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What iPhone? Apple's push toward services begins – CNET

Last month, Apple CEO Tim Cook announced a new direction for his company. Yes, it will still sell iPhones, Macs and AirPods, but now it will focus on the stuff you watch, listen and play on those devices too.

Apple TV Plus, a video streaming service, Apple Arcade, a paid package of games and Apple News Plus, a subscription service to articles from about 300 magazines and newspapers, are the future of Apple's growth. The company's even creating Apple Card, a credit card,  with cash back for people who buy products directly from the company.

"For decades, Apple's been creating world-class hardware and world-class software," Cook said. Now it's going to tackle streaming and gaming services too. "It's unlike anything that's been done before."

He even brought TV legend Oprah on stage to talk up her planned documentaries and programs for Apple.

Whether Apple can pull of this remaking of its business is an open question. Investors so far are cautiously optimistic, pushing Apple's shares up more than 8% since the March announcement.

"Video streaming is not going to save shares of [Apple] if the iPhone market declines," Chatham Road Partners analyst Colin Gillis said in March. "Apple remains the iPhone company."

Which is why when Apple announces its second quarter earnings Tuesday, we'll be looking for more signs of what the future will bring than how many iPhones it sold between January and March. Sure, it'll be nice to get a look into Apple's business, in which analysts expect the company to announce $11.1 billion in profits on $57.4 billion in sales. But Apple no longer reports how many iPhones, Macs or iPads it's sold, putting more pressure on the company to show impressive sales and profits. By the holidays, those results will include its new services.

So far, though, Apple hasn't said much about how its existing services have fared. Apple News Plus, which launched in March for $9.99 a month, is the only service that's been made publicly available so far, and it's estimated to have netted 200,000 subscribers in its first two days. That's still far below publications like The New York Times, which counted more than 3 million digital subscribers at the end of last year, though of course Apple's just at its start. Apple TV Plus, Apple Arcade and Apple Card aren't launching until later this year.

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One other thing that could impact Apple's results is a settlement with chip giant Qualcomm, which came earlier this month after a series of dramatic courtroom battles. Qualcomm's technology powers cellular connections for many of the world's phones. The settlement included a payment from Apple to Qualcomm, though we don't know how much, and an agreement for Apple to buy Qualcomm chips.

Some analysts believe this could drag Apple's profits, though how much is unclear.

"Investors still don't fully appreciate the strength of Apple's platform," Morgan Stanley analyst Katy Huberty wrote in a recent message to investors. 

What iPhone? Apple's push toward services begins     - CNET


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