Apple, a business well known far and wide for its constant
innovation and financial success, hit its first fiscal bump in more than a
decade. Sales fell 13%, while profit fell 22%, representing the first losses Apple
has taken since its Q1 in 2003, with struggling iPhone sales playing a major
role. In fact, its last quarter marked the first time iPhone sales fell since
being introduced in 2007.
The RTP editorial team shares the advice they have for Apple
as it aims to get back on track for the rest of 2016, and explains what brands
can do to learn from the company’s losses.
Debbie Hauss,
Editor-In-Chief: First, if I had the best advice for Apple, they would have
made a movie about me instead of Steve Jobs. That said, the cliche, The
bigger they are the harder they fall comes to mind. One area that some
people might not be paying as much attention to is Apple Services. The iCloud
business unit is doing well compared to the other business units. This would be
a smart area for Apple to promote more. And apparently the company has the cash
to do it: Apple’s available cash is close to $233 billion in Q1 2016, up from
$216 billion a year ago. Apple also needs to keep a key eye on China, which I
am sure they are doing. Sales were down 26% in China in Q1 2016, which is the
greatest decline in any region. As China overtook the U.S. as the largest
economic power in 2015, maybe it wasn’t ready for the role.
Adam Blair, Executive
Editor: When a company has been as over-the-top successful as Apple has
been, quarter after quarter after quarter, it can start to seem like the laws
of financial gravity don’t apply. But of course, they do. As the CNN report notes, Apple’s overall sales and
profitability are heavily tied the performance of the iPhone. Consumers’
willingness to line up for a new version of these phones means that any fiscal
period that includes a product launch will, by definition, outperform others.
And when the quarter serving as the comparison to this one (Q1 2015) saw the
introduction of the iPhone6 in a market as huge as China, disappointment is
inevitable. As to what brands can do to manage the pitfalls of growth and
expectations, it appears Apple is already doing it: branching out into areas
that can provide a recurring revenue stream, namely services. Apple’s services,
including the iCloud, iTunes App Store and Apple Music, was the anomalous
bright spot in the company’s results, showing a 20% rise in sales over Q1 2015
to $6 billion.
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David DeZuzio,
Managing Editor: As a lifelong fan and user of Apple, it was surprising to
see the mighty brand take a serious hit for the first time in a very long and
profitable time. But, it stands to reason that no company can maintain an
upward projection forever. There are highs and lows for every company and
sector out there, so really, this is probably nothing more than a minor bump in
the road for the iconic brand. Of course, anyone would love to be successful
enough to consider a $47 billion valuation loss as a “bump in the road”, but I
am quick to say in Apple’s defense that we should never count them out. They
will come up with something new or a refined version of their products that
work better than any of the other ones out there. Here’s a great idea for Apple
that would send the stock through the roof again and reaffirm everyone’s belief
in the company. For any retailer out there, it’s wise to take the bumps in the
road as lessons. You can’t always be at the top, but perhaps the biggest trick
you can pull off these days is to endure the highs and lows and keep building
your brand. There are many ways to maintain positive growth even if it’s not a
headline-grabber every time.
Glenn Taylor,
Associate Editor: While Apple’s run of dominance in the tech industry has
certainly been impressive, it was an inevitability that the company would haul in
less year-over-year quarterly revenue at some
point. However, that doesn’t mean the tech giant should get complacent, nor do
I expect that to be the case. The Chinese market is still the second biggest
market for Apple products, and while penetration is slow there, a large
population with an increasing focus on tech shows that there is still reason to
remain optimistic. Apple may have to focus more on its other multimedia
services such as Apple Music, which
still gets mixed reviews and is set for a revamp later this year, or Apple
TV, an interface that still lags behind competitors Roku and Amazon Fire.
Innovation, and perhaps more importantly, ease of use, are the biggest factors
that have pushed Apple far beyond any potential competitor. Regardless of what
market the company is operating in, Apple can’t forget that those two factors
are universal in appeal.
Klaudia Tirico, Associate
Editor: I’m going to go out and say I am not the least bit worried for
Apple. Losses happen to companies all of the time; it’s about how they bounce
back that matters. Considering all of the products and offerings Apple turns
out, slow iPhone sales seem like a minor bump in the road. I’m sure the company
will launch a new iPhone 7-8-9S the size of a tablet and people will be
flocking to its stores. In the mean time, Apple should focus on areas that did
well by promoting offerings such as iCloud, as Debbie said. And just because
they weren’t able to capture the Chinese market this time around, doesn’t mean
they can’t do it in the near future. Only time will tell. I think Apple should
just continue to push forward with what they know best and they will be out of
this slump in no time. It just goes to show that you can’t win them all — and
that’s a lesson for other retailers and the public in general.
