When compared to Apple’s earnings in Q2 2015, the earnings in Q2 2016 are significantly lower. In terms of pure numbers, Apple’s earnings fell from $58 billion to $50.56 billion and profits fell from $13.6 billion to $10.5 billion. Apple is still making a lot of money, more than Microsoft and Google combined (around $40 billion), but the drop in earnings is indicative of deeper troubles for Apple.
This is the first time since 2003 that Apple has reported a year-on-year drop in earnings and the first year-on-year drop in iPhone sales. Considering that over 60 percent of Apple’s income comes from the latter, it’s no wonder that earnings have fallen.
The smartphone market is stagnating however, and, even if Apple maintains its current earnings, that’s still 250 million devices sold and over a $100 billion in revenue just from the iPhone.
2007: The iPhone
It wasn’t till 2007, when the first iPhone was introduced, that Apple earned its first billion and transformed into a cultural phenomenon. What was the iPhone really? A well-built phone with a touch-screen? Nokia had touch-screen phone in 2004, as did others, but those devices paled in front of the, arguable, elegance of the iPhone.
The first iPhone was nowhere near as good as it is today, copy-pasting and forwarding messages were added later on for example. But the phone transformed everyone’s expectations from a mobile device. Apple showed the world that a touch-screen doesn’t need a stylus, that phones can have large, gorgeous screens (3.5 inches was large at the time) and that a phone might just double as a portable computer.
2008: The MacBook Air and App Store emerges
2008 was a big year for Apple. Steve Jobs pulled the MacBook Air out of an envelope, the iPhone 3G was released and along with it, came the App Store. Again, Apple transformed our expectations from our devices. The MacBook was a netbook-sized device with the power of a regular laptop, the App Store gave developers a common platform for publishing their games and apps. Combined, these innovations effectively doubled Apple’s income that year.
Android development started this year.
2009-10: The iPad and first Retina display announced
The next two years saw rapid growth for Apple. The iPhone 3GS was the first of the S series phones, announced in 2009 and 2010 saw the release of the first iPad and the completely redesigned iPhone 4. People fawned over the iPhone 4’s Retina display and the pixel density (ppi) wars were born.
The iPad was, again, a game-changer. By itself, the first iPad didn’t amount to much and people called it a stretched iPod Touch. But with the iPad, Apple introduced something more than just another large-screen device. It introduced a brand new way of consuming content. It was still not as significant as the iPhone in terms of sales, but it contributed significantly to Apple’s bottom line.
2011: The end of an era
Steve Jobs passed away in 2011 and a great many Apple staples followed him to the grave. There is a select group of people who feel that with the passing of Steve Jobs, Apple lost some essential, defining element and arguably, kicked Apple into a spiral of irrelevance.
2011 was a tough year for Apple’s new CEO, Tim Cook, but he did manage to push out iCloud services and the iPhone 4S. The iPhone 4S brought an incomplete Siri and the disastrously bad Apple Maps platform, but that didn’t stop Apple from increasing their earnings by almost 50 percent.
Significantly, 2011 was the year that Samsung and Google released the Samsung Galaxy Nexus and the Samsung Galaxy Nexus S. Both devices caused a shake-up of the mobile space, offering competitive hardware and features at a comparatively low price. This was the year Android came of age (with 2.3 Gingerbread). The Galaxy Nexus marked the beginning of an Android onslaught that would consistently shake Apple’s beliefs and its confidence in the market.
2012: A new direction
2011’s Nexus lineup and a sudden surge in the availability and demand for large-screen phones forced Apple to rethink its iPhone. Suddenly, 3.5-inches just wasn’t enough. Apple’s answer? The 4-inch iPhone 5. Apple also refreshed its Mac lineup with a Retina MacBook Pro. In all honesty, 2012’s product launches weren’t that great, the iPhone 5 was, after all, just a larger iPhone 4S and it showed. Apple’s earnings the next year were higher than in 2012, but only by 8 percent.
We also saw the Mac Pro that year. A revolution in computer design that resulted in a trash can size device capable of putting most high-end PCs to shame.
2013: Android eats away at Apple, so does China
Large screen phones are everywhere and 5-inch phones are becoming the norm. Apple, stubbornly sticking to its “4-inches are enough for everyone” strategy, refused to do more than release the iPhone 5S and the iPad Air. Considered in isolation, the iPhone 5S was a massive bump over its predecessor. The move to a 64-bit processor and a massively improved iSight camera were major upgrades.
In the long term, Apple’s introduction of TouchID was significant, but it didn’t do much for the iPhone 5S. Apple lost a huge chunk of the smartphone market to Android.
Still, people wanted larger iPhones and regardless of how good the 5S was, it simply wasn’t enough. At the same time, the iPad Air, a newer, much lighter iPad, gained some traction thanks to its low weight. However, it came at the start of the decline of the tablet market and didn’t amount to too much.
A redesigned iOS, which arrived in the form of iOS 7, received more flak than praise, especially from Apple purists.
It was around this time that Chinese smartphone makers started making their presence felt. Companies like Xiaomi ushered in the age of the budget flagship and a small, expensive iPhone just wasn’t significant anymore.
In the end, a growth of 6 percent was all that Apple could manage. Do note that 6 percent for Apple still translates to over $10 billion or total earnings of over $180 billion.
2014: Finally, a larger iPhone
Caving in to public demand, Apple was almost forced into releasing the completely redesigned iPhone 6 and 6 Plus devices with a 4.7-inch and 5.5-inch screen respectively. The response was staggering, for Apple at least. People left Android in droves and the devices sold out almost as fast as they could be made.
Apple had finally made a mark again. Jony Ive’s design for the iPhone wasn’t particularly well-received, but a larger iPhone was what people wanted and most didn’t bother with much else. The introduction of the 5K iMac was just the cherry on the cake!
Beats was also acquired for $400 million this year.
2014’s launches saw Apple’s earnings cross the $200 billion barrier in 2015, a growth of over 30 percent.
2015: A Chinese prop
Let’s just be nice and call this the year that Apple ran out of ideas. We saw the diminutive MacBook, the underwhelming Apple Watch, the ridiculously fast iPhone 6S and 6S Plus and the 12.9-inch iPad Pro. Work also started on Apple’s Car project and the Apple Music subscription service was launched.
Sure, they launched a lot of products and one can argue that the Apple Watch is, at least, something new. But as with the launch of the first iPad and the first Macbook Air, the response has been less than tame. Oh, the Watch did sell, but when you’re a company selling 250 million iPhones every year, for which the Watch is a perfect companion, 12 million Watches doesn’t amount to much.
The 6S and 6S Plus, while major upgrades to the iPhone platform, were identical to their predecessor and in terms of real-world performance, didn’t offer much of an upgrade.
To add to those woes, the smartphone market was already stagnating, the economy was struggling and people just didn’t see why they needed to spend upwards of Rs 60,000 just to upgrade a fully-functional phone.
More than the devices, the real coup for Apple was a tie-up with China’s China Mobile, resulting in an expanded userbase that potentially encompassed over 800 million users. Together with China, India also contributed significantly to Apple’s bottom line this year.
The result? $233 billion revenue in one year alone. Staggering.
January to March 2016 saw the launch of a replacement for the iPhone 5S in the form of the iPhone SE and a smaller iPad Pro. Insignificant launches that would obviously not do much for a company like Apple. With nothing new on the horizon, people unwilling to upgrade perfectly functional devices and a smartphone market that was tapped out, where could Apple’s sales go but down?
It’s also not like they were the only company affected and if you’ll notice, Apple still made billions of dollars in profit and there’s still half a year left. Sales of iPhones, Macs and iPads did decline, but they’ve declined everywhere. Apple Music and the Apple Watch even went so far as to make a profit, however insignificant they are to the larger picture.
The future doesn’t look any brighter for Apple though. At least, as far as the iPhone is concerned. Apple needs a new product to shake things up all over again and it doesn’t look like the Watch is the one to do it.
However, you have to consider that Apple has consistently grown for more than a decade and is currently the most valuable company in the world. The pace at which Apple has grown is unprecedented and a slow down is to be expected.
Publish date: April 29, 2016 7:42 am| Modified date: April 29, 2016 7:54 am