by Dan Moren
Warning signs for Apple’s iPhone business
Analyst Neil Cybart thinks that Apple’s most recent financial results are just the latest warning signs for the future of iPhone growth:
The combination of a slowing iPhone upgrade rate and declining number of growth catalysts for expanding the iPhone’s addressable market will make it very difficult for management to report unit sales growth going forward given its current strategy. In addition, the iPhone SE highlights how any strategy to fix some of these issues will likely end up jeopardizing iPhone ASP and margin trends.
Cybart’s quick to point out that this isn’t about Apple doom, just that the prevalent trend of the constantly growing iPhone is unsustainable. And I think he makes a particularly smart point that the key is in the messaging from the company itself:
The one thing management needs to work on is moving the Apple narrative away from iPhone unit sales growth. [emphasis in original]
One Steve Jobs quote displayed at Apple HQ will end up doing a great job of describing Apple’s path forward for iPhone: “If you do something and it turns out pretty good, then you should go do something else wonderful, not dwell on it for too long. Just figure out what’s next.”
Resting on one’s laurels is a danger to any company that manages to achieve significant success: in many ways, Apple has bucked the trend by always seeming to be working on the Next Big Thing. Tim Cook reiterated on CNBC last night that the company has “great innovation in the pipeline” and even went so far as to say that upcoming iPhones would convince folks to upgrade.
The astronomical success of the iPhone has meant that more and more of Apple’s eggs were in that single basket. But it seems unlikely that any new Apple product will match the size of the iPhone business–certainly in the near-term, but perhaps ever. It’s perfectly possible for Apple to survive that shift, but the key is perception: You want to look like you knew that was going to happen, not like you were taken by surprise when that unsinkable ship you were on goes belly up.