Commentary

At Apple Event, Much Ado About Nothing

Despite the usual buzz, Apple didn’t break any new ground on Monday. It upgraded its 4-inch iPhone and iPad Pro, and showed off a new Watch strap. That's it.

No one was expecting any big surprises, and the new offerings shouldn’t change anyone’s take on the challenges facing Apple.

Far more significant was Apple’s first negative sales forecast since 2003. The tech giant said it expected first-quarter revenue to reach between $50 billion and $53 billion -- below analyst expectations of around $55 billion.

Along with a shaky world economy, the obvious culprit is a maturing market for smartphones. In fact, the poor outlook followed reports that Apple recently cut its order forecasts to iPhone suppliers.

Apple has reason to be optimistic, however. During the fourth quarter, the tech giant said its active-install base surpassed a billion devices for the first time ever.

advertisement

advertisement

From iPhones to iPads to Macs to Apple Watches, the number of gadgets syncing with Apple’s services increased by a healthy 25%, year-over-year.

It didn’t hurt that the company that Steve Jobs built sold a record 74.8 million iPhones during the fourth quarter, not to mention 16.1 million iPads, and 5.3 million Macs.

Partly as a result, Apple generated nearly $6 billion in revenue from services, including its App Store, iTunes, Apple Music subscriptions, Apple Pay.

Looking ahead, analysts say Apple’s biggest and best hope lies in the success of its next iPhone -- not the upgrade unveiled on Monday.

“Clearly, Cook & Co. have a few tough quarters ahead until we get to the buildup around iPhone 7 later this year, which is what bulls (including ourselves) are focused on to turn this ship back into growth waters,” Daniel Ives, a senior analyst at FBR, explained in a recent note to investors.

Piper Jaffray analyst Gene Munster couldn’t agree more. “We believe shares of AAPL could achieve upside of over 50% from current levels by the iPhone 7 launch in September,” Munster wrote in his own note.

Of course, that’s extremely optimistic, considering signs that the global smartphone market is maturing.

Next story loading loading..