HAS gravity finally caught up with Apple and its stratospheric share price?
Last week Apple lost 8% in after-hours trade the day its second-quarter earnings were announced. This shaved US$47bn off its market value. The quarter saw the fist drop in gowth since its remarkable run began in 2003.
There has been an outflowing of Schadenfreude from the tech industry and its commentators that Apple’s 13-year growth surge has finally ended.
But in the past quarter its revenue fell 13% year-on-year to $50.6bn; while iPhone sales fell 16% to 51.2m. Sales of iPads were down 19% to 10.2m and Macs dropped 11% to 4.03m.
The iPhone sales are the most problematic, as they account for two-thirds of Apple’s revenue. This market-defining device not only spawned the smartphone era (though early precursors from Nokia, Sony Ericsson and BlackBerry paved the way) but now is the biggest part of Apple’s business and reportedly accounts for half of smartphone sales in the US.
“There’s no question that Apple’s best days are behind it,” Bernstein analyst Toni Sacconaghi told The New York Times. “The company grew at astronomical rates, and it’s now so big that its ability to grow at those rates doesn’t exist anymore.”
Apple CEO Tim Cook seemed sanguine — or delusional, depending on how you view it. “This too shall pass. The future of Apple is very bright,” he said, calling this reverse a “pause” and highlighting the “macroeconomic environment” in which its fortunes in economically depressed China, its second-largest market, tumbled.
Is it the death of Apple? No, it’s the maturation of a pioneering, innovative company in technology categories (all-in-one desktops, smartphones and tablets) that have themselves plateaued — against the backdrop of its two main markets (US and China) having matured and the world still not shrugging off the Great Recession.
There is certainly a lot of truth to how flat the market is. The smartphone segment shrank 6% in the first quarter, according to Juniper research. Samsung, the largest maker of smartphones, had seven consecutive quarters of losses (to July 2015) but then had an upturn in its third-quarter operating revenue last year.
Cook is right to mention the surge the larger iPhone 6 and 6S gave to its sales — as these bigger-screened models caught up with those offered by Android makers.
It was an unusual leap that has now flattened out.
But it’s clear that Apple is no longer the company it once was. When Walt Mossberg, the original technology journalist and now executive editor at tech news site The Verge, says your apps aren’t working, it’s a significant sign.
Praising the iPhone as the best smartphone on the market, he wrote in February:
“In the past couple of years, however, I’ve noticed a gradual degradation in the quality and reliability of Apple’s core apps, on both the mobile iOS operating system and its Mac OS X platform.
“It’s almost as if the tech giant has taken its eye off the ball when it comes to these core software products, while it pursues big new dreams, like smartwatches and cars.”
Hard words, but true that “complexity, feature gaps, and bugs have crept in”.
I’ve had random freezes on my iPhone, a persistent problem with the camera where it freezes sometimes when I open it to take a picture, and other minor but previously unheard-of problems.
I also think the iPhone, and the ultra-thin, ultra-light MacBook are the best devices on the market. I still choose both Apple’s iOS mobile and desktop OS X operating systems, which are frankly still superior.
But these once-flawless ecosystems are increasingly showing signs that they’re not as robust — and error-free — as they once were.
Even Apple’s gravity-defying 13-year run of good fortune had to end.