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COMMENT: Apple Heading Down, But Where Is The Bottom?

With over 60% of their revenues wrapped around the iPhone Apple is today facing a questionable future despite being one of the richest Companies on this planet with over $190 Billion in cash on their balance sheet.

As traditional Apple customers desert them sales of the iPhone have crashed along with their share value which sank yesterday anther 10%.

Arrogance and a white hot desire to strip revenue out their existing customer base has backfired for the simple reason that after jacking up the price of their iPhones in the hope that they could compensate for a fall in unit sales customers around the world have rejected the 2018 iPhone range by either not buying a new model or moving on to a technologically superior Android device made by the likes of Samsung.

The fallout has been very evident in China where they have been hurt by its high prices and the rise of cheaper, more comparable rival devices.

Apple’s fall from grace in China is an all-too-familiar story for rival Samsung Electronics

Five years ago, the South Korean technology giant sat atop the Chinese market, selling nearly one of every five smartphones there.

Today, Samsung is an also-ran, controlling less than 1% of the world’s largest smartphone market. Samsung has pared back local staff and moved their smartphone manufacturing plant to India.

Samsung, which remains the world’s largest smartphone maker, was outmaneuvered by Chinese rivals that sold comparable devices at lower prices.

Chief Executive Officer Tim Cook who is paid over $150M a year is no Steve Jobs and without the brilliance of Jobs the man who turned Apple around he is going to struggle.

The iPhone XS Max, the current top of the iPhone range, starts at 9,599 Yuan or US$1,400 in China. Flagship phones from Huawei cost from 4,000 to 5,000 yuan, around half that of an iPhone.

The iPhone is Apple’s most important product, bringing in two-thirds of the company’s revenue and contributing more to the bottom line via attached devices like the Apple Watch and AirPods, and services like Apple Music and the App Store.

I have been around long enough to have seen Apple rise, fall to the point of being days away from the administrators being called in to where they are today.

They have gone from being an open Company who ran press conferences where Steve Jobs would answer questions and executives commented on issues to today being a Company that has a manic obsession to control both comment and the media. They dictate to retailers both price and rebates and they lift prices at will.

Their 23% hike in the price of their 2018 iPhones was a classic example, forget the fact that CPI is running at around 3% Apple believed with hand on heart that they could gouge thousands out of their existing customer base the only problem is, that their existing and very loyal base has got fed up of price gouging for a smartphone that is technologically inferior to several other brands.

Apple CEO Tim Cook

Around the world their customers are fleeing to competitors like Samsung and Huawei’s phones for their combination of unique technology and superior camera systems, even foot traffic to Apple retail stores in Australia is down.

“Apple’s iPhones are facing a saturated premium smartphone market, with slowing growth rates and increased competition” Anshul Gupta, a research director at Gartner, said last month when the firm released its latest smartphone sales tallies.

Apple has recognized its pricing in China may be too high, expanding a recent iPhone trade-in promotion from the U.S. to the region at the end of December. On its website in China, Apple now advertises the iPhone XR for 4,399 yuan with the trade-in of an iPhone 7 Plus.

Gene Munster, managing partner at Loup Ventures, noting the weighted average iPhone price had jumped 23 percent with the release of the new models. “I don’t think it’s an innovation issue. It’s a pricing issue.”

Any new product offering from Apple is unlikely to be revealed before September, when the company traditionally unveils its new iPhones with insider now tipping a variety of new discount marketing programs in an effort to stimulate sales

In an interview with CNBC in the USA, Cook said that the company will look to shore up sales by marketing trade-ins and instalment plans in the hope of reducing the sticker shock of the latest crop of iPhones.

“The truth is, to a consumer, the trade-in looks like a subsidy because it lowers the price of the phone that you want,” Cook said.

ChannelNews understands that the trade in marketing initiatives will only be offered via Apple stores.

CFRA Research analyst Angelo Zino confirmed that the trade-ins are available only through an Apple Store, while most iPhones are sold through carriers and retailers in Australia.

“I don’t think the strategy laid out here by Tim Cook is one that will significantly turn around the iPhone business,” Zino said.