No sentient analyst would have dared even pose that question a year ago. Today, it's open season.
As predicted - and feared - Apple reported slowing iPhone sales for the first time. Ever. While this does not portend the decline of civilization as we know it, it does suggest that there are constraints to people's budgets, especially in a wavering economy. It also suggests that as consumers become more familiar with their technological options they a) make choices and b) are capable and self-confident enough to say enough.
Services are totally super, but as IBM, Microsoft and even Amazon can report, it takes a while to make them profitable.
Apple will survive and probably prosper. But as always happens with favored companies, 'infinity and beyond' turns out to have its limits. JL
Jay Yarow reports in Business Insider:
The iPhone is out of growth, so Apple wants to be seen as a "services" company like Amazon, Facebook, or Google. For Apple, "services" are things like app sales, iCloud revenue, Apple Pay, Apple Music, and iTunes. This is a wonderful idea, but Apple's "services" revenue is tied to the iPhone.
The Apple story is all screwed up right now.
In short, here's the problem: The iPhone is out of growth, so Apple wants to be seen as a "services" company like Amazon, Facebook, or Google.
For Apple, "services" are things like app sales, iCloud revenue, Apple Pay, Apple Music, and iTunes.
This is a wonderful idea, but Apple's "services" revenue is tied to the strength of its iPhone business, which is projected to drop this year.
Apple can argue that it will be able to squeeze more revenue out of its installed base, but on its earnings call it said the installed base grew by 25%, yet its services revenue only grew by 15%, which means, as Ben Thompson at Stratechery notes, that "services revenue on a per-active-user basis actually decreased year-over-year."
Why is the iPhone falling? Because the global economy is shaky.
"Major markets, including Brazil, Russia, Japan, Canada, Southeast Asia, Australia, Turkey and the eurozone, have been impacted by slowing economic growth, falling commodity prices and weakening currencies," said CEO Tim Cook on the earnings call.
The weakening currency is a particular issue of concern for Apple. It said that $100 in 2014 was worth $85 in 2015 because of currency fluctuations.
To deal with weakening currencies, Apple raised the price of the iPhone in certain markets.
This protects Apple's margins, but it limits the number of phones Apple can sell when the economy is bad. Raising prices during economic trouble is not a way to sell phones.
Even CFO Luca Maestri said so on the call, "Inevitably over time, higher prices affect demand and so we're capturing that in our guidance."
Apple's guidance was for $50-$53 billion, which at its midpoint, would be an 11% drop on a year-over-year basis. That would be the first drop in over 10 years for Apple.
So, Apple is in this weird cycle: It wants to grow services revenue, but services revenues depend on iPhone sales, but because the global economy is weak relative to the US, currencies are falling, which is leading Apple to raise prices on the iPhone, which is hurting iPhone sales, which means services revenues will be limited.
Apple could lower prices of the iPhone to sell more units and then grow services, but it doesn't seem to want to do that.
Cook said Apple already has a variety of price points from the low end iPhone 5S to the high end iPhone 6S Plus.
"I don't see us deviating from that approach," said Cook.
This makes sense since Apple is a hardware company. If it were a services company, it would lower prices, go for smartphone unit volume, then get more money from that. But, it is not a services company
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