Two years ago, we warned that Apple was like a decapitated brain unaware that its body had died, but now the signs of rigor mortis are setting in and it is getting harder to deny.
The outfit reported its first ever decline in revenue in 13 years yesterday. Ok, the figures are still what many companies would dream of – revenues of $50.6 billion and quarterly net profit of $10.5 billion, but much worse than the $58 billion and net profit of $13.6 billion last year.
The Tame Apple Press is trying to do its best to claim that the reason is a global downturn in smartphone sales. However this mystical downturn has not affected Apple’s rival Samsung which has done rather well. They are also choosing to ignore the fact that Apple’s problems are going to get much worse.
Apple made several mistakes. It did not spend enough investing in R&D and as a result it relied on the iPhone far too much. For the iPhone to keep making money it had to be super cool and upgraded every year. However Apple has decided not really to upgrade its phone significantly for two years. Sure it might have strapped better chips under the bonnet of the iPhone, but it is still more or less the same phone.
Apple also relied too much on China without really understanding the market. In China, ownership of an iPhone was a status symbol. It proved you had more money than sense. However as the Chinese economy retracted, overt shows of wealth gave way to functionality. HTC and Samsung phones had more bells and whistles, and looked much better.
But Apple’s refusal to have a good old redesign go at its iPhone, even returning to the iPhone 5 design this year, was just silly.
Is it any wonder that Apple sold only 51.2 million iPhones this year?
So what is Apple’s response? Apple CEO Tim Cook said in an earnings call that services, which includes the App Store, Apple Music and Apple Pay, were one of the bright spots of the quarter, with revenues at $6 billion, up 20 percent from last year.
So it looks like Apple will try to lean on those services and hold on until the world economy picks up and can afford its pointless trinkets once more. Not a brilliant, super-cool way out of trouble but given Apple’s huge cash pile it might just work.
Cook claims that everything is down to weakening currencies and he seems to have convinced many of Wall Street’s leading analysts. Most of them are predicting iPhone sales will once again increase by the end of this year, following the likely release of a new product in September.
However that approach might have worked in the past, but rumours suggest that Apple is not going to add much to the iPhone 7 coming out this year. In fact word on the street is that the only significant inovation will be that that Apple is going to introduce the same fast recharging features that other phones already have, and bring in an annoying cordless headphone feature which will hack off any users who have invested in expensive corded headphones.
Cook warned a reduction in channel inventory would also impact Apple’s revenue for the next quarter, but projected an optimistic outlook on the call.
“The future of Apple is very bright,” he said. “Our product pipeline has amazing innovation in store.”
Yeah well so far there is nothing rumoured to be that good. Sadly Apple is not going anywhere fast. It has piles of money and can effectively sit on its hands for a few years waiting for the next big thing. But Apple is paying the price for its arrogance. It has become the IBM it mocked when it first started out. It is slow, indifferent to users and user demands and worst of all it is not putting out new products any more.