Apple’s second-quarter financial results were not quite the bloodbath that some had expected, and while the future remains uncertain, there are some lessons to be learned for companies trying to deal with the current crisis.
What happened to Apple in the second quarter of fiscal 20?
Apple’s sales reached $ 58.3 billion. At other peaks, the installed base reached a record for active devices – over the 1.5 billion it revealed in 2019.
The company saw double-digit growth and set new records in the installed base of iPhones, Macs, iPads and wearables. It now has 515 million service subscribers and expects to reach 600 million by December.
As expected, product sales decreased 4% as economies shrank in response to COVID-19. You can read Apple’s Announcement of the results here, or dig a little deeper into the numbers.
So what are the lessons?
1. Diversification is strength
Apple’s decision to expand its service segment paid off in the quarter and had the highest sales ever, protecting the company against weaknesses in some of its markets.
The meaning is pretty clear: if your company can diversify revenue streams, it really should. And services are good business.
Apple’s service revenue grew 16% year over year and contributed more than $ 13 billion to revenue. Apple Music and Cloud Services both set records. According to the company, the gross margin for services is 65%. Apple’s product range now fits on a larger table than before. Can your company diversify its offering?
2. Build subscription income
As predicted a few years ago, Apple’s decision to focus on creating a subscription-based business really helped.
Apple’s traditional product-driven revenue-generating model was heavily dependent on making hugely popular electronic devices, so the company remained exposed when the economy shrank or consumer interest waned.
Apple already offers an Apple Card-based payment plan for iPhones and confirms that “this will also be done for other products” makes sense. Subscription revenue is predictable even in times of crisis.
How can your company build its own subscription-based business?
3. It’s time to use your reserves
Apple appears to have buried itself in its reserve capital. The company has one of the largest cash reserves among U.S. companies and may have used some of this money to maintain its commitments to customers, partners and employees. The net amount of cash (cash reserves less debt) is now $ 83 billion.
There is nothing wrong with digging in reserves in an emergency.
Funds are intended for rainy days.
4. Be agile on business
During the second quarter 20 financial interview, CEO Tim Cook noted Apple’s “unmatched ability to be creative, always think long-term and move forward when others feel the instinct to withdraw”.
The enterprise had many plans for the quarterCook confirmed that it should be a “productive and energetic period”.
Apple handled many operational challenges: “For a company whose business is innovation, there are real benefits to having to regularly find out how to do almost everything in a brand new way,” he said.
“If you look at the supply chain shock that took place this quarter, the fact that it reappears so quickly that it’s durable and resilient shows,” he later noted.
Digital transformation means that every company exists in a state of constant change. The need to become business agile strengthens every company in every industry in every situation.
5. Your customers are also resilient
During the financial meeting, Apple noted that there is some evidence that customers are now realizing that the pandemic will continue for a while and that buying decisions are made to help them work more comfortably from home.
That means buying devices and using FaceTime and Messages much more. These services set new daily volume records in the quarter.
Apple also posted record results in its retail store during the quarter, which prompted Cook to watch this although physical stores are closed. The company saw a “phenomenal” transition to online sales.
Your consumers are already changing in response to the crisis. Is your company ready to change to meet your customers where they are?
6. Distance work is here to stay
Cook found that the move to remote work actually increased the productivity of some of the company’s employees and reduced it for others.
He also noticed that people are getting used to working and learning from a distance, and expects this trend to continue.
The message must be that smart companies will find out instead of considering remote work as a temporary business interruption how to rationalize the experience to increase both corporate productivity and employee autonomy.
7. Apple’s solutions can help manage changes
As I often notice, Apple is already in the company. The company has created a variety of content to help its corporate customers transition to work from home. This also means that our own retail employees are more focused on support.
Partners such as IBM, SAP and Jamf have supported companies in providing remote working solutions. One company, Peloton, could deploy an entire fleet of Macs overnight so that their teams could work remotely.
In many cases, iPads, Macs, and other Apple products are now the most appropriate choice for your business. Employee choice is too good for business.
8. Do the right thing
Such a global crisis inevitably changes things.
As the pressure to return to work continues to increase, it would be irresponsible to trigger a second wave of deaths that, like the Spanish flu, could overshadow the already observed victimization rate.
Do the right thing under these circumstances means contributing to the communities in which you do businessespecially if you want your customers to stay with you.
Apple really dealt with itEven when facing the operational challenges of developing and launching new products, the company has expanded many parts of its business to contribute to a global response. “Apple’s contributions to the global response are significant, diverse, and a great source of pride for the entire team,” said Cook.
This type of collective pride makes companies agile, reduces brain drain, and makes a big difference in your business relationships. It is also the right thing.
9. Stay optimistic
Any company facing significant business challenges may find it appropriate to reduce activity while waiting for better times. This is not Apple’s approach.
Cook puts it this way: “We always made it through difficult moments by doubling and investing in the next generation of innovations, and that’s our strategy today.”
Keep building and Prepare your company for the next development.
Stay healthy.
Please read these additional reports, which I hope will help you deal with the current situation, and contact me if you would like to investigate certain topics:
