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Services And Wearables Have Protected Apple From The Pandemic, But What About The Looming Economic Crisis? – Forbes


There are a number of interesting surprises to be found in Apple’s financial results. The first is that in a period defined by the coronavirus pandemic, with half the world in lockdown and its stores closed, the company has not only improved its sales and exceed the analysts’ forecasts by showing remarkable resilience, but also its services and wearables divisions — two relatively recent commitments within the company’s strategic plan — have enjoyed strong growth.

Global revenues of $58.3 billion represent an increase of 1% over the same period as last year under very different circumstances, beating the analysts’ consensus of $54.54. That may not sound like much compared to Amazon’s numbers, but let’s not forget that many companies are now in the red. But beyond the global number, what is really interesting is the $13.35 billion the services division contributed, compared to $11.45 billion last year; along with the $6.28 billion dollars from wearables and accessories, compared to $5.13 billion a year ago. This is because the emphasis on these two divisions is relatively recent, a strategic refocus that has effectively served to balance the company’s books at a difficult time. Apple’s services and wearables have been its protective mask while the rest of the world caught the virus.

The question, obviously, is not what will happen during the pandemic, which should be relatively short — or so we hope — but afterwards, when the economic crisis kicks in. While we’ve been in lockdown, Apple News has reached 125 million active monthly users, which is not that surprising given Apple’s strong corporate umbrella.

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It’s worth asking how many of those users will continue to pay the ten dollars a month it costs in the midst of an economic crisis that is likely to be prolonged. In general, subscription services such as Netflix, Spotify, Apple Music, etc. are somehow considered luxuries, in that the content they provide can, in most cases, be obtained free through other more or less regular channels, which implies that the decision to pay is fundamentally a question of convenience. In that sense, the services that have allowed Apple to balance its books during the pandemic may not be so useful in the post-pandemic phase, especially if the economic crisis turns out to be intense or prolonged. Even Tim Cook has recognized a few uncertainties for the (not so) foreseeable future.

As a rule, services have a certain reputation for being more sensitive to economic crises than tangible products. That said, the rules don’t usually apply to Apple. It will be interesting to see how its results pan out over the year.



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