Apple is experiencing its worst quarter in thirteen years. They also posted their first-ever decline in iPhone sales. In fact, this is their first recorded revenue drop since 2003.
To put it in a word – China. Apple Inc.’s sales have dropped by more than 25% in China. Which serves as a knockout punch for the tech giants since it has been their most important market, after the United States, of course. Apple’s shares have fallen by approximately 8 percent, going under $100 for the first time since February.
Going beyond the numbers
Ahead of Apple’s quarterly earnings report, market analyst Amit Daryanani said “iPhone 7 would be more evolutionary, not revolutionary,” and that’s exactly where the problem lies. Apple hasn’t really had a game-changer with the iPhone for a while now, and with new Chinese brands offering more powerful and durable smartphones for less than half the price, people have started looking around. The fact of the matter is that the buyer’s behaviour across the world is seeing a change. Apple does not command the power it once did. People are looking for a bang for their buck which Apple definitely does not provide. They had a golden opportunity with the iPhone SE, but that opportunity seems to have been squandered by pricing it only a few thousand bucks below the base version of the 6s. However, it is widely speculated that Apple will come with substantial changes with the iPhone 8, supposed to release in 2017, as the iPhone marks its 10th anniversary.
Apple needs a Plan B
Apple said it sold 51.2 million iPhones in its second fiscal quarter, down from 61.2 million in the same quarter last year. It did exceed the analysts’ estimates of about 50 million devices. At this point of time, they must reassure their investors that the drop is only a momentary roadblock and not a glaring shift of consumer consumption. They need to address the fear of their investors that iPhone has, after years of dominance, finally reached a saturation point. “Apple needs to come up with a radical new innovation or product rather than just the current incremental improvements to existing products. This is the only way in which it will reinvigorate sales growth,” said Neil Saunders, chief executive of research firm Conlumino.
They aren’t hitting the panic button just yet.
Apple CFO Luca Maestri told Reuters that the success of iPhone 6 has set a difficult bar to beat. “The iPhone 6 is an anomaly,” he said. However, CEO Tim Cook did tell the analysts that there was an issue that needs to be addressed, admitting that the smartphone market was not growing. Cook conceded that the iPhone 6S was driving customers to replace phones at a much lower rate than its predecessor. “I don’t mean just a hair lower; it’s a lot lower,” he said. “If we’d had the same rate on 6S as 6, it would be time for a huge party.”
But there is more of Apple to come in the future. “The future of Apple is very bright,” he said. “Our product pipeline has amazing innovations in store.”
Apple isn’t the only one fretting.
Apart from Apple, Alphabet Inc (Google) and Microsoft experienced a disappointing quarter as well. Microblogging social media site Twitter also missed their targets by a margin. So it is a cause of concern.
Source- India Times