Apple’s Risky New Metric

With iPhone sales flattening, Mac revenues eroding and iPad sales falling, Apple broke out a new metric in its Q4 (fiscal Q1) earnings release Tuesday in a bid to direct analysts’ and investors’ attention toward those parts of the business that are still showing robust growth.

According to the “Earnings Supplemental Material” released with the earnings report, the “active installed base” of iOS devices has reached 1 billion, a figure Apple CEO Tim Cook said the subsequent analyst call has actually now been exceeded. That figure, which CFO Luca Maestri said Apple-TV-4reflects 25 percent year-over-year growth, represents the total number of iOS devices out there actively downloading apps, using Apple Music, buying music from iTunes, using iCloud and other Apple services in the last 90 days. And it underpinned, Cook and Maestri repeatedly stressed, $5.5 billion in revenue for Apple in the quarter ($4.7 billion net of the portion of some service revenue shared with rights owners), an increase of 15 percent over the same quarter last year.

“The market has not fully understood that we have a portion of our business directly tied to our incredible installed base that’s not driven by quarterly results,” Maestri said. “Those customers engage with our services and that business, which is a $20 billion business, is growing at more than 25 percent during the last 12 months.” Read More »