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Ding-dong, reality calling: iPhone slump is not Apple's doom

Revenues

Their quarterly revenues were "only" $50.6bn.

So their share price gets punished.

I'd be happy if the company I work for had that kind of revenue for an entire year.

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Go

Re: Revenues

As for myself, I'd settle for earning this over 50'000 years, in yearly installments.

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Happy

Re: Revenues

You are right. There seems to be an irrationality in some people's views about Apple being "doomed" because it "only" sold 51 Million iPhones last quarter.

Some facts:

This is the first quarter in the 9 years that the iPhone has been for sale that Apple didn't have a "record-breaking" quarter... If that makes Apple doomed, then what is Samsung (the next largest seller of high-end smartphones) which has been having decreasing sales of Galaxy phones and profits each quarter for the past 2 years?

At last count, Apple makes 94% of the profits of all mobile phones sold worldwide. Is this the sign of "doom"? (Samsung makes about 5% of all profits, and many other companies are struggling to break even, or losing money and dropping out of the race)

SiliconValley.com recently reported that Apple ranks no. 1 by far in revenue, and is making 40% of the profits of the tech industry. Last year Apple raked in $234 billion in sales. Trailing far behind in second place was Alphabet (Google), at $74 billion.

Apple currently gets most of its revenue from iPhones, but in the past that was from the sale of iPods, and before that from the sale of Macs. Apple (unlike other companies that continue to flog the same products) is always adapting and changing its business model to grow. Over the past few years, the revenues from Apple's services have gone from a tiny portion to a huge source of income. In yesterday's financial report, the revenue from services has grown 20%, and is now worth more than the income from the sales of Macs and iPads combined! And it has been reported that Apple is developing additional new sources of income (cars, VR, etc.).

With these facts in mind, only an irrational person would have the misguided opinion that Apple is "doomed". It is an indication of reality avoidance.

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Re: Revenues

"At last count, Apple makes 94% of the profits of all mobile phones sold worldwide."

Wow. Considering Apple's iPhone sales outside the United States are single digit percentages, that's one hell of a markup.

Here's a link (from an admittedly biased web site) on the state of sales in 2015.

http://www.macrumors.com/2016/01/28/samsung-vs-apple-smartphone-sales-2015/

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Re: Revenues

"Doom" is just an attention-grabbing headline - "right-sizing" and "refocussing of strategic direction" (a.k.a. gradual decline) is far more likely.

>> Apple currently gets most of its revenue from iPhones, but in the past that was from the sale of iPods, and before that from the sale of Macs.

True, but Apple was a tiny company when all it made was Macs. It blossomed with the iPod, and as that market tapered, followed up with the iPhone (and to a lesser extent the iPad). Having virtually invented these categories, they had the market to themselves and became amazingly profitable.

The reality for Apple is that there is no new springboard to continue their momentum - smart phones are a commodity item and there is stiff competition. Profitability has nowhere to go but down. iPad never got enough of a lead to truly dominate, and Android offerings dominate that segment.

>> the revenue from services has grown 20%

Very commendable, but that is off a pretty small base. If this is the start of a trend of similar quarters for the iPhone business, services will do nothing to restore profitability (except presumably follow that trend down).

Certainly no sign of imminent doom, but without a "next thing", the golden years of Apple are starting to look to be in the past.

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Re: Revenues

Irrational? Considering Apple's history I suggest it is irrational not to be "very" concerned. After the brilliant first Mac Apple failed to maintain innovation to it's PC platform and floundered. After the brilliant iPhone Apple has failed to maintain innovation to it's smartphone platform and is beginning to flounder.

Apple's success has rested on developing a revolutionary interface and introducing a device that uses that interface. Apple has never been able to figure out what to do next. Apple needs a miracle or it's tail-spinning into a death dive. Steve Jobs is no longer around to rescue Apple...

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Re: Revenues

Something IS rotten in the fruity company - fact is that they have no ideas that will set the US fanbois queuing at the store - absolutely nothing.

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Re: Revenues

It is not nothing, rumour is that they are eying Tesla success and planning on getting a piece of that action.

None of the other phone makers are coming up with anything special either.

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– putting the internet in people’s pockets

Not the phone, but the cheap tariffs and plans. Before iPhone the Internet was unaffordable except for higher level corporate users. The Apple deals with carriers was the game changer.

Yes, the GUI (not invented by Apple, but bought in from Fingerworks) was far better than the existing smart phones (which had existed for over 6 years!).

Apple stuff is overpriced. People are increasing realising it. Also the market is saturated now with smart phones. The Apple Watch is the most crazy priced product. You can buy one (even versions with GSM built in as well as Bluetooth) for less than the price of an Apple strap. The highest cost part in a larger phone is screen. Small screens (like in a watch) are really cheap.

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Re: – putting the internet in people’s pockets

That's not entirely true. The first iphone tarriffs on O2 were actually more expensive than comparible phones from Nokia & Sony Ericsson.

It may have got people in to smartphones and using the internet but it wasn't cheap by any means.

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Re: – putting the internet in people’s pockets

Oh, and the original iphone was GPRS only, so you were never going to use a lot of data at that speed anyway.

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Anonymous Coward

Re: – putting the internet in people’s pockets

YYAAAAWWWWNNNN.

How long have you been banging the same old drum? "Apple stuff is overpriced"? No, you're just a tight arse. Look, you get what you pay for. Don't like it it? Don't buy it. As for the watch, I bet Rolex wished they enjoyed a $6 billion flop that was "cheap" to make. (A products cost is not a direct reflection of the BOM, by the way.)

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WTF?

Official Apple Strap - £39 Third party ones ~£10

EBay's finest Chinese smartwatch (128mb ram - yes MB) ~£30.

I know which one will still work after a year.

And why are you ranting about watches when the piece is about Phones?

You may think Apple are expensive, however once you factor in ease of use, lifespan, quality and resale value millions of others think its a trade-off worth making.

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Resale values an important point. Be interesting to see some numbers on it in the same way you get depreciation figures for cars.

So many of these articles just draw up conclusions without any facts. iPad sales are down. I'm seeing many customers switching from iPad to MS Surface. Too small a sample to be significant, but articles like this don't really help.

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"You may think Apple are expensive, however once you factor in ease of use, lifespan, quality and resale value millions of others think its a trade-off worth making."

Hmmm

Yes they are relatively expensive but no more than a S7 Edge or the like.(which I wouldn't buy either.)

Ease of Use :- totally subjective and dictated by the size of the phone, what you use it for. and can it be customised to my tastes.

Lifespan :- As long as the fixed battery, and fixed memory allowance holds out.

Quality :- again subjective. I prefer rugged kit over designer corners.

Resale Value :- Yes probably better than any of my old phones, but I always keep the last one as an emergency backup anyway.

My personal trade off is to have my phone on a contract and every three\four years take the upgrade option to an older cheaper and possibly free handset.

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Anonymous Coward

third party stuff !

You need official stuf if it connects.

Third party stuff has a habit of being disabledby Apple at the next OS fix.

Itis amazing what they can turn off. Hell, fix an iThing the wrong way and Apple may even brick it foryiu!

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Anonymous Coward

"EBay's finest Chinese smartwatch (128mb ram - yes MB) ~£30."

And the Metro newspaper is free...

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Anonymous Coward

When the discussion descends to the scrapers and saver having their say on a tech blog, it's time to tune out. Jumping through hoops to save a couple of quid is a fools errand.

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Re: third party stuff !

"Third party stuff has a habit of being disabled by Apple"

True enough. How many 3rd party devices were, ipso facto, disabled when Apple changed the power/data connector? A friend of mine kept her 'Tower of Power' speaker with iPhone dock limping along for a short while (like 3-4 weeks) by buying a hideously expensive adaptor from Apple, which put extra strain on the connector (the old iPhone used to snuggle into it's shaped cradle. The new one stuck up like a brick onna stick), eventually rendering it irreparable.

And 6 month old BMWs suddenly had connectors for the sound systems which were little more than useless. Yes, I know you can use Bluetooth, but you can't charge a phone with Bluetooth.

I wonder how long before we go through the same forced redundancy when third party devices with Lightning connectors start to become ubiquitous.

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Re: third party stuff !

The fixed battery is just not a problem for phone longevity. A 12 year old can replace an iPhone battery with a £6 replacement in 5 minutes. People are solving the on-the-hoof charging problem with power banks.

As for BMW useless connectors, adapters.

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Can we have some innovation please Apple

The iPhone was innovation at its best.

The iPad was moderately innovative - lets face it it's fundimentally just a big iPhone - but it did spawn a whole new market which never existed before (Windows tablets were cack at the time).

The watch is innovative in that it's never been done before, but what's the point of a watch that's not waterproof and needs recharging daily? It seems to be a bit of a poseur's trinket rather than genuinely useful.

The Mac's are now dull. Little innovation going on except for making them more proprietary than ever. Making them thinner isn't necessary nor innovative. Still need to change SSDs periodically, such as when flogging the thing, but Apple has this locked up.

The Apple telly thing is just getting you to pay for downloading more Apple stuff and locks you in to their expensive tunes/store. It's also up against Amazon's stuff which is cheaper.

Lets hope that Apple are about to sort out in-car infotainment systems - 'cos the car manufacturers are making a hash of it. Lots of innovation there and a high-value market.

On the whole Apple's getting a bit "meh".

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Re: Can we have some innovation please Apple

Apple innovate a massive amount in ways most customers are only peripherally aware of. Here's a small but fascinating and indictaive case in point about the new iPad Pro 9 display: http://blog.iconfactory.com/2016/04/looking-at-the-future/

Arguably Apple are at fault for not communicating their innovation but then most of it is in either software or hardware engineering and that's not sexy. Still, Register readers might be expected to care about that kind of thing but perhaps not to the extent that it spoils the rant

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Re: Can we have some innovation please Apple

"The watch is innovative in that it's never been done before, but what's the point of a watch that's not waterproof and needs recharging daily?"

Huh? Apple was a couple of years late to the watch party.

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Re: Can we have some innovation please Apple

I think his point was that they were first to market with a watch that isn't waterproof and needs recharging daily.

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Re: Can we have some innovation please Apple

@BurnTOffering

Do you really think Apple developed that display? My guess would be Samsung...

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Re: Can we have some innovation please Apple

>> Apple innovate a massive amount in ways most customers are only peripherally aware of.

Er.... no. We can expect displays to keep improving as technology allows. This "amazing innovation" is just Apple marketing its next display tech. The competition will counter with their "amazing innovation" in display tech. It wont create a new category, or blow away all of the competition in an existing one. All it really serves to demonstrate is that innovation at Apple today is a shadow of what it used to be, and wont be enough to sustain the success they have enjoyed in the past. Only time will tell...

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Re: Can we have some innovation please Apple

"The watch is innovative in that it's never been done before"

What? So you mean that Gear2 Neo I had on my wrist for 2 years before Apple invented the Smartwatch was just an illusion? I'm both shocked and disheartened. I truly thought it was real!! I dreamt I made phone calls on it, listened to music, played games, even, on one nerdishly sad occasion, watched a video on it. And it turns out that all this time it was just an hallucination.

Bugger!

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Innovation changes the game; innovation is not incremental technological development

So, lets get this right. There's like this screen thing which is really good (i.e. the retina screens fitted to all iPhones for the last several years), and the "innovation" is fitting a screen which is really good, but three microns thinner.

Shirley innovation is developing a truly 3D experience. Or one which at least emits light outside of our visual range. Or something *innovative*. Just incrementally enhancing a screen to be "a bit better" isn't innovative.

Innovation is somewhat intangible. Innovation in this context is something that's game changing and the whole market follows. The original iPhone was staggeringly innovative. Never before had we seen the gestures or such a simple interface. It was an utter game changer as copied by all subsequent manufacturers. It was so innovative that it immediately lent itself to the tablet market from which an entire industry was born.

The fingerprint reading home button. That's innovation. (and you can easily use proper strong pass phrases as opposed to 9999 numbers which everyone can see you enter)

The current incarnations of iPhones are just plain "meh". Slightly bigger. Yawn. Slightly thinner. Yawn. Slightly better camera. Yawn. Slightly more breaky in your pocket as a result of this "innovation", yeah right. No doubt the next one will be a screen that goes to the edge which you can't grip tightly.

And the watch... What's the point of a watch that can't stay permanently attached to your wrist no matter what you do? Oh, leave it in the swimming pool locker or on the beach to be stolen... You want to use it to log your swimming exercise, water temperature, etc., but you can't. You couldn't take it camping or hiking as the battery's too small. That's the definition of a fashionable trinklet.

Agreed, it's early days for the watch, but it's nowhere near as innovative or game changing as the original iPhone or iPad.

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Re: Can we have some innovation please Apple

You're missing the point. You could try reading the article. The amazing innovation is spending resources and time on software engineering to provide system wide tools for professional colour management for those who care about that kind of things (eg photographers, designers and artists) and not shouting about it so ignorant people can carry on bargling about Apple shiny toys. Of course Samsung et all also do similar things but you'd think Reg readers of all people would understand that any new smartphone is a product of many, many amazing and uncredited incremental innovations produced by hard working and talented engineers, programmers, designers, etc. We are living in an age of miraculous technological innovation and the response is tired, hackneyed rants about rounded corners. You lot wouldn't recognise innovation if it was shoved diagonally up the direct channel to your brains.

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Re: Can we have some innovation please Apple

Innovation on a phone display would only have to be one that can be easily seen in direct sunlight whilst not needing any power for a backlight. This would be many times more useful than cramming in more pixels than our eyes can usefully resolve or making the phone bigger than we can fit in our pockets.

And while they are there, make the screen able to survive a drop onto concreted from 2 metres. This would be more useful than curving the display round the sides of the device.

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WTF?

One of the problems of high market share is that it can bring in high operating costs. So if you are churning 50 billion of whatever currency a fixed overhead of say 20 billion is rather less important. Should the churn-over drop, can the fixed overhead also show the same flexibility? In apple's case it probably does not make a whole difference since the margin is so high they would have time to adjust to falling markets. Financial markets hate uncertainty so they wobble as soon as look at you. So the marketplace for certain things is showing signs of being finite. Those who want them in the main have them. Those like me who are still wanting to know what the fuss was about still cannot find where the magic is hidden. Many of us would still be happy to settle for ten seconds of apple's cash flow, but we will see how the market evolution pans out.

The end of the world is certainly not due.

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Under Jobs, the company innovated. Under Cook, they copy. Why haven't shareholders booted him out?

It's bad that sales have dropped. The iPhone 6se [?] isn't selling. The latest iPad isn't selling. The iPad Minis took away sales that could of had people buy the higher revenue iPads [regular sizes].

Too many security issues of late.

El Capitan started as a dud with major upgrading issues. Took 2 further updates to correct [most?] the issues.

Dump Cook.

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Anonymous Coward

Possibly because he's made it the most profitable company on the planet, starting paying dividends and increased the share price (save the last 18 months or so which is Wall Street manipulation)

Just hazarding a guess as to what might matter to shareholders.

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How is it "bad" that sales have dropped? Can they be expected to keep increasing forever when they are already by far the most profitable public company on Earth? Jobs died a few years ago and sales kept growing and growing since, does he get the credit for all the sales growth, but this last quarter's results are now Cook's fault? What if they set new sales records this fall with the iPhone 7, will you give Cook the credit or will that be Jobs innovating from the grave?

NO ONE has been innovating in smartphones for years. Arguably there hasn't been any real innovation since the original iPhone, every phone since by Apple or by Android OEMs has been incremental tweaks like better display, better camera, more performance and so forth. It isn't as if everyone else is innovating and Apple is being left behind, unless you think having a bit higher resolution than the iPhone, or a few more megapixels in the camera, or some here today gone with next year's model mostly useless feature like IR blaster or wireless charging counts as innovation.

Does Apple have anything major coming where they can innovate again, like a car, and if so will it be a hit or a dud? Who knows, but even if Jobs was at the helm there is no guarantee it would be a hit. I'll agree that with him in charge the odds would be improved, but he was unique as he was more of a visionary who saw where he thought they should go and drove them there. Cook isn't that but neither is anyone else, other than maybe Elon Musk. Even with Jobs he might have had a concept in mind and pushed people toward it, but it was still thousands of Apple employees doing the actual work to make it happen, and they still have them, multiple someone elses like Jony Ive will have to combine to fill Jobs' role. Replacing Cook wouldn't help there, unless Musk is available for hire which I kind of doubt.

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Under Jobs, the company stole. Under Cook, they copy

There, FTFY

You're welcome

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Car Play

I'll gladly keep funnelling money towards Cupertino if it means Car Play becomes the de facto standard for car integration. This, not the fabled 10ft living room interface, is the final frontier for Apple. In-car systems are almost universally awful, pretty much the way smartphones were pre-2007, and the whole thing is crying out for "disruption".

Even the v1 implementation on my wife's VW shows the potential, it's far better than the satnav that could be specced with the car (something like £700!) and requires no updates etc.

I've no doubt the Android Auto is also good in the usual Android fashion, but the iOS UI is much more refined and consistent and works extremely well on a 6-7" touchscreen - quelle surprise.

The sooner the screen in the car becomes a dumb display for my phone the better for all concerned.

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Re: Car Play

Why is the screen in your car being a dumb display for you phone "better"? Are you one of those who believes the lie that hands free calling and dictating texts isn't dangerously distracting?

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Re: Car Play

> Why is the screen in your car being a dumb display for you phone "better"?

Ever got your in-car sat-nav upgraded?

Exactly. They cost insane amounts of money, may or may not get software-updates (sometimes costing substantial amounts of money) and usually can't be exchanged for later, more intelligent models.

It would be cool if cars just had a slot where you could fit an iPhone (or an iPad Mini) and have that serve as radio, satnav, music-player, control-panel for other stuff in the car. This is really a spot where Apple could hurt the current crop of automobile manufacturers most: produce a car where the electronics can be upgraded for less than the purchase price of a new car.

The amount of grey energy that goes into producing a car is enormous - often much more than the amount of fuel it saves over the rest of the lifetime of the previous model.

Treating the car as a dumb "shell" with the electronics being its interchangeable brain would be a bold step.

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Re: Car Play

"This is really a spot where Apple could hurt the current crop of automobile manufacturers most: produce a car where the electronics can be upgraded for less than the purchase price of a new car."

Dude, don't kid yourself. If Apple produce a car then you won't be able to replace a tire without a $300 propriety screwdriver. Expect them to stick with their usual business model - built-in obsolescence of a maximum of 5 years and software updates that disable the brakes in older models.

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Anonymous Coward

Not sure that this isn't intentional

They're doing a massive stock buyback program, and their stock falls in value. This means that the stock buyback program will benefit. Is this a coincidence?

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Re: Not sure that this isn't intentional

How can you intentionally sell less product? Companies have a few ways to do stock buyback programs, they can do it on a preannounced schedule price be damned, they can do the same but suspend sales when the price is too high (that's how Buffett likes to do it) or they can announce new buybacks when they know the price will be low - i.e. when they know the price is going to dip.

The third one is true here, they announced the bigger buyback because they knew the price would drop. It will probably stay down through the summer as they will fail to match 2015 Q2 and Q3 numbers as well. Whether it will stay down in the fall depends on the reception for the iPhone 7, as well as factors beyond their control like the dollar's strength and the health of the Chinese economy.

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Sadly the stock market is responsible for ever increasing short-term thinking.

Everything comes down to quarterly results. Apple is still an absolutely cash rich behemoth and you've got people fanning the flames of its impending doom simply because of a really minor fluctuation in sales over a short time in a massive economic mess.

China's economy is generally rocky at the moment and I suspect a lot of the bad news is being creatively covered up by its absolutely unfree media / PR arm of the state.

The global economy general is also not really back in rude health either. There are massive problems still ongoing almost everywhere, even if there are a few bight spots.

But, in general this idea that if a company isn't producing quarter-on-quarter growth that it needs to have its shares panicked upon just shows the absolute stupidity of modern stock trading. This is why we have bubbles and busts all the time. There's little / no analysis.

It's all number goes up YAY number goes down BOOO!

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"Sadly the stock market is responsible for ever increasing short-term thinking."

I don't think it is "ever-increasing". What has changed is the sheer number of people who are exposed to the stock market (they always were via pension schemes but did not know it.) But the Wall Street Crash certainly wasn't caused by economists trying to think beyond a 5 year horizon. Or even next Friday.

The problem is rather different. The banking sector has grown far too big, right at a time when technology has solved a lot of big ticket problems so there just aren't the opportunities for growth out there. In an effort to justify their enormous incomes, bankers are creating bubbles, and "tech stocks" have been such a bubble for years.

There wouldn't be a problem with Apple if it wasn't for the uncomfortable feeling that the tech bubble is about to burst, the market is maturing, and companies in negative profit with high valuations (Twitter) are about to see their share prices go realistic - like zero. Apple is the company that the "analysts" point to as evidence that companies can go from struggling to wildly successful, so buy shares in this profitless company because it is somehow like Apple. If the Apple bubble bursts and it becomes clear it is the only really large, profitable and successful company in the sector, its shares will correct down but the rest of the industry will go titsup.

It's a bit like the huge shocks that hit the computer industry when IBM suddenly recorded a multi-billion loss.

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Re: "Sadly the stock market is responsible for ever increasing short-term thinking."

Apple is immune to any tech bubble burst because they are trading at a below market P/E. It will be the companies with highly inflated P/Es like Microsoft and Google that have to worry a lot more. I'd say Amazon also as their P/E is ridiculous, but their investors seem to not give a damn about ever making any profit.

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Stop

You know, sometimes it *really* is that simple ...

Most people who *want* an iPhone have one. So the market is made up of:

1) People who want an iPhone, but can't afford it (by definition of no interest to Apple)

2) "My first iPhone" - as people grow into them

3) "My umpteenth iPhone" - for people who lose/break them.

4) "My new iPhone" - the shinyphiles

Can I have my £100,000 consultancy fee now ?

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Phones, or Apps?

The Article says 66% to "Phones" with Apps and other stuff making up what remains.

But I dare say part of this is down to App revinue. Not just the profit from the AppStore itself, but also from people getting new phones just so they could run the Apps they felt they wanted or needed.

Fast forward to now, What new and crazy app has came out that really requires updating your phone hardware?

We have Chickens and Eggs now. No big reason to get new Eggs or Chikens.

It reminds me of the PC Market. There was a time when you felt it was a requirement to update every year, then every two years, it moved to four years, and now something that's six years old feels more than ample enough. Phones have in many ways hit this mark now, unless there is some sort of really spectacular addition to them then demand is not going to rocket.

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Headmaster

Because I Said So.....

Fickle Apple fanboys you have nothing to lose but your chains. Let someone market their products like Apple and we'll all witness the demise of another Oligarchy.

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Buying for growth

The fatal sign is that Cook thinks they can get growth by acquisition. This means two things.

First that they are at a loss for ideas, and have become passive spectators of markets and trends.

Second, they have no idea that the skills required to make a success of acquisitions are completely different from those required to run their current business. The idea is totally out of touch with reality.

Its been a good ride, but we have now gone over the top, and the next way is down. The bigger the acquisition, the more hope they put into it, the steeper the path down.

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Linux

Re: Buying for growth

The best Cooks are innovative, efficient, observe the seasons and use what's readily available. They are less concerned with the 'visual' experience than nourishment. Tim Cook would require a team of consultants, marketers, industrial designers and legal counsel to boil an egg.

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Re: Buying for growth

I'd speculate that Tim would only buy specific properties that are IP rich, have high margin potential, and be both complementary to Apple's ecosystem and relatively easy to fold into Apple's corporate structure. But the mantra would be buy low with borrowed money.

There are also many markets like health, fitness, security and home control that could provide small IP rich acquisitions, but not to the tune of of the price Google forked out for a certain home thermostat company.

The only growth by acquisition strategy I can see would be Apple buying some media distribution or small media creation companies, aka competition for Netflix, et al to enhance iTunes.

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