Apple Revenue Decline – Why it Matters for Mobile Industry

The internet is abuzz with the sad news from Cupertino that the revenue for the Apple Computers has seen a decline for the first time in the last 13 years. Today Apple shared their quarterly results and they were not as uplifting as we have seen in the yester years.

Apple failed to grow the business revenue first time after many years and sales and profits were down year-on-years basis. Apple clocked $ 50.6 billion revenue and profit of $10.5 Billion for the second quarter of 2016. Last year in the same period Apple had a revenue of $58 Billion and revenue of $13.6 Bn, a drop of 13%.

Tim Cook is also projecting a revenue drop of 15% for next quarter which means this is not going to be a great year for Apple. In the earnings call, Tim Cook nodded to the pause on the earnings growth and call the quarter a challenging one.

“We may not have the wind at our backs as we once did,” said Cook. “But things are a lot more stable,” than most people seem to think. Clearly the results are not as per expectations to what Tim Cook or Apple would have liked but there are not too many reasons to worry.  

“We may not have the wind at our backs as we once did” said Tim Cook

Apple has a huge asset pool of 233 Billion dollars and is investing in new technologies like Virtual Reality and Automobiles to make up for the dwindling sales of existing product lines. Apple Smartwatch has a 1 Billion dollar revenue and the services and Apps platform is also growing to reduce the dependency on iPhone and Mac sales.
The PC market is already slow with less differentiation as far as the hardware performance and user experience goes. My three-year-old PC or 2 years old MacBook has nothing obsolete or there are no incremental benefits for me to invest in a new PC with Intel Skylake processor. A bit more battery life or a slightly improved performance can’t make me spend that boat load of money again.
Are the smartphones quickly reaching the saturation point as far as the flagships are concerned?  What really got an upgrade in the iPhone 6s Vs the iPhone 6? The Camera was the most significant upgrade. Process and Ram upgrade make the iPhone 6s faster on paper, but in real life use , not much difference.  ( Though it missed on better battery life , storage and display).

It is not only Apple but Android manufacturers too may hit a ceiling earlier than anticipated.  Now we have 4GB RAM and 6 GB RAM (Meizu Pro 6) mobiles, do we really need a 8 GB RAM or a 12 GB one in future?

Let’s draw some analogies from PC which already has gone through this cycle. We now have 32 GB and 64 GB Ram Kits with 3000 MHz clock speeds, I am more than happy with a 1600 Mhz , 8 GB RAM for all of my work and even gaming. And a majority of people would be satisfied, leaving apart some who have some more specific needs and those who have fat stacks to burn for little gains.
The whole point of above argument is “Someday slow-down will come to smartphones like PC” , and for top end flagship devices it may come earlier.

Not expected in 2016 or even in 2017 , there are still huge improvement areas like storage, battery capacity, cooling efficiency , camera and design which will see significant upgrades if companies are able to push the limits. And I am sure they will.
Samsung S7 and S7 edge are remarkable upgrades and compelling enough for people with at least 1-2 years old phones, to take the leap.

Apple may do great with the iPhone 7 and may sell a much higher number of mobiles by adding some essential upgrades to the iPhone 6s (better camera, battery life & more storage – tops the list).
Every company goes through the growth and decline cycles and more importantly when the innovations and upgrades are not very rapid. Apple will bounce back with the record revenues with the iPhone 7 and more product lines in future but they are going to have an even more challenging next quarter.