Apple has issued advice to financial markets letting them know that forecast earnings won't be achieved. It would seem the iPhone bubble has finally started to deflate with sales down of 51.2 million units, down from the record-breaking quarter Q2 2015 when they sold 61.2 million units. Revenue has fallen for the first time in 13 years to just US$50.6 billion. That's about US$1.8 billion under expectations.
iPad sales have been down for some time and the Apple Watch has not been a resounding success. Apple's lack of data about the Apple Watch is a testament to that, with sales numbers effectively camouflaged in Apple's financial statements.
I'm pretty sure we'll see wagons circling and peasants with pitchforks forming their own infinite loop around Apple's HQ.
Apple is a very successful company. Its revenue numbers are the envy of almost every company in Silicon Valley and the profit on that revenue is quite remarkable. The US$10.5 billion profit represents better than 20 percent margins - not too bad considering Apple operates in what is now a commodity market.
With many PC makers working on single-digit margins and some analysts suggesting many smartphones are being sold at a loss, Apple's performance is quite remarkable.
Over the next 24 hours or so, many experts will be predicting the fall of Apple. I'm keen to see how a quarterly profit in excess of US$10 billion on US$50 billion of revenue represents a catastrophe will be interpreted as a collapse.
Apple still has a very healthy bank balance of around US$210 billion. That affords the company plenty of opportunities for research and product development. And while the Apple Watch may be a short-term failure, at least in the eyes of some pundits, it represents a long-term investment in component miniaturisation, health sensors and new interface design. And let's not forget Apple's partnership with IBM, which will deliver benefits for many years.
It's true that Apple hasn't been as dominant as some expect. But it faces more competition than ever. Aside from mobile players like Samsung and HTC, it is facing Google's ubiquity and a nascent Microsoft, which has transformed under the leadership of Satya Nadella. And yet, Apple's revenue for this quarter exceeded Microsoft and Google's combined revenues by about US$10 billion for the last quarters they reported.
To paraphrase Mark Twain - rumours of Apple's death are greatly exaggerated.
Source: Macworld AU
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