Monday , June 14 2021

Did Apple's iPhone lose its magic?



By CNNBusiness

There is almost 12 years, Steve Jobs took the stage of MacWorld and introduced the iPhone, promoting it as a "revolutionary and magical product". His unprecedented success would prove his point.

The iPhone survived and thrived despite the financial crisis of 2008 and a long list of alternatives and duplicates of cheaper smartphones, ultimately catapulting Apple to become the most valuable company in the world.

Now it seems the iPhone has lost its magic.

In a rare move for Apple, the CEO Tim Cook warned investors in a letter on Wednesday that the company expects less sales for the holiday quarter due to lower iPhone sales. Cook said the deficit comes mainly from China, which is struggling against an economic slowdown and an ongoing trade war with the United States. But Analysts were quick to point out that Apple's iPhone problem is probably due to more than just China.

Gene Munster, an analyst and managing partner at Loup Ventures, said "a third of the problem" comes from Apple's decision to raise the price of its full range of iPhone, with several models exceeding the unbeatable price of $ 1,000. This measure "cushions" the number of people who want to upgrade to new iPhones, he said.

In his letter, Cook did not specifically mention the price increases, but admitted that there are other factors that hurt sales. of the iPhone outside China, including fewer subsidies for the operator and the company's decision to offer a cheaper battery replacement last year.

To make things worse, Goldman Sachs analysts wrote in an investor note that Apple is "more sensitive" to current macroeconomic trends than it did a few years ago because "it's close to maximum penetration in the iPhone market." Analysts have predicted a "big downside" to Apple's next-fiscal sales figures.

For investors, the news was a wake-up call. Shares of Apple fell 9% overnight, prompting the company's market value to fall below Microsoft, Amazon and Alphabet.

"In the modern era of the iPhone last night was clearly the darkest day of Apple, and represents a period of difficult growth for the company, "Daniel Ives, a Wedbush analyst, wrote in a note to investors.

Cook's letter is a clear reminder of the company's new normality: if you want to believe in Apple now, it's no longer due to iPhone sales, but despite this.

Even before the last announcement, there was cause for concern. Several iPhone parts suppliers reduced their own sales prospects last year. Apple also shocked investors by announcing in November that it would no longer reveal the number of iPhones sold after several quarters of iPhone sales have declined or even modestly.

With its decade of rapid growth in iPhone sales, Apple has shifted to try to get customers to pay more for every device they bought by launching the $ 1,000 X iPhone in 2017 and the new iPhone XS and XS Max last year, the latter of which can cost up to $ 1,449.

At the same time, Apple has talked about the success of the complementary services offered to the iPhone and other devices, including iCloud, Apple Pay, Apple Music and App Store. Revenue from this category of services reached almost US $ 10 billion in the three months ended September, an impressive number and a 17% increase over the same period last year.

Even so, the iPhone remains Apple's top revenue source, which accounts for nearly 60 percent of Apple's total sales in the September quarter. So far, Apple has yet to find another revolutionary and magical product to fulfill this function.

"The iPhone is simply too big to be replaced if the product line does not work well," Chris Caso, an analyst with Raymond James, wrote in an investor note on Thursday.

"If the current iPhones are not selling well now, you have to ask what will happen if the next generation represents only minor updates," he added.


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