Some industry followers, tech critics, market analysts, and other with little skin in the game say that we’ve reached an event horizon called Peak Apple.
Maybe yes, and maybe no, but I suspect, upon further analysis, that Apple’s peak or current troubles run deeper than just Apple. Look around. It would seem that many technology companies have hit a so-called ‘peak’ and by peak, I mean slower to no growth; with some contraction in revenue and profits. Why?
It’s The Technology Glut
Why are oil prices down to lows not seen in many years? There are a variety of reasons, but lets sum it up to supply met, the exceeded demand. With tempered demand, and continued supply, prices can only do one thing. Go down.
Apple’s problem is as much a consequence of a technology industry slowdown as anything. Everyone who wants or needs or can afford a smartphone already has one. That alone will slow the industry because growth requires, 1) turnover of product, 2) new customers. The world isn’t in danger of having no customers, or no new customers, but saturation exists for a reason. The tank is full. The pipeline is full.
Over the past month or so we’ve witnessed dozens of high powered technology companies miss their expected numbers on Wall Street and Apple is included in the list. As the world’s economy ebbs and flows, technology gadget makers will be impacted, and the recent ebb has affected our favorite Cupertino, CA Mac maker.
As with most companies facing such saturation, demand can be stimulated– for awhile– by dropping prices, but lower prices also mean lower gross margins which often translate into lower profits. Apple– like other tech companies– is experiencing exactly that phenomenon. PC makers are hurting, too, with revenue and profits tumbling more than in recent years as the tech slowdown, well, slows down more.
The Full Tank Syndrome
Technology gadget makers are experiencing a market that can only be described as a full tank; a saturation of sorts, all part of the traditional cycle of ebb and flow in the marketplace. It may get a bit worse before it gets better but it will change for the better (perhaps dependent somewhat upon the U.S. presidential election whereafter Apple will be required to move its iPhone manufacturing back to the good old U.S. of A.) because the market expands and contracts, almost like a breathing creature. New customers come to the market. Older products wear out and need to be replaced.
Will Apple grow again?
2016 won’t be a great year and the contraction has already begun, but Apple’s growth is not– unlike Google which is dependent upon search engine advertising– limited to iPhone. The Mac also has cycles. The iPad probably has one, too, but no one is exactly sure what it is. Surely the company is working on other products which will aid growth, but the math doesn’t favor segments like the Apple Car or Apple Watch because those numbers over the next few years will be nominal at best.
For now, the tide is going out. That’s what happens. And it will come back in. When? Unlike the tide, wholly dependent upon lunar cycles, Apple’s fortunes are not so predictable.