To hear the nattering nabobs of negativity (I’m a history student) who love to feast on all things Apple, it happened last quarter, and the proof is in Apple’s recently adjusted guidance to the stock market. Sales for the last quarter are not going to be what Apple said they were going to be.
Boom Go Bust
In a word, China. Apple says the drastically changing and uncertain market in China has impacted iPhone, iPad, and Mac sales in the company’s second largest market.
It’s the end of the iPhone, right? Wrong. Well, it’s the end of the iPhone boom, right? Wrong. The iPhone boom ended about four years ago. Uh huh. iPhone unit sales have been on a plateau of sorts for four years. Revenue has continued to climb because Apple’s Services business is growing like crazy, and gross margins have been protected thanks to higher prices.
The iPhone boom is over. So is the smartphone boom. Unless you live in Africa or India, where there remains smartphone growth opportunities, but not for Apple. iPhone is an aspirational brand and many smartphone users in those markets and other developing markets cannot afford Apple’s higher prices. That has not dampened Apple’s ability to gain revenue share and profit share in those markets.
Jason Snell, who should know better, wrote:
The Ride Is Over: Apple Faces the End of the iPhone Boom
That boom mostly ended four years ago. Apple has coasted along on higher prices and Services revenue growth, but there is no boom gone bust; not last quarter. Not now. How about four years ago.
What can we expect of the future, sans boom?
We will spend the rest of our lives in the world of the smartphone, that heady first decade of expansion — from the day the first iPhone shipped in mid-2007 — is over.
So-called smartphones existed before iPhone and Android, but they were not so smart, and not quite so ubiquitous on the world stage.
iPhone changed the course of the smartphone industry. Google’s copycat Android OS perhaps changed it more, but nobody mocks Google or Android for the end of the boom.
Only Apple gets booed, right?
And all the companies that capitalized on that decade — most notably Apple and Samsung — are still coming to grips with the next (mostly boring) phase in the life of the smartphone industry.
Yeah, everyone comes to grips with reality that cannot be controlled, but note that among those with most of the smartphone industry’s revenue and profits, Apple and Samsung own about 90-percent, and most of that belongs to Apple.
As to whether or not we will have smartphones for the rest of our lives remains to be determined. Change happens. That’s why Nokia is an also ran brand, and Apple, Samsung, and Google are industry leaders (sales units, revenue, and profits) not the Chinese knockoff brands.
Wall Street seems to be panicking about Apple, but that’s because Wall Street is focused on growth. Let’s keep some perspective here: Apple is one of the most profitable companies in the world and its revised-down quarter will still be its second-largest revenue quarter of its 43-year existence.
Growth is one of the metrics that many influential investors want to see in a company. Revenue, customer base, profitability, diverse revenue and profit streams often get ignored except by the savvy investor. That’s why Amazon, Google, Facebook, and Microsoft get rewarded on Wall Street while APPL is in the dumpster. Dumpster? Remember, dumpster divers get rewarded, and for every stock sold, someone is buying.
Yes, the iPhone boom era has ended. But it ended four years ago.
Snell comes to his senses with a good perspective on how Apple has changed course in recent years, and his missive is worth reading.
If you are expecting Apple, or anyone else, to come up with a new product category of the size and world-changing scope of the smartphone, I wouldn’t hold my breath. This feels like a once-in-a-lifetime ride.
The boom is over. The boom has been over for a few years. Get over it.