Apple iPhone Sales Lower Than Expected But Tim Cook Is Looking At The Long Game
Apple forecasted that it will experience its first sales decline since 2003, with the company stating that the dip is due to the slowdown of iPhone sales within a smartphone market that is becoming increasingly saturated.
Apple expected its revenue for the second quarter of its financial year to be between $50 billion and $53 billion, which would be the first quarterly decrease for the company in 13 years and falling below estimated revenue of $55.5 billion.
The company, however, did well in the first quarter of its fiscal year 2016, posting record quarterly revenues of $75.9 billion and a record quarterly net income of $18.4 billion, which amounts to $3.28 per share.
"Our team delivered Apple's biggest quarter ever, thanks to the world's most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV," said Apple CEO Tim Cook.
In a conference call with analysts for the discussion of Apple's quarterly results, Cook said that he did not believe that the peak of the iPhone has passed, despite the slowdown of sales growth for the smartphone. Cook also dismissed the notion that the iPhone needed new features that would increase its appeal.
"We do think iPhone units will decline in the quarter," Cook said in the call, adding that there has been no projections made beyond the current quarter. Cook, however, said that metrics suggest that there is no issues with regards to market saturation, as almost half of the iPhones that were sold within China in the previous quarter were to customers that were purchasing their first ever iPhones.
Cook also noted that, while Apple had its best results ever in China, there were already signs of a slowdown in the Asian country in December.
"You need to take into account the business opportunities that we have but also the realities of an economic environment that is not ideal right now," said Apple CFO Luca Maestri, who added that in addition to China, sales in Brazil, Russia, Japan and Canada are also being negatively affected by the global economic environment.
The company remains very confident in the long-term potential of the Chinese market though, with no changes to Apple's expansion plans in the country. About 80 percent of people in China are still utilizing older mobile phones which operate on 3G networks, which will be a part of the market once they decide to upgrade. Also, according to Cook, the number of middle-class people in China is expected to balloon from 50 million in 2010 to 500 million in 2020, which would have Apple benefitting in the longer-term in the country if it moves to a more consumer-driven economy.
Cook also mentioned the importance of India in the plans of Apple, as growth in the country is doing well. India is the third-biggest market for smartphones in the world behind China and the United States, with almost half of the people in India aged under 25 years old for demographics that would be great for consumer brands such as Apple.
Investors, however, have remained skeptical of Apple's plans, with the company's stocks down by about 20 percent over the previous six months. Sales of the iPhone has been the most significant evaluator of the company, and if the smartphone's sales in China is expected to slow down, Apple might need a new product such as the rumored electric car to keep investors happy.