Apple posts flat growth in India for Q4 2018
Apple faces pressure in emerging markets due to weakening currencies
Apple CEO Tim Cook told analysts and investors that the company’s growth in India remained flat in the quarter ended September. “The emerging markets that we’re seeing pressure in are markets like Turkey, India, Brazil, Russia. These are markets where currencies have weakened over the recent period. In some cases, that resulted in us raising prices and those markets are not growing the way we would like to see. To give you a perspective in of some detail, our business in India in Q4 was flat. Obviously, we would like to see that be a huge growth,” he said.
According the latest filings with the Ministry of Corporate Affairs (Government of India), Apple has recorded a 140 per cent surge in net profits at Rs 896 crore for the period from April 2017 to March 2018. However the company has posted a 12 per cent increase in its total income in the country during the same period at Rs. 13,098 crores.
During Q2 2018 earnings call, Apple CEO Tim Cook had stated that India is the third largest smartphone market in the world and there are huge opportunities for Apple in India, while accepting that they have an extremely low overall share in that market. Last year Wistron started producing Apple’s iPhone SE in Bangalore and did trial runs for a few other models. Wistron is investing Rs 682 crore on expanding operations in the country.
“There are import duties in some or most of the product categories that we’re in. In some cases, they compound, and this is an area that we’re giving lots of feedback on. We do manufacture some of the entry iPhones in India, and that project has gone well. I am a big believer in India. I am very bullish on the country and the people and our ability to do well there,” said Tim Cook. “We’ve had really great productive discussions with the Indian government, and I fully expect that at some point, they will agree to allow us to bring our stores into the country. We’ve been in discussions with them, and the discussions are going quite well.”
Marketshare
According to Counterpoint, Apple India’s revenue from smartphones was down 30 per cent in the quarter ended September, as shipments of iPhones halved in comparison to the same period last year. The company’s market share in the country dropped from 2.2 per cent in Q3 2017 to 1 per cent for the quarter ended September 2018.
“The currency weakness has been part of our challenge there, as you can tell from just looking at the currency trends, but I view these as speed bumps along a very long journey, though. And the long term I think is very, very strong there. There’s a huge number of people that will move into the middle class. The government has really focused on reform in a major way and made some very bold moves. And I applaud them for doing that and I can’t wait for the future there,” said Tim Cook referring to the company’s India business.
Global revenue and Gross margin
For the fourth quarter of 2018, Apple recorded a global revenue of $62.9 billion, up 20% and more than $10 billion over last year. Gross margin was 38.3%, flat sequentially, in line with our expectations, as leverage from higher revenue offset seasonal transition costs.
The company recorded double-digit growth in each of its geographic segments and record Q4 revenue in the Americas, in Europe, Japan, and the rest of Asia-Pacific. “In fact, we set new revenue records in almost every market we track, with especially strong growth in Germany, Italy, Sweden, Switzerland, Japan, and Korea, all major markets where revenue growth was 25% or higher. We also set new fourth quarter revenue records for iPhone and wearables and new all-time records for services and Mac,” said Luca Maestri, CFO, Apple.
Mac and iPad perform well
“We were especially pleased with Mac momentum in emerging markets, with strong growth in Latin America, in India, the Middle East and Africa, and Central and Eastern Europe,” said Luca Maestri, CFO, Apple. “We generated iPad growth in a number of key regions around the world, including Latin America, Europe, Japan, India, and South Asia.”
Doubling Services Revenue
In January 2017, Apple CEO Tim Cook had set a target to double services revenue to more than $14 billion a quarter by 2020.
“Turning to services, it was our best quarter ever in total and virtually in every market around the world, with revenue of $10 billion. A year ago, we had a one-time $640 million favourable impact to services revenue due to an accounting adjustment. And taking that into account, our services growth in Q4 this year was 27%. As Tim mentioned, we reached new all-time quarterly revenue records for many services categories, and we are well on our way to achieve our goal to double our fiscal 2016 services revenue by 2020. We now have over 330 million paid subscriptions on our platform, an increase of over 50% versus a year ago. We are very pleased not only with the growth but also with the breadth of our subscription business. In fact, 30,000 third-party subscription apps are available on the App Store today, and the largest of them all represents less than 0.3% of our total services revenue,” said Luca Maestri.
