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  • Apple Losing its Luster? Not Yet!

    November 29th, 2016

    When Apple first announced that iPhone sales had dipped in the March quarter, you can bet that the critics were salivating. After predicting doom and gloom for the company for so many years, maybe they weren’t crying wolf after all. Maybe the iPhone would lose sales big time, and become a niche product in the marketplace. Is Apple fated to become the next BlackBerry?

    All right, that’s pushing it.

    But it’s really easy to talk about crumbling demand for iPhones — and Macs for that matter — considering recent declines in sales. And don’t forget the iPad. Aren’t tablets passé?

    Such “nasty” details may seem to verify the claims from some so-called industry analysts and tech pundits who always seem to find excuses to demonstrate that Apple is doing something wrong, and that the company’s leadership, particularly CEO Tim Cook, just isn’t smart enough to figure it all out and do what they really want Apple to do. Besides, isn’t he the operations guy? What business does he have leading a company that relies on cutting-edge innovation?

    So what do they want Apple to do? Well, make cheaper Macs for one. Why should Apple keep the majority of the high-end PC market to itself, when it can go head-to-head with Dell and HP and sell the same cheap commodity hardware? Why earn big profits when they can sell lots of gear with margins of just a few percent, if that?

    The iPhone? People want cheap, so make a $199 model, discount it with two-for-one offers, and sales will triple. And profits will tumble.

    That’s part of it anyway. Mostly it’s about cheap, or revolutionizing a market every year or so.

    And why hasn’t Apple licensed its crown jewels, iOS and macOS so that other companies can build commodity hardware and spread the joy? Of course, the critics forget that Apple gives the operating systems away on its own gear. Profits come from the sale of hardware and not operating systems, so the only impact of such a foolish decision would be lost sales. Apple went through some of that during its brief foray into Mac OS licensing in the mid-1990s. Several companies, such as Motorola and Power Computing, built cheap PC clone-style hardware running the Mac system software. Rather than expand the market, they competed directly with Apple’s higher-priced machines, although they offered poor quality control and irritating bugs that weren’t always caused by the OS.

    Fortunately, Steve Jobs helped Apple come to its senses in 1997, as he sliced and diced unneeded or poorly performing stuff, killed OS licensing, and set the company on a stable, profitable course. But it didn’t happen overnight.

    So when the critics want Apple to revert to what it was when it was in danger of going out of business — or being sold off at reduced prices to a competitor — you wonder what they’re drinking, or smoking.

    So is it true that Apple’s best days are behind it? That doesn’t appear to be the case, since the company’s financial guidance for the current quarter indicates a slight sales increase. Apple doesn’t engage in wishful thinking, and such estimates tend to be conservative. But it would indicate pretty high sales of the iPhone 7 and the iPhone 7 Plus.

    Now demand may well indicate this may happen. Although you can pretty much find the iPhone 7 you want at an Apple Store, or other vendors, you may have to wait another three weeks or so for an iPhone 7 Plus. Apple is currently listing availability by December 22 if you place your order now.

    Supposedly the iPhone 7 was intended to be an “s-type” or minor upgrade to the iPhone 6s, which didn’t do as well as its predecessor after the first full successful quarter. So what’s going on here? Why the tight supplies? Well, industry analyst Gene Munster, of Piper Jaffray, reports the iPhone as No. 1 on its annual holiday wish list survey. The 7.2% rating, based on responses from 1,000 consumers, is just behind the 2013 total of 7.7%. But it’s also way ahead of the iPhone’s position in 2015, 5.2%. Don’t forget the mixed performance of the iPhone 6s, so this may be significant.

    Oh, and number two on the list is the MacBook, at 2.15%. Of the top 10, there’s nothing from Samsung or Microsoft. Number four is the “Smartwatch” category, but its not subdivided by brand, so maybe Samsung would be in there if individual models were included. Still, at 0.9%, it’s substantially lower than in 2015, where it was 1.6%. Does this portend a problem with Apple Watch sales? Since the results don’t name brands or individual models, there’s no way to know.

    Now compare that to Target’s Black Friday sales report, where new TVs were moving at a speedy clip, and the iPad Air 2 was in high demand. But that’s just one retailer. It may well be that Piper Jaffrey’s survey reveals a wider sampling, but again it’s still a wish list, not a sales report. When push comes to shove, would-be customers may be influenced by special deals and more immediate concerns, such as the feeling that the family TV has seen better days, and wouldn’t one of those nifty new 4K sets look great in the living room?

    The fact that Apple products are way ahead of the competition in that wish list, however, clearly indicates there’s lots of potential for the brand’s ongoing success, at least for this holiday season.



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