Is Apple’s dominance of the smartphone market tumbling? Apple on Tuesday reported a sharp decline in iPhone sales and also recorded its first ever drop in revenue since 2003, reports have stated.
The Chinese market, which represents Apple’s most important market after the United States, experienced more than a quarter drop in sales. Analysts have also forecasted “another disappointing quarter for global revenues.”
Per Reuters, the company’s shares dropped by 8 percent; falling below $100 for the first time in three months. Furthermore, a hike in the Cupertino-based smartphone giant’s share buyback and dividend as well as bountiful revenue from services were not enough to pacify investors.
A breakdown of the drop in sales and revenue shows that Apple only sold 51.2 million of its iPhones in its second fiscal quarter, which is a departure from the 61.2 million it recorded in corresponding period in 2015. The 51.2 million sales, however, represents a slight increase above the 50 million phones, which was what industry experts had projected.
Apple’s biggest challenge will be to reassure investors that the decline in sales only represent momentary setback, and not a permanent shift for its product. Though, the company had predicted a decline this current quarter; it has a duty to calm the nerves of its investors.
Apple’s iBooks Store and iTunes Movies were shut down by the Chinese government a couple of days before Tuesday’s earnings were released by the company. The closure, which came exactly six months after it was opened by the company, is being linked to a couple of factors, including encryption issues. The Chinese government may not feel comfortable with Apple’s policy on encryption, which could deny it access to private information of users of its iPhones.
Fresh in the mind of the Chinese government is the controversy that trailed Apple’s decision not to grant the FBI access to Jun Feng’s iPhone.
It is evident that Apple has a mammoth task of getting things right once again as it cannot afford to slip. Speaking to Reuters on the decline in sales, Apple’s Chief Financial Officer Luca Maestri, said the success recorded by the iPhone 6 set a very high standard difficult to match in the second quarter. He described the success recorded by the iPhone 6 as “an anomaly.”
Apple’s Chief Executive Tim Cook feels otherwise—blaming the decline on saturation. He added that the iPhone 6S was motivating customers to replace their phones at a much lower rate than the 6. “I don’t mean just a hair lower; it’s a lot lower,” he said. “If we’d had the same rate on 6S as 6, it would be time for a huge party.”
He, however, painted a picture of hope when he hinted that Apple still has a lot to offer in terms of gadgets. The future of Apple is very bright,” he said. “Our product pipeline has amazing innovations in store,” he told Reuters.
Companies like Google, Microsoft and Twitter also failed to record results that matched with expectations.