The Flaw in Apple’s ‘Installed Base’ Metric

Here’s an idea for the new AI-powered Bing: Write the script for the next Apple quarterly earnings call with Wall Street analysts. It wouldn’t be difficult. Throw in the phrases “installed base rose to a new all-time high” and “customers are loving the new iPhone” and you’re halfway there. The same would be true for many other big tech companies, including Alphabet and Bing’s parent Microsoft. As the tech earnings announcements over the past couple of weeks have reminded us, all three companies use earnings calls as an opportunity to brag about their products rather than inform investors about their businesses. (An exception is Meta Platforms CEO Mark Zuckerberg, who deserves credit for being clear and informative on quarterly calls. In media, Disney’s Bob Iger does a similarly good job).

Reciting a well-worn bunch of cliches for an hour every quarter isn’t the best use of anyone’s time. Take Apple, whose executives are expert at using lots of words to say nothing. For seven years they have happily cited the growth of Apple’s “installed base of active devices”—from 1 billion to 2 billion in that time—as a sign of progress. But Apple’s definition of “installed base” isn’t that useful in understanding the trajectory of its growth. When the company first detailed the metric in 2016, it defined it as “iPhone, iPad, Mac, iPod touch, Apple TV and Apple Watch devices that have been engaged with our services within the past 90 days.” However, typical Apple households probably have multiple iPhones, iPads and Macs, if not Apple Watches, which means the installed base number counts the same households numerous times. (The average U.S. household had 2.6 Apple products in 2017, CNBC found in a survey that year).