“As rare as last week’s Apple revenue warning from CEO Tim Cook may have been — the company last issued a revenue warning in June 2002 — the company has had other bad quarters in the iPhone era,” Ben Thompson writes for Stratechery. “What makes this quarter seem so much worse was both the already negative sentiment surrounding the shift in Apple’s reporting (the presumption being the company wanted to hide declining unit sales), and also the fact that Apple’s management forecast was so off: here is CFO Luca Maestri on last quarter’s earnings call: ‘As we move ahead into the December quarter, I’d like to review our outlook, which includes the types of forward-looking information that Nancy referred to at the beginning of the call. We have the strongest lineup ever as we enter the holiday season and we expect revenue to be between $89 billion and $93 billion, a new all-time record.'”
“In fact, the only record, such that there was, was the size of the miss,” Thompson writes. “So what went wrong?”
“I believe that Apple’s management made three critical errors in their forecast for this last quarter that were predictable precisely because they had made the same errors before,” Thompson writes.
1. China and ‘S’ Cycles
2. Non-Flagship iPhones / staggered release of iPhones
3. iPhone Destiny / assumption that iPhone growth is inevitable
Tons more in the full article – recommended – here.
MacDailyNews Take: The problem for Apple in China, as Thompson explains, is WeChat. Apple has much less “lock-in” and is only competing with hardware and features like dual SIMs (to which they were late). As Thompson writes succinctly, “Apple is far more exposed to challenging macroeconomic conditions in China than they are elsewhere thanks to their relative lack of a moat.”