Apple’s attempt to draw attention away from iPhone sales leaves Wall Street unimpressed

“Sometimes, giving investors extra insight into a promising new line of business works wonders with Wall Street. But sometimes it does not — as Apple has found to its cost this week,” Richard Waters writes for The Financial Times.

“The company’s attempt to draw attention to its services business — which, at $6bn in the latest quarter, produced more in revenue than Amazon Web Services for the first nine months of last year — did nothing to prevent a near-7 per cent slump in the share price on Wednesday,” Waters writes. “Apple… dropped its news unexpectedly on a wary investor base. It was hardly surprising that Wall Street chose to see the extra, unexpected disclosure as an attempt to distract attention from what is set to become the first contraction in iPhone sales.”

“The data presentation also seemed halfhearted. Apple executives sought to compare their services business with that of a sizeable, freestanding internet company. But they made little attempt to explain a grab bag of businesses that make up what the company calls its ‘installed base related revenue’ (IBRR). These range from the net revenue on App Store sales to supplying replacement iPhone screens and licensing its brand to accessory makers. But Apple declined to lay out a bigger vision for how the services business was likely to evolve,” Waters writes. “In the absence of a clear explanation, investors have therefore chosen to view Apple’s service business [as]… a potentially profitable supplement to the core business, but not something likely to grow into a major revenue source that justifies a premium valuation.”

Read more in the full article here.

MacDailyNews Take: “Investors” can choose to view whatever their little hearts desire, but the fact remains: Currently Apple’s fiscal year services revenue ($16.8 billion) is just about equal to the entire value of HP Inc. and it is growing.

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  1. Let the Financial Times wonder; at an annualised growth rate of around 23%, Services revenue will stand north of $89 billion by 2020; analysts and financial rag procrastinators will hopefully have awoken from their slumber by then (most of them will have been replaced by AI machines that espouse more intelligent rhetoric, hopefully!).

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