Apple is shrinking. Not a little — a lot:
- Revenue was down 14.5% in Q3 2016, to $42.4 billion.
- iPhone sales were down 15% to 40.4 million.
- Analysts are expecting full-year declines in iPhone sales.
And the upcoming iPhone 7 release does not seem to be promising much in new features. It even looks identical to iPhone 6s, so why buy it? critics are asking.
This is a difficult problem for Apple to solve, because Apple is uniquely both a software and a hardware company. The two are tied to each other. In order to make more sales from software — the App Store, iTunes, Apple Music and so on — it needs to sell more hardware.
If one shrinks, the other does too.
Google makes hardly any hardware devices. Its software is designed to run on anyone’s system, even Apple’s. Google doesn’t care whether a device is the best-selling iPhone or the worst Chinese Android ripoff: Gmail, YouTube, Maps, and search work equally well on them all of them.
Scroll down for charts that show the incredible shrinking world of Apple, and then we’ll discuss Apple’s potential escape routes, which CEO Tim Cook hinted at last night.
Apple is driven largely by the iPhone, its biggest product. But iPhone has been in decline for two straight quarters.
The US is Apple's biggest market, historically. But America is Android country, according to Kantar.
To really grow sales again, Apple must create new devices that can replace, supplement, or exceed the iPhone. That is why it launched Apple Watch.
But successful new device launches are not guaranteed. At a company of Apple's size, $40 billion in sales per quarter, you need new devices that sell in the multiple billions to be significant. Sure, Apple Watch is the No.1 smartwatch on the planet. But Apple Watch sales are shrinking also.
That's why CEO Tim Cook dropped some clues last night about where Apple is likely to launch new devices in the future: at home, for the car, and at work:
Cook told analysts: 'That's the rationale for CarPlay. It's the rationale for why we're putting a huge investment in the home, making -- really bringing home automation to life for people in a very simple and elegant way. It's the reason for Apple TV and what we're doing in the living room. And so all these things, all these things together are all about the user experience and making people's daily lives better.'
'And we think that from a user point of view, as the smartphone itself becomes more and more essential to people's daily lives, which is a part of what I had talked about before, a part of bringing it into the home in a bigger way and in the car and at work and so forth, we think people will put more and more focus on what they're buying and the thing that Apple does best, which is provide this killer experience.'