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Cupertino tech giant Apple Inc (NASDAQ:AAPL) took serious financial hits in its second quarter of its fiscal year 2020 as the company struggled to deal with the fallout from the coronavirus. In its previous quarter, Apple's revenue, operating profit and net income dropped by 36%, 50% and 49% respectively, as the company first witnessed a shock to its products and later a supply chain glut as manufacturing operations in Asia came to a halt following government-imposed lockdowns to stem the outbreak of COVID-19.
Naturally, given these revenue drops, Apple's iPhone did not manage to maintain the strong performance that it had exhibited in 1Q20. Apple's data revealed that revenue from the smartphone lineup dropped by $2 billion year-over-year and by $27 billion sequentially last quarter. Now, courtesy of KeyBanc, we can take a deeper look at this drop.
Apple Lost Roughly 80% of iPhone Sales Year-over-Year In April Reports Research Firm
According to KeyBanc's data, Apple took serious hits to the iPhone in the first month of its third quarter of 2020 (3Q FY2020). As per the details, Apple's iPhone sales dropped by a staggering 77% in April (year-over-year) and by 56% over the previous month. Given the fact that the first quarter of this calendar year was a tough one for Apple, today's data shows no confidence about what to expect from the company from its ongoing quarter.
Speaking to investors after the earnings call release, Apple's chief executive officer Mr. Tim Cook shared the difficultuites that his company had to face amidst an unprecedented globl disaster. According to Mr. Cook, Apple's product performance fluctuated during the coronavirus quarter in three phases. These were:
- The first five weeks of the quarter: During this time period, Apple's management was confident that it was heading to a record second fiscal quarter, with results expected at the very high of the company's guidance.
- The next five weeks: iPhone supply and demand in China started to bear the brunt of the coronavirus, with the rest of the world showing no signs of stress.
- The remaining weeks: Demand for the iPhone and wearables witnessed downward pressure as COVID-19 settled in the world.
The executive also stated that foot traffic was improving in China, but given the environment, he was unable to provide guidance to investors. He did, however, state that Apple expected to double its fiscal year 2016 revenue in the fiscal year 2020.
In addition to providing percentage drops in iPhone sales for the month of April, KeyBanc also shares that online sales of the product rose sequentially in the month. This fact mirrors what Mr. Cook stated two weeks back at Apple's investor call when he confirmed that Apple had witnessed impressive growth in online purchases, with retail bringing in a quarterly record. At the time, the executive believed that this was due to strong performance in China, but he hesitated to state if the trend would continue in the future.
KeyBanc's data also raises concern for Apple's latest entry-level iPhone SE that was launched in mid-April. While it's granted that the device needs more time to settle in before it's possible to accurately ascertain its worth to Apple's balance sheet, given the current economic outlook, it's difficult to not wonder whether the company might have launched the iPhone SE at the wrong time. Yet, at the same time, a low-cost product with 2019 silicon seems like a steal when budgets are short.
Heading into the second half of 2020, the fate of this year's flagship iPhones remains uncertain. If we were you, we'd be on the lookout for some big leaks that might take place over the course of this week.