“While the iPhone was selling well, Apple didn’t need to worry about putting in the time and effort to poach Android users,” Adrian Kingsley-Hughes writes for ZDNet. “Sure, the Cupertino giant likes to throw some jabs at the Android camp, but up until recently Apple has been happy with grabbing about 20 percent of the smartphone market in exchange for some 90 percent of the profits… [but] the astonishing momentum that the iPhone has experienced over the past eight-and-a-half years is beginning to show some signs of slowing down, and that has Apple investors more than a little spooked.”
“If Apple can’t find enough people who want to buy iPhones willingly, then it has to start going after a wider market, and the most obvious demographic to target are those who have their eye on buying a premium Android handset,” Kingsley-Hughes writes. “These are the ‘Android switchers’ that Apple CEO Tim Cook was talking about during the last earnings conference call.”
MacDailyNews Take: Misnomer of the year so far: “Premium Android handset.”
“Cook even went as far as making it clear that targeting ‘Android switchers’ was going to become a priority: ‘And it’s our jobs to come up with great products that people desire, and also to continue to attract over Android switchers.’ I think it’s particularly interesting that Cook sees coming up with ‘great products that people desire’ and tempting ‘Android switchers’ as separate tasks. That’s because they are,” Kingsley-Hughes writes. “The overwhelming majority of Android users are cheapskates, and they aren’t willing to pay over-the-odds for a smartphone (certainly not the over-the-odds that Apple asks). That means Apple is going to have to shave a few percent off its profit margins (which, quite frankly, it can afford to do) in order to attract Android users into the fold.”
MacDailyNews Take: As per “shrinking.” Only in comparison with the blockbuster iPhone 6/Plus. In the last 91-period, Apple sold 51.193 million iPhones for $32.857 billion revenue. Compare that with any other phone maker in the world.
Read more in the full article here.
MacDailyNews Take: Yup. If Apple goes after the top of the Hee Hawers, for whom price is the only object, margins will have to be shaved to some degree.
As we explained over three years ago:
Android is pushed to users who are, in general:
a) confused about why they should be choosing an iPhone over an inferior knockoff and therefore might be less prone to understand/explore their devices’ capabilities or trust their devices with credit card info for shopping; and/or
b) enticed with “Buy One Get One Free,” “Buy One, Get Two or More Free,” or similar ($100 Gift Cards with Purchase) offers.Neither type of customer is the cream of the crop when it comes to successful engagement or coveted demographics; closer to the bottom of the barrel than the top, in fact. Android can be widespread and still demographically inferior precisely because of the way in which and to whom Android devices are marketed. Unending BOGO promos attract a seemingly unending stream of cheapskate freetards just as inane, pointless TV commercials about robots or blasting holes in concrete walls attract meatheads and dullards, not exactly the best demographics unless you’re peddling muscle building powders or grease monkey overalls.
Google made a crucial mistake: They gave away Android to “partners” who pushed and continue to push the product into the hands of the exact opposite type of user that Google needs for Android to truly thrive. Hence, Android is a backwater of second-rate, or worse, app versions that are only downloaded when free or ad-supported – but the Android user is notoriously cheap, so the ads don’t sell for much because they don’t work very well. You’d have guessed that Google would have understood this, but you’d have guessed wrong. Google built a platform that depends heavily on advertising support, but sold it to the very type of customer who’s the least likely to patronize ads.
iOS users are the ones who buy apps, so developers focus on iOS users. iOS users buy products, so accessory makers focus on iOS users. iOS users have money and the proven will to spend it, so vehicle makers focus on iOS users. Etcetera. Android can have the Hee Haw demographic. Apple doesn’t want it or need it; it’s far more trouble than it’s worth. – MacDailyNews, November 26, 2012
All markets eventually saturate with products that continually get longer lifespans (3GS & 2006 MacBook that still works for Mom).
Between Apple and the recyclers like Gazelle, the average citizen can get top of the line reliable products that have long life and nearly all the top feature set.
So why should a consumer settle for less?
Ask yourself: Is the iPhone 6S (4.7″) 16 GB model worth $250 more than the iPhone SE (4″) 16 GB model?
I upgraded my iPhone 5 for the SE because I didn’t want the larger screen. The $399 price point was a very welcome surprise.
Reviewing teardown estimates of the iPhone 5S, iPhone 6S and the iPhone SE, it costs less to manufacture the SE than it did to manufacture the 5S, while the 6S costs about $28 more to manufacture than the SE.
Granted those estimates most likely are not entirely accurate (margin of error +/- 5%) and do not include indirect costs Apple may attribute to iPhone manufacture. The point remains that incrementally, the cost to produce the large format iPhone is not substantially more than the SE.
Foreign Exchange headwinds may be reducing Apple’s revenue, but they are also reducing the component costs to manufacture iPhones.
If Apple were to lower the base price of the next generation iPhone by $100 (something I strongly believe it will do), it will maintain iPhone 5S like gross margins (>60%) and cause a major upgrade cycle driven not just by the iPhone base (~60% is 3 years old or older) but most significantly, from the $400+ Android base (switchers). These switchers represent the only segment in the Android market that is making a profit. This will exacerbate the losses currently being experienced by Lenovo, LG, HTC, Xiaomi, Huawei, Oppo et al, and seriously impair the profits of Samsung (the only other smart phone manufacturer making a net profit).
Android manufacturers would love to make the margins that Apple does, but, contrary to what the media says, they are not competing against Apple so much as they are competing with each other (price differentiation among me too manufacturers).
The ‘shrinking iPhone sales’ seems to be the story that has wings. Every single blogger, and even most mainstream media outlets, are ejaculating from this narrative. “Apple missed earnings across the board, iPhone sales tank!”
We have two more months until the end of next quarter, and that quarter will include revenue (and profits) from the SE. And then, this golden story will likely drop out of the sky and fall down hard.
The problem here is that the across-the-board drop, led by iPhone, was simply inevitable, after the insanely powerful same quarter a year earlier. A pent-up demand for large-screen iPhone (6 and 6+) caused an absurdly high rate of growth, that was simply impossible to eclipse during a normal year. If you look at the growth chart for the same quarter, back to, say, 2008, you’d see a fairly consistent rate of growth all the way; take away the bump from March 2015, and the curve is still strong and upward. I have no doubt that the same quarter next year will show continued growth, and the bump of 2015 will begin to emerge as a clear anomaly. Especially since the next year is the redesign year (when iPhones change the look), which, some argue, bring better sales than the other years (when the design stays, and features change), although no data seems to corroborate this theory.
The main premise of the shrinking sales theory is that the iPhone has peaked, it is all downhill from here, and Android users are orgasming over each other on this news. By mid-July, it will all be over for them…
The iPhone SE looks to goose revenue, and if it does so, the cruel spotlight will switch over to declining ASP. The Grand Narrative of Doom stays alive through such contortions.
ASP may well decline, but the margins are quite likely going to remain intact, or affected very lightly.
You do have a point, though, torch-bearing mob being what it is, there will always be something to fixate on and scream about.
They’ll dust off the original narrative and re-use it. That’s worked for them every single time. No one cares to remember failed predictions; the glory is in being a member of the torch-bearing mob, not a member of an accountability panel.
Well, how about that, Apple seems to be just as susceptible to the vagaries of market forces as everyone else. Kinda destroys the myth of Apple’s superiority. I wonder how long Tim Cook will be blaming nebulous and nefarious external forces for all of Apple’s problems. How convenient.
The only myth that’s never been dispelled is the sheer depths of your stupidity.
Apple is done for as a prized investment. Tim Cook’s folly will remain pretty much worthless for investors. Even as a long-term Apple shareholder it doesn’t make any sense to me why new shareholders should waste their time with buying Apple when they can easily invest in Amazon, Tesla, Alphabet, Microsoft, Facebook, etc. and get much quicker returns for their money.
Most of those stocks have terrific P/Es as their revenue doesn’t have to come anywhere close to Apple’s requirements in order for their share price to increase. Look at Google’s market cap overtaking Apple’s market cap with less than a third of the revenue Apple has. Most of those other stocks aren’t being pissed on constantly by the news media and tech critics, either. Apple has nothing going for it to be worthwhile investing in. As one commenter above put it, the Grand Narrative of Doom towers over Apple above everything else. Apple does nothing to change this continued rhetoric.
Even when Apple is doing well, the company is said to be in trouble from future problems. No company’s future is guaranteed but Apple’s is always guaranteed to be a failure and that’s what shareholders have to put up with. It’s stupid to own a stock that’s going to be called a failure long before it becomes an actual failure.
Tim Cook has already frittered a $700 billion market cap down to a barely $500 billion market cap. That’s a pretty huge loss of company value while most tech stocks have been making relatively large gains in value. It’s very difficult for me to understand why Apple with so much money to spend, can’t stop the bleeding in shareholder value. Tim Cook has clearly frightened investors away with his seemingly incompetent managing of the company’s huge resources. I’m not dumping my Apple stock but I’m really puzzled and disappointed with Apple letting good opportunities go to waste while other tech companies created backup plans in advance. Apple with all of its money could have easily expanded its business base outside of hardware.
It’s always so easy so see who knows nothing about investing, and has lost playing their “gut” feeling.
In the last 90 days Institutional Ownership of AAPL has increased from 59.30% to 60.10%. These are the investors that count, they have far more buying power than the average wailer and far more knowledge about where a Company is headed.
By the way, that 0.80% increase in share holdings amounts to a net increase of about 44.3 million shares valued at about $4.140 Billion at today’s Close.
I expect Institutional Ownership of AAPL to increase to about 61.00% by July earnings. Why? Because WS has the resources to see changes in macro economic conditions (like those hampering Apple’s revenue) and growth patterns in established and emerging markets. Armed with this knowledge they don’t wait until it happens, typically they start buying 6 – 9 months before the change becomes apparent, and the little people start buying.
When there’s blood in the street start buying. WS consensus sell side price target for AAPL (January time frame) is $134. WS isn’t selling, they are buying.