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Against iPhone problems, Apple tries to change the story




When Steve Jobs took a sweep

Amazon.com
Inc.s

Kindle in 2009 pointed to the online store's decision not to report unit sales of the browser unit as evidence that it did not sell many.

Almost a decade later,

apple


AAPL -6.63%

follows a similar path. The company said it would stop disclosing data on the number iPhones, iPads and Macs it sells, eliminating a performance metric it has given since the 1980s.

The change comes as a growth in the number of iPhones sold, with customers increasingly moving on to smartphones anymore. Apple has responded by marketing software and services across its devices and raising prices for new gadgets.

Investors responded to the reporting change, and in revenue outlook that did not match Wall Street estimates. On Friday, the elimination of unit-sales data eliminated shares that fell 6.6% as the company shed $ 71[ads1].19 billion in market value in a single day.

Apple's "privacy obligation now applies to the iPhone device's disclosure," Amit Daryanani from RBC Capital Markets wrote in a note to investors. In an interview, he said that the change means that many shareholders now believe that Apple hides something. "There is a monkey on the back," he said.

Mike Levin, co-founder of Consumer Intelligence Research Partners LLC, a market research firm investigating Apple customers, said that the change shows that Apple executives think of their business in ways they have not wanted to say high.

"When Apple did well, unit sales sold a wonderful story. Now that the story is not so good, they say," Let's change it, "he said.

Mr. Jobs can agree." Usually, If they sell a lot, you will tell everyone, "said Apple founder New York Times, nine years ago, when he criticized the Amazon Kindle.

Apple remains a huge profitable company and recently raised price increases for its best year ever. Cook told analysts Thursday's change reflects better how Apple's business has evolved into the wake of its new pricing strategy. When a cashier calls a shopper, the registry does not show how many units the buyer buys – just what the shopper uses, he said.

Other companies have also changed the way they report long business values.

In April,

General motors
Co.

left a decade old practice to report monthly vehicle sales and quit

Tesla
Inc.

by reporting such figures quarterly.

Walmart
Inc.

and

Target
Corp

Over the last decade has moved to reporting the same store sales quarterly instead of monthly to eliminate volatility.

"This is New Territory," said Peter Bible, Chief Risk Officer at Accounting Adviser EisnerAmper LLP and former chief executive officer at GM. "Whether it's monthly sales of cars or sales of iPhone or iPads, are they afraid that it will not be beneficial?"

Apple Finance Director Luca Maestri, who previously worked with GM, said that Apple would continue to provide "qualitative comment," for example, to note that device sales of flagship iPhones are strong and attracts customers with new features.

Apple will now report gross margins separately for hardware and services.

Where gross margins perform between hardware and services will be an important metric, said Gene Munster, managing partner at Loup Ventures, an investment and research company.

Investors will look at the hardware margins to determine the health of the iPhone. "All Apple needs to do is keep the hardware gross margins stable," says Mr. Munster, who believes reporting changes are positive for investors due to the repeated revenue offered by the service.

Apple also has 1.3 billion iPhones and other devices in active use, and earns $ 30 for each device annually from app sales, music subscriptions and other offers, according to Morgan Stanley. The company expects the services to account for about 60% of Apple's revenue gains over the next five years. In contrast, iPhone accounted for 86% of revenue growth in the previous five-year period, estimates it.

During the past year, services increased by 24% to $ 37.19 billion. Nevertheless, they represented only around 14% of Apple's total revenue of $ 265.6 billion in fiscal policy 2018. Apple has not broken out revenues for its various services.

Shooting the business forward will test Mr. Cook, an operating expert who turned Apple into a profit-spewing machine by controlling hardware costs and inventory. Now, the company's direction will increasingly depend on Eddy Cue's management, which is responsible for internet programs and services, and Phil Schiller, who monitors the app store.

It may take a year or more before Mr. Cook's team shows services and cheaper devices can make up for flat or falling unit sales, "said David Yoffie, professor of Harvard Business School, who has written Apple case studies. "Apple obviously wants to change the story on the street, but lower transparency will reduce trust in the short term," he said.

Write to Tripp Mickle at Tripp.Mickle@wsj.com



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