Is the mighty iPhone in decline? | The Daily Star
08:38 PM, January 26, 2016 / LAST MODIFIED: 04:10 PM, January 28, 2016

Apple in 2016: Is the mighty iPhone in decline?

Apple's investors are spooked.

Despite a rip-roaring 2015, something peculiar happened this month: Apple's stock value dropped to below $100 for the first time since October 2014.

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That was down from a high of just over $132 last May.

As I write this, it's rallying on account of some decent rumours - but it's on Tuesday we'll truly know if 2016 is going to be a tough one for the tech giant.

On the one hand, we're expecting an amazing Christmas with record-breaking revenues, yet again.

But it's Apple's guidance for what to expect in the months to come that investors will be eagerly awaiting. It's here where the company outlines its worries, the issues that keeps it awake at night (or at least, stressed out in the boardroom).

Troubled investors are expecting Apple to say this: For the first time, sales of the iPhone are in decline.


The iPhone!

That's a big deal.

New business

According to the latest figures Apple has shared - from October - sales of the smartphone make up 63% of the company's entire revenue. That's before you factor in all the people who then go on to buy apps, subscribe to Apple Music, and do any number of other things with their phone from which Apple takes a cut.

Its other major products don't even come close. The Mac range has bucked a huge industry-wide decline but still only accounts for 13%. The iPad, meanwhile, represents 8% - though this may get a boost thanks to the recently launched iPad Pro, the bigger version sold alongside a keyboard and little stylus.

Apple's major new product of recent times has been the Apple Watch. Yet we're still none-the-wiser about how successful that has been, as its performance is lumped into the "other" category, which includes sales of the iPod, Beats headphones and various other things.

Collectively, the "other" products were worth 6% in total.

The watch will have likely been a good performer at Christmas, so Apple may begin to shed some light on how well it is doing. But we'll have to wait and see.

The reliance on the iPhone is what worries investors most. Apple has plenty of repeat business - once hooked in, data shows people are far more likely to stick with Apple than change to another brand like Samsung - but it's now seeing a plateau when it comes to bringing in new customers.

'Bet the house'

Which is why China is so important.

Apple now makes more money in China than it does in the whole of Europe, and it's well on course to overtake the US.

"If China falls so does Apple," says Apple investor Daniel Ives, from FBR Capital Markets.

"They've really bet the house on the China growth opportunity."

Almost all of Apple's gains last year were thanks to Chinese expansion - new stores, and new customers who, until fairly recently, had to make do with awful knock-off imitations of the real deal.

But instability in the Chinese economy has rocked global markets. If China continues underperforming, it may be hard for Apple to continue that growth long-term.

But for the majority of investors and analysts, China doesn't represent a problem - yet.

It's still likely to be Apple's huge growth opportunity throughout 2016.

Case in point: there are currently only 30 Apple stores across the whole of China. California has 53.

Data suggests Apple's primary target in China, the middle classes, are still emptying their pockets with glee - particularly when it comes to buying Apple products.

Predicting the future

Trying to predict Apple's future is a dangerous habit.

It rarely ends well - just ask ex-Microsoft boss Steve "the-iPhone-is-not-a-good-email-machine" Ballmer. And everyone at Blackberry. And Nokia.

But speculate we must, and here's a summary for what investors and analysts think could happen in 2016.

1. The iPhone 7 will come out - possibly without a headphone jack - and give iPhone sales a massive kick. (And perhaps headphones sales too, come to think of it.)

2. A new budget iPhone — called the "5SE" - will hit the developing world. This may be a prime product for markets like India where, we learned this week, the company has applied to open up its own-brand stores too.

3. China will become even more important and show little sign of slowing down, at least where Apple is concerned.

4. A big acquisition will provide an express route for Apple into a new area. Apple investor Daniel Ives told the BBC that buying Netflix, for one example, would "get Wall Street the most excited".


On the road

And then there's one word that would send Apple's shares soaring in an instant: car.

Rumours that Apple is making a car have gone from a murmur to shouts in the past six months.

Some predict Apple is looking at making a car, others say the company would be wiser to work with existing car makers to integrate Apple software - something which is already happening with CarPlay, a sort of slimmed down version of iOS designed for driving.

"It always goes back to can they come up with something as powerful as the iPhone," says Carolina Milanesi, an analyst with Kantar Worldpanel ComTech.

"And I don't know if that is going to have to have us wait until the car comes out."

But she adds: "I don't think investors will ever be happy with Apple,"

"Because if they can do 10, they want 11. If they can do 11 they want 12."

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