Apple’s big miss: It’s time to stop messing around

Apple’s warning of softer-than anticipated iPhone sales is entirely predictable

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In retrospect, Apple’s warning of softer-than anticipated iPhone sales is entirely predictable as trade wars, political, and civil insecurity and tribalism deepen their grip across societies that really should know better.

Tough times

Apple CEO Tim Cook issued a statement to explain the miss. You’ll have seen it dissected everywhere (though few point the finger at the real culprit).

In a lengthy explanation, he observed:

  • Challenges in key emerging markets, particularly in China
  • People keeping their devices for longer
  • Disappearing carrier subsidies
  • The strength of the dollar (great for imports, bad for exports)
  • Shipping dates meant some peak sales translated into the previous quarter

There was also some good news.

Services generated over $10 billion, a new record in every geography; revenue from wearables (AirPod, Apple Watch) climbed “almost 50 percent”; and the company saw growth in Mac and iPad sales. In other words, Apple continues to build its position in the post-iPhone segment.

While I’ve not seen too many people notice, it is also interesting to learn which countries Apple continues to do well in.

Cook said: “We also expect to set all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands, and Korea.”

In developing markets, Mexico, Poland, Malaysia, and Vietnam also set records, he said.

What about the UK?

Who is missing from this list? The UK.

For months I’ve been reading reports that observe the impact of economic and political uncertainty on the UK.

In direct response to the current UK government’s utterly incompetent mismanagement of the matter of exiting the EU, most people are spending less, opting for economy products above high-quality items. Apple didn’t mention it, but this must be hurting its business.

Anecdotally, I’ve seen long-term iPhone users in the UK switch to Android not because they like that system (they don’t), but because once sales tax, the strong dollar and weak pound are factored in, a new iPhone costs around 4 percent of a Brit’s average annual salary.

The UK market is very important to Apple — why else do you think it opened its first European Apple retail store in London? It comes to something when Spain generates a better iPhone sales story than the UK.  

What can Apple do?

I don’t expect the bloodshed to end in the near term.

We’re a long way from a return to the international free trading dream that drove so much of Apple’s success. The new tribalism will take time to erode, and a miraculous return to internationalism seems unlikely in the short term, pending positive change in political leadership.

In the medium term, Apple could build revenues on the back of three products, all of which it may introduce this year:

  • Apple’s movie and TV streaming service: Particularly if sold as an upgrade to Apple Music, this could reach tens of millions of users rapidly, generating a very healthy annual income.
  • The return of the iPhone SE: My girlfriend drops her phones. A lot. The iPhone SE has been the most long-lasting device she’s ever had. Robust and highly portable, it does everything she needs it to do. Surely it makes sense to introduce a new 4-inch model for people who want a good iPhone?
  • The iPad mini: Similarly, a new iPad mini will also appeal to lots of users. Portable, perfect for reading, studying or toting around town in a school bag, it should also become the go-to device for retailers putting iOS across their teams.

All three plans should boost the bottom line and expand the company’s reach.

The industry is changing

“Apple has always used periods of adversity to re-examine our approach, to take advantage of our culture of flexibility, adaptability and creativity, and to emerge better as a result,” Cook said.

He also pointed out a few other strategies the company is taking to help it navigate these increasingly perilous seas:

  • Phone trade-ins in stores
  • Financing
  • Ensuring iPhones last longer

Of course, Apple wants to drive people to its more profitable high-end devices.

All the same, it must accept that the environment we are in has changed. The new tribalism means it is in its own best interests to ensure wide adoption of its devices in order to expand and maintain its own loyal cohorts within an increasingly polarized social landscape. The argument that selling a cheaper iPhone will impact revenues seems a lot less powerful when people aren’t buying those phones in the first place.

I think Apple — and by extension everyone else in the sector — is inexorably entering a new space in which it makes sound business sense to combine trade-ins with financing and to offer all its products as a service.

Why should one of the world’s biggest companies be immune to the impact of the gig economy effect? 

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