iPhone 7 Sales Cool Faster than Expected

Posted on May 3, 2017 by Paul Thurrott in iOS, Mobile with 39 Comments

iPhone 7 Sales Cool Faster than Expected

Apple surprised analysts by announcing lower-than-expected iPhone sales in its quarterly financial results this week. Is this just the latest chink in the armor of a firm that was once viewed as invincible?

No. Instead it’s important to view these results in perspective: Apple is still minting money, with net income of $11 billion on revenues of $52.9 billion, both of which are higher than a year earlier. And with almost 50.7 million iPhones sold in the quarter—basically flat compared to 51.2 million a year earlier—Apple’s phone business is hardly in disarray.

I’m amused to see reports suggest that this “shortfall” is due to customers waiting on an anticipated 10th anniversary iPhone this fall, and even Apple CEO Tim Cook got in on that convenient excuse during a post-earnings conference call. But that’s ridiculous: Apple’s mainstream customers aren’t that tuned-in to anything, let alone tech rumors. What we should all be doing here is applauding Apple for milking its iPhone 6 generation of products for three generations instead of the usual two and still driving such heady sales.

To that end, Cook correctly lauded the “continued robust demand for iPhone 7 Plus” in particular. Apple generated $12.5 billion in operating cash flow in and returned over $10 billion to investors in the quarter. Its total cash hoard is now $256.8 billion, a record.

That said, I understand why everyone is over-analyzing Apple: This is the biggest tech company in the world and its product launches, no matter how minor, generate incredible interest and, more important, enviable sales. But what I think is perhaps more relevant is Apple’s continued inability to augment iPhone with another blockbuster business. Its other products, successes all for sure, just can’t measure up to the impossibly high standards of the iPhone. This is the same problem Microsoft faced with Windows a few decades ago.

In Apple’s case, the “game changing” iPad was supposed to usher in the post-PC era and relegate Windows-based PCs to the dustbin of history. PC sales have absolutely fallen over these years—have in fact collapsed in many ways—but the culprit here is iPhone, not iPad. In fact, iPad sales have now fallen, year-over-year, for an astonishing three and a half years. This quarter, Apple sold 8.9 million iPads, down 13 percent from the 10.3 million units it sold in FQ2 2016 a year earlier.

Meanwhile, Mac sales were up, but just by 4 percent: Apple sold almost 4.2 million Macs in the quarter, compared to 4 million in the year-ago quarter. It looks like the new MacBook Pro hasn’t moved the needle much on Mac sales despite a years-long wait for a new model. And with 61.25 million PCs sold in the quarter, Mac accounted for just 6.85 percent of the market. Speaking of not moving the needle.

I’m sure there is a ton of nuance to evaluate here, including the ongoing growth of Apple’s services business and the lagging Apple Watch and Apple TV. But whatever. Apple is Apple, and it remains unique in the industry. And it will continue to be unique for the foreseeable future, no matter what you or I may think of the company, its products, or its strategy. Let’s not invent a narrative where there isn’t one.

 

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