iPhone Sales Drop, and Apple’s 13-Year Surge Ebbs | Hacker News Reader

iPhone Sales Drop, and Apple’s 13-Year Surge Ebbs

nytimes.com

386 pointsacalmon537 comments

I run a repair shop. We've repaired over 3,000 Apple devices for customers. We are always chatting with our customers, so we get a ton of feedback from them about what they're doing with their phones.

We hear a few things consistently:

1) Providers have switched from "free upgrades every 2 years" to a plan cost and a monthly phone cost, so people now really know how much their phone costs--and many would rather save the $30 a month than upgrade their phone. This started with T-Mobile a few years ago and now is how most phone plans work. This is having a huge impact on people's desire to buy new phones.

2) iPhone 5/5C/5S users have no desire to upgrade to a larger phone. The SE is going to solve some of this, but it'll more likely be a scenario of "I dropped my 5S in the toilet and it's completely dead, so I'll upgrade to a SE instead of dealing with the hassle of finding a legit used 5S." I don't expect to see a huge push toward the SE from current iPhone 5 users.

3) Repairs are so cheap, so easy and so effective. It's $79 for us to fix an iPhone 5/5C/5S screen right now, and we can fix it in less than 30 minutes typically. No reason to upgrade when your old one works just fine and you can get it fixed cheaply.

Interestingly, the SE screen is 1:1 compatible with the 5S screen, so the SE is coming out of the gate being cheap and easy to repair as well. I'm typically recommending the SE if people really want a new phone.

We also ask customers about 3D Touch (the new feature on the 6S/6S+) and if they're using it if they have a 6S. 99% of people have no idea what it is or how to use it. They bought a 6S/6S+ because it was pink. Yep, most of the 6S phones we see are rose gold, and that seems to be the #1 factor driving sales of that line. If they don't care about the pink and ask me what phone I recommend, I recommend buying a refurbished 6 over any of the 6S line. (We don't sell phones, so I have no horse in that race at all.)

3D Force Touch was one of those features I feel would have only caught on, if it was one of the original iPhone features. Tacking it on later, with little to no support in apps, makes it forgetware. I actually really like the functionality, and I completely forget it exists. There needs to be some type of small indicator reminder that a button HAS 3D touch.

To me its real problem is that it's almost indistinct from long-press. Combine that with Apple's poor UX discoverability (I'm looking at you, swipe-from-the-side-to-see-iMessage-timestamps!) and 3D Touch is basically useless.

Yeah, Force Touch has really compounded their problems of overloaded and undiscoverable UX. I realized this recently when trying to tell a family member how to rearrange their home screen icons. It used to be "hold down an icon until it wiggles, then drag it". Now it's "hold down an icon, but not too hard, until it starts wiggling. What do you mean there's a popup?! Oh you pressed too hard. Tap somewhere else to close the popup and try holding down an icon again."

3D Touch should've replaced long press. I hate that I have to wait, I don't care that it's 0.4 of a second. A long press is a concession to the fact that there's no physical button, and 3D Touch should've solved this problem.

But instead I end up triggering a 3D Touch when I want to delete an app.

(I'm looking at you, swipe-from-the-side-to-see-iMessage-timestamps!)

Wow, that is poor discoverability. Also, thanks so much -- I've been wanting that for ages. I never knew about it.

>> "To me its real problem is that it's almost indistinct from long-press."

Are you saying this as someone who actually uses the feature? Because in my experience a long press and 3D are very distinct. In fact 3D touch makes it quite difficult to long press on home screen icons to delete them.

3D Touch is Apple's gimmicky answer to Microsoft's gimmicky Windows 8 Live Tiles. It's the feature you never knew you never needed :)

BTW, thanks for the tip on the iMessage timestamps, their "seeming" absence was an obnoxious nitpick when I switched to an iPhone.

Weird. I kind of always expected it to be there and found it forever ago. Maybe because I was developing on iOS and knew it was a table/list view, and expected it to have a left-swipe something?

Dang! I just learned a new trick!! Being using an iPhone for four years. Thanks?

Oh boy, the amount of times I've tried to copy a URL or open a link in a new window... Now I know what's causing this annoyance!

Now how to turn it off...

The best 3D touch feature is the trackpad keyboard. It's also very not discoverable (who thinks to force touch the keyboard?)

Having said that, 3D touch is far from the only improvement on the 6S. If it didn't have 3D touch I'd still recommend the extra $100 to get MUCH better internals (processor, cameras, touch ID sensor) and a stronger body too.

The trackpad keyboard is huge. It greatly ameliorates how horrible touch keyboards are, and makes editing text not too much of a chore. I'm afraid no one will use it and the feature will get axed.

I git exited about the trackpad keyboard when I heard about it, but the cursor always jumps a character or two when the lift my finger.

> Having said that, 3D touch is far from the only improvement on the 6S.

However the internals are largely the same as the iPhone SE

I like the two finger version of the ipad much more. Wish they would do the same on the iphone.

I forget that 3D Touch exists because I own an iPad, which does not have it. After using the iPad for a while, I stopped trying to use 3D Touch on my phone, because I got conditioned to the idea that it isn't there.

That's funny because i got used to the force touch application switching gesture of swiping from the left side. When I got handed an ipad, I found myself making the gesture and then remembering that I need the double press on the home button.

I use it all the time for Live Preview in Photos. The Harry Potter effect in photos is awesome.

The only consistent use case though, completely useless beyond.

Photos shows a little icon to indicate that a long press will do something. It is discoverable. No other area where this UI element exists.

I mainly use press down on the screen's left side to invoke the app switcher, so that I can switch apps without using the home button. It's nicer for one-handed use. Apart from that I haven't seen a compelling reason to use it -- even within first-party apps for example.

EDIT -- I also use the keyboard trackpad thing. Not often though.

I wholeheartedly agree. I find 3D touch very helpful. But it really begs the question if you consider that unless I am consciously aware of 3D touch every time I interact with my phone, I am very likely to forget that it exists and go back to performing actions the way I am used to.

Providers have switched from "free upgrades every 2 years" to a plan cost and a monthly phone cost, so people now really know how much their phone costs--and many would rather save the $30 a month than upgrade their phone.

Wasn't this why Apple was quietly introducting the "iPhone Upgrade Program"?

http://www.apple.com/shop/iphone/iphone-upgrade-program

Seems like Apple realized the future will be a place where everyone just leases their equipment on a monthly basis and switches stuff in-and-out as they need to...including the carrier (gasp!)

The future won't be a place like that by default. As phones mature and features stabilize, we're seeing the same trend that we saw with desktop PCs five years ago: Away from "must update every 18 months" and towards "my old one is still good and I like it, so why upgrade?"

This reduction in churn and corresponding reduction in new device sales is great for consumers, which is why all of the large companies (MS, Apple) are trying to push the subscription model, to try and safeguard their revenue streams.

That program is really only appealing to the people who upgrade their phone ever year, which has got to be a small part of the market. Lucrative to Apple, I'm sure.

Even if you don't upgrade every year, it's still a 24 month installment loan at 0% interest. Since the phone is unlocked and the financing is not tied to a carrier, you're also free to switch carriers without having to buy the financing out.

Quietly? They debuted it onstage at an iPhone product announcement.

In Australia you always had to disclose the phone cost in a contract. People still keep upgrading phones.

In the UK it's changed and it's not so much that they disclose it as that you can buy them separately. In my case it's like £37/month for iPhone, data and minutes for a 2 year contract or £15 a month if you use your old handset. The latter option wasn't always there.

Often it is a bit more complicated. The last one I did it had say a $30 monthly phone charge with a $15 rebate. I guess so they could make the pone look cheaper while just building the rest of the phone cost into the service cost.

Does it show as a line item on the monthly invoice, or in the fine print of the contract?

Here in QC/Canada it's basically "90$/month for the 2 year upgrade" or "65$/month for BYOD".

It's not exactly front-and-center, though. There's some miniscule print that says how much the phone is, whereas the overall monthly cost is in giant numbers.

(Lots of interesting data; upvoted.)

> It's $79 for us to fix an iPhone 5/5C/5S screen right now

Interesting, since I have a 5s with a broken screen glass that I haven't bothered getting fixed yet. :)

It used to be quite a bit more, I think? Have you figured out how to separate the glass (etc) from the actual display, or have replacement display+glass packages just gotten cheaper?

(If you are replacing the display - is there any significant performance difference between the stock display and the replacement display?)

All depends on the cost of parts. Part cost is very low right now...I advise people to get it fixed ASAP if they have the money! You never know what it will do--part cost bounces around like the stock market. Last year it bounced really high there for a bit, and now it's come back down.

The backlight, LCD, digitizer (touch "web"), and top glass are all one piece. They come bonded from the factory. I never recommend glass-only repairs, and they're nearly impossible to do yourself. Some shops will do them, but realistically, with the 5 series screen cost so low right now, there's no reason to risk digitizer issues with a glass-only repair. (It's very difficult to replace only the glass without breaking the delicate digitizer "web" right below it.)

From what we can tell, there is very little difference between an OEM display and the ones repair shops sell. The 6 model is slightly thicker. On a 5, you probably won't notice it.

It is all about the warranty if you choose to get it replaced from a shop--some percentage of the screens are just going to have issues, and you want a shop that stands behind their work. (No repair shop warranty will cover if you drop or break the screen, though!)

"there is very little difference between an OEM display and the ones repair shops sell."

I burned by this, all was looking good till I try to used with my polarized sunglasses, it was probably cheap screen, with wrong polarization, which you see nothing with glasses.

Where do you source parts from? Does Apple sell these like a car manufacturer would?

The whole electronics repair business seems rather immature and shady compared to something like car repair. For a car make, you can easily get the software manufacturers give to repair shops which has all sorts of exploded assembly views, instructions and part lists.

Do you calibrate the screen because I have seen uncalibrated repairs and the image quality is terrible. Though that could also be caused by bum screens.

Repair shop owner here as well. Couldn't agree more people are just continuing to use their old phones. We have big companies even asking to continue to repair iPhone 4S phones to date.

aren't your customers a pretty small niche compared to the most of the Apple users in the US? Most of the people will go to apple store if they need a fix for their device instead of going to a local repair shop which will void their warranty. So the argument about people wanting/or not to upgrade to a new device a pretty subjective to your specific customer type, no?

> "I recommend buying a refurbished 6 over any of the 6S line"

I would not, upgrading to "S" was the biggest performance boost I've had, compared to regular 6 - it's blazing fast and on top of that I can't imagine myself without 3D touch app switching, live photos and text navigation, those do help a lot at least to me and most of the people I know.

> Most of the people will go to apple store if they need a fix for their device instead of going to a local repair shop which will void their warranty.

It really depends on the location of the shop. There are a ton of people who don't live anywhere close to an Apple Store.

My bet: http://www.aliexpress.com/ :)

An example:

http://www.aliexpress.com/item/10pcs-lot-Mobile-Phone-LCD-Di...

US $215.00/lot 10 pieces/lot, US $21.50/piece

I would add this to this as well to the new "forever leasing a phone" model, you have to get insurance which makes sense. However the monthly insurance premium can go up at any time. This just just happened to me. I received a letter from the insurance company the carrier uses - not the carrier informing me that the insurance is going up $2.00 more a month(it was $8.00 its now $10.00.) Thats not an insignificant percentage. This is despite never having to have made a claim for any damages or replacement to the phone.

I think the reason most 6S's are rose gold is that it's the new latest color - i.e. you want the latest, and also to message that to everyone else? Get a rose-gold phone.

Also, considering probably the vast majority of servicing of iPhones happens at an Apple genius bar, I'd say your (very informative) views of the population have some selection bias.

There are still states in the US that don't have a single Apple store, lots with very few. Then there are ~180 countries with none and a handful of countries with very few. iPhone 6S is officially available in over 130 countries.

http://www.cultofmac.com/278978/apple-stores-usa/

Repairs are probably orders of magnitude more common outside of Apple stores.

Exactly. Apple is taking a leaf from the automotive industry's book, and starting to sell new phones explicitly as status symbols rather than based on new features. Expect new generations of iPhone to be much more visually distinct than the relatively subtle changes up til now.

I'd also wonder if there's something that skews more people who have rose gold phones to break them? Maybe they're less likely to use a case because they want to show off the color? Or maybe rose gold skews younger (and therefore possibly less responsible with electronics)? Total guesses, but I'm pretty confident that rose gold is not the best selling color of iPhone currently, so it seems like something else must be going on.

Pink (aka "rose gold") appeals to many women. It also differentiates from the sea of space grey devices.

Also, considering probably the vast majority of servicing of iPhones happens at an Apple genius bar

That may not be the case for display replacements. From what I've seen, the Geniuses won't attempt to replace a screen if the phone's chassis is even slightly deformed. But the local fixit shops will.

The question then becomes, "How random is the subset of people who get thrown out of the Genius Bar for screwing up their phone really badly?" The wealthiest of those will just buy a new phone, so that's one potential source of bias, I suppose.

"...the rose gold iPhone 'looks like someone vomited a salmon dinner onto a dirty pair of ballet shoes'" - John Oliver

Hey Erica, hope you've been well!!! Do you have any thoughts on the software side of things?

Personally, I think Steve Jobs rolls in his grave every time yet another crappy iOS update gets issued. It's led to a general distrust of anything "forward-moving", and that's led to a distrust in the newer phones too.

Would your customers agree?

From what I can tell, our customers generally fall into 2 camps: 1) Upgrade software whenever it's available and their phone prompts them or 2) Have been burned by an update or don't trust them for some reason, and almost never upgrade. Their computers follow a similar pattern.

I don't have much to say about the software side, though one of the biggest problems we see is that people constantly run out of space on the lower-end 16GB phones, and the way Apple handles that is completely unintuitive.

If Apple is going to continue to sell phones with such limited storage, they really need a better way to manage that storage and allow people to move items to the cloud or delete them more easily than just scrolling through a seemingly-infinite list of photos and videos.

Dont worry, Apple will force the upgrade the same way they always have. Make the next version of iOS so freaking slow on older devices that its unbearable to use. People that stay on iOS[789] will eventually be forced to upgrade in order to get their necessary app updates.

My poor iPad 2 is so slow on iOS9 that its unbearable to use for any length of time. A5's are unbearable, A6's are not far behind.

It's not just Apple - it's the developers who release updates to their apps which, because they have the latest gear, are optimised for the latest hardware. I have an iPad2 and only recently upgraded it to iOS9 after 6? (I think, the one where they introduced the wobbly effect) - it got slow before I upgraded it because I updated all the software on it incrementally. It started lagging before I upgraded, indeed it was the reason why I upgraded the operating system. It didn't make any difference.

Is it possible to downgrade the OS on an iPhone? Is that a viable option if the newer OS is very slow on an older phone?

I hate hate HATE how standard practice this is. My 5C doesn't have night shift, for seemingly NO reason other than being the "value" iphone.

3D Force Touch has one really useful use, which is to go back to the previous app on the backstack. I use that constantly. But I use almost nothing each with 3D Touch.

I never knew this existed. Not sure it's much easier than double pressing the home button and choosing the last app though.

Where do you press to do that?

On the left edge of the screen. You can either force press there, or force drag it to the middle of the screen from there.

I really hope #2 gets traction. It's been disappointing to see the SE not do as well as I wanted it to. I'm not an iPhone owner myself but I'm hoping the SE popularizes the "small" form factor phone again.

Tim mentioned on the earnings call today that the SE is supply constrained because the SE is selling far better than they projected that it would.

i'm always dubious whenever a company says that.

That's good to know. Thanks!

In your experience what's the usual time between battery replacements?

That's been the only "killer" for phones for me. With a decent case I feel like they otherwise last forever.

My personal upgrade cycle usually involves someone else's (ex: spouse or parent) phone breaking, giving them mine, and buying a new one. Otherwise I'd probably still be on an iPhone 4.

2-3 years is average, depending on how much you use your phone. Battery replacements are cheap (we charge $49 for the 5 series right now) and quick to do.

Easiest way to know you need a battery replacement: Your phone gets to 40% or 20% and suddenly just dies on you. That means at least one cell in your battery is dead, and it's time to replace the whole battery.

Also, if your screen is edging up on the left side but isn't cracked or broken, that's a sign of an exploded or "puffy" battery. Usually people have the first issue for a while, don't realize what's happening, and then eventually it goes puffy and explodes. It can even break the screen when it does that.

As with other repairs, if you get a battery replacement at a repair shop, ask about the warranty. Replacement batteries can have real issues, and some runs of them have high defect rates. No big deal if the shop you work with has a good warranty and will just swap it out if it stops working.

This matches my experience on iPhone 5.

Since I was out of warranty anyway I opted to self-replace the battery.

http://www.onpaws.com/2015/10/fresh-iphone/

Wow thanks! The top left corner of my iPhone 5 is kind of pushed up. I can press it down but it doesn't stay. I thought it was a problem with the glue. Also battery life has been terrible recently.

I had an iPhone 3GS with the puffy battery issue, I replaced the battery and the replacement did the same thing. It puffs up almost like a bag of microwave popcorn. Very odd.

> don't realize what's happening

Wait, why cant the OS tell the user that something is wrong with the battery.

My parents only replaced their iPhone 5 when the battery wasn't holding a charge as well as they'd liked. So, they replaced it with a 5S (this was before the SE, but it was free with a contract anyway). They use it for calls and directions, but not much else so the 5S is more than adequate.

If they still have that 5, it's pretty cheap and quick to do a battery replacement (we charge $49 -- many shops charge similarly.) Should bring it back to life just like new. if nothing else, I think it would be worth doing just to have it as a backup phone.

Yeah, I own a 5S and I have almost no desire to replace it other than to upgrade storage to 128 Gb. Even after 3 major iOS upgrades, all of my most used apps open close enough to instantly. - the time it takes to pull the phone out of my pocket is the biggest bottleneck at this point.

If I'm going to spend > $600, I expect my life to improve a little bit. I'll probably upgrade to the 7, mostly because I've gone without a case and have had some dings that do impact functionality, but I hope to go 4 or even 5 years with my next phone.

Apple needs an app revolution that drives people to seek faster CPU's. Seems like the only way to obsolete such effective & robust devices.

The CPUs are already impressively fast, they just suck tons of power to do it. There are a few games I won't play on my phone anymore because they absolutely kill the battery. (Same with the Facebook app.)

If there was any way to dramatically increase power efficiency or battery capacity it would be a huge draw for consumers.

You don't by chance do business via mail or have a website do you? :)

Sure :) http://www.1uprepairs.com - we are based out of Austin, TX. Email is in my profile if you need to reach me, or you can call our store during business hours.

I don't think buyers had much choice in colors. We're a dev shop and we couldn't get basic silver / grey devices with the specs we wanted. All they had was gold or pink.

Um, what? You can order whatever color you would like:

http://www.apple.com/shop/buy-iphone/iphone6s

What's an iPad Air screen repair cost?

iPad Air 1 is $120 to fix; newer ones are $260. The reason for the jump is that Apple moved to bonded technology (backlight, LCD, digitizer, glass is all one piece bonded from the factory) in the newer iPad Airs, so the parts are more expensive. The older iPads have separate glass/digitizer and LCD/backlight.

Feel free to email me if you want more info--my contact info is in my profile.

Anecdotal evidence also suggests that people like the 6 more than the 6S. It's nicer to hold in hands and it's quite a bit cheaper for basically the same phone.

Er, really? The 6S is almost identical to the 6; the primary difference is that it's 0.1mm (!) thicker and 14 grams heavier.

Is it possible you mean to compare the iPhones 6S and 6S Plus, which actually differ in size?

Nicer to hold in hands? It's the exact same frame. Are you confusing the 6 and the 6 Plus?

It probably doesn't help that the subsidy model has completely changed. But personally, I think iPhone performance has hit a point where one doesn't really feel the need to upgrade right away. I was so ready to upgrade when the contract on my 4 expired. It was really a pain to use after a couple of years. But my 5S has now lasted me two and a half years and other than wishing I had more storage capacity, there's really nothing compelling in the new models for me to want to upgrade. The build quality and battery are so good that I don't feel like it's even getting worn out. The better cameras would be nice, but otherwise? I just can't justify the cost, much as I'd like to, so long as my 5S keeps performing.

I do think Apple needs to focus their money and efforts on improving their services and software integration. There's a lot to like in Apple services, but there's a lot of rough edges and weird gaps, and too often I feel like apps get written and then abandoned. If you bundle an app, it should have a dedicated team that keeps making it better, faster, easier to use all the time.

I also feel like Apple has a real chance to make a mark on the home automation market if they chose to do so. The best stuff out there is still pretty bad, and pretty much all of it spies on you. Based on how they've been adding context-aware features to iPhone in a very privacy-conscious way, Apple is the one company I would still trust to actually try to do home automation in a way that respects my privacy. And they have the money to invest in making it happen. But while I'm sure their hardware would be well-made, can they raise their software polish to the same level?

> I think iPhone performance has hit a point where one doesn't really feel the need to upgrade right away

I have a cheap 2014 Motorola Moto G and I have the same "problem". Yes, there are hundreds of modern phones out there which are several times faster and have way better hardware but the Moto G is fast enough for me.

I usually just browse the web, type a few messages in Whatsapp, take a few pictures, ... and the phone does all of this well enough so that I just don't have any reason to invest 500+ Euro in a new phone.

Another bonus is that if I accidentally drop my phone I can just buy a new one (or two) and it will still be cheaper than an iPhone or other similar phones.

You might not even get a perceptual performance boost at all. I recently upgraded from a 2013 Moto G to a current-gen Nexus 5x and it feels about the same, maybe even slightly slower, in terms of latency for common tasks and how often it gets bogged down. I think part of the problem is that the new phone has a higher-res screen, which some apps (like Facebook) adapt to by shipping much larger icon sets, loading higher-res images and video, etc., which negates any performance improvements. The camera is definitely nicer, though.

I think that's a problem with the 5x though. I moved to an S7 edge recently and it is quite frankly so fast that I'm unable to use my old Moto G due to the excruciating slowness of the UI.

The 5X is slower in single thread code than the Nexus 5 from 2013. It has 6 rather than 4 cores but not many apps can take advantage.

Dam, I was just about to do the exact same thing...

Hmm, now i'm kind of out of options. As after Samsung Galaxy note experience, I said I'd never buy Samsung again.

Agreed, this is the exact reason I went with a Moto G. It was under $200 and I tend to be very clumsy. It runs the latest nearly stock Andriod and is a very smooth experience. The only fault I can find is it's camera. So for someone who finds that very important this may not be an option.

I had one - great phone for the price but I found the 1GB mem to be a real limitation - websites would reload if I switched to a dif app then back. I now have an Asus with 4GB - great phone too and also relatively cheap (about a yr old now)

Fellow Moto G user, and I completely agree with this sentiment (along with the camera being meh). Remarkably the battery has held up very well with two years of use, part of me wonders if that's due to performance improvements in Android offsetting the natural wear (though every update seems to make the stock apps slower, with Maps being a particularly noticeable example).

I'm in the same boat and bought a Moto G, but one major issue is the lack of gyroscope for google cardboard/vr use.

Yeah, I had a 1st gen Moto G, I think it had comparable value to expensive high-end phones (for people who're not int big screens).

Now I have Nexus 5X, it costs less than half as much as top phones but I think it's actually better, at least for me - clean Android with timely updates, everything is smooth and fast, USB-C, good camera...

I just upgraded to an iPhone 6s and now I have the opposite problem: the hardware is too fast, so fast that it replaced an ages-old pattern ingrained in my usage. I used to be able to tap the home button to turn on the screen, so I didn't have to go to the top of the phone for the power button. I could click the home button and move my finger before TouchID had a chance to notice. Now TouchID is so fast, it's unlocked the phone before the screen even turns on.

It sounds like a minor complaint and I guess it is, but when I'm fumbling around in the dark and I want my flashlight, or when I'm trying to quickly take a picture, I don't want my phone to be unlocked. I just want my damn flashlight or camera, which are easier to access if the phone is locked.

I'm actually considering going back to the 6 instead of the 6s just because I like that little delay in recognizing my fingerprint.

heh, I've got a really cheap android phone ($30~40 flat out, no contract, no plan). It doesn't have great specs, but after rooting it and installing a clean Cyanogen install on it, it feels faster then many $600 phones. I wish phones would stop coming with so much bloatware installed.

I actually did this with my Moto just the other day. But they've stopped making the model I had!

Can anyone shed some light on why the subsidy model is going/has gone away? It seems to me cell providers would not want to stop essentially requiring 2-year contracts, so why have they? Fear of government action, or market competition? Or was the subsidy model actually bad for the networks somehow?

Someone had to blink, especially as basic Android phones got better and cheaper.

Pre-iPhone, most contracts were one-year, and typical expensive phones cost $3-400 unlocked. Post-iPhone, phone costs go up, so contracts get longer, but now the carriers are in a position where they're treating expensive iPhones the same as the same as less-expensive base-model Androids. Sure, they can make a killing on the less-expensive phones in that model - since the subsidy amount is greater than the cost of the phone - but it gave T-Mobile incentive to ditch the model and pass on some of the savings to budget-conscious consumers.

And ultimately, that's not such a bad thing for the carriers, but it is a bad thing if almost all the phones you sell are on the "more expensive" side, since you're now competing more directly on price.

I speculate that it's a couple of things. First, carriers are putting out big capital outlays to the phone manufacturers to get customers on new phones either under a contract with a subsidy or a payment plan.

Second, the carriers are smart enough to realize that even with relatively old phones data usage is still pretty high. The carriers now make their money on metered data so they want to avoid the capital outlay required to subsidize a phone if they don't need to for customers to stay data hogs. T-Mobile provided a real world experiment that likely found attrition to be low enough even with contracts gone that it was worth removing the subsidy.

Tl;dr The carriers are cheap and don't want to lend you money for a new phone when you still pay them a lot to use your old one.

T-Mobile changed so others had to to keep up. Basically most cell phone contract innovation in the last 5 years has been through T-Mobile.

You do realize that US and T-Mobile was one of the last holdouts with this "bundled"system and in Europe we had this "new" system in place for at least 5 years.

"Innovation" isn't the word I would use here, it was simply that the US caught up to the rest of the western world.

I'd love to know why these went away too -- not that I liked them, but they seemed well suited to the ignorance level of most people that I know. Even though they've been replaced with ATT Next/Verizon Edge/... plans that are appealing to technophiles, as well as easy 3rd-party financing (just not through the provider), I'd like to know the "illuminati" reason that the market shifted.

Carriers want diversity so that they can do better bargaining with the phone makers. ex: My HTC M7 phone came with lots of preloaded shitty apps made by AT&T which i can't delete, Apple will not allow AT&T to twist their arm like that. Similarly they want diversity in the chip makers as well. If the phones are subsidised most people will go with iPhone.

Apples service revenues are still growing 20% YoY.

Apple can and does generate a steady stream of revenue from existing devices. App Store revenue increased 35 percent year-over-year, and iCloud is also continuing to grow. Apple pay is adding 1 million new users per week. and they just announced the Apple Music has 13 million subscribers.

Apple's services unit is now the company's second largest category during the recent quarter, ahead of Mac and iPad sales

The only iDevice that's not still in use in my family is my first, an iPhone 3G. My youngest has my 3GS. The 4 is with my father in law, etc. My first iPad, a v2, is with my sister in law in China, she uses it to Skype to us. These things just keep on going.

The quality of the camera keeps me upgrading every chance I can.

Also the touch-id capabilities are significantly improved.

I have an iPhone 5 (not S) and the performance is starting to get on the frustrating side. But it's only now getting to the point where that is an issue.

Maybe you should wipe it? I have a 5 that I bought the year the 5s came out, and it works great, still

I always do the OS installs through iTunes so it pretty much gets wiped every time.

Maybe that's the issue - I don't do OS updates on iOS devices, so my 5s is still on iOS 7.1 - and it's still blazing fast after 18 months of use. My suspicion is that the iOSes getting slower with every release is a planned obsolescence strategy.

Thats easy to fix - next iOS release your phone is gonna get slower and slower. :)

Incredible that this is the first time in 13 years that Apple hasn't posted quarterly growth. I'm sure there will be lots of "Apple has lost its ability to innovate" articles based on this, but growing for the last ~52 straight quarters is insane.

And I don't think one quarter without growth is enough evidence to conclude "Apple may be reaching the saturation point among potential customers in some countries" or "other smartphone makers using Google’s Android operating system continue to challenge the company with powerful, lower-price devices."

There is something fundamentally wrong with our system that "growth" is used as the main metric for assessing business success. It's growth for the sake of growth (and more $), and not deploying business to solve hard customer problems and to make the world a little bit better.

growth for the sake of growth

Working at a small shop now, and seeing this same behavior, it's a little frightening. In our case, and from my perspective coming from a couple of startups more recently, and large enterprises prior to that: terrifyingly frustrating for a number of reasons.

I'm in a great spot to make suggestions from my accumulated past, but the team and management seem terrified to make the jump and have nestled themselves nicely in the niche of "let's just do what's easy for now" while still telling themselves they want to grow grow grow, but I don't think management is quite aware of what this growth is going to mean internally for our ability to solve problems with the toolsets we have (both for support and project management).

That's a big reason why private businesses are better than public ones. There's no need to push for unsustainable growth at the behest of busybody investors.

It's growth for the sake of growth (and more $), and not deploying business to solve hard customer problems and to make the world a little bit better.

Not sure I understand. How do you grow revenue unless you're producing something that someone wants, presumably because it solves a problem and makes the world better?

If I were a company I'd pay a lot of money to find other ways to grow!

> There is something fundamentally wrong with our system that "growth" is used as the main metric for assessing business success.

Not only that, if there is no growth in the next few quarters Apple will be considered to be in "bad shape" which is insane when you consider the size of the company and its revenues.

Even at that, it isn't just about making a profit, it is about making more profit (or often just revenue) each quarter. Your business could be operating at a 40% profit margin that but be called a failure and run against on the stock market when that doesn't become a 41% margin next quarter.

It isn't really lack of growth that's a problem, there are tons of companies out there that post a very consistent profit quarter after quarter that are doing just fine - negative growth, especially in a few of a company's core segments, is just as unsustainable as positive growth year over year is. If you have enough quarters of negative growth, very soon you have nothing. It is a warning sign to investors that things might not be going so well. Is one or two quarters of negative growth bad? Probably not in Apple's case, probably yes in something like AMD's case. The context matters, but there is a reason growth is used as a metric, the market is not stupid.

hm, there is a valid criticism to be had but "wrong" isn't the word I would use.

there isn't anything wrong with Apple's stock selling off violently, as much as there was anything wrong with people bidding the shares up so high under the idea of selling it to someone else at a higher price.

there are plenty of companies that are content with steady or even cyclical growth/earnings. in many other countries were local stock markets are not popular venues for speculation and capital formation, it is quite respected to have steady earnings without a drive to quarterly growth.

that being said, many places that are low growth envy the high growth areas, especially how it has been achieved in the US markets.

Every time you buy a stock in the anticipation that its price will rise, or, for that matter, buy VFINX with the expectation that the total value of the S&P 500 will rise, you are putting money on a bet that companies will grow.

A recent book that tries to address this (kinda annoying title): http://www.rushkoff.com/books/throwing-rocks-at-the-google-b...

Growth is simply part of the formula that lets you arrive at valuation. It's just math. If growth goes down, so does the valuation

Down voters: valuation = income / ( discount rate - growth rate )

"Apple may be reaching the saturation point (of the products it currently sells) among potential customers in some countries"

Apologies in advance if this is a dumb question.

What is Apple's next move once it saturates the market?

Or, more generally, what is the next move once you've saturated a market?

Personally, I wonder who though Apple's growth would never end. This happens to every company sooner or later.

I was at a NASA workshop in Mountain View. An informational placard outside had two plots of growth, one with an unchecked exponential curve, and one with a curve that comes up to a peak and goes down. It asked which made more sense as a growth curve.

My idealized mathematical self thought, naturally, the exponential growth curve, because it expresses what happens when y-dot equals alpha y.

But I asked a passing Caltech astrophysicist, who (not surprisingly) gave a better reply. The curve that flattens out and goes down, he said, because exponential growth is impossible to sustain. Physical limits on some aspect of the system must intervene and impose a new law.

>I'm sure there will be lots of "Apple has lost its ability to innovate" articles based on this

Given that people have already been writing those articles for a couple years, i'm sure a drop in their revenue and missed estimates won't make them stop.

Innovation had little to do with this, US cellphone companies stopped heavily subsidizing phones. Apple's profits dropped.

>Incredible that this is the first time in 13 years that Apple hasn't posted quarterly growth. I'm sure there will be lots of "Apple has lost its ability to innovate" articles based on this, but growing for the last ~52 straight quarters is insane.

Not to mention that all the other companies (Microsoft, Amazon, Google, Facebook) have much worse ups and downs (and are also 1/3 or less the revenue and much much less the profits of Apple, Amazon comically less) but you never see "X is doomed" for them...

It's a bad report across the board...

AAPL YOY (year over year, not quarter) : iphone down 18% ipad down 19.5% mac down 9% revs down 13.5% eps down 18.5%

> It's a bad report across the board...

Just to put this into perspective:

> quarterly net income of $10.5 billion

It is year over year growth that has gone negative and quite significant across the board.

It's got to be largely a zero-sum game between Android and iOS at this stage.

I think that the boomers retiring with no more company-paid cell phone is a small market that is expanding.

IMHO biggest Android advantage is being open. Hardware and software is obviously better on iOS, but being closed platform I keep getting disappointed every week because I can't do x or y.

I doubt that many people base their purchasing decisions on this though.

Ignoring of course the fact that the most important parts of Android is not open source (Google Play Services, which is at the centre of a very misguided EU anti trust case), just because Android is 'open' it doesn't mean you can do more things on it. If something is possible on Android that's because of a design decision that Google took. Besides, what happens when you run iNot someone that you can't so on Android? You going to download the source code and make a change and flash it to your decide? I doubt it.

I think that the importance of being able to do X of Y depends on what you are lookimg for in a device.

This is my first iPhone as at previous occasions I always used Android (nexus) devices and I found the fact I don't need to tweak it, a positive thing. That and the fact that at it is longer supported than some Android flagship devices.

Ten years ago I had the time (and needs) to tweak my phone, nowedays I just want a good (out of the box) smartphone with long support.

Apple doesn't innovate terribly much, there were smart phones before the iPhone, the iPhone was just a better one. There were tablets before the iPad and the iPad was just a better tablet.

Apple's strength isn't in coming up with NEW things, I would say quite the opposite as they're usually very late into any given market. Apple's strength is coming up with products that are better than the ones that came before, in their Apple-y way.

Since when does innovating really mean making something new? I think that already has its own word: inventing.

"Innovating" is a business buzz word. Its not meaningless, but I think that its meaning is far from inventing/creating.

The options prior were half-dead PalmOS, Windows CE devices like the iPaq, and the Blackberry.

The blackberry was the ultimate pager, but didn't have a functional web browser. The Windows device was pretty much awful, and PalmOS was waiting for euthanasia.

And how do you not consider this innovation?

Innovating isn't just about inventing new technology wholesale. It's also about packaging that technology in a way that makes it useful and desirable.

In the past this has been true because their exceptional design skills. But companies learned that skill, it's not unique to Apple anymore. So for example, the Apple watch isn't objectively significantly better than Google's Watch OS.

But Apple still has a lot of resources and capabilities it can deploy to make something a sucsess, like any other big company, so maybe that's what we should except from the current Apple - altough considering the circumstances - this can be very lucrative.

> Google’s Android operating system continue to challenge the company with powerful, lower-price devices."

Apples customers barely complained on slow iPhones, and even less at their pricing level, where many knew apple margin is 40%. "Normal" company cannot withstand such high margins because of competition. Jobs achieved opposite where many people just said "oh screw it - it will cost me plenty, but I really want it!"

As of the lack of growth, I agree with you. It doesn't mean they are in serious troubles, just like a light caught doesn't mean you have a throat cancer. But the truth is that their products lost plenty with Job's departure.

Apple growth barely been done due to progress, but rather because of evolution! First mass-scale touch device, first mass-storage music device (I know, there been Palm and others; but ask 10 people - who ever heard of Palm?). Those were steps of evolution. Before you couldn't type with a finger. Before you couldn't store 160GB of your music in your pocket. Etc etc.

Now Apple is all about growth. There is no more evolution! There is faster CPU, if you really needed it. There is lighter phone, if you really needed it. There is faster GPU, if you really needed it. There is more fancy front-facing camera.... BUT none of those things are evolution; its just a progress. And that won't catapult Apple sales into previous levels. It simply can't.

Would we see the same "disappointing" sales numbers had Jobs still be here? Most likely not. By now we would steer the "i" devices with our eyeballs, and mind control that really works and is friendly to a customer would be just around the corner...

As of today under current management... it's funny, but my i device doesn't even have an FM radio built-in.

The expectation was $2.00 EPS, Apple reported $1.90. AAPL is down in after-hours trading right now, at 95.91 from 104.35 at market close (as of 5:20 PM).

This is a significant earnings report as it's the first to break 13 years of continuous growth. Revenue was down 13%.

• Q2 EPS: $1.90, down 22% YoY, versus expectations of $1.99

• Q2 revenue: $50.6 billion, down 13% YoY, versus expectations of $52 billion

• Gross margin: 39.4% versus 40.8% last year and expectations of 39.47%

• iPhone unit sales: 51.2 million, down 17% YoY, versus expectations of 50.7 million

• iPhone ASP: $644.25, down 2% YoY, versus $651 expected

• iPad unit sales: 10.2 million, down 19% YoY, versus expectations of 9.4 million

• Mac unit sales: 4.03 million, down 11% YoY, versus expectations of 4.6 million

• Q3 revenue guidance: $41 billion and $43 billion, versus expectations of $47.35 billion

> AAPL is essentially in freefall right now, down from 104.35 at market close (~97.00 around 5 PM).

It looks like it is just going back to where it was in Feb? (90 or so). I guess if it keeps heading down below that it would be alarming.

Well, they had a good run. I wonder what's next.

I don't think anyone was surprised though, around 2014 we saw the writing on the wall. I mean take the Nexus 5, I have plenty of friends who have one and it's basically like they bought a microwave. It just works, it's fine, and they're expressing 0, and I really mean 0 interest in upgrading their microwave. They'll keep it for as long as the battery lasts and they don't break it. And that's really a last-generation phenomenon, before two years ago I was looking forward to new mobile tech. Now the changes aren't meaningful anymore.

And now people are openly expressing it, too. Like the CEO of sony, who spoke about the end of innovation in smartphones a few months ago. I mean take my dad, he just bought an LG G3 for $8 a month on a 2 year contract. Now this phone is 2 years old, not top of the line... but it's $8 a month and it comes with a nice screen that's almost double the PPI of the latest iphone, 3gb of ram, a nice snapdragon 801 chip, 3000 mAh battery, it just works fine and it's just really cheap. In two years, the latest G5 will be $200 too, and you'll buy G3 like phones for $100. What can we innovate in smartphones that's worth $700 to most people? That used to buy you a magical device that could do things nothing else could, in your pocket just a few years ago.

Anyway, I wonder what's next for Apple. There's no rumours of anything happening except its car. Wearables will expand. But they're all late or super late to market in these product categories. That's not a bad thing, they'll obviously make money, but it's not comparable to creating a real smartphone industry.

"Like the CEO of sony, who spoke about the end of innovation in smartphones a few months ago."

The only innovation was the original iphone. There has been zero innovation in the smartphone space since then.

Every single smartphone is just a touchscreen slab. They are, in terms of design, indistinguishable from the original iphone.

Sure - thinner, a curved edge, a different button ... but those are just trivial details.

The original iphone was a different thing than, say, a moto razr or a candybar phone or a treo. That was innovation.

I haven't seen any since...

Nexus 5 was phenomenally good though for the price point/no-crapware bundle. Coupled with Android finally being good enough to at least rival iOS, it was the start of a new era. Certainly in the UK, since buying my Nexus 5, android has gone from like 6% to 40% of mobiles hitting the websites I manage (the EU market has always been heavily iOS skewed compared to America).

My battery crapped out rather quickly, but a replacement has extended its life.

> The EU market has always been heavily iOS skewed compared to America

On the contrary! iOS relative to Android is more popular in the US than in the EU.

I have a Nexus 5 and I emphatically agree.

Call quality, screen resolution, responsiveness of the UI, material design, size, lack of crapware...Google really got it right. I've had this phone for 2 years and I have zero interest in upgrading to iOS. Sure, the display is nicer, the battery life is marginally better, but really, I just don't care.

Actually, Apple's pattern is to be late to market. They let other companies feel out the market, inform the consumers, work with pricing, etc. and then they come in with a great product and dominate the domain completely. Apple does this over and over again. Computers, MP3 players, cell phones, etc.

Smartphone VR with positional tracking will come this year I reckon (on Android)

In this thread: lots of people making unfounded assumuptions and drawing dumb conclusions when anyone who has been paying attention knew this was coming as Apple even said so last quarter.

The last year quarter was buoyed by previous quarter supply constraints causing a lot more sales in many categories and products.

It's not that this quarter was bad (it was fine) it's that last years quarter was SO GOOD and last quarter had no major supply constraints that we see this.

Basically - Apple has got so good at the supply chain it's hurting their numbers for quarters with no new releases.

But sure, start speculating about [insert your favorite phone] and writing screeds about phone subsidies/performance/innovation/whatever. It won't be right... but you'll feel better I guess.

As someone who basically looked at this as confirming what I believed about the iPhone 6/+ (ie: that it is too big and no one likes it and Apple's sales are going to fall), thanks for this post. Changed my view.

You're very welcome!

I think sales are going to slow down but that is a case of less growth to be had in western markets.

Still plenty of growth opportunities in other markets but they'll be slower

50.6b net income on 39.4% gross margins. A bit early to be writing Apple's obituary or anything even close. Retail is suffering nationwide and I suspect Apple is caught up in this decline.

More likely mobile is headed quietly down the path of the PC - fewer generational improvements means people keep devices longer and there isn't as much of a reason to buy new hardware so sales flatline. Great business still but Wall Street hates that narrative. They want the next hot growth market -- VR perhaps when its killer app moment arrives.

I'll say this: Amazon Echo cut Apple's growth balls right off. That's a $2b revenue business Siri can kiss goodbye.

Yeah, but "50.6b net income on 39.4% gross margins" doesn't get those juicy clicks like "Apple is DOOOOMED!!1!" does. These journalists gotta put food on the table somehow.

Forget "nationwide", China is currently getting ready to drop like a cliff. That they are buying fewer iPhones isn't surprising.

Now? Next month? Next year? People have been saying that (and betting on that) for quite a while.

The era where cell phone companies offered phone subsidies as trade for a customer's long term commitment has ended. The impact this is having and will continue to have on smartphone sales is profound. It is much more likely that customers will upgrade their devices less frequently. We are already beginning to see the impact in Apple and Samsung earnings.

I don't really buy that. Can you point to any evidence people are updating devices less frequently? Apple sold more iPhones in Q1 of 2016 then they did in Q1 of 2015 so are you extrapolating from a single down quarter?

This report[0] (from 2014, but the trends cited seem to have continued from other places) have cited the end of 2-year upgrade incentives (or rather, cheaper monthly fees after 2 years) as a primary reason for a drop in cellphone sales.

In particular, in 2013 40% of respondants would upgrade phones after 2 years... in 2014 that number dropped to 15%.

At the same time, the number of people who said they would upgrade at "obsolesence" went from 15% to 35%.

There's a decent amount of evidence that 2-year contracts trigger a lot of phone upgrading. The end of that whole cycle is going to continue to cause pain to anyone selling cells.

[0]:http://reconanalytics.com/2015/02/2014-us-mobile-phone-sales...

I personally did not upgrade from the 4s because the subsidy ended. Relatively the iPhone 6 vs 5 was an unusually big jump for Apple which confuses the issue.

This is false. Tim just said on the call that users are upgrading to the 6s at a higher rate than they did for the 5s.

This is the first quarter where we can see the impact of the changes. Be ready for its impact on future quarters.

http://recode.net/2015/12/30/att-confirms-it-is-doing-away-w...

Here is data on drop:

iPhone

First quarter of 2015: 61.2 million First quarter of 2016: 51.2 million, down 16%

>Its newest smartphone, the four-inch iPhone SE, went on sale in late March, too late to affect the most recent quarterly results, but analysts hope to get more insight into how it is selling.

Went to the Apple Store in my large metro and they were out of almost every model. The associate searched other stores and there wasn't much within 1500 miles. Anecdotal, but it looks like the demand is outpacing the supply of the iPhone SE. It'll be interesting to see the sales numbers.

Two to three weeks from the Apple Store when I checked this morning. I don't know if it's heavier-than-expected demand, or if they just don't keep that many in the pipeline (which I guess amounts to the same thing). My wife just broke hers (yes, again), so the plan is to at some point give her my 6S and I get a new 5SE, because I want my smaller screen back. It would seem that perhaps I'm not the only one.

On the conference call, Cook mentioned that they are still supply constrained on the SE - they are still selling all they can build as fast as they build them.

For me, the main reason to upgrade phones is to get a better camera, so I can take better pictures of my kids. Other than that, most of the features are "nice to have". Don't get me wrong, I like Touch ID, I like the big screen of the plus (but not the size and slipperiness of the phone), but nothing has been a compelling upgrade, other than camera improvements.

In many ways, this is a credit to Apple doing a great job. On the other hand, the real challenge with driving iOS upgrades is software. There's no killer app that requires the latest hardware, unless you care about games and maybe a few drawing apps on the iPad.

Dunno about you, but TouchID is indispensable to me. I would not buy another phone without it (or something as secure).

With TouchID + strong alphanumeric password, I can be secure in my person. My data is far more valuable than just the hunk of metal and glass it resides on.

I think Apple should do an expansion of their 2008 iFund, but writ bigger (and maybe focused on the watch and apple TV).

Out of curiosity, in what way do you feel TouchID makes your phone more secure than just a password? Someone could steal a glass you've touched along with your phone and unlock it with a bit of effort. From a technical standpoint, the only thing TouchID adds in terms of security is preventing someone from peering over your shoulder at a passcode as you enter it, but a would-be thief is more probably far more concerned with selling the hardware than ransoming your data. And if they want your data, iCloud and other services are the real weakpoint.

Agree that TouchID is great. I certainly wouldn't go back to something without it. ;-)

So anyone thinking planned obsolesce might move itself up the Apple priority list? Their per quarter revenue is still massive, but Wall Street always expects more. At its current rate of stock buy back, Apple could buy back all of its stocks and go private in a few years. They could rid themselves of market fluctuations in regard to stock and pump out products while continuing making the ridiculous amounts or revenue and overcome the need to take shortcuts for the sake of Wall Streets obsession with non-stop growth.

They could, and that may be the plan.

But ultimately it's about impressing customers, not Wall St. And Apple has been getting less and less good at creating products that do that.

This was inevitable for Apple; their stratospheric valuation has expected growth priced in. Given the company's inability to foster the same ambition Steve Jobs instilled in it, they can only ride on their existing product line for so long.

I do find their lack of acquisitions strange given how much capital they are sitting on. There are a lot of markets w/high barriers to entry they'd have no trouble getting their foot in the door(Gaming, On Demand Streaming, etc...).

> The Company also announced that its Board of Directors has authorized an increase of $50 billion to the Company’s program to return capital to shareholders. Under the expanded program, Apple plans to spend a cumulative total of $250 billion of cash by the end of March 2018.

My god, that $50 billion expansion is 7% of the company at the current market cap.

It's actually an even more astounding 8.65% of the current market cap ($578 billion).

I'm glad to see them returning capital to shareholders. However I worry about the debt they're taking on in order to do so, due to most of their cash being overseas. If things continue to slide for them, for whatever reason (iPhone loses favor, smartphone sales keep contracting globally, something replaces the smartphone, etc), it will pin them into a disastrous situation of extremely high debt and crashing sales (while having committed to very large payouts to shareholders).

Well, they can always bring their cash back right? (it will be taxed, but it's still a formidable warchest) Or somehow pay back debt through some overseas shenanigans....

Not a great situation to be in but I can't imagine it getting big enough to where Apple could no longer handle it. Maybe I'm underestimating interest rates

tl;dr it's hard to find lots of new people every quarter who can afford $600 phones.

Or it's just gadget saturation in general. My MBP from a few years ago works great. Some of the older iPads I have at work are just fine. The iPhone 6/6+ also works just great. At some point, the marginal utility of a new device just isn't there. It is what happens as markets mature.

I think this is what it is.

Smartphones in general have reached a point where we are barely wowed anymore.

I got myself a cheap xiaomi phone as a stop gap after my high end phone died. A year later, I'm still using it and have no energy to even bother looking at what else is out there.

My iPad v1 still works. Not great, but it's still around.

It's sort of astonishing that they kept it up this long.

It really is. They were able to squeeze more out of China than any other foreign company has (or at least American company).

Apple used to offer through mobile companies a discount or monthly fee to make iPhones more affordable. I think that stopped.

My son got a iPhone 6 for $25 extra a month. Without that we could not afford it.

Specially outside US and other first level countries.

Heh, I'm going to get myself the new CAT S60 phone (650€ at the moment, hope it goes down to 550-600 in two months). I already have an (aged) B15Q... but holy cow, a FLIR camera in a phone?!

Only downsides:

1) no MediaTek CPU any more, only Qualcomm shit => no more easy rooting, firmware reflashing etc.

2) no dual-SIM :'(

Very interested in this one as well.

I'm not surprised. I think Apple underestimated the demand for the iphone SE 64 GB. Its been out of stock in most stores since it was released. Apple's shareholders should be asking why can't anyone buy it in a store? Also many people don't want wait two weeks to receive their phone when they buy it online.

People can't buy it in a store, because like pretty much every model that came before it, they're massively supply constrained.

They've gotten better about it, but there's only so much you can do when you're producing a high-tech item being purchased tens of millions of times per week globally.

Looks like the SE didn't matter. Interesting note from Apple conference call. "2:11 pm iPhone SE not included in these results, as it launched after the end of the quarter, but demand has been very strong. Demand exceeds supply, but we're working hard to meet demand. iPhone SE puts us in strategic plan to attract new customers."

Source - http://www.macrumors.com/2016/04/26/q2-2016-earnings/

If I have read it correctly on another newssite, these numbers doesn't include iPhone SE data.

The key numbers from the Press Release: The Company posted quarterly revenue of $50.6 billion and quarterly net income of $10.5 billion, or $1.90 per diluted share. These results compare to revenue of $58 billion and net income of $13.6 billion, or $2.33 per diluted share, in the year-ago quarter. Gross margin was 39.4 percent compared to 40.8 percent in the year-ago quarter. International sales accounted for 67 percent of the quarter’s revenue.

So not really a surprise from what they announced at previous quarter.

I love my iPhone 6+ but while overall the ecosystem is getting better, the device is more laggy and glitchy than previous models.

Apple Pay always gets triggered by accident when I try to unlock using the fingerprint, and once in a while random apps seem to heat up the phone and drain the battery before I realize what is going on.

I think small things like the minor points of perceived quality that I'm describing can have a big impact on sales. When a phone costs $800 people expect a very solid experience with no glitches.

Absolutely on point. There are numerous points where the polish is missing. For smartphones at Apple's preferred high-end price point, if the user experience doesn't feel like the designers anticipated user needs, then an Android will look "good enough". The gap between "good enough" and "just works" is gigantic, and is only breached by psychotic amounts of attention to detail:

1. Create an appointment, set the geographic destination, start setting alarms and about half the time Calendar crashes.

2. No gesture to make a copy of an appointment in Calendar.

3. No API for Siri.

4. Dial into a conference call with a passcode. Start a second call, and try to dial into another phone number with a passcode from Contacts or Calendar. It dials the number but not the passcode (iOS ignores everything after the phone number for the second call).

5. Come back into cell range from a long absence and receive a barrage of voicemail notifications about voicemails you've previously been notified about.

6. Add a field in Contacts, and the cursor and focus stay in the "add field" area of the record, while the actual field is above that area. You have to scroll up, find the field as the keyboard appears, then key in the field. Older versions of iOS had the behavior correct: adding a field moves the focus to the field in the record.

These and more warts arguably should not exist in a high-end, premium smartphone.

Trim a video, save as original, and then you "lose it" until you go back home and then back to photos

Sales faltering...just wait until the margins dip. Hardware margins the size Apple has enjoyed are incredibly rare and never have lasted with any company, period. Their hardware margins are on par, or even above many software vendors, which is just unsustainable. It's a great product, but the upgrade cycle is lengthening, and margins are going to fall. Same happened to the PC, same started to happen with the tablet, and the same will happen to the phone market.

> Hardware margins the size Apple has enjoyed are incredibly rare and never have lasted with any company, period

Intel has routinely maintained gross profit margins of 60%+ for decades on its microprocessor sales. Their hardware margins put Apple to shame.

Isn’t it closer to 30% when you factor in the cost it takes to build a fab? I remember reading something about that.

I think we just reached peak smartphone. What's next?

VAR - Virtual/Augmented Reality.

Also, i'm hoping my future glasses have some kind of mechanism built in that will let me text with my mind... even if that means thinking about moving shapes or colors or something to do it.

VR is still about 10 years away before it moves into the mainstream. Currently it's just looking like a gaming accessory and has a long way to go before it's much more

Nope, you're wrong. Do you think smartphone sales are going to decrease this year?

http://techcrunch.com/2015/06/02/6-1b-smartphone-users-globa...

http://www.businessinsider.com/smartphone-sales-forecast-201...

According to all the VCs in my Twitter feed: chatbots.

Chatbots are a novelty. They will come and go faster than Pepsi Clear. I don't see them being big headlines next year, and at most, two years from now.

Some combination of wearables, AR/VR, IoT, and consumer 3D printing.

The thing is a) those are all a few years out, b) they're interconnected. VR will happen first because it's got an obvious path to a large consumer base. That will lay groundwork for AR, which is probably the actual Next Big Thing. Wearables/IoT/3D printing are really an extension of the miniaturization/customization of longstanding technologies, but are all experiencing severe growing pains (wearables : size/batteries, IoT : cost, 3D Printing : materials).

I agree about VR and AR.

As for the rest: wearables hadn't had a really strong use case - so it's either a niche or a fashion/status object - and maybe that's what will limit growth even when size/batteries gets solved ?

IOT: cost is definitely a huge barrier, but will it be that huge deal ? or just another feature in the stuff we already buy - sold to us through the same big companies, with a few specialized products ?

And 3D printing - don't you think a 1-day Amazon 3 printing with the most optimal processes will win, for most consumers ?

I really don't see 3d printing going anywhere. What are you really going to print?

What happens if there's a pause between the next big thing and now? What if technology effecting people's lives starts to slow? Interesting (for me at least) to think about.

More importantly in this context, will Apple be the company to bring it to us? Is it the watch? Interesting point for the company.

Nonputing. Ubiquitous invisible (hopefully secure).

Gaming console ?

Funny enough, most VR projection models use gaming consoles as the low point of estimating units a few years from now.

I want to bet on sunglass sized AR, but it seems like we'll need some material science revolutions to shrink down the requisite hardware to have the kind of useful experience is imagine

VR, Drones, self-driving cars, of course, everything controlled by smartphones.

no phones

Are we past peak-smartphone or is this just noise from model release schedules?

It took PCs 20+ years to get good enough, smartphones managed the same in much less than 10 it seems.

Yes, you better assume the smartphone golden era is already over. It is super hard for the manufactures to get people hyped for their new gears.

now that phones are quite fast and have good cameras, what is the main driver towards upgrading? so that you go from 300ppi to 500ppi? not going to make much of a difference and for most people not worth the upgrade costs.

The only issue is that phone manufacturers have even more of an incentive to bloat the OS more and more (and make it slower and slower on old models) and to deprecate it faster (on older models) so they can sell more hardware if people want to get the latest security fixes / software

yet for the most part PCs dropped significantly in price but smartphones seem to be holding the 400+ range which is still woefully overpriced for most of the phone buying populace because not only are you putting out 400 bucks but usually under obligation to send forty to eighty more a month. That is a good chunk of the the lower and middle classes.

Sweet, time to buy more. I was holding off since it was obvious that prices over 100$/share without any new products to excite the imagination of traders with no technology background wasn't going to last forever. It' always interesting to me how wall street lacks any depth in their analysis. Direct sales and revenues are basically the only metrics they look at. Which is fine for a small company but when you are looking at a 700B company, spending 8B a year in R&D being that shortsighted is almost funny.

For any exponential function comes time when its growth cannot be sustained. Smartphones are boring and mature, we haven't had killer app in ages - welcome to the PC market of 2007.

I've been a "mobile is the future of everything" skeptic since the iPhone first came out. Lately I'm feeling slightly vindicated. These things are awesome for navigation and rapid interactions with services and of course chatting. But the totally jailed OS and tiny screen and the rest limits mobile to those kinds of interactions.

That’s a logistic function, not an exponential.

Well besides the obvious about the decline in phone sales I think the primary reasons is Apple's steadfast refusal to get in lower margin markets. Sorry, but a four hundred dollar phone is still not cheap enough especially when you consider the monthly usage fees following the purchase.

Then we see tablets and all Apple has done is release newer models with higher price points and worse more expensive add ons.

Finally, their cheapest desktop is eleven hundred and cheapest laptop is nine hundred for a low powered system, the first realistic laptops start at thirteen hundred. No I don't really count the Mac Mini because it never seems to register on people's radar and by the time you add on the monitor and such its up close to eight and nine hundred.

I won't even touch that Watch, its price or the silliness of that is the price of just the bands.

Apple's failure is that it won't go low. They don't have to go rock bottom but they damn well need to push "LE" models or the like. Redo the first Air with a few minor upgrades as the Air LE, 299... get an iMac out for the public nearer seven hundred. Get the rest of the iMac line back into realistic pricing especially for SSD upgrades. Please update the Mac Pro, really how long are they going to ignore it?

tl;dr Apple simply priced them out of too many markets, either out of ignorance or arrogance.

I just upgraded from being a long time iPhone user to a nexus6p and an delighted. Most of the UI makes more sense to me. The camera is amazing and the integration with Google apps as first class apps is a positive. Being able to voice command the device without a power cord plugged in is an added benefit. I can't imagine going back to iPhones.

My wife has an iPhone 4. She's not a technical person; she just wants a phone and some apps. She has no interest in upgrading.

Moreover, her iPhone 4 was the first smartphone in our family. Since she got her phone (and stuck with it), I've gone through at least four or five phones -- always because they broke, not because I was interested in upgrading.

So I'm guessing that while there are lots of Apple gotta-have-the-latest people out there, most people just want a phone that works. And if Apple's hardware and software quality are good (or even half-good), then people will just keep using their old phones.

Which means that Apple will continue to sell phones, but the number of people who will buy or upgrade each year will shrink, at least to some degree.

It should also be noted that Apple is still very profitable! It's just less profitable than it was last year.

Apple is not doomed, but I think they've taken their eyes off the ball a bit. Watch and iPad Pro are me-too products, and the switch to flat interfaces cost them a lot of differentiation IMHO. They've cheapened their brand and they don't seem to know what market they should really disrupt.

Personally I'm not interested in the watch, but the iPad Pro is far from me-too. The display on the 9.7" is outstanding, the pencil is top notch, it's light, powerful, sounds great. At this point Apple is just knocking it out of the park in tablets on every front. Nobody else makes anything that comes close.

The iPad Pro is actually really awesome for artists. Pro + Pencil is a better experience than a Wacom Cintiq display, and it's a whole tablet for about the same price point, not just a display.

They have way too many products out now particularly the iPad line.

I've said this before but I think it's because my socks are most definitely still on my feet, and have been for the last several years. Apple used to come up with new, distinctive, products that had me gasping for air and figuratively knocking my socks off. Not anymore. I don't want to say it's because of the loss of Jobs but it sure seems that way. I really like Tim but he seems like a production guy instead of a product guy.

Come on Apple, where are the revolutionary products of yesteryear? 3D displays? AR/VR technology? Home automation? iPod headphones? Voice recognition (ala Alexa)? I used to look to Apple for a glimpse of the future; not anymore. :(

The concerning part of this is how little Apple did to get ahead of the market saturation problem before it started impacting sales. They had plenty of warning. Analysts have been predicting this for years. They waited way too long to release iPhones with larger displays. Then it takes more than a year to update the 4" model and when they do it gets released with a nearly identical enclosure to a 3 year old phone. Current rumors suggest the iPhone 7 may share a very similar design to the iPhone 6/S which is just baffling to me if true. When market saturation is a problem it seems like the absolute worst thing you could do is keep recycling 2-3 year old designs.

Is this something that Apple can address with more competitive pricing in China?

More competitive pricing in any region would mean lower pricing everywhere in the world. Apples products are extremely fungible.

More competitive pricing would reduce margins. Apple has chosen to pursue high margins and high profits rather than market share. That's how it accumulated roughly $200 billion in cash.

Chinese are known to travel and buy iPhones in packs (6, 8, 10 at a time). They will buy it from where it's cheapest

Cut prices on their ageing cash cow, or start flogging that faltering horse?

Smart money's on the latter. Kinda painful to re-watch the Apple II moment while android ambles off into the sunset with all the users....

I'm curious what other people think about the ecosystem as a catalyst, in particular Apple Pay. It seems to be that squeezing between iPhone owners and everyday purchases would be very lucrative.

When Apple Pay came out I was astonished. It's a brilliant move to act as a middleman between a device that almost everyone possesses and currency. After all, what is more profitable than a financial institution?

    It seems to be that squeezing between iPhone owners and everyday 
    purchases would be very lucrative

And something that Banks will very strongly oppose. How many places can you use Apple Pay right now? I love Android Pay, but the only store I can use it at is Walgreens -- no where else I go takes it. Banks still hold a huge amount of power at the point-of-sale market, and they will not give up their margins to Apple.

If it becomes successful it has potential to dwarf the historical growth in smartphones. But the question is if other players in the field can prevent Apple from getting traction to enough extent.

This is a small anecdote, but: I'm happy with my current iPhone and the current models aren't additionally compelling enough to me to upgrade.

I have an iPhone 5S and don't want a larger one. When the iPhone SE came out, I was excited until I found out it didn't have force touch, which was the main interesting feature to me about the new lineup. Other than Apple Pay it seems I have very little reason to upgrade until this one dies or breaks. I don't see being satisfied with their product as a black mark against them.

I have a 6s and I'd really like to go back to my 5s, for me that was "peak phone", did everything I wanted, in a good form factor, great battery life, was the perfect size.

I originally upgraded because I wanted NFC and "it was time", but nothing is using the NFC chip in my phone so why bother?

I'm considering buying the SE but my girlfriend is hampering me, she says a 6s is a status symbol. I guess for a lot of people they'll just upgrade anyway.

I only see it as a matter of time before brands like Xiaomi make cheaper and better products for sale beyond their current dominance in 'developing countries'. We need to catch up.

There was recently a story saying $400 smartphones are almost as good as flagships. Also huawei is attacking the american market with a great $200 phone.

I have been a happy Android user for years but was planning on switching to an iPhone next time for compatibility with my iPads.

I changed my mind because of the Google Fi service. I can get a compatible phone for $200, and I project my monthly service plan would be less than half than my Verizon plan, given my usage patterns. I do worry that Google might drop the Fi service, or change the features/cost in the future though.

Apple's probably just biding its time with the iPhone while it works to soup-up the Apple Watch - add cellular, more power, more battery, smaller package.

I reckon the iPhone (and maybe iPad) will transition into just a dumb accessory screens.

My thinking is that this follows the trend: Desktop (power on your desk) -> Laptop (power in your bag) -> Smartphone (power in your pocket) -> Watch? (power on your person)

It is probably end of the era moment, like the end of PC back in 2005. Personal Computer is nothing special and even status/luxury brands does not make real difference. PC is mere cheap commodity.

Now there is moment when smartphone is just a phone. Apple or any other brand - does not make real difference.

Some, say, MicroMax or Huawey Android stuff is about $150, and it gives you everything, except 3D.

It is just a phone.

The 6S and 6S plus didn't offer a ton of new features really besides being faster. The 3D-touch screen is nice for quick shortcuts but not a killer feature.

Basically, the only reason why I would personally want to upgrade is for the bigger screen on the plus model and the battery life that comes with it.

I'm not surprised at all. I don't get why people are. Anyone who wants one, pretty much has one at this point. Those who have them within the past few years are most likely happy with them. The bubble won't exactly burst but it will decrease.

>Apple said it would raise its quarterly dividend 10 percent to 57 cents a share and increase the amount of stock it buys back to $175 billion.

Surely that's the NYT's typo and they mean million with an M, right?

EDIT: Not a typo, see mbrubeck's reply below.

No typo. A year ago they had authorized $140 billion, and had already repurchased more than $80 billion.

https://www.apple.com/pr/library/2015/04/27Apple-Expands-Cap...

($175 million would be less than three hundredths of one percent of Apple's market cap.)

Apple is doing just fine. But there's been no Next Big Thing since Jobs. Apple's watch is a dud. Nest's products don't work well. It's like Sony after Akio Moreta died; the company plugs on, but the light has gone out.

> Apple's watch is a dud.

Why do certain people say this? The watch is a $6.5 billion business in its first year. That is a huge success. Nothing compares to that.

Not sure how Nest's products are relevant here; they are owned by Google, not Apple. Unless you are saying that there has been no interesting Next Big Thing in the entire consumer hardware/device space? In which case I'm not sure how the reference to Sony is relevant?

The watch is interesting. I think you can argue that the whole idea is fundamentally flawed (operating a miniscule touchscreen with your greasy paws), but you can also argue that incremental improvements could change a lot of minds.

A faster CPU, a thinner device (the first gen Apple Watch is huge), and more useful software are clear areas of potential improvement. I think there's a hypothetical wrist-mounted computer which could be really great, but the Watch obviously isn't there yet.

I think that Apple would be wise to invest a few billion in solving the fundamental problem of batter life. That is the key missing ingredient for everything else we want in the future for mobile tech.

I hope the lack of growth in hardware sales makes the company improve their services and lower their hardware prices instead of trying to increase hardware replacement rates via shorter life cycles.

The most innovative thing Apple can do now to reverse the course of things is to decrease their outrageously high prices (especially in Europe) and phase out these ridiculous 16GB models.

So, does this mean we shall start seeing "the iPhone is dead" click-bait articles like we see with other similar tech products when their sales slump for various reasons?

I'm glad Apple has some competition with Android. I made the switch to Android after I got multiple "dud" iPhone 6's which stopped working after a few days.

In weird analogies, I think the 5S is the Apple's playstation 2 ( good enough for everything and really really no incentive to upgrade except for the enthusiasts ).

Apple still have $233,000,000,000 in the bank. More than the federal reserve, more than Google, Microsoft, and Facebook combined.

They could buy their way out of this I am pretty sure.

Buy their way out of it? How? They obviously don't have anything profitable to invest their excess cash in, since it is either sitting in the bank or going to stock buybacks or dividend increases.

False. There is enough press about this - Apple has already spent a large chunk of that by issuing debt to pay for current buybacks and dividends (and avoid US taxes).

Until some months ago, I had a factory unlocked iPhone 5 which I used for 2+ years. I had no reason to switch to a more recent model, other than the (at times) nagging need for the finger-print lock. Then, out of the blue, the battery on my iPhone began to malfunction, in that, it would only let the phone stay on for a couple of minutes unless it was plugged constantly to a power source.

I bought an iPhone 6S, space gray, factory unlocked at around $650 (excluding tax). I sent my iPhone 5 back to Apple for a recycle. They gave me $200 in iTunes gift money. So, all in all, I got a new iPhone 6S for $450 (excluding tax).

I wonder if Apple is going to find a new market with the potential for massive growth any time soon. So far smartwatches don't seem to be such a market.

The Apple watch outsold the iPhone in it's first year, so a bit premature to write it off.

No surprise. I mean... at the end of the day these are flat touch screens... it couldn't last forever. This is great - onto the next!

Apple incapable of breaking the laws of thermodynamics and physics by continuing uninterrupted growth forever. Film at 11.

Well there will always be regression to mean. I wonder what is the case with their App revenue.

Apple is the Ford of smartphones. As the auto industry currently stands, the top selling model each year doesn't earn more than 1% of the industry's total revenue. The question is whether smartphones will eventually become similarly fragmented, or if the ecosystem network effect will maintain a "winner take most" effect.

Even with such results the iPhone sells much better than "1% of the industry's total revenue".

Every year I see a similar post over hyped a few months before a new major model is released. Then it won't be long before I see a post stating Apple's sales and stock are at an all time high. I swear this happens every year.

I'm happy with my iPhone 4S

So now we found out how long Apple was able to ride Steve Job's coat tails.

Because under Steve Jobs they would have continued to increase revenue and profit by the same margins every year until they owned the entire planet, and then continued to grow by colonizing Mars with Elon Musk. Or something.

why sales drop?

Appointing process optimizer Tim Cook was the biggest mistake of Steve Jobs

Perhaps in small part due to recent FBI case?

Tim Cook has stated there is huge room for growth in China. I believe their inflated currency and recent market issues/corruption plays a big role on why the guidance isn't stronger. The emergence of cheap Xiaomi dominance doesn't help, either.

That seems unlikely to have had such a big impact in such a short period of time.

$175 billion in buy backs?! Wow, its expensive propping up the share price to keep Wall Street happy...

There is only so much hardware innovation, there are only so many people on the planet with $600 to spend on a mobile phone.

Apple should really move whole heartedly into services (as evidenced by revenue up 20%); build a gmail / dropbox competitor - stop thinking of itself as a consumer hardware maker, that era is over.

Why do you think the era is over? Are people buying less cellphones and laptops?

You don't know how buybacks work do you?

I don't know. My iPhone 5s recently died. I went to the Apple store. I looked at the new models. I looked at the version they have that looks like the 5s with better mechanics. I paid $269US for a replacement iPhone 5s. I just couldn't figure out a reason to upgrade. I have the same problem with the iPad. I'll probably upgrade at some point, but the battery life isn't better (and in fact I'd have to repurchase all of the extra phone-sleeve type batteries I have to buy due to Apple's inability to comprehend there are customers that care more about convenience than slimness and weight), and of course storage capacity (which hasn't really changed).

I can't be that unusual a customer. I think a lot of people are just done upgrading. For a while there in 2009/11/13 (or was it 10/12/14?) every time you upgraded it really did make a difference... a "quantum leap" in technology. Now, I feel like upgrading just changed the style (and unfortunately accessories) of my phone. Rumor is the 7 is going to do away with standard headsets. That would be a deal breaker for me. I am fatigued of not only replacing the phone, but the $300 in accessories it takes to power/add accessories/run the phone every 2 years.

This whole subject around quarterly earnings at Apple always makes me think about this larger trend here called peak stuff. Material consumption is falling in Western countries. Steve Howard did that great interview on the subject on NPR: http://www.npr.org/2016/01/22/464013718/ikea-executive-on-wh...

Apple's products were the pinnacle of aspirations besides a car or home in much of the world, and now... well... they're less so. Still popular, still great products, but maybe there is starting to be some fatigue. It's probably good. Anyone who things unlimited growth as a model on a planet with finite resources is still living in the 20th century anyways.

Maybe that's contributing.

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