Peter Nowak: The iPhone’s decade changed the world – and Apple

A decade after apple unveiled its iPhone, the company has come to rely on its handheld electronics division for the bulk of its revenue. But will the iPhone carry the company through another ten years?

History shows that Steve Jobs, who passed away in 2011, wasn’t exaggerating about the effect of the iPhone. Paul Sakuma / AP Photo
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It was 10 years ago this week that Apple unveiled the iPhone, a device that would go on to literally change the world.

It wasn't the first smartphone, but it was the one that successfully brought the full internet to the palm of users' hands. The wave of transformational innovation unleashed as a result is arguably unprecedented in human history.

The iPhone’s massive success with consumers spurred the upending, redefining and invention of entire industries, from communications, photography and leisure to media creation and distribution, commerce and transportation.

Suitably, the iPhone also took Apple to the stratosphere. In 2006, the company’s revenues were a mere US$19 billion, its market value only $60bn. Today, Apple pulls in more than $200bn annually and is worth more than $640bn, the largest company on the planet by market capitalisation.

The world is radically different now compared to that fateful January afternoon, when Steve Jobs unveiled his company’s “magical” and “revolutionary” creation. History shows the often-hyperbolic Jobs, who passed away in 2011, wasn’t exaggerating after all.

But where to now for Apple and the iPhone? Storm clouds are gathering. The next 10 years look more uncertain – and considerably darker – than the previous heady decade.

The market for smartphones is quickly saturating, even in developing countries, and low cost devices from Chinese makers such as Huawei and ZTE are increasingly finding cachet with consumers the world over. Those people who are still buying devices also aren’t upgrading as frequently.

Apple’s latest, the iPhone 7, is selling more sluggishly than expected as a result, according to a report from Japanese newspaper Nikkei citing company suppliers.

This is all bad news for Apple, which counts on the iPhone for about two-thirds of its annual revenue. The company reported its first quarterly revenue decline since 2001 in October, and in a regulatory filing last week disclosed a 3.6 per cent shortfall in its 2016 sales targets.

Chief executive Tim Cook and a number of other executives had their incentive-based pay cut by about 15 per cent as a result.

Apple and its shareholders are now, unsurprisingly, pinning their hopes on the next iPhone, the 10th anniversary device, to revive the company’s fortunes. But will it?

The rumour mill on what will be in the next iPhone, which is likely to be unveiled in the autumn as per Apple’s regular release schedule, and which could be known as the iPhone 8, is already in full swing.

Industry observers and chattering fans are expecting all manner of additions and redesigns, from an all-glass chassis and long-distance wireless charging to dual back cameras and curved Oled screens.

Some analysts expect the iPhone 8 will kick off a “super-cycle”. Nomura analyst Jeffrey Kvaal, for example, believes the next device will shatter all previous iPhone sales records. Apple has a much bigger subscriber base to sell to now than it did with its previous mega-hit, the iPhone 6, Mr Kvaal recently told investors in a research note. He also expects three different models to cater to disparate market segments.

It’s worth noting analysts have been very wrong about Apple before, even recently. Just before the new year, for example, Brean Capital analyst Ananda Baruah predicted the iPhone 7 would post the best holiday sales ever for Apple. Obviously not.

It’s equally reasonable to expect that instead of a super-cycle, consumers will greet the next iPhone with the same ho-hum reaction as they did the last one. The fact is, smartphones – especially Apple’s – are too expensive and the ones that most people have are already good enough.

There is little reason to upgrade and a flashy new screen or wireless charging isn’t likely to provide enough justification for enough people to move the needle for Apple.

The company’s real problem is that it continues to be a one-trick pony. iPad sales are plummeting and the new products introduced under Mr Cook’s tenure – the Apple Watch, Apple Pay and Apple Music – also haven’t much moved that proverbial needle.

Long-time fans, meanwhile, are disappointed and disillusioned by the latest Macbook Pro line-up of laptops, which have been criticised for being underpowered and too expensive.

There is little confidence that Apple has any new tricks left up its sleeve. The company could still surprise, but all signs are pointing in the other direction.

The iPhone was indeed revolutionary, but 10 years on the magic is gone.

Winner of the Week: DJI

The Chinese company is reportedly acquiring the iconic Swedish camera maker Hasselblad, a move that would cement its leadership in commercial drones. Its top rival Parrot, meanwhile, is laying off a third of its staff.

Loser of the Week: Yahoo

The company is renaming the remainder of its assets that aren’t being sold to Verizon as “Altaba”, or an “alternative” to China’s “Alibaba”. The name change is incurring much mockery online and there is still the possibility that Verizon backs out of the deal.

Peter Nowak is a veteran technology writer and the author of Humans 3.0: The Upgrading of the Species.

business@thenational.ae

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