iPhone Sales: Fuel for the Critics

January 28th, 2016

All right, so maybe Apple isn’t walking on water. But it was a close call. Over the past few weeks, there were loads of predictions that iPhone sales weren’t quite up to snuff, that maybe they’d be flat or there’d be a drop. While it was easy to dismiss those predictions in light of the fact that the critics have been wrong before, this time they were right on. There was a sales increase, all right, but it was real slight.

Now the reasons were many, and vast currency fluctuations and economic headwinds were certainly part of it. It’s also true that smartphones are, in a sense, similar to TV sets. Most everyone has one, and Apple is strictly catering to high-end clientele, or at least people who aspire to have great quality and are willing to stretch a little here and there to pay for it. On the other hand, how much can Apple improve iPhones each year, and aren’t the reasons for users to upgrade becoming less compelling?

The fact is that other handset makers are having even more trouble moving high-end gear. Certainly Samsung Galaxy smartphones haven’t sold in the quantities they used to, meaning sales have dropped. So with relatively flat sales, Apple did mighty well against the competition.

It’s not a good thing that revenue for the current quarter will drop, and you can look at all the excuses, but that means that Apple will have to look long and hard for where the market is going. Is that it? Are things going downhill from here? Well, it’s also true that Mac sales dipped a few percent, although other PC makers reported even larger sales decreases.

The iPad? A 25% sales drop is obviously disappointing. Some might have hoped the release of the iPad Pro would stem the erosion, but it came late in the quarter, and I suspect sales will be higher in the business market, where adoption will no doubt be slower.

Even if Macs and iPhones sell in greater numbers through the year, where does that leave the iPad, and will sales ever stabilize? And will that be at a far lower level?

No doubt, Apple has lots of information about the customer base and the potential for iPad upgraders. That might be what fuels a new growth cycle, when and if it occurs. With many still using iPads from 2010 and 2011, the question is — when? Apple didn’t even bother upgrading the iPad Air 2 last year, as if minor refreshes really don’t count for much.

Besides, tablets are down across the board, and Apple still remains dominant in a market that is no longer growing. So was the iPad a flash in the pan, or does Apple need to refine the product to reach more potential customers who might be interested in a note-book replacement?

After All, the 12-inch MacBook may be the perfect compromise. If you don’t need to connect lots of things, and can suffer through somewhat less performance, and don’t mind paying $1,299 for the privilege, it may be the perfect note-book. Sure, the iPad Air 2 weighs half as much, and the iPad Pro is between the two. But neither can accomplish close to what a MacBook can accomplish for road warriors.

If you just need to stay online, and catch up on email, the iPad may not be so bad. But as soon as the workload becomes more complex, even the presence of a well-featured Microsoft Office on the iPad may not be enough.

Economic downturns aren’t necessarily permanent, and Apple is no doubt working on fleshing out the feature sets for the next iPhones, iPads, and Macs. So it’s quite possible the sales slowdowns will all be history when Apple’s 2016 overall revenue is considered.

By the same token, Apple had a great run, and its sales are still the envy of most companies, even as revenues and profits begin to dip. The company is far larger than it was just a few years ago, and if future growth is slow and steady — meaning barely — that’s nothing to apologize for.

But the critics who have been proclaiming doom and gloom for years will have reason to feel they might have been right after all, even if those concerns are overwrought. Sales would have to crash for real concerns to arise, though I realize the 25% iPad sales dip is fairly significant.

It might have been better for Apple to offer more information about Apple Watch and Apple TV sales. It’s not that sales haven’t been revealed for the latter in recent years, though it’s discouraging that the latest speculation about an Apple subscription TV service conveys the image of failure. If there’s decent growth for either or both, that might satisfy the skeptics and give people more confidence in Apple’s future. It is promising, though, to see services rack up nearly $20 billion in revenue. That’s more than enough for most companies.

Amid reports of problems developing an Apple Car, just what will the company’s next act be? It may be that the auto project, if it is what many suspect — an attempt to develop an electric car — will ultimately come to fruition. Few would assume it’s easy to do, but a few more hints here and there, and more information about Apple Watch and Apple TV revenue, might better convey the image of a company that has it all under control. Surviving indefinitely on products that are past their peak won’t reassure the market — or stockholders and customers who might rightly be concerned that Apple’s star has lost its shine.

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