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Pandemic hurts iPhone sales, helps iPad sales; kudos to Apple for hitting a five-year target

Pandemic hurts iPhone sales, helps iPad sales and kudos to Apple for hitting a five-year target
Apple released its earnings report today for its fiscal fourth quarter which includes July, August and September. Due to the pandemic which pushed back sales of the iPhone 12 series into the first quarter of 2021, sales of the handset amounted to $26.44 billion for the quarter, a year-over-year decline of 20.7% For all of fiscal year 2020, Apple sold $137.8 billion worth of iPhone units, a 3.2% decline from fiscal year 2019.

The pandemic leads to a decline in iPhone revenue during the fiscal third quarter and fiscal year

The iPad tablet had a fabulous quarter even though sales of the hot new iPad Air (2020), powered by the same 5nm A14 Bionic chip that runs the 5G iPhone 12 line, won't count until the first quarter of fiscal year 2021. For fiscal Q4 of 2020, Apple rung up $9.03 billion in tablets as the pandemic made this product more desirable for home schooling students and those working from home. The year-over-year gain in sales came to 46%. For the full fiscal year, Apple sold $23.72 billion in iPad tablets, a gain of 11.5%.

Apple achieved a major goal this past quarter by garnering $14.55 billion in Services revenue. For the year, that figure came to $53.77 billion. When iPhone sales peaked in fiscal 2015, Apple smartly decided to focus on selling services to active iPhone users. The company set a goal to hit $50 billion in Services revenue by the end of fiscal 2020, and that goal has been reached; congratulations Apple. Fiscal third quarter Services revenue was up 16.3% and for the year the increase in gross was 16.2%.

The Wearables, Home and Accessories category features two of Apple's top-selling products, the Apple Watch and the Air Pods. Revenue in that division amounted to $7.88 billion for the fiscal third quarter, a 20.8% annual gain. For all of fiscal 2020, the unit generated $30.62 billion in revenue, a 25% gain.

Apple CEO Tim Cook said, "Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services. Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive. From remote learning to the home office, Apple products have been a window to the world for users as the pandemic continues, and our teams have met the needs of this moment with creativity, passion, and the kinds of big ideas that only Apple can deliver."

Apple CFO Luca Maestri added that "Our outstanding September quarter performance concludes a remarkable fiscal year, where we established new all-time records for revenue, earnings per share, and free cash flow, in spite of an extremely volatile and challenging macro environment. Our sales results and the unmatched loyalty of our customers drove our active installed base of devices to an all-time high in all of our major product categories. We also returned nearly$22 billion to shareholders during the quarter, as we maintain our target of reaching a net cash neutral position over time."

Sales in Greater China declined to 7.95 billion from $11.13 billion during the same time period last year. For the full fiscal year, sales in Greater China fell from $43.68 billion in FY 2019 to $40.31 billion in FY 2020.

Overall, fiscal year Q3 revenue rose to $64.7 billion from the $64 billion racked up over last year's fiscal third quarter. For the entire fiscal year 2020, Apple brought in $274.52 billion, up from fiscal 2019's  $260.17 billion. Net income was $12.67 billion for the fiscal third quarter, a 7.4% decline. Fiscal year 2020 net was $57.41 million, a slight improvement from fiscal year 2019's $55.26 billion. Diluted earnings per share came out to 73 cents and 76 cents for the fiscal third quarters of 2020 and 2019 respectively. For the full year, earnings per share amounted to $3.28 for 2020 versus $2.97 for last year.

After gaining $4.12 to $115.32, Apple's shares declined $5.87 after the report was issued. The stock is currently trading after hours at $109.45.

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