News - Latest Apple results see growth slow down

[HEXUS]

Apple experiences first year-on-year fall in profits in over a decade.

Read more.

[TheAnimus]

Well I'm a little bit smug about this because if you search back you'll find me nailing this one in Jan, mocking Grubers comments that it was due to down pressure of the options market.

It is hard to see where they can go, mobile phones have crested with the S3 showing how many people want an effectively cheaply made, heavily carrier subsidised device.

The 10" tablet market I'd say is contracting. I have two, but I always either want the convenience of my 7" or an ultrabook (thout I do find myself reaching for the surface RT an awful lot now). My iPad is only used for flying now, but depending on one killer app is not a way to keep users.

The smaller tablets are a kind of race to the bottom. £150 is the price to beat. Sure you can charge an extra £100 because of the logo, but not much more. Given that lots of people want a refreshed mini, due to it losing out so badly in the specs game, I think Apple are going to find they lose even more margin (at the moment charging more for cheaper hardware is a good thing for them!).

What options do they have? Massive software refresh, iOS is really quite poor in terms of features, things like its multi-tasking are just awful compared to Andriod or WindowsRT. Even just getting a video on to the iPad is a logistical nightmare. If they made iOS a more powerful OS, they could perhaps sell new versions of the devices, by locking it in.

The only other one really is to find a new area. Apple don't want to release a cheaper devices, half of their sales go to fashion ***** who would buy the badge and not what it is, you can get a rough sense of this by the distribution of capacity of devices sold.

They can't make smaller and lower cost devices, as they might seriously disrupt their higher end.

Where is the area that will sustain sales going to come? Right now there clearly isn't anything. Unless they pull something out of the bag, it will be circling around 350 very soon.

[3dcandy]

I'd argue that $350 is where the shares should be anyway. Agree 100% with all of the above

[TheAnimus]

Well the issue is how long can that go on for?

I remember upgrading my PC all the time. I've not for 3 years now. I have simply no need. I've gigabytes of SSD space on the RAID, the graphics cards haven't been significantly surpassed, and the old CPU is doing just fine. Nothing has come along to beat my 3008WFP monitors.

In fact it is looking like the Chair and Desk will last less time than the PC.

Sure laptops have some space to get smaller, lighter, with less power drain. But my 3 year old Z series, with core i7 256gb of SSD RAID and 8gb of RAM has more than enough guts, add in the very high res screen. Why do I need something a little bit lighter! Not to mention it would probably cost £1.5k+ to replace, for something a little bit lighter, the batterylife is the only reason to upgrade, but not 1,500 reasons too. It's not going to happen.

This is why I don't think I'll have much in the way of PC expenditure this year, in fact the only thing that might be replaced is my i5 Ultrabook, purely because it got a bit trashed (dropped it a bit, oh and DEET, laptops don't like DEET).

So if I'm not upgrading every 3 years. Who is?

This is the problem the PC industry has been facing, simply the devices they sold two years ago, are still great! No significant improvement or change has happened.

I remember a friend of mine joking about the iPhone 5, "will I upgrade, pfft no, I like my gmaps". The fact is this full on apple fan didn't want to move, because there wasn't a good enough reason to, in fact they saw only the negative side of apple maps.

This is why I'm staying short Apple. Their buyback plan resulting in a flatline is a terribly worrying thing for any investor who is still holding. Apple have to switch from growth stock, to high div yielding. Or pull another must have rabbit out of the hat.

[crossy]

I thought folks were saying that the Apple share price was "wildly inflated" and "not sustainable" for some considerable time? In which case all that's happening is that it's drifting down to the level it should be at.

What's amusing me is the media spin on this - very much "end of the world" type stuff, whereas Apple made profits near $10bn net - it's not as if they made a loss, they're still very much a wildly profitable company.

Unfortunately, it's too much to hope for that the hit on the share price will force them to be less litigious.

I suppose the other aspect is that their honeymoon is pretty much over - there's cheaper and/or arguably better alternatives to both iPad and iPhone for a lot of people, something I couldn't have said when the iPad first came out. The state of the economies around the world also don't really encourage that "upgrade every year" mentality that helped Apple - e.g. the lack of wild enthusiasm over the Galaxy S4.

[martian_aphid]

You guys are right, and it has been all of the hardcore apple fans that have refused to accept the inevitable decline. I've told them time after time the profits will diminish and the shares will fall because eventually if you keep trying to rip your customers off with constant refreshes based on the bare minimum amount of advancement, even your core customer base are going to say "hang on do I really need the iphone 3SSS". The obvious thing for them to do is be more competitive, they need to offer more features and make iOS more open so you aren't being dragged into a staggeringly restrictive eco-system - I don't see them doing that because controlling their customers has been their key design ethos for ages. Actually I think it's a good thing that they will lose their market share and hopefully some of the smaller players can take some from Samsung too - I'd like there to be a lot more competition in the future rather than Samsung and Apple taking all the pie.

[kingpotnoodle]

I'd argue Apple would be better ploughing that stockpile of cash into actual R&D, new business etc. It's all very good to launch some good products, sell them well and build a strong market position, but unless you use the proceeds to create new stuff the competition will eventually catch up and surpass.

They need a differentiator, something you can ONLY get from Apple, for a while iPhone, iPod etc were that but not anymore so the more cost effective competition will continue to eat away at market share and cause falling margins. OS-X is one, but its not like its head and shoulders above the competition and has drawbacks, the Mac line-up is strong hardware but it's nothing exclusive and you more than pay for it so it's not really an innovation, Dell/Sony/HP etc. could/would make the same kind of thing with Windows on if there was actually a demand for it.

They've got a massive pile of moolah and they do nothing with it, iOS is stagnating and flawed, the iPhone/iPad/iPod makes incremental improvements but the only real new push they've made for several years is the higher resolution and PPI screens which other manufacturers have been very easily able to use themselves. A long slow decline will ensue unless they put their money where their mouth is an actually innovate something new... surely they must be working on a Google Glass competitor, better device integration, wireless power, mesh networking, home automation... something!

[3dcandy]

I thought folks were saying that the Apple share price was "wildly inflated" and "not sustainable" for some considerable time? In which case all that's happening is that it's drifting down to the level it should be at.

What's amusing me is the media spin on this - very much "end of the world" type stuff, whereas Apple made profits near $10bn net - it's not as if they made a loss, they're still very much a wildly profitable company.


Unfortunately, it's too much to hope for that the hit on the share price will force them to be less litigious.

I suppose the other aspect is that their honeymoon is pretty much over - there's cheaper and/or arguably better alternatives to both iPad and iPhone for a lot of people, something I couldn't have said when the iPad first came out. The state of the economies around the world also don't really encourage that "upgrade every year" mentality that helped Apple - e.g. the lack of wild enthusiasm over the Galaxy S4.

Spoken to a few mates in the phone business and actually demand for the S4 is very very good. In fact, it appears that the main loser in this round is Apple again if they're to be believed as many people are choosing the S4 over the iPhone 5.

[crossy]

Spoken to a few mates in the phone business and actually demand for the S4 is very very good. In fact, it appears that the main loser in this round is Apple again if they're to be believed as many people are choosing the S4 over the iPhone 5.

I'll graciously bow to your better knowledge then. Though I didn't say that there was a lack of demand - merely that the 3rd party hypegasm that accompanied the S3 launch doesn't seem to have happened with the S4. And I'll admit to being guilty of being swept up in that S3 "enthusiasm".

Getting back to the Apple story, maybe there's a parallel there with Apple - the S4 is pretty much an "S3S" - not the "great" evolution that arguably the S3 was over the S2. Similarly there must be a limit to the number of times that any company can merely evolve an existing product rather than doing something obviously new before the consumers mark it as stale or old-fashioned. So the next iPhone needs to be an "iPhone6" rather than a "5S".

[3dcandy]

I wasn't try to stoke a fire, I see the S4 as the real rival to the iPhone at moment. I feel Samsung has gone for evolution in hardware but the software is where it's at this time round. I thing Samsung are different enough with many fingers in pies to weather a storm though unlike Apple. Apple, as said above have rested a little too much on their laurels, and because of that seem to have actually managed to not get enough of their fans to upgrade to newer shinier toys. Whilst the USA is a mainly iPhone stranglehold, Europe is increasingly going the Android route. As regards other products in Apples range, who would buy an iPod these days? Have a phone and get it all and more...and Macs seem to be struggling because of there perceived poor value whilst we tighten our collective belts.

[3dcandy]

Damn I sound like a right Samsung fanboy...

[crossy]

I wasn't try to stoke a fire, I see the S4 as the real rival to the iPhone at moment. I feel Samsung has gone for evolution in hardware but the software is where it's at this time round. I thing Samsung are different enough with many fingers in pies to weather a storm though unlike Apple. Apple, as said above have rested a little too much on their laurels, and because of that seem to have actually managed to not get enough of their fans to upgrade to newer shinier toys. Whilst the USA is a mainly iPhone stranglehold, Europe is increasingly going the Android route. As regards other products in Apples range, who would buy an iPod these days? Have a phone and get it all and more...and Macs seem to be struggling because of there perceived poor value whilst we tighten our collective belts.

My turn to apologise - that "bowing" comment was meant genuinely not sarcastically - the info about S4 actual demand was interesting.

Similarly, your point about the iPod is well made - anyone I've talked to who's buying an iPod is purely looking at either the Touch for the kids, (because the parents don't want them to have an iPhone), or a Nano for use down the gym. As to the "Classic", well the last time that came up the comment was made that it seemed like a "legacy" product - especially these days when a 64GB flash card for your phone (not an iPhone of course) is easy to get and USB3.0 mean that content syncs are done in a reasonable time. And therein lies one of my confusions with Apple (along with "why the heck don't they license OSX and/or iOS"), since they've got that MP3/MP4 market by the short and curlies - why not push harder there, even as a way of getting folks hooked on iOS?

[mcmiller]

I also think there is an issue with how the phones are being sold to a customer because 24 month contracts are now the norm and it is extremely difficult to find a 12 month contract which means that previously you could upgrade after 9 months now i believe the earliest you can upgrade is after 13-15 months and with only small changes between the handsets is there really an incentive to upgrade e.g. from a iphone 4s to a 5.

[mcmiller]

This is the problem the PC industry has been facing, simply the devices they sold two years ago, are still great! No significant improvement or change has happened.

I still happily use a E6600 to play games, browse the internet, I see no reason to upgrade.

[3dcandy]

I also think there is an issue with how the phones are being sold to a customer because 24 month contracts are now the norm and it is extremely difficult to find a 12 month contract which means that previously you could upgrade after 9 months now i believe the earliest you can upgrade is after 13-15 months and with only small changes between the handsets is there really an incentive to upgrade e.g. from a iphone 4s to a 5.

That's a simple one, I know of loads of people who will simply not buy a phone now because they never have. So, because phones are so highly priced they get a 24-month contract. If the contract was 12-months and you had to pay £400 would you do it?

[Roobubba]

Tim Cook made a statement to accompany the latest set of results. He said “The most important objective for Apple will always be creating innovative products. Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline.” On the subject of the stock price Cook said “The decline in Apple's stock price over the last couple of quarters has been very frustrating for all of us... but we'll continue to do what we do best.”

Paraphrasing:
"The most important objective for Apple will always be making as much profit as possible. Our legal teams are hard at work on some amazingly exploitative deals on other people's new hardware, software and services, and we are very excited that we're able to get good products for a stupidly low price that we can then sell on at a quite astonishing markup based on an inexplicable fanboy loyalty legacy that we continue to milk."
Or something.