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Apple in decline, but at least its phones don’t blow up

Apple store

Apple has released its Q3 2016 results which revealed another year-on-year revenue decline, but CEO Tim Cook can still take some comfort in knowing his phones are still allowed on planes.

Revenue for the period was $46.9 billion, down 9% from 2015’s $51.5 billion, so the team will hardly be searching the back of the sofa for loose change, though it is the third consecutive quarter in which it has reported a year-on-year decline. The news was not unexpected, as the global smartphone industry has been slowing over recent months.

“Our strong September quarter results cap a very successful fiscal 2016 for Apple,” said Cook. “We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24% to set another all-time record.”

We’re not saying the team should be fleeing to the panic room just yet, but perhaps Cook is looking at different numbers to us. Total revenues are down 9%, iPhone revenue is down 13% and a report Telecoms.com covered this week suggested Apple Smart Watch sales declined 71%. This is broadly in line with analyst expectations but that doesn’t mean it’s good.

Another area which might be a concern is the average price of unit. During this quarter in 2016, Apple shipped 48,046 iPhones, collecting just over $32 billion. This year, 45,513 phones were shipped across the period, collecting just over $28 billion. The average price per unit has decreased from $670 to $618. One possible explanation is a cash strapped consumer who is leaning more towards low-end models, such as the iPhone SE, as opposed to premium ones.

From a regional perspective, Europe and Japan showed good results, though the US and Chinese markets would appear to have peaked and are now in decline. China is a region where the Apple has been struggling in recent months as Huawei takes control of its home market, though the figures released in the quarterlies just confirm the misery for Cook and co.

One glimmer of hope for the Apple team in a gloomy smartphone market is the horror show which Samsung is going through currently as it limps from PR disaster to PR disaster. Forecasts for the period leading up to Christmas have Apple bringing in between $76-$78 billion, which would be an increase on the 2015 figures of $75.9 billion. The team are seemingly confident of capturing new customers in a potential flee from the Samsung blaze.

Apple is hardly going to disappear from the world anytime soon, it has too many loyal iLife followers (#cult – see A Week in Wireless for context), but the smartphone market is no longer the cash-cow it once was. Cook focused on the services side of the business in his analyst call, which was the only part of the business to show growth, and it looks like Apple needs to diversify fast if it’s going to return to growth.

Apple Q3 2016


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