Reading Between The Lines Of Apple's Decision To Go Silent On iPhone Unit Sales

While weak iPhone unit shipments and sour December quarter guidance were partly responsible for negative sentiment toward Apple Inc. AAPL's shares following its fourth-quarter results, much of the blame could be traced to Cupertino's decision to drop its practice of reporting unit shipments.

"Starting with the December quarter, we will no longer be providing unit sales data for iPhone, iPad and Mac," CFO Luca Maestri said on the Nov. 1 earnings call.

Apple's Logic

Apple argues that the number of units sold in any 90-day period isn't necessarily representative of the underlying strength of its business, and unit sales are less relevant today given the breadth of its portfolio and the wider sales dispersion within any given product line.

Maestri also pointed out the fact that Apple's top smartphone competitors do not break down unit numbers.

The company is open to providing qualitative commentary on unit sales, the CFO said. 

Investors may have to rely on the Street's guesstimates going forward.

Lower Sales Numbers, Higher ASPs 

As is evident from the just-reported Q4 results and the Q1 guidance, iPhone numbers aren't sterling. 

The unenviable statistics sent shares down by 6.6 percent Friday.

Unit sales have been flatlining in recent quarters even as dollar sales are follow an upward trajectory.

Is Apple trying to keep the unpalatable numbers out of investor view? 

The phonemaker is moving toward a strategy of countering any potential unit sales weakness with higher-priced product line ups.

Unit Sales, Revenue Growth Diverge

Apple's strategy of accelerating iPhone growth, defying the wider slowdown in smartphone sales, was to focus on the premium segment, which perked up ASPs. The volume and ASPs of iPhones, which were positively correlated for much of the period in the past, are now beginning to diverge, according to Statista.

The non-disclosure of unit statistics is likely Apple's way of fixing the focus of analysts and investors on more positive numbers, the data firm's Felix Richter said in a Nov. 2 post. 

Source: Statista

The Sell-Side's Take 

Investors may not take kindly to the development, Wedbush analyst Daniel Ives said in a note reviewing the quarterly results.

"The Street will find this a tough pill to swallow this morning as the transparency of the Cupertino story takes a major dent, given that tracking iPhone units has become habitual to any investor that has closely followed the Apple story for the last decade-plus and is critical to the thesis," the analyst said. 

Loup Ventures' Gene Munster sees the move as the culmination of Apple's efforts to encourage investors to measure the iPhone on an annual rather than quarterly basis.

Apple's Services business is emerging as a source of growth, supplanting hardware revenues, according to CNBC, which cited FutureWealth CEO Jay Srivatsa.

Apple's announcement couldn't have come at a worse time.

Smartphone shipments declined 6 percent year-over-year to 355.2 million units in Q3, according to IDC's Worldwide Quarterly Mobile Phone Tracker. This marks the fourth consecutive quarter of declines.

IDC also pointed out the fact that China, which accounts for roughly one-third of global shipments, saw declines for the sixth straight quarter.

Related Links:

Report: Apple Pulling Back On iPhone XR Production On Soft Demand

Why Apple Will Likely Remain Sole Member Of $1 Trillion Club For A While

Photo by Daniel Lu/Wikimedia. 

Posted In: CNBCDaniel IvesFelix RichterGene MunsteriPhoneLoup VenturesLuca MaestriStatistaWedbushNewsEducationMediaTrading IdeasGeneral