Investors bristle as Apple's iPhone data goes the way of its headphone jacks

First Apple Inc took away the headphone jack on its iPhones. Then it took away the home button.

And now, it has taken away a closely watched performance metric that it has disclosed to investors for 20 years.

The Cupertino, California-based company on Thursday said that it will stop reporting unit sales data for its iPhone, iPad and Mac computer products, the latter of which it has given out since 1998. Analysts and investors use the figures to calculate the average selling price of Apple’s devices and gauge the health of the company.

Apple said the data is less relevant to the strength of its business as customers bundle products, such as an iPhone paired with its wireless AirPods headphones, along with paid subscription services like Apple Music to listen to songs and iCloud storage for photos. Analysts were sceptical.

“Companies typically stop reporting metrics when the metrics are about to turn. This is not a good look for Apple,” said analyst Walter Piecyk from BTIG Research.

The move cost Apple dearly, helping to send shares down about 7 per cent in after-hours trading. They later settled at USD 207.81, about 6.5 per cent below their previous close.

“Apple is a complex company with a lot of moving parts,” said analyst Ivan Fienseth from Tigress, “I think they need to give more transparency to their shareholders and not less.”

But now, Apple will give cost-of-sales data for both its total product businesses and its total services business, which will let investors evaluate a gross margin for both. In the past, Apple gave only an overall gross margin figure for the company.

The new numbers are important for two reasons. First, they will show just how lucrative Apple’s hardware business really is. But more importantly, for the first time they give margin information on Apple’s services business, which reached USD 10 billion in its fiscal fourth quarter, up 17 per cent.

Many of Apple’s fastest-growing businesses are subscription based, like its USD 9.99 a month Apple Music service. And investors tend to value subscription business through a combination of their revenue growth rate and margins - information that Apple investors will now have, said Tien Tzuo, chief executive of Zuora Inc, a company that helps subscription businesses track their finances.

But one problem Apple investors will face is not knowing what the margin mix is within the services business. Some parts of it, like iCloud storage, are likely lucrative, but others, like Apple Music, are probably less so because Apple has to pay music licenses costs and competes with rival Spotify Technology SA.

“You would value the music business with one (revenue) multiple closer to Spotify, and the cloud business with a (subscription software) multiple,” said Tzuo. “Having some sense of which business is growing faster would be nice.”

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