Will Apple Shift to Subscription Model for iPhones?
Does it make sense for Apple to shift gears and charge a monthly fee for hardware such as the iPhone? The wind is apparently shifting in that direction, based on comments from this week’s earnings call.
“Under the argument for an iPhone subscription, which some people call Apple Prime after the Amazon program of the same name, Apple would bundle hardware upgrades with services like iCloud storage or Apple TV+ content and hardware for a single monthly fee. This would let it switch iPhone sales from a transactional model to a subscription model, potentially driving the stock price up without having to increase product sales or prices dramatically,” writes Kif Leswing of CNBC. “During Wednesday’s earnings call, when analyst Toni Sacconagi asked about the idea of a prime subscription, Apple CEO Tim Cook did not shoot down the idea. In fact, he suggested that something like it was already in effect.”
Apple reported a record $64 billion in Q4 revenue, despite headwinds from slower iPhone sales.
“The news reflects the general trend with Apple over the past year: iPhone sales are down, but service revenue hit an all-time high. In other words, Apple’s strategy to de-emphasize hardware sales and bet more on subscription services seems to be working,” writes Chaim Gartenberg of The Verge. “iPhone sales — still Apple’s biggest moneymaker — continued to decline compared to last year, bringing in $33.36 billion in revenue compared to $36.76 billion last year, a drop of roughly 9.2 percent. On the flip side, Apple reported that it had reached a record high for its services business, which brought in $12.5 billion in Q4 (compared to $11.46 billion last quarter, and $10.6 billion year over year).”
Lyft Beats Analyst Estimates and Heads Towards Profitability
The past couple of months have been difficult for the “sharing economy,” with WeWork shaping up as a potential debacle for its investors. But there was good news from Lyft, which seems heading in the direction of profitability.
“Lyft Inc. blew past analysts’ revenue estimates for the third quarter and raised its 2019 forecast, suggesting efforts to add more active riders and gain pricing power are paying off,” writes Lizette Chapman of Bloomberg News. “The ride-hailing company said full-year revenue will be $3.57 billion to $3.58 billion, beating analysts’ projections of $3.51 billion. Increased ridership and higher revenue per rider drove the results and the company reiterated that it plans to turn a profit by the end of 2021.”
If Lyft achieves its financial goals, that would be a boost for the tech industry, which plays an absolutely essential role in the “sharing economy,” a concept based on the idea that in the near future, people will choose to rent, lease or simply borrow items such as homes, cars, phones and electric scooters instead of purchasing them outright.
Fed Rate Cut Leaves Unanswered Questions
U.S. Federal Reserve Chairman Jerome Powell announced a rate cut on Wednesday, but left many questions unanswered in the process. From my perspective, the Fed is still hedging its bets in an uncertain economy.
“Powell is saying the Fed isn’t likely to make any more reductions to interest rates in the near future unless something really bad rocks the economy. Though he wasn’t specific about what might prompt the central bank to take action, he did say the Fed expects the economy to grow at a rate of roughly 2 percent, suggesting that if the pace slows a lot more than that, policymakers would step in,” writes Victoria Guida in Politico.
As a technology leader, I’m glad the Fed is taking a prudent course. Despite signs of a looming recession, the economy remains relatively stable. Having a steady hand at the tiller is reassuring.