Daily Management Review

Apple Forced Into Discomfort Zone By Poor iPhone Sale


Apple Forced Into Discomfort Zone By Poor iPhone Sale
Even as the season of festive sale is upon us, a number of questions about one of the favourites of buyers for this time – Apple Inc, are rising. There are questions over whether buyers are falling out of love with expensive iPhones or has Apple been forced into a new course of action because of a slack in iPhone sales growth?
One can start off with the announcement made by Apple about its decision of not reporting anything about the sale numbers for its iPhones in the future but only announcing sale revenues. In most of its public announcements about its performance, Apple has been focusing on growth of margins and increasing in average selling price instead of the actual unit sales since not so impressive annual sales of the iPhone since the iPhone 6 and iPhone 6 Plus launch.
But with the upper range price of the iPhone XS Plus touching $1500 in some configurations, the scope for boasting about larger margins and higher selling prices apparently is little. Now Apple’s decision to not reveal the actual unit sale of iPhones means that the company would now increasingly focus on the revenues and profits earned by Apple from its software and services instead of the hardware.
Many analysts are of the view that are Apple believed that it would take quite some time for the handover period. But the softening of demand for the ‘affordable’ $750 smartphone iPhone XR has been revealed this week by the suppliers of the phone.
It should also be remembered that the usual rush to pre-order for iPhones that Apple is accustomed to did not happen with the iPhone XR and it was not even near close to a sell out on the first day. In fact it took Apple four days before it informed customers about a shipping delay.
Analysts and market experts however have noted that iPhone 8 and 8 Plus from last year’s launch which are now available to buyers at a discount of $100 when compared to the launch price, is the model that is selling well. And this clearly indicates inherent risks for Apple strategies of focusing on the higher selling iPhones that have a larger margin and more revenue because cheaper phones are being preferred by consumers.
Questions are also being raised about whether Apple should depend on the revenues and margins from its services and software business to make up for hardware sale and margins. Many analysts are of the view that it could be a tough task because about iPhones account for about 59 percent of Apple’s revenue and just 16\5 percent is accounted for by services.