Is Apple Rotting?
From the Apple II to the iPhone XS, Apple is known for creating great products and maintaining a loyal fan base. They’re also the first US company to achieve a $1 Trillion. That is an impressive achievement. However, with that being said we haven’t even been in 2019 for a week and it’s not looking good for the tech giant, Apple. Share prices have dropped 20% since October and Apple have announced that there will be “fewer iPhone upgrades.”
So, what has happened?
What Has Happened?
In November 2018, the tech giant shared that it forecast sales of at least $89bn which didn’t sit all too well with investors.
4 days in and 2019 hasn’t been too kind to iPhone creators.
On January 2nd, CEO Tim Cook released a letter to the company’s investors.
In the surprise press release, Apple stated that it anticipated revenue of around $84bn(£67bn) for the last 3 months of 2018. As you can imagine, this doesn’t fill investors with confidence. Revenue of $84bn would show nearly a 5% fall from the same period last year. But, why are Apple’s sales falling?
There could be a lot of reasons as to why Apple’s sales are falling. It could be because of the Chinese economy and the fact that Chinese consumers aren’t contributing as much as they once were. It could also be down to the fact that the company isn’t really pushing boundaries with their products. It seems as if they are releasing the same phone year after year with slight hardware improvements (and aesthetical differences as seen in the iPhone X), but are charging more and more each year. Simply put, Apple has quite an extreme price tag that a lot of consumers aren’t willing to pay year after year. Why spend £1000 on an iPhone which is has no brand new features? I don’t personally see the appeal.
China’s Falling Economy
In Tim Cooks letter to investors, he claimed that “most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”
The Apple CEO also believes that rising trade tensions between China and the United States have impacted the economic environment in China, which in turn has resulted in fewer sales from Chinese consumers.
Over the past couple of years, Apple has been building their next big business.
Apple Services business is comprised of Apple Music, Apple Pay, Apple Care and much more and it could be essential for Apple in the near future. With their sales falling, it might be a good idea for Apple to heavily push their services business in 2019 to drive growth. Apple anticipates earning a whopping $50bn in services revenue by 2020.
From my point of view, I see their services business being the best way to go after recent events.
2019 could be a rocky road for Apple, or it could be their best year. Failure drives success and we all know that this company isn’t considered failures. This setback may be what they needed to come back better than ever and take back control of the tech world.