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Apple Wobbles Despite $100 Billion Teaser, iPhone X Blamed

Apple is set to report tomorrow, and for CEO Tim Cook, it’s going to be a case of proving that Apple can still deliver growth going forward, or he could be out, early retirement as he has hinted.

The much-heralded iPhone X has been a fizzer, some analysts blame the $1,395 iPhone X for the down turn, with its full bleed screen and facial recognition, it was once viewed by investors as key to driving customers to upgrade their smartphones but the only thing it has done is drive customers onto the Android platform.

Analysts claim that Apple missed the mark by launching one redesigned model that was too expensive and two other new devices, the iPhone 8 and 8 Plus, that essentially look the same as older models.

In an effort to take the emphasis away from the poor result Apple is expected to announce the executives have come up with a plan to return between $100 billion and $150 billion to shareholders.

The potential share buybacks and dividends follows the passage of the US tax bill late last year, which makes it cheaper for Apple to bring back the more than $250 billion it holds overseas.

Apple stock fell last month after one of its key chip suppliers warned of “continued weak demand.” Since then, a series of analysts have slashed their estimates for iPhone shipments.

Daniel Ives, an analyst with GBH Insights, wrote in an investor note last week that Wall Street was in “full panic mode” over iPhone sales ahead of Apple’s earnings report.

Bloomberg claims that Cook and other Apple executives have a “major prove-me” period ahead, beginning with a new sales forecast. GBH Insights analyst Daniel Ives said. He and other analysts cut their iPhone sales estimates, and Apple shares where are down almost 8 percent in the past two weeks.
Mark Moskowitz, an analyst with Barclays, wrote in an investor note Monday that the iPhone X’s “price point was too high and likely alienated many users.”

The consensus estimate among analysts is for Apple to have sold 53 million iPhones for the quarter ending in March, up only slightly from the 50.8 million iPhones sold in the same period a year earlier.

While growth in the number of iPhones sold could be more anaemic than investors had hoped, Apple’s sales are still expected to increase 15% to about $61 billion, fuelled in large part by the higher price of the iPhone X.

Investors will also be looking closely at Apple’s forecast for sales in the upcoming quarter. Morgan Stanley analysts think demand for the iPhone X, 8 and 8 Plus to be “weaker … ahead of September’s expected new iPhone launch.”

There is also concerns over the price Apple is paying for components. When the X launched last year, Apple paid handsomely for the new Face ID system, stainless steel casing and sharper, more efficient OLED screen technology.

The iPhone X’s parts cost $175 more than the iPhone 8’s, according to a November analysis. That made it difficult to price the product much below $1,395, without slicing Apple’s legendary profitability.

A new, lower-cost iPhone will use an LCD display that’s about half the cost of the OLED screen in the iPhone X. It’s also likely to use an aluminium casing versus stainless steel. That could bring the price close to $700, a level that’s proven successful for many years.

In addition, Apple will launch a giant iPhone with a 6.5-inch screen and an update to the current iPhone X size, people familiar with the matter told Bloomberg News earlier this year.

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