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Apple earnings top profit estimates despite drop in iPhone sales

Apple's Q4 earnings beat estimates despite iPhone sales declining. Yahoo Finance’s Dan Howley weighs in.

Video Transcript

JULIE HYMAN: Apple sort of wants to be seen as not just an iPhone company, but the Street's not really buying it.

DAN HOWLEY: Yeah, and what they've done is focused a lot more heavily on things like services, their accessories, wearables, obviously Apple Watch and AirPods are big moneymakers for them. But they still are tied heavily to the iPhone because that's what gets people in the door in the first place. And then they're able to tie them up with services and accessories for the long run.

But, you know, really what I think happened here was investors may not have realized that what you used to get was a small bump at the end of the quarter. Usually, that was when the newer iPhones came out and so you would see the initial jolt up of iPhone sales. And that would help kind of boost a quarter that's usually pretty slow for Apple because people are waiting for the new iPhones.

But what happened this year, of course, is that the iPhones were delayed significantly. So they didn't count in the prior quarter, they're going towards this current quarter. And so that's why we saw that kind of dip in overall sales for the iPhone. It also could be that during the last quarter, some people just didn't want to buy the new i-- the older iPhone because they were waiting for the new 5G version of the iPhone 12.

And so that could explain some of the drop there. So I don't think it's really a fundamental risk for Apple or that there's necessarily people kind of falling out of love with the iPhone. I think it has to do with those two kind of issues combining to create a bigger problem for them. But the other problem was China. China sales disappointing for Apple, and that's a major area for them as far as sales go.

But again, that could also have to do with the fact that the 5G phone wasn't out yet, and 5G networks are more established in China. And so that would mean that people would be less likely to want to buy the iPhone 11 if it doesn't have 5G, which it didn't, and opt for the 12 instead because they have 5G widely available. Why would they want something that doesn't have 5G already?

So that's really where I think the new iPhones are really going to shine. China, and then obviously in the US. Unfortunately, as I've said before and probably a million times until I'm blue in the face, don't expect the earth-shattering changes of 5G to hit you as soon as you unbox your iPhone.