Apple Reports First Quarterly Sales Drop Since 2003 (down 22.3%)
iPhone sales post first year-over-year decline. The iPhone accounted for 65% of Apple’s total revenue in the March quarter. Shares of Apple, down 20% over the past year, fell 7.6% to $96.41 in after-hours trading. Obviously bad news for investors and the market. But c’mon they’ve been riding this wave for way too long. iTunes was not created by Apple, MP3 pave the way for the iPod, Blackberry set the foundation for smartphones & iPhone. The same could be said for the tablet and smart watch. Not even the stylus or revolutionary $99 Apple Pencil is original. They don’t invent much and they’re just average on the innovation front compared to the Googles & Facebooks of the world.
The question is, what’s their secret sauce? Screen size! No I’m kidding. I don’t think it’s the OS or the UX. The packaging is nice and the commercials are clever. The real secret is that Apple knows how to do an amazing job at branding and marketing their products. They built an army of raving fans. Much like Starbucks, Virgin and others. They create a story and provide consumers with a feeling of happiness. This means they can grow by making few changes to their products. Most of which are manufactured in a giant sweat shop in China (I mean state of the art facility). They even get to charge much more than their competitors, until now. For more than a decade the brand loyalists kept buying. Anyone in business would love to have this problem. Will their market share keep shrinking? Hopefully, they can create something new and original to maintain that market cap. Perhaps, AI/VR if they’re not already too late to the game. Maybe, self driving cars if the Auto industry will allow it and if Tesla doesn’t steal the show. One thing is for sure it’s not going to be the Beats headphones or the iPhone.
Their net income in its fiscal second quarter totaled $10.52 billion, or $1.90 a share, compared with $13.57 billion, or $2.33 a share, in the same period a year earlier. Revenue declined 13% to $50.55 billion from $58 billion. Analysts polled by Thomson Reuters estimated that Apple would post earnings of $2 a share on revenue of $51.97 billion.
I think there are 2 reasons Apple’s growth is slowing down and slowing down quickly. The first reason is the external force called competition. Android dominates the global market with their OS and Samsung & LG dominate with their devices. See the chart below.
The second reason is an internal force. Their sales are decreasing for the same reason they went up. It’s their story. Except that story is not helping them now. From unethical business practices such as anti-competitive behavior, rash litigation, and dubious tax tactics, their production methods involving the use of sweatshop labor, customer service issues involving misleading warranties and insufficient data security, and concerns about environmental destruction.