2016 was the first year in 15 years where Apple’s sales and profit were less than the year before. That’s not to say Apple didn’t make a lot of money in 2016—it did. But it also released a lot of new products across the year, including a new iPad Pro, Apple Watch, iPhone, and entirely new line of Mac laptops, and despite that, it did not seem to capture the same level of excitement in consumers as previous models have.
Consumers have stopped getting excited about new laptops years ago. This phenomenon is also happening in the smartphone market. Smartphones are improving every year but the changes are getting relatively small over the years. With the iPhone 7, one of the best smartphones available came with a little of new compelling features. A better camera , faster processor and better graphics. Well we can’t complain since these are the most common things consumer look for in a smartphone. There is talk on the next iPhone bringing with it substantial improvements like OLED screen and a new design. This could spire a massive number of upgrades and return of Apple to growth. That will require them to come up with something really special.
Coming up with something completely new and enticing is one of the hardest things in the smartphone industry. Apple made a big impact when they first introduced the iPod and even bigger impact with the iPhone. The iPad, unlike the iPod, didn’t have such an impact. The Apple iWatch, still in its early days, hasn’t gained a big following. Apple still lumps its wearable device in “Other Products ” category which saw a sudden drop year after year. While the iPhone became a must-have device that essentially created the smartphone market, the Apple Watch doesn’t have the same shine. The odds of Apple coming up with another device that is at par with the iPhone are very small, for the simple reason that the iPhone has been such a massive outlier in the consumer electronics industry. If iPhone sales continue to drop, it will be very difficult to counter that decline with sales of new devices.
The shares of Apple have been constant despite the incredible profits. The iPhone which accounts for the bulk of Apple revenue and profits has suffered from slumping sales. The launch of iPhone 7 was unable to reverse that trend. Sales of iPads and Macs also tumbled leading to a total decline in revenues. They will surely try to make a comeback this year but they face major challenges like:
Cloud services. It’s been debatable if there is enough talent to continue to grow and develop iCloud which they recently created. The North Carolina server farm was to solve the problem but didn’t. They even tried to buy Dropbox. This would have made enormous sense for Apple not just for tagging on to Dropbox’s momentum but for bringing in that domain specific knowledge into Apple.When iCloud was first launched they relied heavily on Amazon web services and Microsoft to deliver first cloud functionality. As Facebook and Google continue to develop these services they gain a lot of in house knowledge on scaling these up. Apple doesn’t at present.
Internet services has received a lot of attention lately in blogs and the press. Apple hasn’t been keen on approaching these. As we all know MobileMe didn’t work, Apple Maps didn’t work as well. They seem to be thinking they don’t have to be first to market with great services but just need to get to market. This is making consumers really impatient with Apple.