On Wednesday, January 23, Apple will broadcast its quarterly earnings call, where Tim Cook and other top executives will discuss in detail the company’s financial performance for the final three months of 2012. However, unusual for an Apple announcement, it hasn’t followed months of overwhelmingly positive speculation. Instead, we’ve been treated to weeks of doom and gloom. The outlook is now so bad, analysts are predicting Apple will report its first year-on-year profit decline in nearly a decade, and reporters are calling for Tim Cook to be replaced.
This follows a dismal week of negative press for Apple. Sharp and Japan Display were both linked with dramatic reductions in production of display panels for the iPhone 5, the latter by as much as 80 percent, all due to “weak demand,” according to analysts. This represents an order reduction from Apple few expected so soon after the release of the iPhone 5. A few days later, Sharp was again said to be cutting back to the point of, “nearly halting” screen production for Apple, this time on panels destined for the full-size iPad.
This has culminated in reports that Apple’s products are no longer selling very well, with the Wall Street Journal saying Apple reduced its orders for iPhone 5 screens due to, “a weaker than expected demand,” for its latest smartphone. If the majority of the press coverage is to be believed, Apple’s reign at the top of the smartphone and tablet hierarchy may be coming to an end, and it’s its own fault for being far too greedy and/or egotistical. But is it really that simple? Has the world’s most desirable smartphone suddenly, almost overnight, stopped selling, causing the world’s most valuable technology company to falter? Let’s look at it in a little more detail, starting with iPhone 5 sales performance.
Comparison with previous iPhone models
The only facts we have about the iPhone 5’s sales performance come from Apple itself. The company confirmed it shifted five million over the opening weekend, more than one million more than the iPhone 4S managed, and it also boasted two million were sold in China in the first three days. Despite some serious supply problems, Apple even managed to hit its target of putting the iPhone 5 on sale in 100 countries by the end of 2012.
Looking back to the iPhone 4S, which was released in October 2011, Apple sold 37 million units leading up to the first quarter of 2012 – contributing to Apple’s highest performing quarter yet. Fast forward to the fourth quarter of 2012, and Apple had 26.9 million iPhone sales on the books, while in 2011, 17 million were sold. What’s interesting here is that analysts had predicted sales of the iPhone to reach 20 million, then wrote off the result as a disappointment, conveniently ignoring the fact Apple’s iPhone sales were up by 21 percent on the year before.
As of this moment though, we only have analysts predictions to go on regarding the total amount of iPhone handsets Apple has sold. Bloomberg has averaged out all the predictions to 48 million, a figure which doesn’t sound all that disappointing right now, but what if Apple says it has sold between 38 million and 40 million? It’s a lot lower than anaylsts are expecting, but still over and above last year.
When Apple does release its sales figures on Wednesday, remember not to compare it to these estimates, but on this period last year. Then we’ll see if the iPhone has stopped selling.
Apple’s press-pocalypse hasn’t stopped there, as reports of Apple cutting component orders have been instrumental in causing its share price to fall from around $700 to $500. This is another area where Apple has received a kicking in the press recently, and some see a conspiracy at work. Don’t worry, we’re not about to tell you that the Crap People are displeased with Apple and are plotting its demise. Instead we’re going to talk about stocks, shares, and people who wear red braces to work for a moment.
Apple watcher John Gruber recently called attention to a financial article, where it’s shown that if Apple’s stock price is above $550 during January, a lot of those people in red braces will lose a lot of money. Also, if the stock price should be $500 or less on January 19, those same people would make lots of money instead. Gruber points out Apple closed at $500 on January 18.
Forbes’ Philip Elmer-Dewitt is convinced this is an example of Apple’s stock being manipulated, and backs up his theory with graphs showing the stock behaving similarly over several weeks. The Street’s Rocco Pendola vehemently disagrees though, employing a professor of finance to explain why the theory used by Gruber and Dewitt is nonsense.
Falling share prices, manipulated or not, combined with analysts crying about missed sales targets rarely leads to positive coverage in the press. Unfortunately for Apple’s PR department, it gets worse.
Not so cool anymore?
Just prior to all this more specialized news, Tina Wells from Buzz Marketing Group was quoted in a Forbes article as saying, “Teens are telling us Apple is done,” and she didn’t think the firm was, “connecting with kids.” The article, entitled Is Apple’s iPhone No Longer Cool to Teens?, was subsequently picked up by many news sources, where it was used as another nail in Apple’s coffin.
A slightly less often quoted survey comes from Smarty Pants, a market research firm which publishes an annual list of 100 most loved brands based on data taken from children. Apple’s iPod, iPod Touch, iPad, iPhone, and the company name appears at number seven, 13, 23, 25 and 32 respectively. Neither Samsung, Galaxy nor Android appear anywhere in the top 100. This fact has been obfuscated by reports saying the study had Samsung showing up on one in four teenager’s wishlists, a fact just not reflected in its 2012 top brands list.
Forbes, when writing about Apple’s lost coolness, brings up a Piper Jaffrey survey which says 67 percent of affluent teens want an iPhone as their next phone. Sixty-seven percent! The author is quick to point out Samsung is in second place though, with a, “Strong,” 22 percent. I’m sorry, but can you point out where Apple is losing its coolness or desirability? Samsung was also one of the companies Buzz Marketing singled out as doing it right, and the noise surrounding the Korean company recently has been overwhelmingly positive, including stories about it selling 100 million Galaxy handsets and how cool the Galaxy S4 is going to be. But Apple seems to be overwhelmingly ahead.
Apple has dealt with legitimate negative press many times before, but this is on a completely different level. The sheer amount of doom-laden stories, now accompanied by leaks about badly named products which sound completely at odds with Apple’s usual modus operandi, borders on the overwhelming. They culminated today with a Forbes piece calling for Tim Cook to stand down as CEO and make way for, of all people, Jony Ive.
Has all this just come together at a time when Apple looked vulnerable? Has its success turned it into an easy target? Or is the world just sick of its secrecy, pompous refusal to admit its mistakes, or its continued success based on half-hearted product refreshes? Let’s face it, they’re all good reasons for disliking Apple; but right now, the press hatred is beginning to turn into a bad comedy.
Worse still, it’s difficult to see anything more than speculation regarding falling sales and reduced orders, and the latter is almost exclusively viewed negatively. Not everyone thinks it signals the beginning of the end though: Computerworld’s Jonny Evans says the reduction in screen orders could signal a shift to new screen technology for the next iPhone, such as the adoption of Sharp’s IGZO panels.
Dan Pallotta, writing for the Harvard Business Review, neatly sums up this recent spate of Apple bashing by saying, “The critics that are screaming right now are intellectually lazy. They’re throwing temper tantrums instead of looking at the big picture. Like two-year-olds, they don’t really know what they want, and they’re not happy when they get it, anyway.”
So what is the big picture? As far as Apple is concerned, we just don’t know; and it could be that frustration that’s generating many of these disparaging headlines. Tomorrow, we’ll find out, and the story likely won’t be any different than any other quarter. Apple isn’t going anywhere, and neither is the iPhone.