Abu Dhabi, UAESaturday 24 August 2019

Apple's bombshell poses a trillion-dollar question

Analysis: Cupertino-based firm's shares dropped almost 10 per cent following its revenue announcement

A customer looks at Apple products on display in a shop in Beijing. EPA
A customer looks at Apple products on display in a shop in Beijing. EPA

Revising its revenue outlook downwards for the first time in nearly two decades has raised questions over Apple’s position as an indisputable innovation leader in the global technology sector.

The company sliced its revenue outlook for its first fiscal quarter to $84 billion - more than $7bn short of earlier estimates.

Here, The National dives into the nitty gritty of the US consumer tech giant, while considering its future in 2019.

Will nosediving of shares continue?

Apple shares tumbled almost 10 per cent following its announcement on Wednesday, with the company dropping nearly 38 per cent since its valuation hit $1 trillion mark.

“Apple stock is now at a crossroads,” said a research note written by Gene Munster and Will Thompson of Loup Ventures – a US venture capital company.

“Some investors will consider the stock broken... but we have followed the company long enough to know there is cyclicality in the market's relationship with Apple.”

Apple became the first $1 trillion publicly listed US company in August 2018, transforming from a niche player in personal computers into a global powerhouse covering communications and services.

Is it a pricing blunder?

Releasing iPhones costing between $1,000 to $1,500 in a smartphone industry that is already facing harsher competition and is largely saturated could have gone against Apple.

“The $1,000 price point is fine on the higher-end. But when it starts pushing closer to $1,500 [XS Max at 512GB], that's where things don't make sense,” Abbas Ali, managing editor of TechRadar Middle East, told The National.

“Apple certainly can't expect to grow at the rate it’s been growing at prices that high.”

Is Apple moving to services?

At a time when Apple is finding it difficult to sell iPhones, the company will be focusing more on services in multiple categories - including the App Store, Apple Music, cloud services, Apple Pay and its search advertising business - in 2019.

In fact, only 48 hours after trimming its revenue outlook for the holiday quarter, Apple announced that it had enjoyed buoyant business in its services segment during the holiday season.

“The holiday week was our biggest week ever with more than $1.22 billion spent on apps and games, and New Year’s day set a new single-day record at more than $322 million,” said Phil Schiller, the company’s senior vice president of worldwide marketing, on Friday.

Is it a ‘Nokia moment’ for Apple?

Diminishing sales of iPhones are being compared with Finnish company Nokia that led the mobile phone industry in the early 2000s. However, regional tech analysts say it is too early to reach this conclusion.

“We are quietly confident that Apple's not going anywhere... go to New York or London, it's all Apple iOS,” Sam Blatteis, chief executive of The Mena Catalysts, which advises technology companies on policy and government affairs in the region, told The National.

“Apple has full vertical integration, global reach, and a premium price – requirements of any luxury brand in the global marketplace.”


Read more:

A perfect storm for Apple’s downward outlook, experts say

Apple becomes the world's first trillion dollar company

Asian markets diverge as Apple’s sales outlook sent shockwave

Updated: January 4, 2019 12:22 PM