Is The iPhone Finally Losing Its Mojo? - InformationWeek

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1/27/2016
02:06 PM
Eric Zeman
Eric Zeman
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Is The iPhone Finally Losing Its Mojo?

Sales of iPhones have flattened and are expected to begin receding. Can Apple do anything to change course?

iPhone 7 Rumors: 7 That Have People Talking
iPhone 7 Rumors: 7 That Have People Talking
(Click image for larger view and slideshow.)

It finally happened. The long upward arc of iPhone sales has reached its zenith. Apple's fourth quarter 2015 report shows flat sales year-over-year, and the company predicts a first-ever drop in shipments for the first quarter of 2016. The numbers paint an interesting story, but not the whole story.

Apple shipped 74.8 million iPhones during the last three months of 2015. That's up just 300,000 units from the 74.5 million it shipped during the same period in 2014, when the larger iPhone 6 and iPhone 6 Plus made their debut. Consumers were all too happy to lap up the more powerful phones, which were a huge upgrade from the 2012 iPhone 5 and 2013 iPhone 5s.

Interest in the 2015 follow-up smartphones, the iPhone 6s and iPhones 6s Plus, however, has waned, despite the bonkers first-weekend sales of 13 million. Apple doesn't break out sales of individual iPhone models, so we don't have a clear picture of exactly what handsets are selling.

(Image: Mutlu Kurtbas/iStockphoto)

(Image: Mutlu Kurtbas/iStockphoto)

Most other phone makers would kill to have Apple's numbers. Look at LG as an example. Its fourth quarter results show it shipped 15.3 million phones during the last three months of the year, and 59.7 million for the entirety of 2015. Apple shipped five times as many phones in the same period. Apart from Samsung, which is still the world leader in terms of volume, most other handset makers shipped far fewer devices than LG. Moreover, Apple owns the lion's share of profits from smartphone sales.

The iPhone accounted for $51 billion of Apple's $75 billion in revenue for the fourth quarter, or about two-thirds of the total. The company posted a record profit of $18.4 billion -- more than any other company ever. LG netted a profit of $301 million for the fourth quarter. Apple's profits were 61 times higher than LG's.

Looking ahead, Apple predicts first-quarter revenues of between $50 and $53 billion. Piper Jaffray analyst Gene Munster said that he believes this equates to iPhone shipments between 50 million and 52 million. Wall Street expected Apple to predict first-quarter iPhone shipments of 55 million, so the disparity has investors reeling.

[Read iOS 9.2.1 Gives Older iPhones a Performance Boost.]

Apple CEO Tim Cook would only admit that iPhone shipments for the first quarter would be flat at best. He blamed the company's performance on weird market behavior and currency fluctuations. "We are seeing extreme conditions unlike anything we have ever experienced before," he said on a call with investors.

There is a silver lining. Cook noted that only half of all current iPhone users are on the iPhone 6, 6 Plus, 6s, or 6s Plus. The rest are still using the iPhone 5s or earlier. "This indicates to me there's still a tremendous number of people in the world who will buy smartphones, and we ought to be able to win over our fair share of those," said Cook.

In the end, Apple is not immune to larger market conditions. IDC recently said 2015 marked the first-ever single-digit growth period for phone sales. The analyst organization says it doesn't expect 2016 to be much better.

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Eric is a freelance writer for InformationWeek specializing in mobile technologies. View Full Bio
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SunitaT0
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SunitaT0,
User Rank: Ninja
1/27/2016 | 2:26:59 PM
iTrouble
The reason for this drop is that iPhone 6 and 6s weren't that different and the differences were minimal. People can live without 3D touch for the time being. But these sales figures would again climb up once the 7 is released because the 7 is a significant step up from the 6 if not the 6s. However I predict that Apple's 7 sales wouldn't beat the 6 sales, although the sales would pickup.
SunitaT0
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SunitaT0,
User Rank: Ninja
1/27/2016 | 2:31:06 PM
Re: iTrouble
Apple really put its balls on the court when it introduced a 5+ inch screen. The world is trending towards phablets with 5.5 inch being the minimum of what people want to use nowadays and really, amongst the flagship Samsung phones which look flashy and shiny and huge, people find peace owning one because its larger and has more "value" factor. I cringe at the thought of holding a 5s in my hands again when I already own the Galaxy S6. Apple really downplayed when it introduced big screen phones. People would take a bigger screen over functionality because most aren't power users.
Pablo Valerio
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Pablo Valerio,
User Rank: Ninja
1/27/2016 | 2:50:10 PM
Other vendors catching up
When the iPhone was launched 9 years ago it was revolutionary. Apple did a good job of launching a completely new interface and the App ecosystem was something users loved from the beggining.

Now everyone has apps and high performance phones, at any price point. 

It is not possible for loyal Apple users to renew their iphones every two years, and not so loyal users start looking at other phones from Samsung, HTC and Sony.

Also most experienced users have discovered that paying the phones by expensive locked contracts with the likes of AT&T and Verizon is a horrible financial decision. They are much better off buying unlocked devices and shopping for a MVNO with cheaper rates.

Apple will be sucessful again, but not with the same volume and margins that investors were used to.
Gary_EL
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Gary_EL,
User Rank: Ninja
1/27/2016 | 3:40:04 PM
Re: iTrouble
Apple's problem is that just about everybody already owns a smartphone. They can be made bigger, they can be made shinier, but the sad fact for Apple and all the other manufacturers is that smartphones are no longer revolutionary. From here on out, they will be mainly selling replacement models to people who already own older devices.

Apple needs to come up with something new that people just HAVE TO HAVE.
Whoopty
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Whoopty,
User Rank: Ninja
1/28/2016 | 7:44:11 AM
Re: iTrouble
Indeed. We're well past the point where smartphones were "good enough," now. Phones are powerful enough to continue handling future applications - unless you're a mobile gamer - for years and water proofing and dust resistance are helping keep them ticking for longer. While there wil always be early adopters who have to have the latest model, for most people a phone is a phone and if it can handle Facebook and Youtube, they don't need much else.
Pablo Valerio
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Pablo Valerio,
User Rank: Ninja
1/28/2016 | 9:26:07 AM
Re: iTrouble
" We're well past the point where smartphones were "good enough," now. Phones are powerful enough to continue handling future applications"

Agreed.. it is similar to the "Perfect PC" 10 years ago, when a Windows machine could handle most applications for several years. Thatis when the PC market started to slow down.

If you have a 6 y/o MacBook it will still do 99% of the applications just fine. Same with an iPhone 5
jastroff
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jastroff,
User Rank: Ninja
1/28/2016 | 9:52:28 AM
Re: iTrouble
And selling to people in China, right?
SachinEE
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SachinEE,
User Rank: Ninja
1/28/2016 | 9:45:26 PM
Re: iTrouble
@SunitaT0: I don't know about the rest of the world, but if the iPhone 7 doesn't create enough buzz, people in India are going to stay at peace with the 6s. Seriously they want a luxurious looking big screen phone over anything else.
SachinEE
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SachinEE,
User Rank: Ninja
1/28/2016 | 9:50:27 PM
Re: iTrouble
@Pablo: Makes no sense. That wasn't the only factor for PC sales to slow down. Yes, my 5 year old PC still has enough power to run because it was made "future proof" for a couple of years by using the most extreme hardware. But smartphone are a different domain than the pc. Most smartphones are only made future proof of upto 2-3 years and that is the reason alone why you would see phone sales slowing down, however they would see a spike when this "future proofing" wears out.
SachinEE
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SachinEE,
User Rank: Ninja
1/28/2016 | 9:52:51 PM
Re: iTrouble
@Whoopty: Yes indeed. I still have my Galaxy S4 in my home and that is still usable and works without lag and plays most games in HD. To me that phone still hasn't worn out. Moreover if you root the phone and flash the rom of your choice, you get to squeeze more juice out of the phone.
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