“Apple on Wednesday warned investors that its revenue for the last three months of 2018 would not live up to previous estimates, or even come particularly close,” Brian Barrett reports for Wired. “The main culprit appears to be China, where the trade war and a broader economic slowdown contributed to plummeting iPhone sales. But CEO Tim Cook’s letter to investors pointed to a secondary thread as well, one that Apple customers, environmentalists, and even the company itself should view not as a liability but an asset: People are holding onto their iPhones longer.”
“As recently as 2015, smartphone users on average upgraded their phone roughly every 24 months, says Cliff Maldonado, founder of BayStreet Research, which tracks the mobile industry. As of the fourth quarter of last year, that had jumped to at least 35 months,” Barrett reports. “‘There’s not as many subsidies as there used to be from a carrier point of view,’ Cook told CNBC Wednesday. ‘And where that didn’t all happen yesterday, if you’ve been out of the market for two or three years and you come back, it looks like that to you.'”
It’s bad news for Apple, but “it’s terrific news for consumers, who have apparently realized that a smartphone does not have a two-year expiration date. That saves money in the long run. And pulling the throttle back on iPhone sales may turn out to be equally welcome news for the planet,” Barrett reports. “Given a long enough horizon, Apple may see a financial benefit from less frequent upgrades as well. An iPhone that lasts longer keeps customers in the iOS ecosystem longer.”
“It also offers an important point of differentiation from Android, whose fragmented ecosystem means even flagship devices rarely continue to be fully supported beyond two years,” Barrett reports. “‘In reality, the big picture is still very good for Apple,’ Maldonado says. Compared with Android, ‘Apple’s in a better spot, because the phones last longer.'”
Read more in the full article here.
MacDailyNews Take: People are coming back for a new iPhone (or fake iPhone) after a few years and they’re being sticker shocked because there’s no carrier subsidy to hide the real cost of the devices which raises the question:
Where’s Apple’s lower-priced iPhone for the masses?
They did it with iPod, why haven’t they done it (years ago) with iPhone, too? Were/are they really so afraid of trading iPhone ASP for more device sales and more users (read: potential users of Apple subscription services)? The fact is that Apple does not have an iOS “phone” that the vast majority of people on the planet can afford.
If they’re afraid of cheapening the Apple or iPhone brand, why didn’t they buy the BlackBerry brand (or some other well-known brand) years ago on the cheap – not for the company or employees, just the brand — and make it a subsidy that makes and sells less expensive iOS smartphones under that brand? BMW has Mini. Why didn’t Apple go the same route? Imagine how many more iOS devices Apple could have sold in places like China, Brazil, and India had they done so five years ago!
See: “Apple should buy BlackBerry and sell lower-priced iOS-powered phones and tablets under the BlackBerry brand” — SteveJack, MacDailyNews, November 4, 2013
Lower cost no, feature parity between iPad and iPhone yes, notice people actually bought more iPad’s this quarter why better hardware.
New 12.9 Pro iPad upgrade from 2 gen iPad.
This is the Silver lining .. a huge bright silver linning ! Lost in the negative noise and panic.
“While we are disappointed to be falling short of our quarterly revenue goal, our fiscal first quarter was also a record setter for revenue from Services, Wearables and the Mac. iPad revenue grew double-digits over the year-ago quarter, and iPhone activations in the U.S. and Canada set new Christmas Day records. We expect to set all-time revenue records in key markets including the US, Canada and Mexico, Western European countries including Germany and Italy, and countries across the Asia-Pacific region like Korea and Vietnam. Our worldwide installed base of active devices also hit a new all-time high, reflecting the loyalty of our customers and their appreciation for the work you do.”
The uptick in Services –> might <– be a silver lining, but to determine that, what we really need to do is to do the math.
Basically, the question is if customers are buying more Services in lieu of hardware.
And this does need to be a “more” because an iPhone customer who buys $XX/year in Services regardless of how often they replace their iPhone is less profitable to Apple when they slow down their iPhone replacement rate.
As such, one needs to do the math for the Service differential, and then compare that to the hardware profit differential.
Personally, I’d be very surprised if the increase in Services links only to replenishment cycle change and that it is big enough to offset the hardware markup.
Riddle Me This: Does Apple make more money:
A. Selling new iPhones every 1-2 years to existing customers, while having them in the ecosystem buying other things.
or
B. Having customers buy new iPhones ever 3-4 years while keeping them buying things in their ecosystem.
For Apple, slower upgrade cycles are never a good thing. It means they don’t make nearly as much due to upgrade delays, and it doesn’t allow Apple to continue stretching their technology (HW/SW combo) well beyond Android devices…
B is pretty much all bad, save for the $ it saves the user.
You apparently haven’t been around the Apple community very long.
That longer cycle is not new. Apple has been doing that since the mid to late ’80s. To speak of 1 to 2 year cycle says that your product is crap. Intel/MS deliberately built planned obsolesce into their product due to the progress in technology every year. Remember Gate’s quote: “No one needs more than 640K RAM! 1 year later – 1 Meg RAM. So Gates and Intel intentionally built cheap stuff because there was not need due to the quick obsolescence.
However, Apple always built to a higher quality and their computers lasted 2 to 4 times. They have been building that way for 30 plus years.
Think of it this way: OH it only lasts 1 to 2 years? Let me try a different brand. Long term working products produce higher resale and longer term loyalty and in the long run, more sales.
Not sure I agree with any of the MDN take. It’s not carrier subsidies or their lack that have given the iPhone sticker shock. It’s phones that are too damn expensive. I used to by the top of the line iPhone every 36 months, until this year. I want the XS but not at that price, i’ll instead just hold on to my 6sPlus, which is, frankly “good enough”. I might even fork out for a new battery to extend its life. I don’t want a cheap iphone for the masses, I want top line iphone at a price that offers value.
Mini’s by the way are not cheap BMWs, they are overpriced Rovers.
“The fact is that Apple does not have an iOS “phone” that the vast majority of people on the planet can afford.”
Yes, they do. It’s called the iPhone 8 / 8 Plus.
Your world mus be very small.
iPhone-8 $600 -$700
iPhone-7 $450 – $569
iPhone-SE $250 (discontinued)
iPhone-6 $350 (discontinued)
And that’s old technology
The technology in the 8 Series is older than the XS / XR series but saying it’s old is an exaggeration. The performance of the 8-series is still far better than even the newest Android devices.
The technology in the iPhone 8 resulted in a more usable and affordable phone than all the fugly X models. The overhead of faceid and no home button results in a slower, more awkward phone for many of us.
Cook gives the middle finger to people who liked the minijack, small phones, or affordable anything. He’s killing Apple.
Which lists for over $600.
In the meantime, its been widely reported: “40% Of Americans Can’t Pay $400 Emergency Expense”.
Sure, that $600 phone gets chopped up into 24 payments of $25/mo each, but the widespread lack of even $400 worth of savings (let alone a month’s worth) to cover emergencies reveals that the disposable income just isn’t there for more discretionary purposes.
Something to think about the next time you see any smartphone user walking around with a broken screen, etc.
Apple has become an unbalanced consumer products company. They forgot about the Mac. Smart watches are nothing but a niche. Their entry into the smart speaker was an expensive, not ready, crippled device.
They focused exclusively on the iPhone and believed people would be upgrading them constantly. Apple failed to noticed the phone market had become saturated.
They responded by introducing the expensive X iPhone. They also came out with $250 & $350 iPhones but unfortunately they killed those low price points when they came out with more flavors of the expensive X iPhones.
Apple subsidized the X iPhones by killing off the iPhone SE & 6 price points. The new price points are now $450 and $599 for the low end iPhones. This way they could keep some of the new X iPhones under $1000.
I’m finding I’m becoming less worried about the cost of my iPhones. I spend hours a day on my iPhone and use it for so much. It’s with me every minute of every day.
Ironically I wish I’d spent more on my current iPhone 9more storage) and won’t won’t hesitate to spend $1000 next time. (Whereas I cringe at spending more than $2000 on a MacBook Pro, even with all the horsepower you get in one.)
But that’s the problem. You’re one in a million. It’s those other 999,999 consumers who are killing Apple. They’re perfectly happy with the cheapest Android smartphones they can get their hands on. Apple is catering to such a tiny percentage of users so they can’t sell enough iPhones to satisfy investors. I don’t expect Apple to slash iPhone prices, so Apple’s iPhone business is rather ruined at this point in time. The Chinese consumer doesn’t need an iPhone to run WeChat and that’s all there is to it. There’s nothing Apple can do about it.
Apple had record sales and activations in the U.S. China accounted for almost all of the decline. And, China is a complicated story where many factors are operating. It was reported that many companies were threatening employees likely to buy iPhones as a result of the arrest and the trade war, for example. Simple approaches of having a cheaper phone alone is not going to be the solution. An SE2 might help, but likely not as much as many think.
The EPS, is projected to be a record for the quarter. That should not be overlooked.
Have you ever talked to Android users? I have an office full of them and they are totally satisfied with Android and everything that comes with it, like smart texting spelling corrections, maps, apps, everything integrated with Gmail, docs, and a host of integrated apps. The thing is, i find that the iOS as good as it is has glaring problems, like texting, where Android intuitively suggest words that make sense, apple texting does barely does, it switches to words that would never go together in a sentence, and thats just bad AI, same with Maps still having the stigma of not being as good as google maps, I’d have no idea how all the Chinese phone makers stack up, but the idea that Ios and the apps are perfect is not the case and people are making choices, especially in China. If this is a thread about a silver lining, i hope that silver lining is that the FAT overpaid execs at AAPL who have not improved their product line significantly get a kick in the ass. finally.
Stop thinking that Android and these other “Slavish copiers” suck, they dont, and apple better become up to the task. Lets face it, they havent come up with that new killer product, and according to PE of 11 now, the market doesnt feel Apple has ANYTHING up their sleeves,
In the next 12 to 24 months, everyone will be upgrading to 5G capable phones. Everyone on the iPhone platform will buy a new phone. This will result in an increase in iPhone sales. So if you have invested in Apple stock for the long term, the current turbulence is not a reason to unload your stock.
I was visiting an acquaintance last week and the subject of new phone came up. He works with one of the phone companies. He said, “I love to sell, but I would hold off on a new one until the 5G’s are out and bug tested. That will be a different world.”
There is no silver lining in this Apple FUBAR. I’m not even sure share buybacks at this low a price will help the company when they actually need to sell millions of more iPhones. Tim Cook’s iPhone dependency burned all loyal Apple shareholders. You know what they say about putting all your eggs in one basket? If that basket drops, most of the eggs will be broken. Now Apple and loyal shareholders have egg yolks all over their faces. Apple’s market value is now in fourth place behind Microsoft, Amazon, and Alphabet. How sad is that? Major disappointment.
It will be interesting to see how Buffett talks his way out of this huge loss for Berkshire Hathaway. He was saying how young people want iPhones and now he knows he put his foot in his mouth. He’s taken a bigger loss from Apple then he ever did from IBM.
Apple needs to take a step back and get an understanding of how to build the company so it doesn’t become so vulnerable to economic changes. No company with as much money as Apple has should collapse in value this quickly. I’m long Apple 2004 so this drop is nothing for me to cry about. However, I do feel a bit bad for recent investors who put their faith in Apple to make some money. I think they just threw their money away as WS has absolutely no confidence in Apple. Even Facebook appears to be a better investment than Apple.
“Apple’s market value is now in fourth place behind Microsoft, Amazon, and Alphabet. How sad is that? Major disappointment.”
Apple is making a billion of dollars a week in profit. They’re about to announce their best quarter ever (even with this adjusted forecast / bad news), the shares dropped 30% and they’re still the 4th most valuable company on the stock market, they’ve built a company that reliably invents new profitable product categories several times each decade.
All is not lost : )
You were doing well until the last sentence!
This is the Silver lining .. a huge bright silver linning ! Lost in the negative noise and panic.
“While we are disappointed to be falling short of our quarterly revenue goal, our fiscal first quarter was also a record setter for revenue from Services, Wearables and the Mac. iPad revenue grew double-digits over the year-ago quarter, and iPhone activations in the U.S. and Canada set new Christmas Day records. We expect to set all-time revenue records in key markets including the US, Canada and Mexico, Western European countries including Germany and Italy, and countries across the Asia-Pacific region like Korea and Vietnam. Our worldwide installed base of active devices also hit a new all-time high, reflecting the loyalty of our customers and their appreciation for the work you do.”
news flash Apple fanfoy:
Unless your business is in decline, every Xmas sets new records. It’s the biggest gift giving day of the year, and every year the global population grows.
The real questions that your one-day indicator does not address might include:
1) Does Apple retain a user-desired technical advantage over the competition?
2) Does Apple act responsively to user requests for features or capabilities?
3) Does the average person hold Apple up as a leader or innovator?
4) Is Apple generating large repeat sales or new switchers at a greater rate than the competition?
5) Is Apple gaining or losing its foothold in growing nations, or is Apple merely a brand recognized by rich countries that have low birthrates (would be declining population except for immigration).
6) Is Apple appealing to a narrow cultural/age/technical savviness range or does Apple still offer devices intuitive enough for everyone?
7) Are you, youjimbo, biased into believing cherry-picked data such as iPad sales data that obviously compares a declining period with a holiday period right after a product refresh? Seriously man.
You are so drunk on the Apple kool aid you can’t even think straight.
Now I have heard everything MDN, these would be the masses who you dismissed barely 2 weeks ago as being too poor or mean to be any worth to Apple as they barely buy any further services once they buy a Cheaper iPhone thus apparently making a new SE pointless in your view. How did it go Apple is only interested in the wealthy buyer. The world has truly spun wildly on its axis.
“Where’s Apple’s lower-priced iPhone for the masses?”
Wait a second…
Is this not the MDN that has always told us that Apple makes luxury items for luxury purchasers? And that the masses can go elsewhere?
nice post thanks for sharing
Great article! Very interesting to read and I really enjoyed it. Thanks! Keep up the good work!