Making Sense of iPhone Sales Projections

January 22nd, 2016

When you read the current chatter about iPhone sales for the December quarter, it doesn’t appear so favorable. If there’s going to be any sales increase at all, it’ll be slight. But whatever that figure, there will be a larger percentage of sales of cheaper gear, meaning Apple’s high average sale price will be a little less high.

Where is the source of this information? Well, supposedly some of it comes from the supply chain, where leaks indicate Apple has cut back orders, meaning fewer iPhones are being built perhaps to satisfy a lower demand. That information is taken as gospel. What’s not being considered is what Tim Cook said a couple of years back, that the metrics from a few of Apple’s suppliers can’t be applied to the total sales picture. The long and short of it is that Apple’s ordering patterns, and the reasoning behind them, may not be at all obvious to an outsider. So it’s wrong to take a little bit of information and make assumptions.

But that’s precisely what’s being done, as various so-called industry analysts are reaching all sorts of conclusions that aren’t terribly favorable to Apple. Of course it’s not that Apple is suddenly going to respond. This is the quiet period ahead of the announcement of the financials for the December quarter next week. At that time, Apple will give projections, expectedly conservative, for the current quarter. So we’ll know what’s really going on, including the company’s outlook for the near term. Will, for example, the financial headwinds in China, where slower growth is a certainty, impact Apple? Or will it all hit other companies first?

It’s not that that other company that got so much press as a leader in the industry, Samsung, has done so well. Revenue and profits haven’t matched the level the company projected, which should fuel speculation that Samsung is in trouble. Instead, after some initial coverage, it’s mostly the sound of crickets since then.

The main focus continues to be on Apple.

As the stock market goes down amid all the problems of declining oil prices, the financial situation in China and elsewhere, Apple’s stock price has understandably taken a beating; the same is true for the rest of the market. It’s been running in the mid-to-upper 90s in recent days. That may not seem so favorable, but it’s not that Apple has said or done anything to warrant stock market skepticism.

If you track the growth of Apple’s stock price, you’ll see that it’s always been interrupted with downturns. It then resumes the upward path and often reaches a record price. But once a plateau is reached, whatever it might be, the stock price goes down again.

So where does that leave iPhone sales.

Well, the iPhone 6s and 6s Plus are in somewhat the same situation as the iPhone 5s, the previous occasion where customer demand was said to be tepid. In both cases, they were alternate year upgrades were the iPhone looked the same, but newer features were added. Since they weren’t perceived as huge upgrades, it was assumed sales must be bad. After all, why should people upgrade anyway? Wait for the following year where major changes would occur, at least externally.

Unfortunately such conclusions ignore the facts, which is that most people aren’t buying new iPhones every single year. The upgrade cycle might be two years or longer, in which case someone who currently owns an iPhone 5s would find the iPhone 6s and its bigger brother to present huge changes. Of course, the critics were skeptical about the iPhone 4s too; you know, the one where Siri was introduced.

I agree that it’s really difficult to predict what’s going to happen with iPhone sales in the last quarter and this one. There are too many financial whirlwinds to track, and certainly Apple can’t grow sales by huge numbers indefinitely. Sure, even if sales are growing at a good clip in China, it has to taper off inevitably. The growth curve will inevitably slow down before everyone on the planet owns something with the Apple branding on it.

There is other news that’s more positive. Despite the slowdown in PC sales — and Windows 10 isn’t helping at all — Mac sales reportedly rose in the last quarter. That comes from both Gartner and IDC, both of whom routinely underestimate Mac sales. So it does show promise.

As to the iPad: Will the arrival of the iPad Pro, and the possible start of an upgrade cycle from folks who bought the very earliest models, mean that sales will resume the upward path? I haven’t seen much meaningful speculation about it, although I read one estimate that sales of the iPad mini topped the other models. But that doesn’t tell us about the totals.

As it stands, those who expect relatively flat iPhone sales may be right after all, or Apple might do noticeably better. In the latter case, it’s a sure thing the critics won’t apologize for getting it wrong. They never do.

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