Apple could soon face one of its biggest challenges to date: Peak iPhone.
Most analysts believe Apple surpassed its own record by selling more than 74.5 million units of its flagship product in the final three months of 2015. But there are signs that iPhone sales in the first three months of 2016 will – for the first time ever – show an abrupt decline from the same period a year earlier.
That could mark a pivotal moment for the Silicon Valley giant. Apple is the world’s biggest company, in terms of stock value, thanks to the iPhone’s surging popularity around the world. In business terms, Apple makes most of its money from iPhone sales.
But concerns about slowing growth have sent the stock into a months-long slump, fuelling debate about what kind of company Apple will be in the future.
The iPhone contributed nearly two-thirds of Apple’s $234 billion in revenue last year. None of the other new products Apple has launched in recent years have emerged as blockbusters. That’s led some critics to suggest Apple has lost its innovative touch, while others say it’s evolving to depend on a broader base of related tech products and services.
One thing is clear, said analyst Angelo Zino at S&P Capital IQ: “Last year was an unprecedented year for Apple and the iPhone.... You’ll never see that type of growth from the iPhone again.”
When CEO Tim Cook reports on Tuesday on Apple’s sales for the last three months of 2015, investors will be watching closely for any hints about how Apple’s signature smartphone is faring in the current quarter. Sales usually fall somewhat after the holiday shopping season. But analysts say it appears Apple has cut production orders from key suppliers in recent weeks, suggesting it’s lowered its own forecasts.
Apple hasn’t commented on iPhone sales since last fall, when Mr Cook struck an upbeat tone. In part, Zino and other experts say, the company is suffering from its own success. Apple sold 61 million iPhones in the March quarter of 2015, or 40 per cent more than it did a year earlier. To match that growth rate, Apple would need to sell more than 85 million in the current period. Instead, analysts are expecting around 55 million.
An estimated 500 million people own iPhones now, which means Apple can rely on a significant number to upgrade each year. But some have put off buying a new model because they didn’t see a strong reason to upgrade.
Despite some new features, “people are feeling like there hasn’t been anything that’s really new” in the latest iPhone models, known as the 6S and 6S Plus, which came out last fall, said market researcher John Feland of Argus Insights.
Apple will likely make significant changes in the next major iPhone release, expected in September, which could fuel another surge in sales. Some tech blogs have reported a new model might even be coming this spring.
The company went through a similar cycle a few years ago, when iPhone sales growth slowed to 7 per cent in the final months of 2013. The next year, Apple introduced new models with significantly bigger screens. That sent sales skyrocketing, especially in Asia, where consumers had previously flocked to buy big-screen phones from rival Samsung.
But there may no more equally dramatic changes left to jump-start sales like that again. “Apple really pulled the big lever they had left un-pulled, up to then,” said tech analyst Jan Dawson of Jackdaw Research. “That was sort of a one-off event.”
While iPhone sales may be slowing, Apple has launched other products and services tied to the iPhone – from the Apple Watch to the digital payments service known as Apple Pay, the subscription-based Apple Music and “smart home” software that lets users control their lights and appliances with Siri, the voice-enabled digital assistant on the iPhone and iPad. These are designed to make the iPhone itself more useful, while producing a steady stream of new revenue.
None of those new products have sold like the iPhone itself, however. Sales of the iPad have been declining for two years.
“Apple still has a lot of value, a lot of cash flow, so it’s not to say the company is in trouble. But it’s difficult to say that it’s on the cutting edge,” said Murillo Campello, a finance professor at Cornell University who follows Apple closely.
Others say it’s premature to count Apple among former tech giants, like Hewlett-Packard, that have struggled for relevance as their pace of growth and innovation declined.
Apple is working on a wide range of future products, from streaming video to virtual reality and even self-driving cars, said FBR Capital Markets’ analyst Daniel Ives in a recent note to clients.
“Apple’s often surprised us with what they end up doing,” added Dawson.
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The biog
Siblings: five brothers and one sister
Education: Bachelors in Political Science at the University of Minnesota
Interests: Swimming, tennis and the gym
Favourite place: UAE
Favourite packet food on the trip: pasta primavera
What he did to pass the time during the trip: listen to audio books
What is Folia?
Prince Khaled bin Alwaleed bin Talal's new plant-based menu will launch at Four Seasons hotels in Dubai this November. A desire to cater to people looking for clean, healthy meals beyond green salad is what inspired Prince Khaled and American celebrity chef Matthew Kenney to create Folia. The word means "from the leaves" in Latin, and the exclusive menu offers fine plant-based cuisine across Four Seasons properties in Los Angeles, Bahrain and, soon, Dubai.
Kenney specialises in vegan cuisine and is the founder of Plant Food Wine and 20 other restaurants worldwide. "I’ve always appreciated Matthew’s work," says the Saudi royal. "He has a singular culinary talent and his approach to plant-based dining is prescient and unrivalled. I was a fan of his long before we established our professional relationship."
Folia first launched at The Four Seasons Hotel Los Angeles at Beverly Hills in July 2018. It is available at the poolside Cabana Restaurant and for in-room dining across the property, as well as in its private event space. The food is vibrant and colourful, full of fresh dishes such as the hearts of palm ceviche with California fruit, vegetables and edible flowers; green hearb tacos filled with roasted squash and king oyster barbacoa; and a savoury coconut cream pie with macadamia crust.
In March 2019, the Folia menu reached Gulf shores, as it was introduced at the Four Seasons Hotel Bahrain Bay, where it is served at the Bay View Lounge. Next, on Tuesday, November 1 – also known as World Vegan Day – it will come to the UAE, to the Four Seasons Resort Dubai at Jumeirah Beach and the Four Seasons DIFC, both properties Prince Khaled has spent "considerable time at and love".
There are also plans to take Folia to several more locations throughout the Middle East and Europe.
While health-conscious diners will be attracted to the concept, Prince Khaled is careful to stress Folia is "not meant for a specific subset of customers. It is meant for everyone who wants a culinary experience without the negative impact that eating out so often comes with."
Company profile
Date started: December 24, 2018
Founders: Omer Gurel, chief executive and co-founder and Edebali Sener, co-founder and chief technology officer
Based: Dubai Media City
Number of employees: 42 (34 in Dubai and a tech team of eight in Ankara, Turkey)
Sector: ConsumerTech and FinTech
Cashflow: Almost $1 million a year
Funding: Series A funding of $2.5m with Series B plans for May 2020
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Uefa Champions League semi-final, second leg result:
Ajax 2-3 Tottenham
Tottenham advance on away goals rule after tie ends 3-3 on aggregate
Final: June 1, Madrid
