Apple Has Come a Long Way…the Apple Lisa 2 Computer 1983
Apple has entered a new slow-growth era of iPhone sales, with sales for Apple’s most recent quarter up less than 1% from a year ago, marking the slowest sales increase since their 2007 introduction. Apple’s other products such as the iPad and the Macintosh both saw a decrease in sales. The iPhone contributed $75.9B in revenue, missing analysts’ expectations of $76.5B. Earnings however, were $3.28 per share, which beat expectations of $3.23 per share.
Near-term Expectations Not Bright
Although Apple has a strong past, stock prices are largely based on what investors expect to happen in the future, and Apple’s near-term future is not so bright. Apple CEO Tim Cook hinted that next quarter will be rough on iPhone sales: iPhone shipments are expected to fall, underscoring rising concern that the smartphone market has peaked, and he anticipates slowed growth, with revenue dropping up to 14% from the same quarter last year.
What Is Causing Slowed Growth?
Besides recent economic turmoil and slow global growth, there are various contributors to Apple’s slowdown:
- Apple is too focused on sustaining growth and popularity in a mature smartphone market, when it needs to be investing in growth areas just a few product cycles away.
- Apple is piling on debt faster than it is growing cash. 93% of Apple’s cash is overseas, and to avoid paying huge tax rates by bringing it back to the US, Apple is borrowing money to pay dividends and purchase shares. Investors are in angst over the billions of dollars out of grasp ($215B in cash, or $38.90 per share).
What is “in the Works”?
It’s not all bad news for Apple, as Apple has a few things currently in their favor:
- new Apple iPhone 5se, iPad Air 3 and updated Apple Watch expected in March
- iPhone 7 likely to come September
- new iOS software development center in Naples, Italy
- “top secret” car project in works
- success converting Android users to iPhone
How Can Apple Turn Around?
Apple should not let one or two bad quarters set the tone for the new year. By exploring a few opportunities, Apple can take advantage of this stagnant smartphone market…here are my suggestions:
- reach emerging markets: Apple grew 14% last quarter in China, and has many opportunities in other emerging nations
- improve services: Apple must work to increase the number of Apple Pay users, and beat Apple Music and Apple Cloud competitors (Pandora, Spotify, Google Drive, Microsoft Cloud)
- use cash efficiently: Instead of acquiring long-term debt to pay dividends and buy back shares, Apple can consider buying start-ups in lacking areas such as virtual reality
- enter car market: we have heard rumors but nothing definite…Apple’s car project is stalling and it must progress!
So don’t give up yet folks. Apple has many opportunities to thrive; we can only hope they take advantage of them, and quickly!
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