Apple Reports First Year-Over-Year Revenue Decline Since 2003: $10.5B Profit on $50.6B in Revenue

[Jakeoster]

As much as Wall Street and everyone else likes to believe, a company cannot always beat expectations.

Does that mean the company is going to be a failure?

No.

The Intelligent Investor understands a good sale and buys at a bargain.

Let the folks with weak hands give you a sale

 

[Analog Kid]

The size of the smartphone market isn't the same size every year. It has grown every year.

And every new customer has a little less money than the last, driving margins to zero across the aggregate demand. That's not growth, that's barrel scraping.

 

[Gawjuz]

I'm guessing Apple Watch sales are lumbered in to the 'other' category again. Figures.

 

[2457248]

the way i see this: apple exists these days because of the iphone.
2 products make 2/3 of their revenue, everything else looks like a struggle to stay afloat.
also, despite all the marketing on how ipad will substitute your laptop, mac revenues are higher than ipad, still.

apple watch is hidden somewhere, and they never released any real sales figures.
i expected the claimed 13m apple music subscribers would show somewhere, but i don't see any surge on services revenues.

 

[doelcm82]

It won't last. They have peaked on margin performance - they won't be making as much margin on iPhone SE - and increasing competition, lack of innovation, combined with increasing product saturation means that their pricing model will start to evolve to the next phase.

Or so you hope...

I expect that Apple will continue to innovate, but naysayers will dismiss each innovation as it appears. In five years, the claim will be that Apple hasn't produced anything innovative since the Apple Watch and the Apple Pencil.

 

[pika2000]

I wouldn't blame this on market saturation. Samsung has a great strategy, they are pulling out a lot of stops to get their sales up. I expect Apple having the ability to do the same. May this be a wakeup call.

I don't want to pick up the next Samsung Galaxy phone if the iPhone 7 ends up being a drop in the bucket. A touch home button, and camera enhancements without OIS exclusive to a bigger plus version, won't cut it for me.

Not that 10.5B is anything low, though for a company like Apple, who has done what was considered impossible... maintaining growing numbers since the launch of a product 13 years ago... this should come as a surprise.

No company can maintain growth as desired by current wallstreet analysts (who are pretty much mere speculators with no knowledge of actual engineering).
Samsung does not have great strategy. Just look at their own profits and their decline in Asia, especially China.

I think a better way to analyse this is to look at the overall market itself. If everybody else is doing better than Apple, then Apple is in trouble. If everybody else is not doing much better, then Apple is still on the right track.

 

[RestUnknown]

One thing Apple never used to be was a company that lowered their prices to compete with cheap Windows computers.

People made the same sort of 'shoemaker in the tech business' comments when Apple entered the phone business.

There are a lot of selective perceptions of what Apple was, is, or should be on this board today. Luckily for Apple, Tim Cook probably doesn't read any of this crap.

I totally agree, but when Apple entered the phone business with a smartphone it was more or less in line with what they were doing as in the computer business. The Apple car might be a huge succes, you never know as, like I said, thorough research will have been conducted. But to me it just feels like they need something new, a desperate struggle for air because they're slowly drowning. The phrase 'Apple can't innovate anymore', to me feels true. I don't blame them, it's difficult in this day and age, but don't become desperate.

I don't say they need to lower their prices to be at the same par as with Windows computers. I'm fine with them being more expensive because most of their products look gorgeous and overall work really well. But the fact you start to pay more and more (in my country due to the strong dollar the prices are way too high at this moment) for less and less specs (see my remark about no more discrete graphics card in the low end MBP + a very very low update cycle), it's just a huge turn off.

 

[Intuitive Computers]

 

[maflynn]

Some have given me a hard time for calling Apple a one-trick pony, but that really is becoming reality as Apple relies more and more on the iPhone every quarter.

Wall street type people have long called apple a one trick pony (on so many words). They've been want see apple with a more balanced product offering. While Apple has many products and services, none of them come close to generating the amount of revenue the iPhone does.

i don't get it. apple has multiple "1 billion dollar products". what point are you making?

I think the point is, that apple has a single product where it derives most of its revenue from.

 

[Lemon Mac]

Bad news is having your dead infant child washed up on a beach in the Med after fleeing a war zone.

This artilcle does not even qualify as being news.

 

[nick42983]

Awesome that Matt Drudge reads MacRumors, thank him for your traffic spike, hope the servers hold out.

 

[Abazigal]

Wall street type people have long called apple a one trick pony (on so many words). They've been want see apple with a more balanced product offering. While Apple has many products and services, none of them come close to generating the amount of revenue the iPhone does.

I think the point is, that apple has a single product where it derives most of its revenue from.

The Apple Watch reportedly earned more than Rolex. The iPad earned more than the Surface Pro line. Apple Music has 13 million paying customers. Each of Apple's product lines is fairly profitable in its own right.

The way I see it, it's not that the other products like the iPad are not earning enough, but that the iPhone is earning way more than people expect it to.

The iPhone reportedly makes up over 90% of the smartphone industry's profits. Name me a product by any other company which is as profitable.

People are arguing about it the completely wrong way.

 

[TallManNY]

Engineers in Silicon Valley don't get options anymore. Certainly not for public companies. They get RSUs instead. And they can never go underwater. They're always worth something.

Thanks. Not options then. But the RSUs become greater or lesser in value with the stock price. And they vest over time with the employee forgoing them if they leave before they vest. So my point is still valid, Apple's stock price is part of its employee retention strategy.

Thanks again for the clarification that options are out.

 

[nunes013]

Well I think a lot of people jumped to the iPhone 6 when it came out. And now not a lot need to upgrade. Plus wireless plans are too expensive to get a new phone every year. I was going to buy the iPhone 7 however if a redesign is not coming until 2017 I will hold off. I am buying an iMac and iPad Pro this summer so Im doing my part

 

[maflynn]

Name me a product by any other company which is as profitable.

No one is questioning (at least I'm not), the profitability of the iPhone. Its making Apple gobs of money.

People are arguing about it the completely wrong way.

No, I think some of the comments are on point. When a company relies on a single product for most of its profit, its akin to putting all of your eggs in a single basket. if something bad happens to that single product, then Apple is in a world of hurt. No company can easily weather a massive drop in revenue, and right now, the iPhone represents 65% of Apple revenue. I'm not saying Apple is doomed, but they need to diversify their product mix. They haven't been sitting on their hands, they've been working on that, but so far, nothing has come close to evening out the product mix and the revenue it produces.

 

[kbk75]

As a long-time Apple user, I can't say I am surprised. This has been coming for a while. Each year's iPhone "update" has got less to be excited about than the previous one. I feel like they hit a new low with the 6S' new 'features', which are a joke and are gimmicky at best. It's almost as though they have got so consumed with planning the update pipeline for the next 2-3 years, that they are very obviously holding back features that their flagship products should have, each time they update them. The market is now reflecting the disappointment this sort of attitude creates even among long-term brand loyalists.

This situation is not unique to the iPhone, it affects the iPad and other product lines as well, even if those contribute less to Apple's coffers. I do hope the reduced earnings and profit serves as a wake-up call to the company to start pushing the boundaries, and the competition, a little. Enough of the cynical, semi-updates designed to milk customers year after year, while relentlessly chasing the highest margins in the industry.

Hopefully they will shake things up with their 2016 refreshed products, not continue holding-back for 2017 and beyond or this downward turn in earnings and profit will continue. The competition today is simply too stiff to be complacent and cynically expect your customers to be blind to this sort of thing.

 

[plexdk]

For everyone who constantly discredits Steve Jobs contributions, the man did do something at Apple. He didn't write code/source parts from vendors etc, but he gave direction as he knew what to work on. Tim Cook isn't the same visionary; the numbers show this. Apple needs to **focus** on building fewer products and making them the best.

If they focus on fewer products, they get punished for not making the next big thing? Loose loose

 

[Abazigal]

No one is questioning (at least I'm not), the profitability of the iPhone. Its making Apple gobs of money.


No, I think some of the comments are on point. When a company relies on a single product for most of its profit, its akin to putting all of your eggs in a single basket. if something bad happens to that single product, then Apple is in a world of hurt. No company can easily weather a massive drop in revenue, and right now, the iPhone represents 65% of Apple revenue. I'm not saying Apple is doomed, but they need to diversify their product mix. They haven't been sitting on their hands, they've been working on that, but so far, nothing has come close to evening out the product mix and the revenue it produces.

Then what is Apple supposed to do? Tell people to not buy so many iPhones so that it no longer forms such an oversized portion of their profits?

The whole problem is that there isn't anything quite like the iPhone. Or to put it another way, you don't need a product to match the profitability of the iPhone before it can be considered a success.

For all we know, the iPhone could be that once in a lifetime phenomenon that not even Steve Jobs himself could have topped.

I suppose a point could be made that perhaps Apple has allowed its other product lines to languish because it paid too much attention to the iPhone. But even then, my original point still stands - that they would still not have been as successful and profitable as the iPhone.

 

[TallManNY]

I respectfully disagree. When I was in the market for my iMac, I wasn't paying attention to the specs very closely. While I did want to future proof it by selecting more RAM and fastest CPU, I didn't care if it wasn't the latest Intel CPU out on the market. Why? Because I knew that OS X would run beautifully on this machine. I guessing most folks buying the Macs are looking at the user experience and aren't concerned too much on specs.

Now is Apple losing Sales to PC vendors due to not updating frequently to the latest hardware? Very doubtful. Folks that are buying PCs are either:

1. Not familiar with OS X so they go with what they know: Windows.
2. On a serious budget trying to get more bang for their buck. Apple products aren't cheap.
3. Gamer or techie that likes to tinker and customize hardware.

Apple's Macs was kinda of a niche product that is currently branching out. Traditional sales went to graphic designers and such. Nowadays, more casual users are buying up Macs due to the iPhone being the gateway device to the ecosystem. That's how they got me. I started with the iPhone and was hooked. The iPhone got me curious about the MacBooks and the rest is history. Just check out my signature.

Walk into an Apple store and just look around at the customers. Ask yourself how many of them shop on NewEgg? Get my point?

At to the last point regarding the Mac Mini, I can't speak to it as I'm not familiar with it. My guess is that Apple is phasing it out kind of like the iPods or they or redesigning them from the ground up like the Apple TV.

All of above is true. But there are also buyers of Macs who are sophisticated users. Those are the folks who might buy a Mac Pro. But the Mac Pro has now gone 860 days without being refreshed and without a price drop. They built this fancy case with innovative thermal capacity and then just did nothing with it? in over two years they couldn't put a new GPU in there? It almost boggles the mind.

The Mac Mini has gone 559 days without a refresh. Maybe they don't want cheap hardware available that can run their OS, so maybe they are going to kill that model. But I think that is a mistake. They could have really captured serious marketshare from Windows during the Windows 8 debacle.

If Apple refreshed the specs in their hardware more often, then power users would be compelled to upgrade more often. And power user sales drive consumer user sales because it is the power users that provide advice.

 

[maflynn]

Then what is Apple supposed to do? Tell people to not buy so many iPhones so that it no longer forms such an oversized portion of their profits?

I'm not saying they should do anything, but just point out, that having a single product that makes up a majority of their profits is a bad thing. I see them doing what they can do to diversify. Much smarter folks in Cupertino are working on this as they're fully aware that while they're making a lot of money, they need a product mix and strategy that allows them to no rely on a single product.

 

[Abazigal]

For everyone who constantly discredits Steve Jobs contributions, the man did do something at Apple. He didn't write code/source parts from vendors etc, but he gave direction as he knew what to work on. Tim Cook isn't the same visionary; the numbers show this. Apple needs to **focus** on building fewer products and making them the best.

Apple is a much larger company now, catering to a way more diverse consumer base. What used to work for it in the past is probably no longer relevant today.

It made a lot of sense to have a slim product line when you have limited resources and need to be very selective about what you can and cannot do. Today, I don't think even Apple can get away with selling just one size of iPad.

Times have changed, and Apple has to change with the times as well.

 

[johngordon]

the way i see this: apple exists these days because of the iphone.
2 products make 2/3 of their revenue, everything else looks like a struggle to stay afloat.
also, despite all the marketing on how ipad will substitute your laptop, mac revenues are higher than ipad, still.

apple watch is hidden somewhere, and they never released any real sales figures.
i expected the claimed 13m apple music subscribers would show somewhere, but i don't see any surge on services revenues.

Just to be clear here - are you saying that Apple would "struggle to stay afloat" if its business did not include the iPhone?

You are saying that a company making profits of around $10-15 billion dollars a quarter would "struggle to stay afloat"?

 

[pmau]

Just to be clear here - are you saying that Apple would "struggle to stay afloat" if its business did not include the iPhone?

You are saying that a company making profits of around $10-15 billion dollars a quarter would "struggle to stay afloat"?

Apple is squeezing every penny to get the cheapest possible suppliers.
Just imagine that the switch from Qualcom to Intel for their LTE band has some baseband issue.
Then imagine that millions of upset people return their phones after "holding it wrong".

This would be a disaster. If the iPhone 7, besides being the third identical phone with minor spec bumps, has a problem then we might see what a real "struggle" might be.

People expect an iPhone, but they can almost always just skip iPads or even new MacBooks.

My Retina MacBook Pro died from liquid damage. Guess what. I did not buy a new one.
I am currently working on a MacPro 2008 and a MacBook 17" from 2011.

Phones are the most constant revenue stream for Apple. If the iPhone declines, Apple is in trouble.
Even if you don't want to believe that.

 

[tomaki]

I know that it's a fools hope, but I'm seriously hoping that this will mean that apple starts to focus it's efforts on the computer-side of it's business again.

There has been way too many updates to their machines where the only "update" has been making the hardware worse: Uselessly underpowered imac/mini entry-level models, no serviceability both in desktops and laptops etc. There used to be a time when I could switch a dead battery of a laptop in 15 seconds. Now it takes a week (in service). Also nowdays it's pretty much impossible to upgrade your memory or service your broken hard disk later on.

Come on Apple, being pro-user hostile is pointless, so stop crippling your machines! Please? There are people who like to work with these things instead of using them as mere lifestyle-accessories.

 

[NT1440]

I know that it's a fools hope, but I'm seriously hoping that this will mean that apple starts to focus it's efforts on the computer-side of it's business again.

There has been way too many updates to their machines where the only "update" has been making the hardware worse: Uselessly underpowered imac/mini entry-level models, no serviceability both in desktops and laptops etc. There used to be a time when I could switch a dead battery of a laptop in 15 seconds. Now it takes a week (in service). Also nowdays it's pretty much impossible to upgrade your memory or service your broken hard disk later on.

Come on Apple, being pro-user hostile is pointless, so stop crippling your machines! Please? There are people who like to work with these things instead of using them as lifestyle-accessories.

So you're expecting apple to single handedly turn around the entire decline of the PC industry by focusing not on average consumers, but people that actually want to tinker with their machines.

Good luck with that.