Apple Inc. iPhone sales are crashing but the crash is just as bad for Android OEMs as it is for Apple.The firm has probably lost the founder’s effect from Steve Jobs and the iPhone and other products are suffering as a result. Tim Cook has made the iPhone bigger, then slimmer and its latest phone is a smaller 4-inch device; yet, no amount of tweaks and upgrades to specs could coax more buyers and iPhone sales are falling very fast.
Here’s why falling iPhone sales are bad for Apple
The drop in Apple’s iPhone sales is bad for Tim Cook and his firm because the decline has shaken the fundamentals of investors’ confidence in the firm. iPhone sales accounts for almost two-third of revenue for the Cupertino firm and the firm has not been able to create another compelling product that could fill the gap created by declining iPhone sales. IDC reported that Tim Cook’s firm shipped 51.2M iPhones down from 61.2M in the in Q1 2015.
In April Apple reported its first quarter (Q1 2016) earnings and the firm noted that iPhone sales were 16% lower year-over-year. The firm reported a 13% drop in revenue to $50.6B to mark the first drop in revenue in the last 13 years. More so, the firm’s net income was down by a massive 22% to $10.5B or $1.90 per share.
The weakness in the financials caused investors to think twice about the stock and it lost almost $47B in its market cap after investors rushed for the exits. Tim Cook has tried different tweaks with the iPhone but people are not just buying the device again. The fact remains that most people that wanted an iPhone probably has one already.
The only thing that Apple could do to trigger more iPhone sales is to reduce the price of the device. Lower prices could help many of the cheapskates who are buying cheaper phones in the Android ecosystem. Cook has hinted that “it’s our jobs to come up with great products that people desire, and also to continue to attract over Android switchers.”
However, making/selling a cheaper iPhone would reduce margins; hence, the volume sales of iPhone might increase, but the financials will remain unimpressive, and investors will remain pissed. In the words of Toni Sacconaghi, an analyst at the Bernstein brokerage firm, “there’s no question that Apple’s best days are behind it… The company grew at astronomical rates, and it’s now so big that its ability to grow at those rates doesn’t exist anymore.”
Android has something to lose from falling iPhone sales
OEMs manufacturing smartphones that run on Android OS will also suffer because of declining Apple sales. To start with, Apple has largely operated in a market distinct from the targets of Android OEMs. The iPhone maker is content to control a 20% market share while taking 80% of profits in the smartphone market. However, Tim Cook might start looking for ways to steal more market share in order to get back his huge margins.
OEMs that make Android phones will be on the receiving end if Apple starts making iPhones that competes with Android devices on price. It is also worthy of note that Apple has more than 200B in cash and it could afford to play the price game (and win) if it finds a compelling enough reason to steal buyers away from Android.
In the Q1 earnings call, Tim Cook noted that “… we continue to see a very high level of customers switching to iPhone from Android and other operating systems… In fact, we added more switchers from Android and other platforms in the first half of this year than any other six-month period ever.”
So, what’s bad for the Apple iPhone is bad for Android too – at east in this case.