Hey look! A snark-free Apple story in the Wall Street Journal

It’s been some time since the Journal described anything at Apple as “surging.”

From Dan Gallagher’s “Apple’s New Buds Sing an Old Tune” ($) in Monday’s Journal:

It is shaping up to be a strong season for Apple’s wearables business, which also includes the Apple Watch. Analysts currently expect revenue for the company’s Wearables, Home and Accessories segment to surge 34% year over year to $9.8 billion for the fiscal first quarter ending December. That’s an acceleration from the 33% growth seen in the same period last year, which was also helped by the original AirPods. Jim Suva of Citigroup boosted his price target on Apple by 20% to $300 earlier this week, projecting wearable revenue surpassing $10 billion this quarter.

Wearables are Apple’s fastest-growing business—and rapidly approaching the size of its vaunted services arm. Total wearable revenue surged 41% to $24.5 billion for Apple’s full fiscal year that ended in September. Service revenue hit $46.3 billion for the fiscal year, but its 16% increase was a notable deceleration from 22% growth in the preceding year. Apple doesn’t disclose specific sales figures for wearable devices, but the company’s 10-K filing did cite AirPods as the primary factor driving wearable growth in the recent fiscal year.

The shift to services has been a key part of the narrative driving Apple’s stock price—and valuation—to new highs this year. The company has furthered this effort with recent new offerings such as Apple TV+ and Apple Arcade. But Apple’s services are a complicated mix of high-margin contributions like AppleCare, iCloud and license fees from Google that offset the lower margins of its media-related fare. Due to heavy promotions and the cost of producing high-caliber programming, few analysts expect Apple TV+ to be a significant contributor to the company’s business in the current fiscal year.

By contrast, AirPods show Apple playing to its strengths. The company has long excelled at well-designed products it can sell at a premium. And because they are designed to work closely with the iPhone, wearable devices can serve to further lock in customers to what remains Apple’s largest business. This is a tune Apple knows well.

My take: Gallagher on Apple is like a breath of fresh air after so much derision from Tripp Mickle. The former came up through East Bay tech reporting, the latter through NASCAR, hockey and the Olympics.

See also: The Apple 3.0 Tripp Mickle archives. 

3 Comments

  1. Aaron Belich said:
    “By contrast, AirPods show Apple playing to its strengths. The company has long excelled at well-designed products it can sell at a premium. And because they are designed to work closely with the iPhone, wearable devices can serve to further lock in customers to what remains Apple’s largest business.“

    Shame he notes only the iPhone and AirPods. They are still missing the forest for the trees.

    1
    December 9, 2019
  2. Aaron Belich said:
    Also, does this mean Tripp has been reassigned?

    1
    December 9, 2019

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