Apple has disappointed with its business outlook for the holiday season, with the company warning last week that sales in the December quarter could fall short of Wall Street expectations.
The US tech giant blamed weakness in some emerging markets and currency movements for the potential tepid performance.
But what jolted analysts even more was an announcement by the firm that it will stop reporting quarterly unit sales figures for its products from now on.
Apple argued that the data is less relevant when it comes to gauging the strength of the business, but not many were convinced, prompting a sell-off of the Apple stock and pushing the company’s market value back below the US$1 trillion mark.
In the eyes of analysts and investors, Apple’s decision to stop disclosing unit sales figures could only mean one thing: the iPhone sales growth story may have come to an end, and the company wants to sweep it under the carpet.
Given the slowdown in global smartphone industry sales in the recent past, investors had feared that Apple, too, could settle for weaker shipments going forward. Now, with the company saying that it will no longer provide unit sales data, the worst fears seem to be coming true.
With some analysts warning that iPhone shipments would be turning negative on year-over-year basis, Apple has taken preemptive action to hide the bad news, investors felt.
After taking a pummeling late last week, Apple shares continued to slide this week amid talk that the company had suspended a plan to add new production capacity for the iPhone XR device, as well as cut orders for the flagship iPhone XS series.
There is growing buzz among industry observers that the new iPhone devices have met with lukewarm response overall in the market after their launch in the past two months.
For Apple, it could be quite difficult to clarify all market rumors that would affect share price movement. For example, several Chinese media outlets have reported that contract manufacturer Foxconn had received instructions from Apple for cutting the order number for iPhone XS series.
Apple, in keeping with its established practice, did not bother to comment on what it deems as market rumors, even though some of the media reports were touting dubious numbers.
As a matter of fact, it is quite difficult for market watchers to make accurate predictions of Apple’s sales volumes. We have seen cases where even leading market research firms got their shipment projections for Apple products wrong, suggesting that the forecasts are more of a guessing game rather than estimates based on facts.
A recent media report suggested that Gartner and IDC both issued reports on worldwide PC shipments based on wrong estimated figures, causing confusion in the market.
Gartner reported that Apple had sold 4.928 million Macs in calendar third quarter, while IDC issued a parallel report that credited Apple with sales of 4.762 million units. That marked a difference between the two of 166,000 units of Mac computers, AppleInsider website noted.
Apple’s actual sales for the quarter were officially reported as 5.3 million units, showing that the third-party estimates were way off the mark.
Now, with Apple deciding to stop providing quarterly unit sales data, industry analysts will find it even more difficult to make accurate assessments and offer proper guidance to investors.
From corporate governance perspective, Apple’s move to cancel the disclosure of individual product shipment numbers is a negative development. It doesn’t bode well for transparency or serve investor interests.
Apple executives said they believe unit sales had become less important than total dollar revenue. That suggests that the company will try to boost the topline by pricing its iPhones higher, accepting the fact that it can no longer rely on unit sales growth for its main product.
In recent years, Apple had already made its strategy clear, as it enhanced revenue largely by way of more premium pricing for the iPhone, rather than through expanded sales volume.
Apple CEO Tim Cook has said the services business was becoming more important for Apple, and that the market should focus on the installed base of existing iPhones rather than the quarterly unit sales numbers.
“Our installed base is growing at double digits. And that’s probably a much more significant metric for us from an ecosystem point of view, and the customer loyalty, etc,” Cook said last week.
“The second thing is this is a little bit like if you go to the market and you push your cart up to the cashier and she says or he says, “How many units you have in there?” It doesn’t matter a lot how many units there are in there in terms of the overall value of what’s in the cart.”
Cook has a point, yet one cannot ignore the apparent reality confronting the iPhone, which still accounts for almost 60 percent of Apple’s revenue: slowing or even negative sales growth.
The decision to do away with unit sales data means that Apple has realized that it is no longer in a position to keep crowing about record shipments, unlike in the past.
Hiding bad news may be good PR, but the company needs to think beyond such moves and come up with some concrete initiatives that will reassure investors.
Amid signs that smartphone sales are past their peak, Apple needs to work harder to bring more new innovative features and design in its next iPhone series to keep users in its ecosystem.
The focus should be on bolstering the services income and taking the segment’s share higher in the firm’s overall revenue.
Only then will the tech giant be able to ensure that it remains at the top.
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