36 Monday May 2 2022 | the times
Business
television and fitness platforms. During
the second quarter of the group’s finan-
cial year, the services business generat-
ed record sales, 17 per cent higher than
the previous year. That helped to drive
the 9 per cent growth in overall revenue
for Apple during the three months to
the end of March to $97.3 billion, well
above the $94.1 billion that analysts had
been expecting.
The services business is becoming an
increasingly important part of inves-
tors’ earnings expectations because ittempus:
focus on
tech
King of tech giants shows little
In the first of a three-
part series Tempus
Editor Emma Powell
looks at the seemingly
relentless rise of Apple
Faith in America’s technology giants
has rarely been tested thanks to easy
money flooding financial markets after
the 2008 crash, the rapid mass adoption
of the internet and, more recently,
immunity to the impact of global lock-
downs. But investor zeal is waning and
there has been a seismic shift away from
some of the largest global tech stocks
since the start of the year.
Rapidly rising inflation and the
prospect of a faster-than-anticipated
increase in interest rates has caused a
wholesale sell-off in stocks with high
future earnings expectations bakedinto lofty valuations. Since the start of
this year the S&P 500 has fallen by
12 per cent and the tech-heavy Nasdaq
Composite index has declined by a fifth.
Quarterly earnings figures released
in recent weeks have coincided with
even deeper concerns: that there are
more fundamental barriers to earnings
growth. A warning from Netflix that it
had lost subscribers for the first time in
a decade last month caused the stream-
ing giant to lose more than a quarter of
its market value in one day. Meta, the
owner of Facebook and Instagram, re-
ported its slowest quarterly salesgrowth in a decade amid rising compe-
tition. Meanwhile, Apple has warned of
a much bigger hit from supply chain
disruption to come this year. Investors
have been left wondering, has the
bubble truly burst for these American
success stories?
In the first of a series focusing on the
opportunities and challenges facing
three of America’s most largest tech
stocks, we take a look at the king of the
big tech companies, Apple.
Earlier this year Apple fleetingly
became the first company to reach a
$3 trillion valuation, less than 18
months after vaulting the $2 trillion-
mark. The iPhone maker, founded in
1976 by Californian college dropouts
Steve Jobs and Steve Wozniak, has
delivered the highest share price return
of any member of the exclusive Faang
club — Facebook (now Meta), Amazon,
Apple, Netflix and the Google-parent
Alphabet — over the past 20 years, to-
talling 45,155 per cent. An investor put-
ting their money into Apple on the day
of the stock market crash in early 2020
would have still almost doubled their
money, despite the recent sell-off.
Analysts attribute Apple’s success to
its brand strength, the deep inroads it
has made into the Chinese market and
an ability to reinvigorate a suite of prod-
ucts and services that has built a high
customer retention rate. “It’s the most
loyal customer base in the world,” said
Dan Ives, an analyst at the US broker-
age Wedbush. “Their success has been
innovative product development and
that develops a halo effect.”
About 98 per cent of customers who
purchase an iPhone, which accounts
for more than half of revenue, go on to
buy another when they come to up-
grade their handset, Apple estimates.
During the first three months of the
year, a 5 per cent increase in iPhone
sales indicated that the tech group was
still enjoying the benefits of a supercy-
cle in iPhone upgrades that began with
the release of the iPhone 12 in late 2020.
Growth in Apple’s hardware sales is
more impressive given the strength of
prior year comparators, said one Apple
shareholder. “Look how few companies
have got through those comps, Netflix
being a case in point, and have got
through the pandemic period un-
scathed, and so far Apple is definitely
one of those companies,” they said.
But great investor hope also lies in
faster revenue growth from its higher-
margin services business, which sells
software through the App Store, online
storage space via iCloud and generates
subscription revenue through its music,The big Apple
period in 2021, driven by the surge in oil
prices, the Saudi General Authority for
Statistics said. Output in sectors out-
side of oil rose by 3.7 per cent compared
with 4.7 per cent at the end of last year.
Gulf oil-exporters including the
United Arab Emirates and Qatar have
also benefited from the spike in oil and
gas prices. The price of Brent crude
reached $107 a barrel this year, having
risen by 50 per cent in the past year.
The global recovery from the pan-
demic will slow in many countries
because of the war in Ukraine, forecast-
ers at the International Monetary Fund
said. The IMF cut its forecast for global
GDP growth by 0.8 percentage points
to 3.6 per cent last month, lowering its
expectations for the UK, US, China and
India as inflation pushes up costs and
weakens demand.Saudi Arabia booms as oil
prices weigh on economies
Saudi Arabia’s economy is growing at
its fastest pace in more than a decade as
oil prices boom while many economies
across the world brace for economic
slowdowns.
The price of oil and gas spiked imme-
diately after Russia’s invasion of
Ukraine at the end of February amid
concerns that supplies would tighten.
Russia is one of the world’s biggest
exporters of crude oil and a key supplier
of natural gas for Europe.
The oil and gas sector accounts for
about half of the output of Saudi
Arabia. Its pace of growth was the
fastest since 2011 in the first three
months of this year.
Gross Domestic Product (GDP) rose
by 9.6 per cent compared with the sameArthi Nachiappan