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iPhone ASP decline shows Apple's Services strategy at work

Gregg Keizer | July 28, 2016
Success of iPhone SE impacts revenue, but Apple plans on making it up on the ecosystem-services side

"That's always been the plan," contended Gottheil, of the SE strategy.

Neither Cook or CFO Luca Maestri explicitly linked the SE to the expectation of larger services revenue, but they repeatedly turned to the phrase "iOS ecosystem" as a kind of shorthand or code.

"We believe that the iPhone SE is doing exactly what it was intended, which is we are seeing a higher rate of new-to-iPhone customers, which is obviously very important to us because we bring new people into the iOS ecosystem," said Maestri yesterday during the earnings call's Q&A.

For several quarters now, Cook has been touting the revenue success of Apple's services, an attempt, analysts have waged, to redirect the narrative from the conversations about slumping iPhone sales.

The drumbeat continued yesterday, as Cook referred to the nearly $6 billion Services raked in during the June quarter, an increase of 19% from the same period in 2015. "Most of our ... Services performance during the quarter was fueled by our active installed base of devices," Cook said.

"They're never going to be a low price device [seller]," said Gottheil, of the SE and Apple's underlying strategic reasons for the device. But Apple is edging prices down, forced or not, to fuel the recurring revenue stream of services. But slow is the watchword, added Gottheil: "They're doing it like someone getting into a cold lake on a very hot day."

iphone asp 

The new smaller -- and less expensive -- iPhone SE contributed to a slide in Apple's APS (average selling price) for the June quarter. But the company figures to make up in services revenue what it missed on the hardware sale.

 

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