Ming-Chi Kuo Says 'Worst Soon Over' in Regards to Slowing iPhone Sales

[dampfnudel]

Who would guess a store on the street would be empty when it's 25 degrees outside, no products have been launched recently and Grand Central is 3000x more convenient?

Shocking.

It got into the 40s yesterday here in NYC. It’s more a case of the January tourism blues and a large number of more convenient locations now exist as you said. I wouldn’t be surprised if Apple closes at least one store in NYC a few years from now if the new “sales norm” for iPhones becomes lower because other companies have recently begun to realize that the “prestige” of having multiple flagship stores in NYC isn’t necessary and a waste of money.

 

[xpxp2002]

I 100% agreed with everything you said until I got an XS. FaceID IS actually a killer feature it’s just very very hard to market; as you demonstrated.

I didn’t think I would like it, however it actually makes the phone more useable. You can feel that it’s the kind of system that Apple wanted in the first place. Raise the phone and glance at it and it’s already unlocked.

Once you have it you’ll never go back!

Nah. I was skeptical but I went from a 7 to the X. The battery life improvement is amazing and worth it. Face ID is a terrible downgrade. Touch ID always just worked, arguably unless you just stepped out of the shower.

Face ID is slow, and it often tries to unlock when I’m glancing at the time and I end up with a phone that locks out and requires me to enter the passcode anyway, defeating the whole benefit of biometric authentication. It was a half-assed solution that Apple needed because they were determined to drop the home button. I’d gladly go back to have the reliability and speed of the Touch ID sensor again. If only Apple had released a phone with decent battery life and Touch ID. The holy grail...

 

[Ramchi]

They set revenue records in those countries. I never said anything about market share.

To offset a significant decline in a major market like China, Apple would need to significantly outperform in many other countries, not just perform well...which they did.

What you’re not understanding is the simple logic. Apple flat out told us that China was responsible for over 100% of the revenue shortfall. This means if China performed only as well as last year, Apple wouldn’t have revised guidance. That’s it. Not further explanation needed. They would have hot at least the lower end of their guidance range.

Apple did well enough in the markets like Canada, US, Italy, Mexico, Korea, Germany, and Vietnam to note that revenue records were set. This further cements how much of a drag China was in the calendar 4th quarter.

Your statement about price being unsustainable wasn’t true in markets they set records. Lowering prices across the board doesn’t guarantee revenue growth either. You have no data to support that. My data is revenue records in the countries I mentioned, indicating prices aren’t a problem there. China pricing has been adjusted, but we still have to see if it will work. Again, no guarantees. Maybe the problem is with market saturation, features, etc.

All you people thinking that lowering prices is the winning strategy don’t understand business. Lowering prices doesn’t necessarily get you to a goal of revenue growth. If they lower the price and sell X more units, they may or may not make more money, which is the goal. You could also give the product away and sell more units. Apple’s strategy isn’t simply to sell more units.

You are true to a larger extent that lowering prices doesn't get you success. But the problem with Apple price is that people slowly start looking outside for better value probably because they don't want get tied to a ever increasing prices for relatively evolutionary upgrades considering the overall landscape.

 

[78Bandit]

I'm guessing "the worst is over" means the sales decline is going to level off. The big question is what will future growth look like? Overall unit sales peaked in the 2015 fiscal year and have been pretty stable in the 215M - 225M range in the three years since. It was mainly an increase in ASP due to the release of the X and a $50 increase in the price of the 8 vs. the 7 that drove revenue growth last year. That appears to have been a one-time boost as we are looking at a significant revenue drop in Q1-19 despite the expectation of increased service and other revenue.

The smartphone market is saturated, devices are more powerful and last longer, and generational improvements in hardware and software are becoming incremental rather than revolutionary; so it would appear the iPhone has entered the commodity phase of its life cycle. Growth in hardware sales (iPhone, iPad, and Mac) will likely be in the single digits for the foreseeable future.

 

[justperry]

Not much of a feature imo, although, I have never used it.

I really wished the newer phones had Touch ID.

Or better, both.

Fast enough might be accurate but 5% speed is not. Phones and tablets are doing what computers did back in the day. They are literally nearly doubling their speeds. The latest iPad is as fast as a 2017 quad core 15” MBP.

The latest iPad is NOT as fast as you claim it to be, try to get some heavy work done on an iPad, you can't, not because of software, hardware can't keep up compared to a MBP, and don't tell me Geekbench results are same or better, those numbers mean little.

 

[Baymowe335]

You are true to a larger extent that lowering prices doesn't get you success. But the problem with Apple price is that people slowly start looking outside for better value probably because they don't want get tied to a ever increasing prices for relatively evolutionary upgrades considering the overall landscape.

You need to provide facts rather than just how you feel. I'm just telling you Apple did great in many larger developed markets and the list of companies blaming China is growing. This is starting to feel like a China only problem and the pricing isn't an issue. China is an issue.

Companies so far specifically blaming China for earnings:

• Apple
• Nvidia
• Caterpillar
• Samsung
• Intel
• FedEx
• Goodyear
• Tiffany

 

[Ultramove69]

Tens of millions of iPhone users around the globe won’t upgrade their phones until there’s a compact, thumb-friendly iPhone in the lineup again.

You’d have to pry my Xs Max out of my cold dead hands before ever going back to a Zoolander micro-sized 5 series screen.

 

[joueboy]

That's because out of warranty X expected to have battery, display issues. They probably get away with potentially problematic device at whatever price they could sell it off

So with your point provided, how is this going to help to end iPhone sales according to Ming. With that situation basically it's just gonna discourage the owner not to buy iPhone again and the potential buyer will be the same thing.

 

[peteo]

Tens of millions of iPhone users around the globe won’t upgrade their phones until there’s a compact, thumb-friendly iPhone in the lineup again.

I find this funny since the anecdotal evidence around me suggests that once a person uses one of these bigger phones for a week they would never go back

 

[I7guy]

You are true to a larger extent that lowering prices doesn't get you success. But the problem with Apple price is that people slowly start looking outside for better value probably because they don't want get tied to a ever increasing prices for relatively evolutionary upgrades considering the overall landscape.

Don’t underestimate the amount of churn back towards Apple, as opposed to away from Apple.

 

[WatchFromAfar]

You need to provide facts rather than just how you feel. I'm just telling you Apple did great in many larger developed markets and the list of companies blaming China is growing. This is starting to feel like a China only problem and the pricing isn't an issue. China is an issue.

Companies so far specifically blaming China for earnings:

• Apple
• Nvidia
• Caterpillar
• Samsung
• Intel
• FedEx
• Goodyear
• Tiffany

And yet it the China thing has not bothered the top most valuable companies in the World:
1. Amazon
2. Microsoft
3. Alphabet (Google)

https://fxssi.com/top-10-most-valuable-companies-in-the-world

Apple fell from 1st to 4th; but that's China's fault right?

 

[Baymowe335]

And yet it the China thing has not bothered the top most valuable companies in the World:
1. Amazon
2. Microsoft
3. Alphabet (Google)

https://fxssi.com/top-10-most-valuable-companies-in-the-world

Apple fell from 1st to 4th; but that's China's fault right?

Google and Amazon do almost no business in China. Nice try though.

And AMZN and GOOGL are significantly down from their highs too. Amazon currently 21% from its high.

The difference is China. In this case, they are lucky they don't do business in China. Personally, I'd rather have the business long term.

Microsoft is a software company and is somewhat insulated from the consumer. China is also a smaller market for Microsoft than Apple.

AMZN also trades at 300X earnings, Google 40X.

Apple is currently trading at 10X. Your move.

 

[WatchFromAfar]

Google and Amazon do almost no business in China. Nice try though.

And AMZN and GOOGL are significantly down from their highs too. Amazon currently 21% from its high.

The difference is China. In this case, they are lucky they don't do business in China. Personally, I'd rather have the business long term.

Microsoft is a software company and is somewhat insulated from the consumer.

AMZN also trades at 300X earnings, Google 40X.

Apple is currently trading at 10X. Your move.

No no no, stop right there. All the top four companies are American companies and as such should be judged by their overall results. It's not my, or anyone elses, fault that company X thought it a good idea to go into whatever market while company Y thought it a bad idea.

Overall results are overall results. You can't say "hey we went into a market that no-one else did, and guess what? we are doing better than them!"

 

[Baymowe335]

No no no, stop right there. All the top four companies are American companies and as such should be judged by their overall results. It's not my, or anyone elses, fault that company X thought it a good idea to go into whatever market while company Y thought it a bad idea.

Overall results are overall results. You can't say "hey we went into a market that no-one else did, and guess what? we are doing better than them!"

Apple is a $50B business in China. Of course it will be impacted by a China slowdown, just like the other companies that named China as a reason for a shortfall. The reason they told you China impacted them is because it did.

For you to point out China didn't impact a business that doesn't have revenue in China is totally laughable. How could Google say China is a reason for our shortfall if they don't do business there?

Why is Amazon down 21%?

So because Apple named China as a slow market, they should get out of that $50B business? It's not Apple freaking out...it's the market. Long term investors aren't worried about stocks going up and down in the short term.

 

[onepoint]

For Warren Buffett, sinking Apple shares a wish come true

https://www.reuters.com/article/us-...g-apple-shares-a-wish-come-true-idUSKCN1OX05Y

I’ll stick with this guy, who is looking to increase his Apple holdings.

 

[WatchFromAfar]

Apple is a $50B business in China. Of course it will be impacted by a China slowdown, just like the other companies that named China as a reason for a shortfall. The reason they told you China impacted them is because it did.

For you to point out China didn't impact a business that doesn't have revenue in China is totally laughable. How could Google say China is a reason for our shortfall if they don't do business there?

Why is Amazon down 21%?

So because Apple named China as a slow market, they should get out of that $50B business? It's not Apple freaking out...it's the market. Long term investors aren't worried about stocks going up and down in the short term.

If China was an issue you would expect everone to fall at the same pace but maintain the same table structure; first place would be the same but worth less but still first, second place would be the same but worth less but still second etc etc.

That hasn't happened.

 

[Baymowe335]

If China was an issue you would expect everone to fall at the same pace but maintain the same table structure; first place would be the same but worth less but still first, second place would be the same but worth less but still second etc etc.

That hasn't happened.

You are really struggling here. "EVERYONE" doesn't do business in China and doesn't do it at the same scale. Apple does $52B in China annually. That is as much revenue as the entire Walt Disney Company. Scale DOES matter. You do A LOT of business in China? You will have a bigger impact than a company like Google, doing NO business in China.

LOL....I can't believe I'm explaining this.

There is not a question of "IF" China is struggling. It IS struggling for the companies doing business there:

• Apple
• Nvidia
• Caterpillar
• Samsung
• Intel
• FedEx
• Goodyear
• Tiffany

If you do business in China, your business has been impacted by their economic slowdown. Period. This isn't complicated and you don't have to try to sound smart by throwing out red herrings.

Since you like to quote short term price moves in stocks, go to Google and type NVDA. Then report why you think it's getting crushed.

 

[WatchFromAfar]

You are really struggling here. "EVERYONE" doesn't do business in China and doesn't do it at the same scale. Apple does $52B in China annually. That is as much revenue as the entire Walt Disney Company. Scale DOES matter. You do A LOT of business in China? You will have a bigger impact than a company like Google, doing NO business in China.

LOL....I can't believe I'm explaining this.

There is not a question of "IF" China is struggling. It IS struggling for the companies doing business there:

• Apple
• Nvidia
• Caterpillar
• Samsung
• Intel
• FedEx
• Goodyear
• Tiffany

If you do business in China, your business has been impacted by their economic slowdown. Period. This isn't complicated and you don't have to try to sound smart by throwing out red herrings.

Since you like to quote short term price moves in stocks, go to Google and type NVDA. Then report why you think it's getting crushed.

OK genius either you truely believe your signature (or are a troll) please enlighten us mere mortals why all this bad news is sunshine, rainbows and lollipops for Apple?

 

[spinedoc77]

I ALWAYS upgrade to the newest iPhone every single year, even on S years when changes are not as drastic. This is the first year that I am considering not upgrading my Xs max. I don't foresee any drastic upgrades. They usually upgrade the proc, but I have yet to encounter an app that needs a faster proc. Camera upgrades don't mean much to me until they address the crappy low light performance of their existing cameras, no more grainy pictures of my kids would make me upgrade. My big thing was bezel size reduction, well they've done that and I'm quite happy on that front. Don't see what else they could possibly upgrade that would make it worthwhile.

 

[Baymowe335]

OK genius either you truely believe your signature (or are a troll) please enlighten us mere mortals why all this bad news is sunshine, rainbows and lollipops for Apple?

Who said it was sunshine? I live in reality. The reality is China is an issue for Apple and the companies I mentioned.

Throwing out a red herring that Google wasn't impacted by China is a ridiculous statement, so you got called out for it.

There are a few things at play for Apple.

1) China is slowing down. Since Apple does over $50B in business there, it will be reflected in the results...proportional to the business they do there, which is A LOT...as I said, the size of Disney.
2) Apple is doing extremely well in other markets, setting revenue records in the US, Canada, Korea, Mexico, Italy, Germany, and the Netherlands.
3) Apple is growing non iPhone revenue 19%
4) Services are growing at 25%
5) Wearables are growing at 50%
6) Other companies have echoed (after Apple) that China is a problem.
7) Apple's struggles in China are not a reflection of the entire business tanking.
8) The entire market has been poor the last 90 days, particularly tech. NVDA is now down 52% from its high. Amazon over 20%. Google still almost 20% Google and Amazon are stocks down WITHOUT even the excuse of China because they do little business there. WITHOUT!! So why are they down? At least Apple has a reason. The others are just down.

I see the world the world the way it is. Apple is going to address China, but to act like it's some kind of business failure is just ignoring the facts.

You hate the stock? Short it from here. It's trading at 10X earnings and has the biggest buyback in the world and $60B in profit. Good luck.

Amazon is trading at 300X earnings and isn't immune to economic slowdowns should it start impacting other countries.

 

[WatchFromAfar]

Throwing out a red herring that Google wasn't impacted by China is a ridiculous statement, so you got called out for it.

When did I say that?

 

[Baymowe335]

When did I say that?

You aren't even reading what I'm posting because you're instantly quoting me, so I'm giving up on you. You DID say China has not bothered the top most valuable companies which you listed Google. LOL!

"And yet it the China thing has not bothered the top most valuable companies in the World:
1. Amazon
2. Microsoft
3. Alphabet (Google)"

 

[WatchFromAfar]

You aren't even reading what I'm posting because you're instantly quoting me, so I'm giving up on you. You DID say China has not bothered the top most valuable companies which you listed Google. LOL!

"And yet it the China thing has not bothered the top most valuable companies in the World:
1. Amazon
2. Microsoft
3. Alphabet (Google)"

I never called out Google; I gave a list of the most valuable companies. Of course they are all affected but seem to weather the storm, just like a rise in minimum wage affects them but it doesn't worry these companies.

Look, I've given you an upto-date list; your beloved Apple has fallen from first place to fourth. Spin it however you want but Amazon is coming for you.

 

[Baymowe335]

I never called out Google; I gave a list of the most valuable companies. Of course they are all affected but seem to weather the storm, just like a rise in minimum wage affects them but it doesn't worry these companies.

Look, I've given you an upto-date list; your beloved Apple has fallen from first place to fourth. Spin it however you want but Amazon is coming for you.

I can't continue discussing this with you, because you just can't keep up and/or you're just ignoring my content.

I will say this. Amazon is a great company, but valuation matters. 300X earnings. Go buy some shares now if you love it. Amazon already tried to go after Apple, and failed. Remember their phones and tablets? Yeah, went over like gangbusters.

And at the end of the day, Amazon is a low margin retailer with an online store that can be copied by other great companies with physical stores, like Walmart.

AWS is interesting, but Apple services alone is bigger and is already facing intense competition from Microsoft and IBM.

My sense is you really know nothing other than how to compare market caps in the short term. You don't understand the data behind stocks, whatsoever.

 

[calzon65]

There is no way the "Worst is Soon Over". Apple's product prices continue to increase and they are running out of major ideas to drive new iPhone sales. Folks (like me) are keeping their current iPhones longer.

For years it was about thinner and lighter, but the past few iPhones have become thicker and heavier (yea I know screen size has increased). They (the overall marketplace) are, maybe have, reached the point of diminishing returns with the current smart-phone primary form factor and primary feature set.

Face ID versus the finger print reader to unlock the phone … big deal, there was nothing wrong with the finger print reader. I'm not saying Face ID is stupid, but it's not a huge improvement. Remove the audio jack because the whole world will go wireless (Bluetooth), no thank you, there was nothing significantly wrong with the audio jack.

Other companies (not just Samsung) are going to continue to introduce new phones. And because Apple's prices are so high (think about the Apple culture of demanding things like custom screws), we will continue to see new downward pricing pressure as they (Apple competitors) learn how to make a decent smart phone at a lower price. There is no way this "war" is over.