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

[baller1308]

I am thinking sales will go up next complete refresh. But removal of the headphone jack will be odd. Needs to start at 32gb as well.

I bet Apple had visions of the Apple Watch taking off like the iPad or something. I still haven't seen a single person wearing one.

I guess it depends where you live. I see them everywhere nowadays around Atlanta.

 

[LordVic]

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.

And it's something I've said before and will repeat. This is why Wallstreet (for good/ bad it does) has issues with with relying as much as Apple does on the iPhone.

I keep reading people say "without the iPhone, Apple would still be super profitable multi-billion company on the remainder of their other products".

I argue (obviously hyperbolicly, since this is speculative and hypothetical), that without the iPhone, Apple would likely be still a small player.

The reason for this is because if you look at their product offerings. Almost their entire product catalogue has been assisted, or influenced by the iPhone. The iPhone is Apple's Halo product.

If the iPhone wasn't the success it was, not only would iPhone revenues not be where they were (or existing), The services portion would be next to nothing, if it exists. iPads would likely not exist, or sell well. Brand name recognition of the iPhone has absolutely helped sell Apple PCs. Most of the "other" category is accessories and items for i-devices (eg Watch).

Without the iPhone's rampant success, Apple would likely be a tiny PC vendor, if they still existed. iPods would have likely died out by now as well since most people were already looking to move MP3 / Media playback to their smartphones (Believe it or not, Smartphones did exist prior to the iPhone, and could play MP3's. Convergence was already happening long before the iPhone was released)

Its this that has investors worried. Last year, iPhone sales were Approximately worth 40Billion. (69% of 58B rev from apr 2015). This year, with 10m less volume, they're worth 32.5Billion. thats an 8 Billion drop in Revenue for 10m phones.

say this is a trend and the iPhone sells 10m less again next quarter (and assume same percentage without increases to other revenues). Revenues for the iPhone would drop further to 26 Billion (assuming 10m phones = 8b $). Assuming all other categories stays equal (which would be unlikely, but for hypotethical). Would further drop overall revenues down to 42B in revenues. With only 42B in revenues, That quarterly profit would be roughly 2-5Billion only.

I know this is a lot of assumption and analysis based on limited information. It's just me being an analyst. But it's not hard to see why, despite the size and profitability of Apple in the past 13 years, Wallstreet is questioning Apple's future. Wallstreet / investment is all about the future. Not the past. And there is doubts that Apple will be able to continue record revenue growth in mature markets. Especially, since IMHO, Apple has lost a lot of the uniqueness that set them ahead of everyone else. You could justify "apple tax" high margins when you were legitimately getting something that nobody else could equal. But now the competition has caught up, and in some places surpassed and providing much more compelling products.

Apple is NOT Doomed. But I think the days of Apple being #1 money making profit house and the leader in the smartphone wars is over. We're now in a mature marketplace for smartphones and rampant growth fo sales is likely ending for any established company.

 

[FrozenDarkness]

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.

And yet so does googleand microsoft. Windows still makes up the bulk of their revenue.

 

[LordVic]

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.

And I say you're misusing this number and using it wrong.

Claiming that one companies smartphones is the biggest profit centre isn't a winning statistic to me.
Let me start by sayign: I Think the iPhone is a hell of a beautiful smartphone, that is well engineered, feels good in hand and looks great, and performs very well.

BUT:

It clearly puts in less technological items / stats / performance parts than many of the other people in the market. Apple's iPhones pricing and build are primarily focused on profit margins and not deliverying the highest, newest and best technologies available. Apple is fantastic company at refinement and thats what the iPhone is. It's a really good refinement of existing technologies, Most of which were pioneered by others, but refined into a nicer package on the iPhone.

Because of this, Apple charges full price flagship price, But, with overall less in it. Smaller Flash storage, Less RAM, lower resolution displays on older mroe mature (and cheaper to produce) LCD's. These cost savings for Apple, do not get passed along to the consumer. Instead, Apple pockets the difference as profits.

Eventually, And we're starting to see it in the market, this starts to feel like the "Apple Tax". You are literally paying more for an Apple device because it has the logo on it, Not because of any of the actual technology in the device. When you're a consumer and you hear that on every single iPhone sold, apple is earning almost 40% Pure profit off of your purchase, you start to wonder "why can't they afford to give us 32gb base?" or "Where's my 2-4GB ram base?". "where's my open NFC?", "where's my __________". Aside from iOS v Android debate right now, There is very little in an iPhone from a technological standpoint that makes the iPhone's hardware stand above and beyond most of the compteition. In fact, despite lower profits, many of the competition are selling items that are generally more "spec heavy" than iPhones.

So at the end of the day. As the consumer. Repeating "BUT APPPLE HAS 90% OF THE SMARTPHONE PROFITS" is actually a bad thing. Not a good thing. Knowing Apple is pocketting 40% of my purchase to give to Ive and Cook's already full pockets doesn't make me feel good about 90% profits in the industry. Especially with the Tax Avoidance and other legal issues that Apple has historically abused.

Apple makes some really nice products. But corporate ethics of theirs, and their rampant profiteering past reasonability makes Apple Co. ethically and morally questionable. And the 90% profit mantra just exemplifies that, NOT helps

 

[shalegac]

Doom and gloom. It's over! Everybody go to Android. Sell your stock and hide in the closet!!!!!!!!!!!!1

 

[RoccoFan]

It's the law of large numbers, people. You can't get around it. The iPhone helped them side step (and helped to bring about) the downfall of the iPod. The iPad was supposed to do the same thing, but the phone was more portable with a larger addressable market. Incremental changes in the phone won't cut it unless it is such a radical rethinking of how people see/use their phones that it moves the needle dramatically. For this to happen, it would have to be something akin to what we see in the movies or tv. Take a look at the way phones are used in the SyFy series, "The Expanse".

The Car? Too small an addressable market.
The TV? Too much competition and too much power is in the hands of the content producers.
The Enterprise market? Deeply entrenched competitors who are filthy rich and scared. This means they won't hesitate to innovate.

Let's not even talk about some kid in his dorm room that's putting something together that will make all of this moot.

Fun times ahead.
[doublepost=1461770291][/doublepost]

And yet so does googleand microsoft. Windows still makes up the bulk of their revenue.

The thing is that Windows is a juggernaut. The iPhone is a big deal, but it doesn't rule the roost. I have a Galaxy Note 5 and I feel strongly that is it far superior to the iPhone. That said, I'm typing this on an iPad, of which I've purchased four.

Face facts, Apple has been a brand living on borrowed time for a while.

 

[maflynn]

And yet so does googleand microsoft. Windows still makes up the bulk of their revenue.

Yep, and the same argument applies to Alphabet, in that Google is the division that makes most of the money.

MS on the other hand has been working to diversify its product mix, and I think office 365 is a nice step in the direction. They're much more balanced now then a few years ago.
I found this on the net and it shows a fairly balanced product/service mix.

 

[magbarn]

And yet so does googleand microsoft. Windows still makes up the bulk of their revenue.

If you add up Microsoft's Business Division & cloud operations it totals over $12 billion in revenue. Their 'Personal Computing' division which has Windows 10 and Windows Phone/Xbox/Xbox live accounts for around $9 billion. If you add up all the other parts of Apple and exclude the iphone it doesn't even come close to 50% of their total revenue.

EDIT: Nevermind Maflynn beat me to it... as he said above, Microsoft has done an excellent job for diversifying their company. Much better than Apple by far...

 

[paulsdenton]

I used to upgrade my iPhone every year, but the iPhone 6 plus that I got two years ago is so good that it still meets my needs completely. Like my three old iPads, there's no compelling reason to upgrade it. I do hope that the iPhone 7 will be a killer and give me a reason to buy it. I still wonder what major innovations are still POSSIBLE with a phone?

 

[I7guy]

Yep, and the same argument applies to Alphabet, in that Google is the division that makes most of the money.

MS on the other hand has been working to diversify its product mix, and I think office 365 is a nice step in the direction. They're much more balanced now then a few years ago.
I found this on the net and it shows a fairly balanced product/service mix.

View attachment 628965

The three big slices are all variations of Windows it seems to me; Windows server and Windows desktop and server products. They are just calling those lines different names.

 

[maflynn]

The three big slices are all variations of Windows it seems to me; Windows server and Windows desktop and server products. They are just calling those lines different names.

If you mean server products then no, you're incorrect. That includes SQL server, Exchange and other server products.

Even if it did, Window Server is much different then the consumer level, including the type of support provided.

 

[I7guy]

If you mean server products then no, you're incorrect. That includes SQL server, Exchange and other server products.

Even if it did, Window Server is much different then the consumer level, including the type of support provided.

Fair point about Windows services, and support. But even if the pricing and support of server products reflects the critical usage; it's still Windows as a core product; just broken out into two boxes. If the open source movement gains any traction in corporate data centers watch one of the boxes shrink.

 

[Ghost31]

PC and tablet are dying and watch is seemingly a niche market at best, a companion product for the main product, which is the smartphone.

Apple's entry into cars could be interesting but it's unclear whether Apple without Steve jobs can come up with a new product category that creates a new dominant computing platform, such as PC, iPod, smartphones, and although it was short lived, the tablet was.

Smartphones of today are similar to perhaps where the PC was in 1995 or so. There's still room to grow, as third world plebians come out of poverty, there will be more people owning smartphones, the top end of which will be mostly Apple.
But what will Apple do to create new markets?
If current price to earnings ratio is any indication, the market doesn't believe Apple can do anything beyond the smartphone.

I'm genuinely curious what you mean when you say the tablet market is dying

 

[iMcLovin]

Im really not surprised. For the average user the iPhone 6s is a rather pointless upgrade. iPad, despite becoming markedet as a pro device has hardly anything worth having for a regular consumer compared to older models. Apart from that pretty much everything that has happened since iphone 6 launch has been a snooze fest without any noteworthy innovation. and it just keeps on coming, an event for the iphone SE seemed completely useless and If the iphone 7 is what rumors says it is I see no reason what so ever to buy one (and that comes from someone who upgrade every year just for the heck of it). Even Apple Music has stayed on pause since launch despite the huge reign of criticism on the net. Things are moving too slow.

 

[LordVic]

I'm genuinely curious what you mean when you say the tablet market is dying

The Tablet market has been seeing some decline in sales over the last couple years.

After the initial flurry when the iPad and then others were released, the last few years have not been kind to the tablet industry.

Apple alone has seen dramatic decrease in iPad sales. Even with the iPad pro 12.9 attempting to shake it up. even with marketting saying the iPad Pro could replace old computers. The iPad product category keeps dwindling.

There are a few reasons for this that I can figure out:
1. Tablets are being kept longer than phones. Many people only buy a tablet once. and then use it until it's dead. The tablet market has gotten faster devices, but since the iPad 2, the fundamenta iPad experience hasn't changed. Users using an iPad 2 are still perfectly capable of using it today for the same uses they were using it when it was new. While newer devices improved the ipad iteratively over each generation, the fundamental use hasn't really changed.

2. 2-in-1's and other hybride devices have taken away sales of tablets. Many people are finding that buying a hybrid device is just more practical, even if there are some compromises to be had. You can effectively buy a single high end surface pro with all accessories, and have both a tablet and laptop in one device to carry around with you. But, if you want to stick with dedicated tablet, most people are finding they'll need both a tablet and a laptop. This is a far more expensive proposition, especially in the Apple camp where there is an absolute clear divide between tablet category and computer category.

3. Tablets haven't proven to be the "pro" devices that they were original intended. Tablet's tend to be too limiting in hardware/software options, especially compared to laptops.

No companies have really managed to increase the volume of their tablet sales. its an indicator that the form factor has use, but very limited use overall and people are looking for other devices that do more.

 

[kdarling]

I think everyone agrees that iPhone was a GIGANTIC hit that ushered in the smartphone era, just like how the Apple II ushered in the era of personal computing.

Smartphones were already selling at 100 million a year, which is why Apple wanted into the market, and as a newcomer they were able to skip right to the good stuff As for the Apple II, it was priced very high and wasn't available as widely as the other computers of the time, like the TRS-80, Commodores and Ataris. The latter are what actually kickstarted the purchase of home computers by the masses.

Things like this just doesn't come every by 5, 10 or even 20 years. Doesn't matter if Steve is here or not.

I think there's constantly something going on that Apple could try their hand at.

Apple makes the most money by marketing higher priced, often slicker devices, for ideas that are already in motion. E.g. computers, MPEG players, smartphones, smartwatches. They started none of those categories, but took advantage of technology coming ripe and of locking people into their ecosystem.

So Apple just needs to figure out what the next hot thing (already) is. Hmm. Okay, they've tried set top boxes, dabbled in health aids and home control, though perhaps not enough.

Now apparently they think the Next Big Thing is electric cars. I think VR would be much easier to get into, but in typical Apple style they seem to be waiting for others to create that market first.

Personally, I think they should dive into senior citizen devices/ aids/ robotics. There's a huge aging population boom, and we're going to need help

They gotta figure out how to make money from all the iPhones that are out there in people's hands.

They've done pretty good at that. They restricted their users to only get apps from their own store, where they get a percentage. They have proprietary cables that third parties have to pay royalties to make. They force banks to pay for access to their own customers for NFC purchases.[/QUOTE][/QUOTE]

 

[MacBH928]

iPhone sales make 65% of the income?
Who would have thought Apple would be more of a Nokia than IBM.

Desktops and laptops only make 10% of what Apple is today. No wonder they don't care about updating them or innovating in that area.

 

[AFEPPL]

IBM are a consulting company - are you meaning the old IBM?
Thats the point, companies transform... Apple needs to do the same.

 

[rockinrony]

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.

Tim Cook has big vision of finance sheet, He wants giant numbers. Giant numbers of higher profit margin, less expense in production, force users to pay $100 by eliminating 32GB model and of course sell half baked product to keep buyers tempted for next generation device. God bless Apple

 

[jmpage2]

I'm sure he did a lot.

I'm not sure he could have done much about the natural maturation of the smartphone market though.

When you have the sort of mind boggling record breaking figures Apple have had over the last couple of years, there's no way they could keep growing indefinitely, Jobs or no Jobs.

The difference is that Jobs would have moved on once the iPhone had matured two years ago to entirely new things. Job was brilliant in looking at what his labs teams were working on and figuring out how that could be used to majorly disrupt existing technology. When the labs team brought him a touch-screen tablet he asked them why they couldn't make it into a phone, that's where iPhone came from and destroyed the existing market.

Tim Cook on the other hand is a supply chain guy... and that's about all he's good at. So Apple has an enviable supply chain infrastructure, but it doesn't matter how efficient the supply chain is if customers aren't excited by your products.

 

[bingeciren]

You can ignore some of your customers sometimes.
But, you cannot ignore all your customers all the time.

Apple has been annoying me for some time with their idea of improving their products and totally ignoring the wishes or expectations of their existing customers.

Cripple the Mac Mini, delete SNMP support from the Airport and Time Capsule, rather than just adding a retina display to the Air introduce the 12” MB and burry the Air, glue and solder everything as much as possible to kill user upgradability, be madly obsessed with thinness at the expense of performance, delete the phone jack for no user benefit, make new versions of the software dumber and less capable and kill the capable ones (deleting Aperture and introducing Photos, iMovie 9 vs 10, Airport Utility 5 vs 6, Disk Utility 13 vs 15 to name a few).

I bought my Apple shares when it was $96 in 2014 and sold it on March 2015 at $123, after seeing their new product line. Since then the shares dropped and did not recover.

In the near future, I see no reason to upgrade any of my Apple hardware, like my iPhone 6, ATV3, 2012 Air, 2012 Mac Mini Server or my existing previous generation Airports and Time Capsules.

Also, iPhone constituting 65% of the sales is a very unhealthy balance for Apple.

I hope Apple interprets these results as warning and takes corrective measures.

 

[ganesh.raam]

$10.5 Billion in profits and people are complaining about losses. Its like the Vegas casinos are reporting losses after making a marginally less than billion dollars in profits... LOL

But from an innovation standpoint, all the products offered by Apple have come to a saturation point. They need to come up with some real good innovations and concentrate on markets such as India (Considering there has been a growth rate of 56%)

 

[ValO]

This is just an adjustment in the market ands stock price after the ridiculous amounts of iPhone 6' s shipped in 2014 and 2015. It was never possible for Apple to best these results.
It is a reality check.
This last quarter and the next quarter are the 2 quarters in which Apple will get stock holders back to reality.
Before the results of Q3 everyone will have adjusted to the " new" situation, and expectations won' t be so high anymore.
Can' t wait for everyone to scream about the pretty good results of q3.

The iPhone situation, is normalized by then.
Sold macs will rise after the introduction of the new and updated macs in 3 months.

For me there are 3 major concerns :
-dropped iPad sales, what is Apple going to do , to halt this? I don' t know whether the pro treatment and prices going up, will be able to stop the downfall. Apple needs a special IOS pro to make it more than just a blown up iPhone OS. Multitasking features were nice, now take the next step to get it more in line with desktop os' es.

-Apple watch->what about that. Bring an exciting update, with a little more elegance/thinnes, perhaps even an edge display. Perhaps it won' t have a function, but it will like very nice, and after all it is some kind of jewelry.
So better hw, nicer design, and better apps. And perhaps even release a few special additional health monitoring bands, gps, perhaps even LTE.

-Apple TV-> update was hmmm ok at most. Release an updated Apple TV in the next year with 4K support and dts HD encoding, etc. Ans make it on par with the x box one/ps 4 graphic capabilities, with a native Apple game controller. Call it Apple TV pro or something.

 

[LordVic]

$10.5 Billion in profits and people are complaining about losses. Its like the Vegas casinos are reporting losses after making a marginally less than billion dollars in profits... LOL

But from an innovation standpoint, all the products offered by Apple have come to a saturation point. They need to come up with some real good innovations and concentrate on markets such as India (Considering there has been a growth rate of 56%)

I think India is going to be a tough nut to crack than Apple is capable of. India is unfortunately a fairly poor country. The Citizens don't generally have the funds to be buying vast quantities of iPhones at full flagship prices. India needs budget devices. This is why Android has done well enough in India now and surprisingly, why BlackBerry used to do very well in India. They are able to provide cheap solutions.

Unless Apple is willing to sell the iPhone 6s's for like 299 in India. I don't think they'll penetrate that market nearly as much as the yhoped

 

[navaira]

Can' t wait for everyone to scream about the pretty good results of q3.

Apple already announced their expectations for Q3:

2016: Apple’s Q316 revenue guidance of between $41 billion and $43 billion is light vs. FactSet estimate $47.4 billion. (source)

2015: Apple® today announced financial results for its fiscal 2015 third quarter ended June 27, 2015. The Company posted quarterly revenue of $49.6 billion and quarterly net profit of $10.7 billion, or $1.85 per diluted share. (source)