ULUROO SPEAKS


The Apple Paradox

13 November 2018


One of the few constants on which we can rely in these dark times is the certainty that those who misunderstand Apple will invariably continue to misunderstand Apple.

Ewan Spence, again writing for Forbes, once again is back again to tell us — again! — that it’s any day now that Apple will tumble off the towering cliff of its own success. Again.

“Poor iPhone Sales Forcing Apple Into More Dangerous Decisions”

Bom bom bom, it’s the Apple doom drum!

As the vital festive sales period approaches, are consumers falling out of love with expensive iPhones?

Given that iPhone sales grew year-over-year and the ASP went up by 28%, it seems that the answer is no.

Has the growth in iPhone sales finally forced Apple into a new course of action?

Ewan seems to be referencing the “Poor iPhone Sales” mentioned in his headline. iPhone sales were not poor, as a quarter-second glance at the numbers illuminates. Maybe Ewan means the slowing growth in iPhone sales, in which case we can have an actual discussion. But c’mon, Ewan, don’t make Uluroo complete your ledes for you.

And can Tim Cook’s Apple change the story around its business from a story of popular hardware to one of software and services?

Is that what they’re even trying to do?

Here’s another rhetorical question: should Ewan Spence still be covering technology?

Okay, that wasn’t so rhetorical.

Let’s start with Apple’s decision that it will no longer be reporting the sales numbers of the iPhone.

Yes, let’s. Uluroo has been waiting for almost two weeks to pounce on Ewan’s inevitable incorrect take on this situation.

Given the flat annual sales of the iPhone since the iPhone 6 and iPhone 6 Plus launch, the story about rising numbers no longer belonged to the actual unit sales, it belongs to the increasing margins and increasing average selling price.

What Ewan neglects to mention is that unit sales are going flat across the entire smartphone market, so the only way for anyone to achieve growth is to get more money out of each purchase. Sadly, the world has a finite population and markets saturate over time.

Unit sales are no longer an important metric of success, and none of Apple’s competitors report them anyway, so why expect Apple to do so?

Per usual, Ewan also avoids — whether through ignorance or deliberate obtuseness, Uluroo is unsure — the fact that Apple’s last quarter was incredibly successful by the only meaningful standards. But alas, this kind of market share-obsessed tunnel vision is to be expected from Ewan Spence.

If you’re going to sell success, you need bigger numbers. With the iPhone XS Plus [sic] clocking in at $1500 in some configurations the scope for larger margins and higher selling prices is pretty much priced out the market.

Maybe there isn’t much more room for higher-priced iPhones. We’ll see. But there also isn’t a whole lot more room for growth, either. The smartphone market is saturated and mature, and people hang onto their phones for longer.

Hiding the iPhone numbers means that the focus can be placed on the increasing revenue from software and services, rather than hardware revenue.

This is not what is going on at all. Apple is not trying to change its focus from hardware to services when the iPhone, as Ewan even acknowledges, composes 59% of Apple’s revenue. It’s not like iPhone unit sales were ever precluding knowledge of growth in services.

I suspect that Apple thought it would be quite a long handover period, but this week reports of reduced iPhone XR production line confirms the softening demand for the ‘affordable’ $750 smartphone.

Right. Every year supply chain rumors claim that Apple’s latest whatever is meeting low demand. Every year these rumors turn out to be hot air.

Let’s see if this makes sense: not only does Apple need to release a cheaper phone lest it go out of business, when it does release the cheaper phone, no one wants it. You can’t demand that Apple change strategies and then complain that your proposed replacement strategy is failing.

Last year the iPhone X saw weaker than projected sales, with the balance made up by the iPhone 8 and iPhone 8 Plus.

The iPhone X was the top-selling iPhone in the year it was available. This analysis checks out beautifully.

If XR sales are as weak as analysts suggest, and the XS and XS Max sales are only ‘in line with expectations (set up the iPhone X), then Apple’s decision to hide the sales figures may kick in just as the iPhone hits a downwards curve.

“You know what? What if iPhone sales are about to go down?” is the technology equivalent of “You know what? What if Earth flies out of the Sun’s gravitational grip?”

The only thing we’re learning is that iPhone sales are no longer growing substantially. The thought that sales are about to hit a decline is nothing but speculation. It is not journalism. There is zero evidence to support that contention.

What happens to Apple’s drive to increase revenue from services as it sells fewer devices? Because you still need hardware to run your bespoke services on.

It seems that Ewan has no clue about the difference between slowing growth and decreasing sales. Apple is not selling “fewer” devices. It’s just not selling a massive number more. This is no bigger a problem for Apple than for any other company that inevitably faces the same conditions.

Tim Cook has lifted Apple to be a trillion-dollar company. Can he keep it up with his dangerous decision to change the storyline away from the iPhone?

Apple is doing nothing of the sort. All it’s doing is ensuring that the focus remains on the important measurements of the iPhone’s success.

But, of course, Ewan Spence will be Ewan Spence and look at things in the worst possible light for Apple. Even if it means ignoring, denying, or making up facts.

Apple is an interesting paradox. Its expensive devices will lead to its doom, but its more affordable devices meet weak demand. Its focus on the iPhone is dangerous, but its imagined shift to other sources of revenue is risky. It’s the most valuable company in the world, yet it’s perpetually doomed.

The higher you fly, Apple, the farther you fall. But somehow you manage to fly higher every time.

Maybe the problem isn’t Apple. Maybe the problem is the people who make money writing about it.


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