THE BLOG

Write Off Apple At Your Peril: The Smartphone Innovator Is Still Leading The Charge

28/10/2016 17:21
Lucy Nicholson / Reuters

The figures are indisputable. Tech stalwart Apple has seen annual profits fall for the first time in 15 years, with iPhone sales having dropped 5%.

Therefore, Thursday's launch of a new MacBook Pro laptop, complete with innovative Touch Bar that can insert emojis into text without needing to leave the keyboard, appeared well timed.

We can hardly call the Silicon Valley giant and its quarterly revenue of $46.9 billion beleaguered, but it is clearly feeling the effects of what is a global smartphone malaise.

A fatal collision of factors - the main being that the mobile market is nearing saturation point and the fact that competition is stiffer than it has ever been - are putting downward pressure on Apple's profit margin.

Kantar figures put mobile penetration in the US and Europe's Big Five Countries at 91%, rising to 97% in urban China, although Gartner says there's still growth potential in India.

And, with Google having just launched a standard and a plus-sized flagship phone to rival the iPhone, and Chinese challenger brands like Huawei undercutting the biggest players to offer feature-laden smartphones at Millennial-friendly prices, it's fair to wonder if Apple has fallen from the tree as the most coveted brand.

Apple - which turned things around from its dark days in 1997 when it came close to bankruptcy to become arguably the world's most aspirational brand - will be just fine, because it won't be resting on its iPhone laurels.

For a start, it's the only brand that consistently sets trends. Who knew there was a market for the handy iPod Touch, or that tablets would steal a march on laptops? Apple did. It's also the only brand that sees people queue for days before a phone launch.

Interestingly, Tim Cook says Apple has underestimated the popularity of the larger iPhone 7 Plus. Despite pundits, me included, tutting over the missing headphone jack in the iPhone 7, Apple's very loyal legion of fans want in. As Tim Cook said after the latest results were published, regarding the current quarter: "We're confident enough to give you guys guidance that we're returning to growth this quarter." But whether some of that is down to dumb luck caused by a faulty Samsung battery, is a fair question.

How will it ride out a difficult market? I'd put money on Apple continuing to attempt to convert feature-phone customers and a younger crowd with a lower-priced iPhone offering. It currently ticks that box with the iPhone SE which delivers the Apple experience for £220 less than the iPhone 7.

It's a tactic that also allows Apple to compete lower down the market in the mid-range, where Chinese challenger brands like Huawei are cleaning up.

One thing that Apple really does need to do is open up its smartphone software to other platforms, especially now Google's cemented itself firmly into the smartphone market.

There's a feeling that if you have one Apple device, you get locked into its ecosystem. But today's mobile customer craves flexibility and platform agnosticism, such as the ability to use Google Drive and Google Maps on any device. Apple Music is a good example of a service that could and should easily be more widely available on other devices. That's something Apple must recognise to survive and thrive.

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