MacRumors

Apple saw lower than expected iPhone sales during its first fiscal quarter of 2019 (aka the 2018 holiday quarter) and one explanation provided by Apple was lower quarterly iPhone upgrades. During today's earnings call, Apple CEO Tim Cook delved into the reasons why Apple is seeing fewer upgrades.

First and foremost, he named foreign exchange rates. The strength of the U.S. dollar has made the iPhone much more expensive in many parts of the world, which is why Apple today said that it plans to lower prices in some emerging markets. In Turkey, for example, the iPhone became so expensive due to exchange rates that revenue fell $700 million from the previous year.

Cook also said that iPhone subsidies are becoming increasingly less common, which is impacting upgrade rates. In Japan, for example, it used to be common to have subsidies for smartphones, but local regulations have eliminated many of those. According to Cook, less than half of iPhones sold in Japan were subsidized compared to 3/4ths a year ago. The total value of subsidies has declined as well.

Cook's third reason for fewer iPhone upgrades was the battery replacement program that Apple offered across 2018, allowing customers to swap out the battery in their iPhones for $29. Cook said that this made it inexpensive and efficient to replace iPhone batteries and hold on to older iPhones for a longer period of time.

According to Cook, while analysts suggested Apple shouldn't do it, the company "strongly believes it was the right thing to do for [its] customers."

To combat fewer upgrades, Cook pointed towards Apple's trade-in program, which drives down the price of new devices when trading in older devices, and he highlighted the monthly payment options that Apple recently started promoting on its trade-in page. This page provides details on the monthly price of the iPhone XR and iPhone XS when trading in an older device.

The lower than anticipated iPhone upgrades along poor sales in China ultimately led to a 15 percent decline in iPhone revenue year over year.

Cook says that while iPhone upgrades were lower than anticipated, the company's business grew in the rest of the world, setting new records in the U.S., Canada, Mexico, Germany, Italy, Spain, and Korea.

According to Cook, investors should be aware of three factors long term: a loyal and satisfied customer base, a large and growing active installed base, and Apple's deeply ingrained culture of innovation.

Apple CEO Tim Cook today told Reuters that the company is "rethinking" iPhone prices outside of the United States. Setting prices in U.S. dollars has made phones more expensive in local currencies, so Apple is planning to lower prices.

Cook says that in some international markets, after assessing macroeconomic conditions, Apple will go back to pricing that's "more commensurate" with what local prices were last year to boost sales.

"When you look at foreign currencies and then particularly those markets that weakened over the last year those (iPhone price) increases were obviously more," Cook told Reuters. "And so as we've gotten into January and assessed the macroeconomic condition in some of those markets we've decided to go back to more commensurate with what our local prices were a year ago in hopes of helping the sales in those areas."

Apple has already started lowering the price of the iPhone for third-party distributors in China, and price cuts could also be introduced in other areas like India and Brazil, where the iPhone is prohibitively expensive and has seen stalled growth due to high pricing.

Cook may provide details on specific areas where price cuts will be implemented during the earnings call.

Apple today announced financial results for its first fiscal quarter of 2019, which corresponds to the fourth calendar quarter of 2018.

For the quarter, Apple posted revenue of $84.31 billion and net quarterly profit of $19.965 billion, or $4.18 per diluted share, compared to revenue of $88.3 billion and net quarterly profit of $20.1 billion, or $3.89 per diluted share, in the year-ago quarter.

The earnings report comes after Apple issued a rare warning on January 2 that revenue for the quarter would come in at least $5 billion below the company's original guidance, with Apple pointing to a number of factors including the later launch of the iPhone XR, general weakness in China, and fewer upgrades as customers took advantage of Apple's reduced pricing on battery replacements in 2018 to extend the lives of their current phones.

Even with the earnings warning, the quarter was the second-best in Apple's history in terms of revenue and profit, trailing only the first fiscal quarter of 2018.

Gross margin for the quarter was 38.0 percent, compared to 38.4 percent in the year-ago quarter, with international sales accounting for 62 percent of revenue. Apple also declared an upcoming dividend payment of $0.73 per share, payable February 14 to shareholders of record as of February 11.

This quarter also marks a change in the way Apple reports its results, as the company is no longer providing unit sales data for iPhone, iPad, and Mac. Apple argues that quarterly unit sales are not an accurate indicator of the underlying strength of Apple's business, but critics have suggested the move is an attempt to make it less obvious that Apple is making up for sagging unit sales by selling more expensive devices.

“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide,” said Tim Cook, Apple’s CEO. “Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.”

Apple's guidance for the second quarter of fiscal 2019 includes expected revenue of $55-59 billion and gross margin between 37 and 38 percent. That revenue figure is near or slightly below analysts' expectation of around $59 billion. Apple's stock is currently up about 2.5 percent in after-hours trading following the release.

Apple will provide live streaming of its fiscal Q1 2019 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.

Conference call recap ahead…

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Apple's upcoming refreshed iPad mini and next-generation iPad could feature support for the Apple Pencil and Smart Keyboard, according to details shared today by developer Steve Troughton-Smith.

Troughton-Smith has been digging into the latest iOS beta for details on the new ‌iPad‌ models, and he says that all of this information should be taken with a grain of salt because he's not 100 percent sure on the details.

From what he's found, though, ‌iPad‌ models codenamed J210, J211, J217, and J218 come in two sizes, likely corresponding to rumored ‌iPad mini‌ 5 models and a refreshed sixth-generation ‌iPad‌, which is said to be getting a larger 10-inch display, up from 9.7 inches.

Both ‌iPad‌ sizes appear to support a ‌Smart Keyboard‌ and Pencil, which makes sense as Apple proved its willingness to offer ‌Apple Pencil‌ support in its more affordable tablets with the launch of the sixth-generation ‌iPad‌.

The new iPads appear to support Touch ID, so it sounds like the form factors will be similar to the existing models. Apple's iPad Pro models use Face ID, but with both the ‌iPad‌ and the new ‌iPad mini‌ likely to be positioned as more affordable devices, we're expecting Apple to stick with Touch ID.

Rumors have suggested both a new ‌iPad mini‌ 5 and an updated ‌iPad‌ will launch in early 2019, and we've seen signs of them in iOS 12.2 and through registration with the Eurasian Economic Commission. Apple has held a March event for the last several years, so it's possible we'll be seeing updated tablets right around then.

Apple is set to report its earnings results for the first quarter of its 2019 fiscal year at 1:30 p.m. Pacific Time today.

The quarter began September 30, 2018 and ran through December 29, 2018, according to Apple's fiscal year accounting calendar.

Apple issued a rare earnings warning for the quarter on January 2, its first in over 16 years. The revised guidance is as follows:

• revenue of approximately $84 billion
  

• gross margin of approximately 38 percent
  

• op. ex. of approximately $8.7 billion
  

• other income/expense of approximately $550 million
  

• tax rate of approximately 16.5 percent before discrete items

Apple's initial guidance for the quarter on November 1:

• revenue between $89 billion and $93 billion
  

• gross margin between 38 percent and 38.5 percent
  

• op. ex. between $8.7 billion and $8.8 billion
  

• other income/expense of $300 million
  

• tax rate of approximately 16.5 percent before discrete items

Apple's guidance suggests it will report its second-best first quarter results ever, based on revenue, behind its 2018 record of $88.3 billion:

• 2015: $74.6 billion
  

• 2016: $75.9 billion
  

• 2017: $78.4 billion
  

• 2018: $88.3 billion
  

• 2019: $84 billion

What to Look For

• Apple's revised guidance suggests it will report its first holiday quarter sales decline since 2001, although it would still be the company's second-best quarter ever in terms of revenue.
  

• This is Apple's first earnings report in which it will not disclose iPhone, iPad, or Mac unit sales, a change it announced back on November 1. Apple's financial chief Luca Maestri said Apple may provide qualitative commentary about sales if necessary, so it will be interesting to see how the conference call and question-and-answer session play out.
  

• In a letter to shareholders on January 2, Apple CEO Tim Cook disclosed that Apple's revenue will be lower than its original guidance for the quarter, coming in at approximately $84 billion. Apple initially guided for revenue of $89 billion to $93 billion in the quarter on November 1. Look for any potential commentary surrounding the shortfall.
  

• Apple's guidance for its second quarter of fiscal 2019, which began December 30 and so far only encompasses the launch of new Smart Battery Cases for the iPhone XS, iPhone XS Max, and iPhone XR. It could eventually include new iPads, a new iPod touch, new AirPods, the AirPower, more. Analysts expect revenue of around $58.9 billion in the second quarter, compared to $61.1 billion in the year-ago quarter.
  

• Continued growth of Apple's Services category, including the App Store, Apple Music, iCloud, iTunes, Apple Pay, and AppleCare. Last quarter, Apple's services brought in a record $9.9 billion revenue. Apple has said it is still on target to double its fiscal 2016 services revenue by fiscal 2020. Analysts expect services revenue of around $11 billion in the quarter.
  

• Continued growth of Apple's Wearable, Home, and Accessories category, previously named Other Products, including the Apple Watch, Apple TV, HomePod, AirPods, Beats, iPod touch, and accessories—particularly as Apple diversifies revenue beyond the iPhone.

Apple's CEO ‌Tim Cook‌ and CFO Luca Maestri will discuss the company's earnings results on a conference call at 2:00 p.m. Pacific Time today. MacRumors will loosely transcribe the one-hour call as it occurs live.

Apple Stores are getting a series of over 50 new Today at Apple sessions for 2019.

The new sessions, being added to the Today at Apple page alongside the announcement, relate to Skills, Walks, and Labs.

Skills are meant for those interested in learning new creative techniques to go further with our products, such as making a quick video with the Clips app or editing photos on iPhone. New Skills sessions include Notes and Chords with GarageBand, Sketching Ideas in Notes, Photo Editing Techniques and more.

Walks invite customers to venture outside of the store with a Creative Pro, where they will explore their surroundings, connect with their community and put new skills to use across passions like photography, music or health. New Walks include Capturing Cinematic Shots, Creating Soundscapes with GarageBand and a Health and Fitness Walk, Staying Motivated co-created with fitness expert Jeanette Jenkins.

Labs help customers experiment with creative techniques and complete the session with the beginning of a project. Many Labs have been co-created with world-renowned artists and makers. Building on the success of Labs with Florence Welch and photographer Chase Jarvis, skilled customers can find inspiration in new Labs like Beat Making with Swizz Beatz, Small Screen Magic with Zach King and Drawing Treehouses with Foster + Partners.

Today at Apple launched in May 2016 at Apple Union Square in San Francisco and expanded to Apple Stores worldwide a year later. The program offers free, hands-on creative and educational sessions related to topics such as photography, videography, music, coding, gaming, and art.

An example of an existing session is the Photo Walk, in which an Apple employee guides a group of people on a walk while providing iPhone photography tips. Another is the Kids Hour session Maze Challenge that tasks kids with programming Sphero robots to navigate a maze on the Apple Store floor.

Today at Apple also incorporates lessons from Apple's free Everyone Can Code and Everyone Can Create curriculums and tools such as Final Cut Pro X, Logic Pro X, and the Swift Playgrounds app for iPad.

Speaking at an October 2018 event in Brooklyn, Apple's retail chief Angela Ahrendts said Apple Stores have combined to host over 18,000 Today at Apple sessions per week, with the help of over 70,000 employees.

While it only made the news yesterday, it appears Apple was alerted to a major FaceTime privacy bug over a week ago.

Twitter user MGT7500 tagged the official Apple Support account in a January 20 tweet claiming that her 14-year-old son discovered a "major security flaw" that allowed him to "listen in to your iPhone/iPad without your approval." The user also tagged Tim Cook on the issue in a follow-up tweet on January 21.

Once the bug started making headlines on Monday, the Twitter user then shared additional tweets claiming that they had also emailed Apple's product security team over a week ago. A screenshot of the email was shared, and it appears the team did respond, but what they said is not visible in the screenshot.

The user acknowledges having wanted to receive a monetary reward under Apple's bug bounty program, but she claims she still proceeded to alert Apple to the bug by phone, fax, and with an official bug report nonetheless. She also wanted to keep the bug private, but she did tweet Fox News about it.

All in all, there is evidence that Apple Support was tagged about an eavesdropping bug eight days before it made headlines, and if the rest of the tweets are truthful, the company was also alerted about the bug via several other avenues.

Apple has temporarily disabled Group FaceTime, as adding your own phone number to a FaceTime call was the underlying cause of the bug, while it rushes to prepare a software update with a permanent fix. Apple said that update will arrive "later this week," but it wouldn't be surprising to see it today.

Apple did not immediately respond to our request for comment about when it discovered the bug and how long it existed.

Update: John Meyer reached out to the Twitter user and has shared a video about the ‌FaceTime‌ bug that he says was recorded and sent to Apple on January 23. Meyer has apparently confirmed the veracity of this info by phone.

In a new interview with Vogue Business this week, Apple retail chief Angela Ahrendts has talked about Apple's approach to "experiential" retail. Namely, Ahrendts discussed Apple's ongoing expansion of Today at Apple sessions, which transform the company's retail stores into communal spaces for classes, how-to sessions, photo tours, and more.

The interview took place near Carnegie Library in Washington, D.C., where Apple's next major retail store will open soon. Ahrendts explained that the location will become a community hub for the area, including field trips for local schools and off-site walking tours of the nearby sites in Washington, D.C., teaching attendees how to capture the best photos on iPhone or sketch landmarks on iPad.

Ahrendts remarked that Apple's goal is to continue the vision for retail that began with Apple co-founder Steve Jobs.

“Steve told the teams when he opened retail 18 years ago, ‘Your job is not to sell, your job is to enrich their lives and always through the lens of education.’”

“I think as humans we still need gathering places,” Ahrendts says. “And when you are serving digital natives, the thing they long for more than anything is human connection. Eye contact.”

To manage an employee network of 70,000 people, each retail worker starts their day using an app called Hello, including briefings on important matters for the day with videos from Ahrendts and her team. There's also a partner app, Loop, that acts as an internal social network for staff members.

The retail chief said this internal communication between Apple and its retail employees is critical, and what's missing from a lot of other brands.

“We use auto-translate and everybody in the world can see what Tom in Regent Street is doing. It’s a huge unlock, just getting all the stores to talk to one another.”

“Many retailers have become so big they’re removed from their own employees. They are lucky if they keep more than 20 per cent every year. We keep nearly 90 per cent of our full-time employees. We moved 20 per cent of the people in retail last year – they got promoted, took on new positions.”

This Spring will mark the two year anniversary of Today at Apple sessions, which began expanding worldwide in May 2017. Ahrendts spearheaded the launch, kicking off the transformation of traditional Apple retail stores into "modern-day town squares" and hubs of education. Before the debut of Today at Apple, the company hinted at its upcoming retail changes by dropping the word "Store" from the Apple Store branding.

In the article, Vogue Business pointed out that since 2017 nearly 10,000 brick-and-mortar stores in the United States have closed, and analysts predict one in four U.S. malls will be out of business by 2022. Ahrendts explained that Apple's approach is "very different...from traditional retailers," because the company focuses on the effect of its branding on customers over profitability.

"One of the things we've had to do at Apple is to stop looking at everything on a linear basis," she said. "You can't just look at the profitability of one store or the profitability of one app or the online business. You have to put it all together: one customer, one brand." According to Ahrendts, "The tragedy in retail" for other brands is that they are too focused on numbers instead of focusing on and investing in their own employees, "and in that environment, big isn’t always good."

You can check out the rest of the Vogue Business interview right here.

Aetna, the third-largest health insurance provider in the United States, today announced the upcoming launch of Attain, a personalized well-being app for iPhone and Apple Watch created in collaboration with Apple.

Through the use of an Apple Watch, the Attain app will provide Aetna members with personalized goals, track their daily activity levels, and recommend healthy lifestyle choices. For completing these actions, participants will earn points, which can be put towards the cost of an Apple Watch or gift cards.

Attain will motivate participants to complete personalized daily and weekly activity challenges based on their age, gender, and weight. Attain's definition of activity includes walking, running, swimming, yoga, and other activities that can be tracked in the Workout app on the Apple Watch.

The app will also prompt participants with healthy action notifications, including reminders to meet activity goals, get vaccinations such as the flu shot, refill medication prescriptions, visit a primary care physician if they have not had a recent office visit, and more, according to Aetna.

To participate in the program, Aetna members will need an iPhone 5s or newer and an Apple Watch Series 1 or newer.

Attain participants will have the option to share their health data with Apple, enabling Apple and Aetna to collaborate and continue to improve the program. Through analytics and machine learning, Aetna says the collaboration will lead to new features for Attain, including more personalized recommendations.

Apple's COO and Apple Watch chief Jeff Williams:

Every day, we receive emails and letters from people all over the world who have found great benefit by incorporating Apple Watch into their lives and daily routines. As we learn over time, the goal is to make more customized recommendations that will help members accomplish their goals and live healthier lives.

Attain is a completely voluntary program in which members determine what information they want to share and can discontinue using the app at any time. All health data is encrypted on the device, in transit, and on Aetna and Apple's servers, where it will be stored with industry-leading HIPAA-compliant security practices.

Information from this program will not be used for underwriting, premium, or coverage decisions, according to Aetna, which was acquired by CVS Health last year. Instead, the idea seems to be that healthier customers will result in Aetna receiving fewer insurance claims, thereby saving it money.

Aetna expects the Attain app to be available in the App Store in Spring 2019. Interested members can sign up at AttainbyAetna.com to be notified when the app becomes available for download in the coming months.

In 2016, Aetna offered the Apple Watch free of charge to 50,000 employees.

Apple appears to have disabled Group FaceTime on its server side as a temporary workaround for a major bug discovered today that allowed anyone who places a FaceTime call to listen to audio from the recipient without them answering the call. The bug even extended to video in some circumstances.

As spotted by Mark Gurman, Apple's system status page now says "Group ‌FaceTime‌ is temporarily unavailable" as of 7:16 p.m. Pacific Time.

As a result, it is no longer possible to add your personal phone number to a Group ‌FaceTime‌ call, which was the underlying cause of the bug. Multiple editors on our team have confirmed being unable to add a phone number to a ‌FaceTime‌ call. One-on-one ‌FaceTime‌ calls continue to work normally.

Apple has promised to release a software update that permanently addresses the bug "later this week," and given the serious privacy implications, the company likely has engineers working on the update as we speak.

Group ‌FaceTime‌ is limited to iOS 12.1 and later.

Apple is aiming to have its video streaming service ready for launch in mid-April, reports The Information. The tidbit about Apple's service was shared in a wider piece on Amazon's plans for Amazon Prime Video.

According to the report, Apple has been telling entertainment companies who will have content available through the service to be ready for a launch in mid-April. A release date is said to be planned within a few weeks of the mid-April launch target.

A mid-April launch is in line with previous rumors that have suggested Apple's streaming service could launch early in 2019. The service is believed to feature Apple's own content along with content from third-party companies like HBO and STARZ.

Apple is planning to make the service available through its existing TV app, and at least some of Apple's own content will be provided to Apple users for free.

While the service is said to be launching in the United States first, Apple has ambitious plans to expand it to more than 100 countries during 2019.

Apple has over two dozen original TV shows in the works, many of which have entered the casting phase and are likely close to being filmed, if filming has not already started. Apple has also signed deals for multiple movies and has brought on well-known TV producers like Jason Katims and Justin Lin for exclusive TV shows and movies.

Content runs the gamut from dramas and comedies to children's shows and science fiction. A full list of the projects that Apple has in the works is available in the original content section of our Apple TV roundup.