Apple’s latest results look quite brutal at first glance, with a 27% fall in quarterly profits to $7.8 billion, and a 15% slip in revenues to $42.4 billion for Q2. However, Apple CEO Tim Cook has waved off any suggestion of failure by clinging on to the results coming in above the frankly poor expectations, and as a result, Wall Street has bumped up its share price by more than 7% following the earnings release. Wall Street too is in a state of denial.
It was well publicized that Apple had a poor start to 2016, with the significant Q1 results marking the first drop in revenues and profits of the iPhone era, and its first ever year-on-year fall for sales of the handset itself. The results out this week make that two quarters on the trot that the iPhone has suffered, down 15% from 51.1 million in the previous quarter, to 40.4 million units shipped in Q2.
The iPhone may be struggling in a saturated market, but it isn’t alone here, all handset manufacturers have experienced slowed growth. Although the iPhone 7 is certain, as with any new iPhone release, to sell better than any other single handset on the market, but fiddling with the same handset time and time again is simply not enough on its own to magically recover growth. What it really needs is a special new product, but the skeptics believe that Apple’s innovation died along with Steve Jobs five years ago.
Samsung leads the global smartphone market, shipping over 80 million units worldwide in Q2, according to new research from Canalys. Samsung gained a huge edge over Apple by bundling a free Samsung Gear VR headset with the purchase of a Galaxy S7 smartphone earlier this year, which Canalys points to as one of the key contributors to its boost in smartphone sales.
Apple lagged once again in the all-important Chinese market, recording weak results with net sales coming in at $13.2 billion, down 33% from $8.5 billion in the previous quarter. Huawei came in strong in third place, increasing shipments to 31 million following record shipments in China and growth in EMEA.
Apples software and services arm, which includes its App Store, Apple Music and iTunes, saw growth of 19% as the company pushes its streaming service to challenge Spotify for the title in the US market. Apple has already shown that video content is high up on its list of plans as it has just acquired the rights to Car Pool Karaoke this week, a spin-off from British comedian James Corden’s Late Late Show, which it will be showing exclusively on Apple Music.
Apple CEO Tim Cook spoke about his long-term plans for the company during an analyst call, including its in-vehicle infotainment (IVI) system Apple CarPlay, artificial intelligence (AI), and augmented reality (AR) – a technology which has seen the Pokémon Go mobile game change the way society functions over past few weeks.
“We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter. We had a very successful launch of iPhone SE and we’re thrilled by customers’ and developers’ response to software and services we previewed at WWDC in June,” Cook said.
We’re not sure what figures Cook is referring to when he talks about success, but the ones on the Faultline desk propose that the iPhone SE did very little to recover Apple’s declining handset sales – a product not quite cheap enough to compete with really affordable smartphones, yet one that lacks the full allure of the high end iPhones.
“We have focused our AI efforts on the features that best enhance the customer experience,” Cook said. “For example, machine learning enables Siri to understand words as well as the intent behind them. That means Siri does a better job understanding and even predicting what you want, then delivering the right responses to requests. To make Siri an even smarter assistant, we’re opening the service to developers, and this fall Siri will be available across our entire product line. We’re also using machine learning in many other ways across our products and services, including recommending songs, apps and news.”
On a final note, the prospect of opportunities for AR seems to have excited Cook, who added, “AR can be huge. There’s a tendency to call everything the next platform, but regardless, it will be huge.”