Apple Warns of Quarterly Revenue Shortfall

Apple has finally confirmed what industry onlookers have known for months: It is experiencing a “challenging quarter” thanks to lower-than-expected sales of its newest iPhones.

“Our revenue for Apple’s fiscal 2019 first quarter, which ended on December 29, will be lower than our original guidance for the quarter,” an open letter from Apple CEO Tim Cook reads. He then goes on to blame several factors that are beyond Apple’s control and repeatedly insists that its new products are actually succeeding so well that they’ve often been in short supply.

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None of that is true. But Cook acknowledges that Apple is also taking steps to improve its results. And each of those steps directly addresses what we’ve known all along: Apple’s newest iPhones are not selling as well as expected.

“One such initiative is making it simple to trade in a phone in our stores, finance the purchase over time, and get help transferring data from the current to the new phone,” Mr. Cook notes. “This is not only great for the environment, it is great for the customer, as their existing phone acts as a subsidy for their new phone, and it is great for developers, as it can help grow our installed base.”

Yep, Tim. It’s a win-win.

Here’s what Mr. Cook blames for Apple’s unexpected poor quarter:

Timing of the iPhone launches. Where the iPhone X launched in Apple’s first fiscal quarter of 2018, the iPhone XS and XS Max shipped in Q4 2018, “placing the channel fill and early sales in that quarter” and skewing comparisons with the current quarter. “We knew this would create a difficult compare for Q1’19,” he writes.

Strong US dollar. The strength of the US dollar has reduced Apple’s revenue growth “by about 200 basis points as compared to the previous year.” Cook says that Apple expected this.

Too many new products. With Apple suddenly launching several new products in the quarter—including iPhones, Apple Watches, and Macs—it experienced “supply constraints” that would “gate” (slow) sales of “certain products” during the quarter. Again, Cook says Apple expected this. But he also claims that sales of the new Apple Watch, iPad Pro, AirPods, and MacBook Air were all “constrained” in the quarter as a result. I don’t recall any supply issues.

Economic weakness in some emerging markets. Cook acknowledges that China, in particular, is becoming a problem. “Most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac, and iPad,” he explains. The reason? “China’s economy began to slow in the second half of 2018.” Wow. And here we had thought it was competition from China-based technology firms.

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Conversation 79 comments

  • Daekar

    02 January, 2019 - 4:55 pm

    <p>You know, it's amazing that the people that run these companies can lie without batting an eye. I wish I could do that, seems very useful for them…</p>

    • VancouverNinja

      Premium Member
      02 January, 2019 - 9:10 pm

      <blockquote><em><a href="#390003">In reply to Daekar:</a></em></blockquote><p>Most of them believe what they are saying.</p>

    • javajunkee

      03 January, 2019 - 9:25 am

      <blockquote><em><a href="#390003">In reply to Daekar:</a></em></blockquote><p>I think I read somewhere that CEO's at times demonstrate traits of psychopathy. That would explain a lot towards how many of them act and run their companies.</p>

  • F4IL

    02 January, 2019 - 5:03 pm

    <p>We know Tim, it's <em>the weather</em>.</p>

    • dontbe evil

      03 January, 2019 - 5:35 am

      <blockquote><em><a href="#390005">In reply to F4IL:</a></em></blockquote><p>or maybe you're holding it wrong</p>

  • jrickel96

    02 January, 2019 - 5:18 pm

    <p>Chinese competition is a small part of it. China's economy is slowing down at a fast pace and US tariffs are taking a toll there. The government is using a lot of stimulus to try to offset it, but the slowdown will continue and even if a trade deal is reached, expect continued slowdown.</p><p><br></p><p>This will mean cheaper alternatives will be more appealing. That hurts Apple, but China's market is likely about to hit a large recession. So are we with housing growth slowing, interest rates going up, etc. I expect a global recession to begin in the next year.</p>

    • RM

      03 January, 2019 - 9:10 am

      <blockquote><a href="#390006"><em>In reply to jrickel96:</em></a><em>I am guessing the China is affecting Android phones also, but they are still selling them . . . I purchased mid-ranged Android phones</em><em style="color: rgb(0, 0, 0); background-color: transparent;">&nbsp;(Nokia 7.1)</em><em> for my family and they can do everything those way overpriced walled off iPhones do and more (because Android allows apps to do things iOS does not allow), with the exception of some neat camera tricks! Oh yea, and the 3 phones cost less than one iPhone. Why would I purchase an iPhone?</em></blockquote><p><br></p>

      • jrickel96

        03 January, 2019 - 10:58 pm

        <blockquote><em><a href="#390211">In reply to RM:</a></em></blockquote><p>Because you like security and reliability? Android is very hit and miss. They also have a problem with system rot as time goes by that you cannot recover from. Doesn't happen with iOS. </p>

  • LocalPCGuy

    02 January, 2019 - 5:27 pm

    <p>They're selling it wrong.</p><p><br></p><p>Put out a new model with a generation or two older Snapdragon at $450 or less and sales will go way up. Keep the $750 to $1300 price range and watch the sales chart keep veering downward. Their top of the line phones no longer need to be refreshed as often as they did before. If they aren't destroyed, they're good for five years or until Apple puts out an OS update that clobbers the older models' performance.</p>

    • jrickel96

      02 January, 2019 - 11:07 pm

      <blockquote><em><a href="#390019">In reply to LocalPCGuy:</a></em></blockquote><p>Umm, the iPhone 7 is $449 and it sells pretty well. They already do this. The iPhone 8 is selling well as well. I also suspect that the XR is doing decently.</p><p><br></p><p>All top of the line phone models are taking hits. Samsung is seeing declines at the top end and are in worse shape than Apple since their overall phone margins are much slimmer. For Android, $450 phones or less are not big money makers but they do make up a majority of the market. The average selling price of an Android phone is now under $200. </p><p><br></p><p>We're about to hit a point where smartphones begin their decline. They won't go away just as the PC has not, but I expect we may see several years of decline before they balance out – and I suspect Apple will survive it better than most on the Android side will. </p><p><br></p><p>What happened in PCs is eventually the prices rebounded so while sales decreased, margins improved. I believe the average PC price is now over $700 but for a long time it was under $500. </p><p><br></p><p>The same should happen in phones. Longer periods of use should lead to higher cost and better built devices. Android really needs to see its average price doubled overall for that market to be truly healthy whereas Apple should have left good enough alone and been satisfied with a roughly $700 per phone average price. </p><p><br></p><p>Apple made a mistake in attempting to drive the price and margin up. And they did it without adding any value – like a 30W power supply getting included with the high end phones for fast charging, etc. </p><p><br></p><p>But both Apple and Android have made big mistakes. Android OEMs bought into the less is more mentality and created devices that were too cheap. Apple went the other route. Neither got it right.</p>

  • IanYates82

    Premium Member
    02 January, 2019 - 5:31 pm

    <p>The multiple products launched in a single quarter didn't gate supply… It gated demand. </p><p>Specifically, if you are an apple fan that gets the newest thing as it's released, you still likely couldn't afford several new things in such a short period. </p><p>This is what Cook refers to as the need for more financing and trade-in.</p><p>It also probably meant that many held off replacing an iPhone X and perhaps got a new watch, or a new Mac Air. That meant the hype for the iPhone subsided enough for them to realise that their existing iPhone was probably quite fine and, since they survived a couple of months, they might as well wait until later this year instead. </p><p><br></p><p>My 2c</p>

  • Elindalyne

    Premium Member
    02 January, 2019 - 5:32 pm

    <p>The Qualcomm/Apple beef probably isn't helping either.</p>

  • chrishilton1

    Premium Member
    02 January, 2019 - 5:32 pm

    <p>It's actually bad for the environment mining and distribution of raw earth materials to produce more iphones . Whatever. This is because nobody wants to buy a £1000 phone, basic economics of supply and demand. And the China thing is a Ruse, its cheaper for the Chinese to buy an iPhone from America, and most Chinese can't afford a £500 iPhone, let alone one more than double the cost. </p>

  • Chris_Kez

    Premium Member
    02 January, 2019 - 5:51 pm

    <p>What's really interesting here isn't any of the specific reasons but rather the simple fact that Apple had to revise their guidance in the first place. They knew all of these factors and thought they had accounted for them; they didn't. When is the last time that happened?</p>

    • skborders

      02 January, 2019 - 6:16 pm

      <blockquote><em><a href="#390029">In reply to Chris_Kez:</a></em></blockquote><p>This! How often has Apple had to do this since the launch of the original iPhone? They still will make huge profits but the fact they overestimated sales is telling. I guess they found the limit to what people would pay. Maybe this will bring lower prices.</p>

      • tmslayton

        02 January, 2019 - 8:30 pm

        <blockquote><a href="#390045"><em>In reply to skborders:</em></a><em> I hope they bring prices down, I am not buying anymore Apple tech until they do.</em></blockquote><p><br></p>

  • siv

    02 January, 2019 - 6:06 pm

    <p>Wow does anyone here even care about Apple?</p><p>After the way Jobs treated Woz and pretty much everyone else who ever worked for him I have made a point of never ever spending a penny with that company. Especially when they are so up themselves and ridiculously overpriced.</p>

    • lvthunder

      Premium Member
      02 January, 2019 - 7:00 pm

      <blockquote><em><a href="#390042">In reply to Siv:</a></em></blockquote><p>There are tons of people in tech that act just like Steve Jobs.</p>

      • VancouverNinja

        Premium Member
        02 January, 2019 - 9:09 pm

        <blockquote><em><a href="#390057">In reply to lvthunder:</a></em></blockquote><p>Unfortunately that is probably true. Jobs was a sharp guy, but not necessarily a nice guy. Pricing drove us away from Apple – it's products are good but not worth the price and it has been this way for sometime. Our tech needs now fall to Microsoft first, Apple if we must, and then only if truly needed – Google. </p>

    • javajunkee

      03 January, 2019 - 8:37 am

      <blockquote><em><a href="#390042">In reply to Siv:</a></em></blockquote><p>Let's not forget that Gates and Balmer were just as ruthless. How about when Gates insisted that Paul Allen only get a 36 percent share in the company he co-founded. And then the time Allen caught Gates and Balmer discussing how they could dilute Allen's Microsoft equity by issuing options to themselves and other shareholders, this after Allen was diagnosed with Stage 1-A Hodgkin's lymphoma.</p>

  • red.radar

    Premium Member
    02 January, 2019 - 6:18 pm

    <p>His open letter is a fascinating read because it does highlight some macro economic issues and gives some insight on challenges with bringing new products into production. </p><p><br></p><p>It confirms some things i suspected that the passive electronics component shortfall is a big issue that even mighty apple is not immune too. </p><p><br></p><p>But there is some double language in the letter. If “sales are fine” with inventory being low then why the trade in effort and pushes to help people upgrade ? Seems like he is saying indirectly price is an issue without saying it directly. </p><p><br></p><p>Will be be interesting to see how they recover. </p><p><br></p><p>I Still rather buy an iPhone than any android offering. However the new Nokia bug eyed camera wonder has me interested. However it’s not like I’d buy it anyways. The ecosystem has me too locked in. I couldn’t afford to switch. It’s iphone for me … because it’s not like I have a choice in the matter. </p>

  • skane2600

    02 January, 2019 - 6:40 pm

    <p>Obviously the number of products released and the timing of iPhone releases is entirely Apple's responsibility. Taken at his word, Cook expected these problems but stuck to the flawed plan anyway.</p>

    • provision l-3

      02 January, 2019 - 6:47 pm

      <blockquote><em><a href="#390051">In reply to skane2600:</a></em></blockquote><p>I would suggest reading Cook's actual letter rather than Paul's interpretive dance of it because this article is fairly inaccurate representation of what was said about both iPhone and other product releases. </p>

      • skane2600

        02 January, 2019 - 9:12 pm

        <blockquote><em><a href="#390052">In reply to provision l-3:</a></em></blockquote><p>From the Cook's letter: </p><p><br></p><p>"First, <em>we knew the different timing of our iPhone launches would affect our year-over-year compares</em>. Our top models, iPhone XS and iPhone XS Max, shipped in Q4’18—placing the channel fill and early sales in that quarter, whereas last year iPhone X shipped in Q1’18, placing the channel fill and early sales in the December quarter. <em>We knew this would create a difficult compare for Q1’19,</em> and this played out broadly in line with our expectations.</p><p>.</p><p>.</p><p>Third, <em>we knew we had an unprecedented number of new products to ramp during the quarter</em> and predicted that supply constraints would gate our sales of certain products during Q1."</p><p><br></p><p>Are you sure <em>you </em>actually read Cook's letter?</p>

        • provision l-3

          02 January, 2019 - 9:39 pm

          <blockquote><em><a href="#390107">In reply to skane2600:</a></em></blockquote><p>I did read it. Cook points out that going into the quarter that they knew there were challenges they would have to account for in their guidance. He then lists them and points out that their initial guidance accurately accounted for the iPhone launch timing being different year over year&nbsp;and that they accurately accounted for the impact of launching the number of products at one time. The sentence you left out of that second quote says "Again, this also played out broadly in line with our expectations". &nbsp;</p><p><br></p><p>Cook actually doesn’t “blame” iPhone timing, the strong dollar or the number of new products for coming up short against the pervious guidance as Paul claims.&nbsp;He is pointing out that they actually were able successfully account for those things. He then says that a slow down in the Chinese economy and the lack of people upgrading iPhones in developed countries were the things they failed to account for. This quote is pretty unequivocal on what the actual cause was:</p><p><br></p><p>“Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline.”&nbsp;</p><p><br></p><p>I’m a little surprised that you opted to selectively quote what was said to make it fit your point. While I can say I don’t always agree with your comments I have always seen you as a person that makes and values honest discussion.&nbsp;</p><p><span style="background-color: rgb(255, 255, 255);"></span></p><p><span style="background-color: rgb(255, 255, 255);"></span></p><p><span style="background-color: rgb(255, 255, 255);"></span></p><p><span style="background-color: rgb(255, 255, 255);"></span></p>

          • skane2600

            02 January, 2019 - 10:59 pm

            <blockquote><em><a href="#390119">In reply to provision l-3:</a></em></blockquote><p>I left out that line because I didn't think it added any new information. What's the difference between knowing ahead of time and having expectations of same? </p><p><br></p><p>As far as the final quote is concerned, falling short of previous guidance wasn't the only issue I was addressing. They anticipated a problem but failed to alter their course to prevent it.</p><p><br></p><p>Thank you for the complement regarding some of my previous comments. I try but sometimes fall short of living up to it. </p>

        • provision l-3

          02 January, 2019 - 9:50 pm

          <blockquote><em><a href="#390107">In reply to skane2600:</a></em></blockquote><p>Also, I think there is plenty to be critical of. First and foremost I don't know why Apple was so late to provide updated guidance. I find it odd that the company came up almost 10% short of guidance and waited until after the quarter ended to announce it. I think Apple had a fiduciary responsibility to let investors know. If not legally then certainly ethically. </p><p><br></p><p>In addition I can see how the extent of Chinese slow down was somewhat of an unknown given the current pissing match with the U.S. but it seems prudent to advise on worst case but based on the comments in the last earnings call it sounded like Apple was still bullish on China. Similarly with upgrades, the reasons listed for the slow down in people upgrading were not new. So I think it is a bit of a surprise that they missed that as well. </p><p><br></p><p>So, I'm not trying to put a spin on this. I find it curious that when there are obvious things to pick apart that Paul chose to misrepresent things. </p>

  • lvthunder

    Premium Member
    02 January, 2019 - 7:04 pm

    <p>"Finally, we also expect to report a new all-time record for Apple’s earnings per share."</p><p><br></p><p>So they are still bringing in records amounts of money. They just didn't estimate where all that money is coming from quite right. I imagine Apple isn't going to be the only company to do this. It's going to be interesting to see the results from the other phone makers. That will show if this is an Apple problem or an industry problem.</p>

  • digiguy

    Premium Member
    02 January, 2019 - 7:13 pm

    <p>Paul, you should read this interesting article by the Verge</p><p>I was actually expecting something similar from you or at least to mention it in this post…</p>

    • Skolvikings

      03 January, 2019 - 11:24 am

      <blockquote><em><a href="#390068">In reply to digiguy:</a></em></blockquote><p>Yep! I personally know people who decided to use this to get brand new batteries and hold on to their older iPhones.</p>

  • prjman

    02 January, 2019 - 7:20 pm

    <p>The simple fact, for Apple, is that they are almost entirely dependent a single product, the Iphone. The Iphone generates almost 60% of their revenue, while nothing else comes in at over 16% or so. They have a had tremendous and enviable success with that product, but when it inevitably begins to decline, they will feel quite a bit of pain.</p><p><br></p><p>The reality is they are charging a hefty premium in a market that is now saturated with very good product at a dramatically lower cost. While they continue to make an amazing amount of money, the reality is that they will continue to see a decline unless they at least offer sometime to compete a the mid to lower end of the spectrum.</p>

    • Pierre Masse

      02 January, 2019 - 11:12 pm

      <blockquote><em><a href="#390086">In reply to prjman:</a></em></blockquote><p>Us, mid to lower end of the spectrum buyers, are waiting patiently for that offer, and then we're gonna jump on it like Garfield on a lasagna.</p>

  • Xatom

    02 January, 2019 - 8:10 pm

    <p>As Mark Twain wrote upon reading his obit-the news of my demise has been highly exaggerated. Having written that, Apple has lost it Jobs mojo. The predictor is anytime a company builds an opulent headquarters. There really has been almost no meaningful innovation in smartphones over the last 3 years. Reality is wireless companies no longer subsidizing purchases has had a big impact as well. Time will tell but single product dependency and cults rarely end well. Oh and all those services are tied to phones and they will attrite customers rapidly as cheaper alternatives exceed Apple's slow moving feature and tech improvements. What was once a high value solution is now very low value.</p><p><br></p><p>Finally, as an example we moved all our video and music purchases to Amazon 4 years ago and haven't looked back despite being a mix phone vendor family.</p>

    • Skolvikings

      03 January, 2019 - 11:22 am

      <blockquote><em><a href="#390088">In reply to Xatom:</a></em></blockquote><p>Almost my entire extended family and most of my co-workers all have iPhones. I don't think any of us are part of a cult. 🙂 Most of us use Windows computers and a healthy mix of Amazon, Google, Apple services.</p>

  • dcdevito

    02 January, 2019 - 8:19 pm

    <p>The sheer arrogance of that company makes it ever so increasingly difficult to NOT want to see them fail. </p>

  • Vladimir Carli

    Premium Member
    02 January, 2019 - 8:59 pm

    <p>He blames everything except the real reason, the horrendous increase in prices…</p><p>V. </p>

  • Thom77

    02 January, 2019 - 9:24 pm

    <p>Hey Tim …</p><p>I can easily download Youtube on my $60 android phone in basically one click.</p><p>I can't on your $750 phone</p><p><br></p><p>I can install 3rd party apps on my $60 android phone.</p><p>I can't on your $750 phone</p><p><br></p><p>I can play NCAA 07 on my PSP emulator on my $150 Android tablet.</p><p>I can't on your $800 Ipad Pro.</p><p><br></p><p>I can drag and drop files easily onto both of my devices which ads up to $210</p><p>I can't on both of your devices that add up to $1550.</p><p><br></p><p>I can download an app over 150mb on my 4G on my $60 android phone</p><p>I can't on your $750 phone because you, Timmy, want to restrict how I use my own cellular service that I pay for separately.</p><p><br></p><p>And, as an added bonus … I can choose not to support your company when you, Timmy, want to boycott Georgia over bathroom policy while you go to Saudi Arabia and celebrate opening up a new store in a country that has horrible civil rights towards gay people and women.</p><p><br></p><p>You see Timmy … the reason I didn't buy your new Ipad Pro and Iphone, even though they are beautiful machines … isnt because of timing, economic weaknesses, or being overwhelmed with too many products to buy ..</p><p><br></p><p>Its because your company produces merchandise that is overpriced and less functional then another companies merchandise and so i choose to buy another companies merchandise .. and in addition, can do so without being lectured about how I am supposed to think by a rich CEO who virtue signals about his morality to distract me from the fact that he puts the $ above it when its convenient.</p>

    • Winner

      03 January, 2019 - 1:33 am

      <blockquote><em><a href="#390109">In reply to Thom77:</a></em></blockquote><p>Playing along here:</p><p><br></p><p>Tim, I can arrange my icons on my home screen as I wish. I can leave blank space if I want. On my Android phone, but not on an iPhone.</p><p><br></p><p>I can use my Android phone as an external drive and drag files back and forth, unlike an iPhone.</p><p><br></p><p>I can unlock my cheaper Android phone way faster with a good fingerprint sensor than you can with your Face ID iphone. And I don't have to have my phone pointing at my face to do that. And I don't have to pay for a bunch of complex extra hardware in my phone to do that.</p><p><br></p><p>My Android phone has computational photography capabilities that you are still trying to catch up to.</p>

    • dontbe evil

      03 January, 2019 - 5:35 am

      <blockquote><em><a href="#390109">In reply to Thom77:</a></em></blockquote><p>but you don't have an overpriced device with a shiny bitten apple logo on it to show off, and also you're not blamed from your beloved company when something goes wrong, because it's never apple fault</p>

  • bradreiter

    03 January, 2019 - 12:14 am

    <p>I’m waiting for the iPhone SE sized all screen version. The xs is boarderline too big. Bring the size and price down please. </p>

    • Skolvikings

      03 January, 2019 - 11:20 am

      <blockquote><em><a href="#390144">In reply to BradReiter:</a></em></blockquote><p>My wife prefers smaller phones too. She just recently upgraded from an iPhone 6 to an iPhone XS. She loves it and doesn't feel it's too big for her.</p>

  • wright_is

    Premium Member
    03 January, 2019 - 3:31 am

    <p><em>“One such initiative is making it simple to trade in a phone in our stores…” Mr. Cook notes. “This is not only great for the environment,"</em></p><p>Sorry, replacing working hardware is not great for the environment, it means more waste and more resources used making electronics that aren't "needed"… It might be nice to have a new phone, but as long as the old hardware is not defective, beyond reasonable repair, it should not be replaced.</p>

    • Skolvikings

      03 January, 2019 - 10:49 am

      <blockquote><em><a href="#390159">In reply to wright_is:</a></em></blockquote><p>Sorry, but I'll trade in for a new iPhone when I want to. I always recycle my old devices. There are much more pressing threats to the environment than me upgrading and recycling old phones.</p>

  • nbplopes

    03 January, 2019 - 4:08 am

    <p>I think Cook should just shut up and admit his error in silence. The crux is that TC and Co pushed the price beyond the value that even some loyal customers attrbute to the iPhone and the iPad Pro . Both iPad Pro 2018 and iPhones 2018 are about $200 more expensive they should be for a fantastic sales quartet both in units as in revenue. Ego and self dazzlement playing with their brains, playing to look good in the board and shareholders.</p><p><br></p><p>The most revolutionary device Apple built came out at $599. The iPhone 3G.</p><p><br></p><p>We don’t value tech jewelry. Apple was not about that.</p><p><br></p><p>Most customers know the trade in program is a loose loose deal to their wallets if you actually care for common sense value. A man being stupid eroding his credibility.</p><p><br></p><p>I really like Apple products, one of a kind. Yet, there are many tools in the market aiming the same problems.</p><p><br></p><p>PS: Too many new products? No! Too many old ones in line to pump the price of new ones!</p>

    • dontbe evil

      03 January, 2019 - 5:34 am

      <blockquote><em><a href="#390160">In reply to nbplopes:</a></em></blockquote><p><br></p><p>it's never apple fault, always someone else fault, especially apple users fault</p>

      • dontbe evil

        03 January, 2019 - 11:04 am

        <blockquote><em><a href="#390177">In reply to dontbe_evil:</a></em></blockquote><p>a big hug to butthurt apple fans that cannot face the truth</p>

        • waethorn

          03 January, 2019 - 3:20 pm

          <blockquote><em><a href="#390260">In reply to dontbe_evil:</a></em></blockquote><p>….motherhugging Apple fans.</p>

  • John Craig

    03 January, 2019 - 5:10 am

    <p>In 2013 I was flying to Cyprus and was leafing through the in-flight magazine. In it was a technology focussed article, where some Wall Street investment player was asked for his prediction of which technology companies would be around in 50 years. </p><p><br></p><p>He said Microsoft would still be around, because they're heavily diversified, taking the fight to Amazon Web Services through Satori machine learning, Azure, cloud infrastructure and Onedrive (Skydive at the time). This guy seemed to think it was the future of computing and considered Microsoft's investments in those areas as a big deal. He also said they were focussed on enterprise software solutions. Not sexy, but functional and necessary. That part annoyed me. I wanted Microsoft to go toe-to-toe with Apple and make amazing consumer products. I was wrong. He was right.</p><p><br></p><p>Ditto for IBM and Oracle. Infrastructure focussed. Building software solutions, and will survive as a result of the Enterprise element. </p><p><br></p><p>He gave Apple a very, very low chance of long term survival. The interviewer was pretty shocked at his response. He said that Apple only have one product, and when they've saturated the market they'll hike prices to cover sales shortfalls, and when that runs out of steam, they'll have to have other revenue generating lines, and those lines will have to be more successful than the iphone, or they'll be in serious bother. </p><p><br></p><p>He considered them a one trick pony, and said the problem they have is that they aren't heavily invested enough in software and services. His view was that they made a very simplistic operating system that could be used by just about anyone, but, because of it's simplicity, it wouldn't be able to serve a wider, more advanced market. </p><p><br></p><p>Scarily, his view was that if Apple were still focussed on hardware for profit by the end of the decade, they'd be no better off than Dell, Sony, HP or Lenovo. Just another hardware company, trying to make a living.</p><p> </p><p>Maybe his name was Edward Casey. Or Jesus. But he called it with uncanny accuracy.</p>

    • jules_wombat

      03 January, 2019 - 7:59 am

      <blockquote><em><a href="#390175">In reply to John_Craig:</a></em></blockquote><p>Yep Enterprise services may not be 'sexy' but they keep you in business, unlike narrow consumer products that have become commoditised. Most people in the market have smartphones and tablets that they are already happy with, where new products do not offer a compelling upgrade. The consumer is simply no longer prepared to sustain $500+ premier phones.</p><p>There is a good reason Satya turned away from consumer market, when he saw that Microsoft could not compete there. He is the CEO that wants to keep Microsoft business proftitable. Apart form the silly sniggers on Windows Weekly, IBM are actually doing pretty well, IBM is leading player in Machine Learnbing and AI services, as well as Enterprise Infrastructure services. Dell, has seen the commodisation of PCs and is transforming itself from a hardware company into a Technology and services centric company (or is attempting to do so.)</p><p>Of course Apple have enough dosh to simply buy out a few Cloud and Enterprise services companies if it wanted to go in that direction. </p>

    • BeckoningEagle

      Premium Member
      03 January, 2019 - 8:10 am

      <blockquote><em><a href="#390175">In reply to John_Craig:</a></em></blockquote><p>Never though I'd see Edward Casey mentioned in a technology article. :-)</p>

      • John Craig

        03 January, 2019 - 9:38 am

        <blockquote><em><a href="#390202">In reply to BeckoningEagle:</a></em></blockquote><p><br></p><p>I like to throw a bit of spice into my rambling every now and then 😉 </p>

    • provision l-3

      03 January, 2019 - 5:26 pm

      <blockquote><em><a href="#390175">In reply to John_Craig:</a></em></blockquote><p>"Scarily, his view was that if Apple were still focussed on hardware for profit by the end of the decade, they'd be no better off than Dell, Sony, HP or Lenovo. Just another hardware company, trying to make a living."</p><p><br></p><p>So if this was written in 2013 then 2019 is then end of the decade and it would be somewhat prudent to look at how Apple is against the diversified companies. In Q1 of 2019 they had what I think we all agree is a bad quarter. I mean, that is what drove the guidance adjustment. In that bad quarter Apple made 84 billion dollars. That is over 75% of what Microsoft made in all of their fiscal year 2018. It is over 100% of what IBM made in a year and 200% of what Oracle makes in a year. </p><p><br></p><p>Obviously the jury is still out on the 50 year mark but the end of decade prognostication isn't accurate at all. </p><p><br></p><p>Also, no disrespect to Microsoft, Oracle or IBM. I think they are all great companies. </p>

  • dontbe evil

    03 January, 2019 - 5:33 am

    <p>bhuahauauahauah … must be apple users fault</p>

  • wocowboy

    Premium Member
    03 January, 2019 - 5:36 am

    <p>Trump's endless trade war is killing markets and economies all over the world, with tariffs raising the price of goods in the US and the price or components used in the manufacture of products both overseas and in the US. It almost destroyed soybean farmers and the soybean market in the US, leaving crops rotting in the fields and raising the price of soybean products around the world for just one example. These trade factors are having a huge detrimental impact on the world economy and are part of the reason prices are rising on cellphones from every manufacturer, not just Apple. Other cellphone makers are also raising their prices, maybe not as much as Apple and Samsung, but they are raising prices and the trade war is part of the reason. Spread the blame around equally because there is plenty to go around. </p>

  • bart

    Premium Member
    03 January, 2019 - 5:54 am

    <p>The only way for Apple to get continued growth is to unshackle its services. Release all Apple services on all platforms</p>

    • maethorechannen

      Premium Member
      03 January, 2019 - 7:29 am

      <blockquote><em><a href="#390183">In reply to Bart:</a></em></blockquote><p>That didn't work for Blackberry. Not sure why it would work for Apple.</p>

      • BeckoningEagle

        Premium Member
        03 January, 2019 - 8:07 am

        <blockquote><em><a href="#390188">In reply to maethorechannen:</a></em></blockquote><p>Depends on how they do it.</p><p><br></p><p>In my home I am the only one using Android, the reason being that I find it much more flexible in terms of choosing my lock screen, my browser, my launcher etc…. Also the fact that I can use messaging applications on my PC, such as Google Messages or Pulse. I understand that this is not everyone cup of tea.</p><p><br></p><p>My wife and two kids use iPhone. I subscribe to Apple Music for the family plan. Making apple some money even though I use Android. I wouldn't mind paying anywhere between 20-30 dollars if it meant that I could also use Facetime, Messenger, iTunes, Apple Movies and be able to share the whole apple eco-system with my phone OR my PC (you could argue that Spotify works across platforms, but I find Apple music manages the music I want to hear better than Spotify, which at times seems random).</p><p><br></p><p>Disney Movies Anywhere has made this inter-operability easier for me, but if Apple made all its services available in Android phones and WIndows for a fee, they would definitely get my money.</p><p><br></p><p>My case may be one in a million, but Apple should at least explore the possibility (I believe they are, since Apple music is available in Android, but I don't know if it is still an experiment project or what not). </p>

        • jbuccola

          03 January, 2019 - 9:43 am

          <blockquote><em><a href="#390201">In reply to BeckoningEagle:</a></em></blockquote><p>The flexibility you gain by choosing your lock screen is a pretty radical trade off vs. what you gain by having an all-in family Apple ecosystem. Find Friends, shared storage, instant photo sharing (both AirDrop and iCloud photo sharing), iMessage, FaceTime, etc. "Dad can you do Find My iPhone?" I hear this several times per week.</p>

  • maethorechannen

    Premium Member
    03 January, 2019 - 7:26 am

    <p><em>Wow. And here we had thought it was competition from China-based technology firms.</em></p><p><br></p><p>I heard that even the China-based technology firms aren't having a particulary great time either. Though I would think that if China is having some economic issues, then more people would do the patriotic thing and save a few ¥ at the sametime by buying a Xiaomi or a Huawei instead of buying an iPhone.</p>

  • BeckoningEagle

    Premium Member
    03 January, 2019 - 7:38 am

    <p>Apple is repeating its past mistakes by locking the services to their hardware. Exactly what they did with the Macintosh for so long. They are making a whole new mistake on the pricing front. Apple hardware has always been overpriced, but it has come down over time. Buying a fully loaded and equipped MAC back in the day would set you back around $10,000.00, counting for inflation that is like $23,411.00 (according to today. The technology started to get smaller and production costs went down considerably, so did the price. To the point where you can buy a fully loaded MacBook Pro for $3,000.00 of today dollars which is $1,281.42 in 1985 dollars, and this is for computing power that was the equivalent to a supercomputer back then, with amount of storage that would be considered ridiculous at that time.</p><p><br></p><p>Apple increasing prices on their hardware makes absolutely no sense, especially since the delta on computing power just doesn't justify it. The company, along with Samsung and Google are going against 35 years of history. It opens the door for companies to create cheaper phones with equivalent hardware. Same thing that happened to Apple AND IBM when Compaq started selling cheaper PC's. The rest is history.</p><p><br></p>

    • Skolvikings

      03 January, 2019 - 10:47 am

      <blockquote><em><a href="#390189">In reply to BeckoningEagle:</a></em></blockquote><p>I've owned several Macs over my lifetime and I've never paid anywhere near $10,000.</p>

      • BeckoningEagle

        Premium Member
        03 January, 2019 - 2:33 pm

        <blockquote><em><a href="#390248">In reply to Skolvikings:</a></em></blockquote><p>You are correct. The Apple Lisa was the one introduced with a retail price of $9,995.00. The argument still holds. Better pricing for more powerful hardware as time passes, not the other way around.</p>

  • zself

    Premium Member
    03 January, 2019 - 9:32 am

    <p>I don't understand how "over a 100 percent of our revenue shortfall" made it past the proof-readers. What does that mean? China accounted for 110% of the revenue shortfall?! Now, in this time of hyperbole, math is also not real.</p>

    • jam3ohio

      Premium Member
      03 January, 2019 - 12:11 pm

      <blockquote><a href="#390217"><em>This likely means that other regions were up year over year, such that China represented over 100% of the net change.</em></a></blockquote>

  • melinau

    Premium Member
    03 January, 2019 - 10:49 am

    <p>The demise of the annual 'phone upgrade, and consequent reduction of iPhone sales is to be expected, especially when Cook tries to wring every last sou out of their customers. </p><p>Apple is still a huge player. Their ARM-based chips unparalleled in powerperformance, and some kind of migration of MacOS to ARM looks inevitable, offering lots of possible additional synergies with iOS. Their Services have a huge user lock-in, and while they will bleed-off customers as their user-base ages &amp; dies, those users' offspring have tended to remain loyal to the brand. Apple products exude a degree of self-indulgent "luxury" that many find attractive, that they are often also very good helps.</p><p><br></p><p>What's happening, is what happened to Microsoft, and for similar reasons. Apple will, like Microsoft, adapt and survive, but without the astronomical growth of yore.</p>

  • MikeGalos

    03 January, 2019 - 11:19 am

    <p>It's amusing that in all but one case the downturns were supposedly predicted and planned for but didn't get rolled into the initial guidance and were denied all quarter. If I owned AAPL stock, I'd feel that Apple management betrayed the requirements for timely notification and based their guidance on things they knew to be false. Frankly, if I were an SEC officer I'd be looking at the trading histories of Apple executives at this point seeing that their guidance was wrong while they admit that three factors why it was wrong were known risks not accounted for in that guidance.</p>

    • nbplopes

      03 January, 2019 - 12:02 pm

      <blockquote><em><a href="#390277">In reply to MikeGalos:</a></em></blockquote><p><br></p><p>The closest organization to you is Microsoft. We all know that, so stop pretending you actually have an opinion :)</p>

      • MikeGalos

        03 January, 2019 - 12:49 pm

        <blockquote><em><a href="#390304">In reply to nbplopes:</a></em></blockquote><p><span style="color: rgb(0, 0, 0); background-color: rgb(255, 255, 255);">Actually, the closest organization to me is a cat supply shop. </span></p><p><br></p><p>Living near a company means you don't have opinions?</p><p><br></p><p>What a bizarre criterion you're using. </p>

    • provision l-3

      03 January, 2019 - 3:04 pm

      <blockquote><em><a href="#390277">In reply to MikeGalos:</a></em></blockquote><p>Your assumption is incorrect. If you read the letter published by Cook you will see that he calls out the timing of the iPhone launch, strong dollar and the number of new products as risks that they were aware of and were able to accurately accounted for in their guidance. Paul's reporting on letter is simply inaccurate. </p><p><br></p><p>I do agree that the timing of the notification. I would assume Apple was well aware of the issues in China well before the quarter ended. </p>

      • MikeGalos

        03 January, 2019 - 4:09 pm

        <blockquote><em><a href="#390432">In reply to provision l-3:</a></em></blockquote><p>Then he should not have mentioned them in why their guidance was wrong. They're not relevant and he should have only stated the downturn in Chinese sales and have mentioned the other three when they gave their guidance.</p>

        • provision l-3

          03 January, 2019 - 5:07 pm

          <blockquote><em><a href="#390505">In reply to MikeGalos:</a></em></blockquote><p>For the first point I disagree. I think in giving a run down of why the guidance was wrong it is prudent to explain how the guidance derived. </p><p><br></p><p>As for mentioning them when they gave guidance …… well, he did. </p><p><br></p><p><br></p>

    • dontbe evil

      04 January, 2019 - 12:34 am

      <blockquote><em><a href="#390277">In reply to MikeGalos:</a></em></blockquote><p>+1 … butthurt apple fans obviously didn't appreciate your truth comment</p>

      • nbplopes

        04 January, 2019 - 4:01 am

        <blockquote><em><a href="#390706">In reply to dontbe_evil:</a></em></blockquote><p><br></p><p>That is a funny observation on a site made out of Windows buthurts. Sone are recovered, others in recovery, others in the way to recovery, unfortunately some surrendered to insanity.</p><p><br></p><p>…. all on top of a butthurt comment …. precious.</p>

        • dontbe evil

          04 January, 2019 - 6:14 am

          <blockquote><em><a href="#390735">In reply to nbplopes:</a></em></blockquote><p>try to visit this and don't forget to buy some ovepriced iDevice to help your beloved company</p>

          • nbplopes

            04 January, 2019 - 12:03 pm

            <blockquote><em><a href="#390755">In reply to dontbe_evil:</a></em></blockquote><p><br></p><p>That is it I am not in love with Apple neither in hate with MS. That is simply not my style.</p><p><br></p><p>This allows me to ascertain that any ideas around Apple needing help or that investors are loosing money with it are at this stage pure fabrications of delusional minds. This while writing what I wrote against TC justifications.</p><p><br></p><p>Note, that this is not the first time Apple deviates from the guidance. Albeit in other turns was down to much more positive notes.</p>

  • dmaddogg

    03 January, 2019 - 11:57 am

    <p>They were "Holding the Company Wrong"…</p>

  • lanzinfo

    03 January, 2019 - 12:26 pm

    <p>Phone sales are slowing for two reasons.&nbsp; First, the average person looks at their phone they see the same thing that they have been looking at for years and it does the same thing.&nbsp; Sure the hardware gets better every year but it does not justify replacing a phone every 2 years.&nbsp; Second, the growth in phone sales is over, especially in the high end of the market.&nbsp; Apple problem is what is its next new product,</p>

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