Apple is losing its charm
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In a sure sign that Apple is losing its mojo, the company’s second quarter results are unrelentingly gloomy with total revenue down strongly on an overall basis and across most regions.
This, combined with a weaker gross margin outcome, has dinted net income which fell by almost a quarter over the prior year.
While sales were blown off course by the strong dollar, which dampened the final results in regions like China and Europe, this was only part of the reason for the decline. The fact that revenue in Apple’s home market dropped by over 10 per cent, and that the volume of devices sold slipped by double digits, testifies to a larger truth: Apple is not innovating enough on the product front to drive sales.
Apple’s last product unveilings were lacklustre and characterised a company that – while still on the cutting edge of technology – seems to have run out of radical new ideas. This was underlined by the fact that Apple has elected to chase lower-priced parts of the market with its smaller, cheaper iPhone.
“This is the only way in which it will reinvigorate sales growth.”
Although there is nothing wrong with this strategy, it is a tacit admission that the company is no longer churning out the kind of leading edge devices that command a hefty premium.
All of this leads to a problem, especially in saturated markets like North America where device penetration is already high: new product is seen by many consumers as being good, but not quite good enough to justify upgrading. This applies to the iPhone, but especially to iPads where the new line up is rather confusing with little to differentiate the various versions now on offer.
Admittedly Apple’s task is very challenging. It has for years been the market leader, not just in terms of share, but also in terms of innovation and thinking – and this is inevitably a very difficult pace to keep up. However, Apple needs to come up with a radical new innovation or product rather than just the current incremental improvements to existing products. This is the only way in which it will reinvigorate sales growth.
None of this is to suggest that Apple is a failing company. Despite the decline, its revenue and profit numbers are still extremely healthy and its brand remains both popular and relevant. However, without pulling something new out of its hat it is likely that revenue will continue to decline as the company moves into its third and fourth quarters.
One of the ‘party tricks’ of the late Steve Jobs was to always have a surprise up his sleeve – that “one last thing” that made audiences gasp and consumers ache with desire for the latest Apple innovation. As competent and passionate as current management is, it is this spirit which Apple is now lacking and desperately needs to get back.
Questions & Answers
Q.What evidence is there that Apple is not innovating enough to drive sales?
What evidence is there that Apple is not innovating enough to drive sales?
Revenue in Apple's home market dropped by over 10 per cent, and the volume of devices sold slipped by double digits. Recent product unveilings were described as lacklustre, showing a lack of radical new ideas.
Q.What strategy has Apple adopted recently that suggests a shift in its market approach?
What strategy has Apple adopted recently that suggests a shift in its market approach?
Apple has elected to chase lower-priced parts of the market with its smaller, cheaper iPhone. This is seen as an admission that the company is no longer producing only leading-edge, premium devices.
Q.Which product lines are particularly affected by the lack of innovation mentioned in the article?
Which product lines are particularly affected by the lack of innovation mentioned in the article?
The lack of innovation particularly applies to the iPhone, but especially to iPads. The new iPad line-up is described as confusing, with little to differentiate the various versions available to consumers.
Q.What is the primary recommendation for Apple to reinvigorate its sales growth?
What is the primary recommendation for Apple to reinvigorate its sales growth?
Apple needs to come up with a radical new innovation or product, rather than just offering incremental improvements to existing items. This is presented as the only way to reverse the current sales decline.
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