Jobs’ Mob has reported that its sales have fallen and that its customers are no longer interested in paying silly money for products any more.
For years Apple has built a sales model which is dependant on its customers shelling out top dollar for nearly identical products, or paying over the odds for more expensive models.
However it looks like economic reality is finally hitting even Apple fanboys. In its latest sales results, Apple said that punters are either giving its products a miss or a buying the cheapest versions.
To be fair Apple did rather well for a maker of expensive toys in the middle of a recession. Both revenue and net income posted increases of just over 20 percent. But Jobs’ Mob shares are hugely expensive and their value is based on the fact that Apple will always make a lot of dosh. While it has managed to do that the past, it is suffering now.
Apple’s growth was the slowest in more than two years and failed to meet analyst expectations.
Part of the problem is that Apple fanboys are starting to realise that the latest range of products are not much better than earlier ones, which are a lot cheaper. The iPhone4S, for example, is identical to the iPhone4, it just has Siri, which many have worked out is broken software and does not work half the time. It is not particularly useful in the UK either where Apple did not bother updating it.
Many analysts think that will change when Apple issues its iPhone5, but early indications are that it will be just a slimmed down iPhone4s with an inflated price tag. While we have no doubt that it will be bought in droves, it is more likely that the more sensible iPhone user will either buy or stick to the more discounted iPhone4s or even the iPhone4.
The iPad is in the same boat. The difference between the latest iPad and its earlier versions is negligible – in this case it is the improved graphics screen. Interesting technology but not really enough to justify the price tag.
This is where Apple is going wrong. The company makes its mark by marketing itself as innovative. That is not the same as it actually being innovative. In the case of Apple it sells sizzle and not steak. But for the last 18 months it has been selling more or less the same product. Indeed, it is running out of ideas just as rivals like Microsoft and Samsung come into their stride.
To make up for this Apple, has been reducing the price of its toys. Its average selling prices for the gadgets have declined to levels last seen in 2010 for the iPhone and the lowest levels ever in the case of the iPad.
Apple’s chief financial officer, Peter Oppenheimer said that when given a choice between older and cheaper models and the “new” ones, Apple users were opting to save their pennies. It is more likely that they can’t see any difference in technology which is worth paying the extra cash for.
Analysts are now starting to wake up to the idea that Apple might not be the great investment that they have been pushing.
One told the Daily Mail that Wall Street had become too confident in its expectations, that Apple had literally a perfect pulse on end demand throughout the globe… and quite simply, that wasn’t the case.
Other areas where Apple failed to make an impact was China. CEO Tim Cook said that was because the iPhone 4S went on sale in China during the quarter that ended in March and the company overstocked.
Cook said he didn’t see any effect of the economic slowdown in China. The troubles in Europe were evident, however. Sales to the continent grew just 16 percent.
Cook also wants to blame the rubbish iPhone sales on anticipation building for the next iPhone model, which is due in October. But for that to be true, punters would really have hated the iPhone4S and would have been prepared to wait up to six months to buy the iPhone5. This is unlikely. Previously, iPhone sales started slowing off about three months before the arrival of a new model.
Net income in Apple’s fiscal third quarter was $8.8 billion, or $9.32 per share. That was up 21 percent from $7.3 billion.
Revenue at the Cupertino, California, company was $35 billion, up 23 per cent. Analysts were expecting $37.5 billion.
Apple shares fell $31.92, or 5.3 percent, to $569 in after-hours trading, after the release of the results.