India continues to be a key focus market for Apple. And just like in China, the company had taken some pricing actions for the Indian market as well. Apple CEO Tim Cook says, "We have made some adjustments in India and we've seen preliminarily some better results there. Everything that we do, does advise everything we do in the future so we try to learn the best we can and fold that into our thinking."

Just recently, there were reports about Apple slowly yet steadily ramping up its iPhone manufacturing in India. The company has started manufacturing iPhone 7 at the Wistron's facility in Bengaluru. And according to some reports the iPhone X local production would start in July this year. Sources close to this matter claims that Apple is also keen to manufacture iPhone XS and iPhone XS Max in the country. Currently, there is a 20 per cent duty levied on smartphones imported in India.

Commenting on the importance of the Indian market, Cook said, "I think India is a very important market in the long-term. It's a challenging market in the short-term. But we're learning a lot. We have started manufacturing there, which is very important to be able to serve the market in a reasonable way. And we're growing that capability there. And we would like to place retail stores there. And we're working with the government to seek approval to do that. And so, we plan on going in there with sort of all of our might. We've opened a developer, accelerator there, which we're very happy with some of the things coming out of there. It's a long-term play. It's not something that's going to be on overnight huge business. But I think the growth potential is phenomenal."

Although India is primarily feature phones and Android dominated, Cook sees this as a great opportunity for growth. He adds, "It doesn't bother me that it's primarily Android business at the moment because that just means there's a lot of opportunity there."

During the earnings call, Cook even highlighted the importance of the trade-in program stating that was introduced in some selected countries. "Many, many people do want to trade-in their current phone. It does -- from a customer user point of view the trade-in looks like a subsidy, and so it is a way to offset the device cost itself. And many people in literally every market that we've tried this in, there is a reasonable number of people that want to take and pay for something on instalments instead of all at once. And so, it's a little different in each market in terms of what the elasticity is, but you can bet that we're learning quickly on all of those."

In March this year, Apple had announced an array of products across hardware and services. The company announced upgrades for AirPods, iPad mini, iPad Air and even Macs. On the Services front, it has announced Apple News+, Apple Arcade, Apple Card and its own streaming service that would compete against the likes of Netflix. Interestingly, Apple had the best quarter for the App Store, Apple Music cloud services and App Store search ad business along with AppleCare and Apple Pay. Even Apple Pay transaction volume more than doubled year-over-year and the company is on track to reach 10 billion transactions this calendar year. Subscriptions proved to be a powerful driver for Apple's services business as the company reached a new high of over 390 million paid subscriptions at the end of March, an increase of 30 million in the last quarter alone.

"It was our best quarter ever for services with revenue reaching $11.5 billion", said Cook.

On the hardware front, Apple had a blockbuster quarter for iPad with revenue up 22 per cent from a year ago, which was the highest iPad revenue growth rate in six years. Even wearables registered near 50 per cent growth. Apple claims that in just four years, its wearables business is now about the size of a 'Fortune 200' company.

The guidance provided by Apple for its fiscal 2019 third quarter states revenue to be between $52.5 billion and $54.5 billion.

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