Tech giant Samsung has reported its lowest quarterly profit in eight years this week an indicator to the weakened global economy to hit PC…
Make no mistake, Apple had a very good Q1 , just not as good as many were expecting it to be. And according to analysts, that’s because it’s finally been affected by the same smartphone market maturity that’s hit everyone else.
The quarter saw Apple sell 74.8-million units. It’s a record, but its only one percent up from the 74.5-million units it sold in the first quarter in the year 2015. And when it comes to Apple, people just expect more.
It’s worth noting however that the fact that Apple managed to increase iPhone sales at the same time as it increased the price of the device. As Ian Fogg, Head of Mobile Analysis at IHS Technology notes, “only the strongest companies can raise ASP and shipment volumes at the same time”.
It’s also worth noting that Apple’s managed to show continued growth despite a volatile global market.
“China has had a widely reported economic faltering in the last year,” Fogg says, “but, despite that, Apple has pushed up sales in China by 14%, just as the iPhone prospered in Europe and North America during the economic troubles of 2008-2010. The question is, if China’s economy had not slowed, how many more iPhones could Apple have sold?”
And while many in the media have been keen to suggest that the results are a disappointment for Apple, it’s probably more to do with perspective.
“Some investors are starting to punish Apple for not being able to do the impossible,” says Dr Aleksi Aaltonen of the University of Warwick. “The longer the company keeps breaking its iPhone records, the more likely the following quarter shows that the product has finally peaked. Lots of analysts predicting quarterly sales figures and pondering if the inevitable peaking has finally happened diverts attention from what really matters to the company”.
That said, Fogg believes that things could get more challenging for Apple in the coming years:
“Compared to the competition, Apple’s iPhone performance is still very strong, but there are headwinds in the maturing smartphone market that are finally impacting Apple,” he says. “Overall, the smartphone market is slowing. Apple has resisted these wider market trends, but their competition is as much their own products from years ago as it is Samsung, Huawei or Xiaomi. Apple’s hardest competitor is itself because it must persuade existing iPhone owners to upgrade and buy the current model”.
Fogg also reckons that this quarter’s results are an indication that Apple should probably look to cut its dependence on the iPhone.
“Apple knows it needs to diversify from its dependence on the iPhone<" he says. "Early signs are the new product lines - Apple Pay, the new app-enabled Apple TV and Apple Watch - are growing well, but not yet fast enough to off-set the headwinds affecting the iPad and iPhone. Apple must leverage its vast iPhone installed base to cross-sell these devices to iPhone owners now, while the iPhone is selling well, to set up its business for the long term". Read more: Apple users spent $1.1bn on apps over holiday season
Aaltonen is similarly down on Apple’s newer products, but believes that the real danger lies with bowing to investors rather continuing to innovate:
“Things like Apple Music and Apple Pay are smart extensions to the product portfolio but not the kind of exciting products from which the company lives from. To me, the real reason to worry is if Apple starts trying to appease investors. The company could easily start focusing bit by bit on efficiency and shave off costs here and there to keep investors happy for quarters to come. Given the remarkably steady pattern of results for the last five years or so, let’s hope this is not already happening. Caving in to short-sighted investors would slowly suffocate Apple’s capacity to innovate.
“There are unavoidable ups and downs in tech business that require long-term vision and risky projects to remain healthy. When maintaining a nice, predictable pattern of growth becomes a top priority, there is progressively less room for bold projects and the kind of people who are ready to undertake them in the company. Then, once the company finally realises that it cannot live forever on old products, there are only those people left who are good at optimising the business for investors.”