Apple plans to invest in augmented reality following success of Pokmon Go

Chief executive Tim Cook said the computing platform is going to be huge as he announced third-quarter revenue was down 15% from last year

Apples CEO Tim Cook has told investors that augmented reality is going to be huge and that the company is investing in the technology.

Responding to a question about Pokmon Go Cook said that the game had shown that AR can be really great. We have been and continue to invest in AR in the long run, he said. Well see whether its the next computing platform, but regardless it will be huge.

The comments came during an earnings call to discuss the results of the companys third financial quarter, the three months ending 30 June, in which the company earned $42.4bn in revenue, a 15% decline from the same period last year.

Its the second consecutive quarter that Apple has reported a revenue decline, following a streak of uninterrupted growth since 2003. However, the companys results were slightly better than expected, leading the stock to increase more than 5% in after-hours trading.

The revenue decline was largely credited to a drop in iPhone sales, which typically make up around two-thirds of the companys revenue. Apple sold just 40.4m phones compared to 51.2m shipped the previous quarter.

The company hasnt issued any major updates to the device range since the iPhone 6 was launched in September 2014, which is likely to have contributed to the slump, but also the recently launched lower cost iPhone SE appears to have cannibalised sales of the more expensive flagship devices.

Apple doesnt reveal revenue breakdowns per model, but the average iPhone sales price appears to have dropped from $642 to $595.

Nevertheless, Cook was eager to point out that many of the people who bought the iPhone SE are switchers people new to the iPhone and the Apple ecosystem.

The weakening Chinese economy, which had been a key source of growth for the Cupertino company, also played a role. Sales there fell by 33.1% compared with the 112.4% growth in the same quarter the previous year.

Despite the disappointing performance in China, Cook said that hes encouraged about the growth prospects in the country and that the underlying business there is stronger than the results imply.

One area of growth is something Apple calls Services, which generated nearly $6bn of revenue thats bigger than the Mac and iPad. Services include Apple Music, iCloud storage plans, iTunes, Apple Care, paid apps and Apple Pay commissions.

This year is the first year that Apple has separated the services from the devices in its financial reporting a shrewd move by Cook that illustrates that the company can still make more money from people who arent upgrading their devices. Cook said he expects the Services division to be the size of a Fortune 100 company next year.

Apple expects a slight uptick for the current quarter, predicting that the months from July to September will deliver between $45.5bn and $47.5bn in earnings, potentially breaking the companys mini streak of bad results. Thats in spite of the fact that the iPhone 7, due to launch on 16 September, is likely to come with only modest incremental changes rather than technological breakthroughs (except, perhaps, the controversial removal of the iPhone jack). This may mean theres less of a reason for iPhone 6 owners to upgrade.

Apple is still the largest company in the world, with a market cap of more than $520bn, $231bn in cash, and a quarterly net profit of $7.8bn, which is the value of the <a href=”http://www.bloomberg.com/news/articles/2016-07-20/will-a-spotify-ipo-live-up-to-its-8-billion-valuation” data-link-name=”in” body link” class=”u-underline”>whole of Spotify.

Read more: https://www.theguardian.com/technology/2016/jul/26/apple-earnings-pokemon-go-augmented-reality-steve-cook

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