News by Luke Jones on Sunday January 31, 2016.
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Apple is in the position of celebrating the huge news that it just recorded the most profitable quarter in history ... not in the history of the company, or the history of mobile companies, but just plain old business history. Apple has achieved what no one else has (leave your Fannie Mae ramblings elsewhere). However, the celebrations must be muted because looking to the future there is an increasing realization that the only way is down.That feeling has long followed Apple from investors and those who just hate the company and wish it would simply fail, it was a feeling shouted loudly and clearly after another record breaking quarter last year. However, something has changed, because even those inside Apple (CEO Tim Cook no less) are suggesting that this may well be as good as it gets. The stark realization is that Apple just brought in more money through one quarter (Q4, or Apple?s fiscal 2016 Q1) than any other company has ever made. It is the most profitable business entity that has ever existed, and the feat is all the more impressive as the number two position is also held by Cupertino, after last year's Q4 performance that shattered all records at the time. The prevailing opinion it that this kind of runaway train of record breaking profit cannot continue, there are simply too many obstacles in the way. Cook reasoned as much, pointing to what he predicts will be a year on year drop in iPhone sales through the next quarter, the first time that has happened ... well, in a long time. Ok, maybe the middle of the year quarters (Q2 and Q3) should not really be used as a litmus test, the second quarter is when consumers are recovering from the Holiday Season, and it is also when many Android competitors launch their flagships. Q3 is always slow (slow still means huge profits for Apple by the way) as it is the frame before the company launches its updated handsets; why buy an iPhone that is going to be old in a matter of weeks? So, Apple may be able to muddle through most of 2016 with a decline in sales year on year and see some fidgeting from investors, but nothing that should bring the sky falling in. The true test of Apple's position will be during the fourth quarter of 2016, the period running September 30 to the end of the year. This will be the quarter in which Apple?s new products are launched and historically it has been the period where the company has swept all before it, as this year?s record breaking Q4 suggests. So, how does Apple top itself and manage to achieve that which has never been achieved, for the third consecutive year? Well, the right answer is that the company probably won't. Investor enthusiasm is cool on the idea of a special edition 4-inch iPhone, while the Apple Watch may be the best-selling smartwatch on the market, but it is not the all-conquering niche defining product many had predicted it would be either. The iPhone 7 will have to be something to capture the imagination then, especially with a smartphone market that is increasingly being flooded by options in all price-points. Basically, the time of the iPhone being the example of innovative wizardry has long gone and Apple is now trading off its considerable cache as a premium brand that is beloved by the consumer. And yes, the consumer is ultimately all important. Expect them to lap the iPhone 7 up in huge numbers, it is just very unlikely that they will turn out for another Christmas and help Apple break another record. And that?s rather the point of the problem for Apple, it is unlikely to see much of a drop off in profits, but if its moves back from its record breaking form, investors may be turned off and the company's share price will fall. Apple is in a rather unique predicament of possibly continuing to be hugely profitable, but be something of a turn off for investors who know the company has topped out.
Luke Jones is the Managing Editor at MobileBurn.com and is the person you need to speak to about the content on the site. Luke studied creative writing at degree level before carving out a reputation as a freelance tech writer. He settled here at MobileBurn, where he reviews devices and contributes to the news, as well as overseeing the site's content and direction.