A week ago, Apple proved that a lot of analysts were right.
2016 is going to be a bad year, and the company has little left to offer consumers to convince them to buy their next and newest products.
However, a lot of these analysts, while right, took it too far by claiming that Apple has run out of ideas.
It has one last trump card to play.
Let’s look at why it will disappoint this year, then at what will revive company sales and products down the road while making one small, new partner wildly successful.
Turning Back the Clock
The proof that Apple has nothing to offer comes packed in the newly announced iPhone SE.
This phone is going to have the hardware and camera of the sixth generation, with the smaller size of the fifth generation.
Of course, it was packaged as answering the demands of consumers, who bought 30 million four-inch display phones in 2015, but it conveniently glosses over the reality.
It isn’t just the size that matters. The newer phones have had little else other than gimmicks and slightly incremental improvements to offer.
The processor in the iPhone 6 was slightly better, along with the camera.
Haptic feedback is largely a novelty for the vast majority of users, and Apple Pay is largely a way to capture fees from transactions using a platform other companies pioneered half a decade ago.
All of this goes for the iPad, though it accounts for far less in sales. The new iPad Pro is going to look exactly like the original, though with higher quality hardware.
The reality is that Apple is looking at a sales slump for the iPhone 6 that will negatively affect its quarterly earnings, all because consumers do not see a reason to continue replacing older models.
Price vs. Demand
Further proof of this can be seen in the reduced price point being offered for returning to a phone design first introduced in 2012.
The SE will be debuting at $399. That is the lowest price ever for an iPhone debut.
Plus, the Apple Watch is already moving down $50 to $299, without the normal improved model debut to take the top tier.
Many of these sales at these lower price points are going to be from customers who want an Apple phone but cannot be sold Apple’s products at higher price tags anymore.
That means many of these SE sales are going to be sales stolen from the iPhone 6 and 6 Plus due to a lack of ideas on how to maintain momentum.
First quarter results disappointed on iPhone sales, and sales estimates from Apple for the second quarter are up to $7 billion off from analyst expectations — $50 to $53 billion versus $57 billion.
The new price points may help total units, but it is going to be a drag on total sales, and investors will not be happy when the extent of cannibalized sales is realized.
The Trump Card
I do not envy the attention and expectations placed on Apple, and especially Tim Cook.
For the past five years, every product announcement is coupled with widespread belief that Steve Jobs would be rolling over in his grave.
However the company has performed remarkably well in spite of this undercurrent, by just about any measure.
Shares are up over 110%, and a nearly 2% dividend is returning even more to investors.
Revenue and sales have consistently gone up. Profit margin and operating margin are consistent and the envy of many other corporations.
However, some aspects of being the world’s largest company (at least by market capitalization) are not easy to avoid.
Apple has been great at staying nimble and progressive, until this generation of products. It simply needs to regain momentum.
There are already signs that it is going to do just that, and has been planning it for some time.
The tech giant announced that its iPhone will soon be enabled with wireless charging technology. With the SE announced, 2017 is all but guaranteed to be the year for it.
Though wireless charging has been a gimmick to date, a new version that works at up to 15 feet is now ready to ship.
The company with this product also happens to be in the same standards group with Apple, already works with top Apple supplier Foxconn, and has repeatedly hinted at a deal with a top tech company before and after the Apple announcement.
Nick Hodge released a research report on this company and its potential before any of this started happening, and still has the best analysis I’ve seen to date.
If you want to check out his research on the company that matches all of the clues about who is behind Apple’s last trump card, you can find it here.
