Apple's future is on the wane
Apple is no longer growing. This is probably the most important insight that investors can draw from the figures for the Christmas quarter published on Tuesday evening. The successful electronics group sold 74.8 million iPhones in the past three months, compared to 74.5 million in the same quarter of the previous year.
True, this is enough for new record figures: never earned Apple more money per quarter, the company made 18,4 billion dollars in profit. Apple CEO Tim Cook was happy to announce the figures: “Our team has given Apple the best quarter ever, thanks to the world’s most innovative products and record sales of iPhone, Watch and Apple TV.“
From now on it threatens to go down
Sales reached a new record level of $ 75.87 billion-but the difference compared to the same quarter of the previous year was just 1.8 percent. The days when Apple was able to grow by double digits are over. The group seems to have reached a peak for the time being – from here it threatens to go down.
This is particularly evident in Apple’s forecast for the current quarter: In the first three months of 2016, Apple now expects sales of only 50 to 53 billion dollars – ten percent less than in the first three months of 2015.
The forecast of Cook and his managers is therefore even lower than expected by various analysts and investors anyway: Apple’s stock has lost over 20 percent of its value in recent months, Apple is currently only about ten percent more than the Google parent company Alphabet. Are Apple’s days counted as the most expensive corporation in the world?
Sharp decline in production
Apple suppliers have already hinted at a decline in production for the coming months. The Japanese newspaper “Nikkei” reported in early January that the production of the two iPhone 6S models should be reduced by 30 percent. There was no confirmation of these plans from Apple.
Such assessments are not always reliable, because Apple relies on different suppliers, on the one hand to spread the risk and on the other hand to have the opportunity not to be looked in the cards. But the forecast for the current quarter shows that the supplier acquisitions were right this time.
Everything depends on the iPhone
Apple currently has several problems. Some competitors would like to have it. But the group from Cupertino plays in a league of its own – and therefore has to compete with itself:
Apple’s risk is less and less spread. The Group now makes more than 60 percent of its sales with the smartphone. By comparison, at the beginning of 2009 it was not even a quarter. The current share of profit is even higher than the share of sales, the iPhone remains the most important product of the Group despite iWatch and iPad.
Success of the Watch still unclear
Real new growth drivers are not foreseeable for Apple, and the attempts to make themselves more independent of the success of the iPhone have so far yielded little. iPad sales continue to shrink. Apple sold 16 million units of its tablet in the Christmas quarter of 2015 – a year ago it was still 21.4 million units. Even the Apple Watch does not yet make itself felt in the balance sheet and is not even shown separately. An Apple car still seems far away.
For the time being, Apple’s fate hangs on the iPhone: Cook reported a billion active iOS devices in its quarterly review, and emphasized: Last year, many buyers switched from Android smartphones. But even this target group only buys a new iPhone every two years.
Innovations have recently failed to materialize
Even if no one wants to talk about saturated markets yet, Apple has to make more and more efforts to bring its iPhones to customers. The record profit in the Christmas quarter of 2014 was mainly due to the desire of users for larger displays. Here Apple had enlarged the screens for the first time after years with the iPhone 6 and the iPhone 6 Plus.
In contrast, the latest iPhone 6S series is more of a model upgrade. Practically nothing has changed in the design. A sales boost as in the previous year has therefore failed to materialize.
China as a lifeline
After all, the expanding business in China has saved the company worse. Apple now makes more than a quarter of its sales in China – here the group achieves the best quarterly result it has ever achieved. The market of high-quality smartphones is dominated by the iPhone.
Overall, according to the figures of the market researcher Canalys in the third quarter of 2015, Apple achieved a market share of eleven percent in China. But the economy is tumbling. Just last week, China announced that the economy has not grown so slowly in 25 years.
A lame economy in China will eventually hit Apple. Cook had to admit in the quarterly conference call: “The economic development in China is a cause for concern.”Apple may respond with a cheaper iPhone. Rumors about a special edition with a four-inch display have increased in recent days. But do Chinese people in particular want a smaller display? I don’t think so.
Apple may soon have to give up the title of the most expensive company in the world to Alphabet. The Android inventors present figures in the coming week.
Virtual reality next big thing?
The Group’s dry spell is likely to continue into September. Only then does the group present its iPhone 7 – and thus has a chance to increase its sales again. But this is not guaranteed.
However, Cook already indicated an upcoming potential growth driver for the mobile business at the quarterly conference: “I do not think that virtual reality is a niche business. She’s very cool!“
Unlike competitor Samsung, Apple has not yet launched its own VR glasses on the market. But the group could, as before, take the opportunity with the smartphone and tablet to pick up an existing technology and make it mass-compatible. Virtual reality could be the next big thing for Apple.