The iPhone 7 - Some Improvements - But will it Sell ?
With it's typical annual build up and fanfare, Apple announced the latest edition of the iPhone - the iPhone 7.
Regardless of the "secrecy" that Apple tries to apply to it's new phones, effectively every prediction about the new iPhone was confirmed, including the somewhat controversial elimination of the 3.5mm headphone jack.
Apple has a history of eliminating "legacy" features like floppy drives, CD/DVD drives, etc - so this a somewhat logical next step for phones. I think the new AirBuds are ridiculously priced @ $159 and with just 5 hours battery life aren't very practical.
Is the iPhone 7 better than it's predecessors ? Yes. Looking at it purely from things like performance, capabilities, etc., the iPhone 7 is an evolutionary step up from last years 6S models - so inline with Apples approach.
But the big question is - will it sell in enough numbers to reverse the decline in unit sales that have impacted Apple in the last few quarters.
For Apple the all important Q1 (Oct - Dec) period is when they see the largest sales volume. And let's face it, iPhone makes or breaks Apple. In Q1 2016 (so Oct- Dec 2015) Apple sold 74.8M iPhones at an Average Selling Price (ASP) of $690, which generated some $51.6B in revenue.
So far for 2016 - Apple has seen declines of 17% or more in iPhone sales in the last two quarters as more and more alternative choices are out there in the market.
Apple continued their recent approach of two new high end models the 7 & 7 Plus and then lowered the price of the 6s & 6S Plus. They did not upgrade the "SE" - the mid-market offering which as I've detailed in other recent posts is the new sweet spot in smartphone sales. To me this was a mistake.
Apple has to ask itself a serious question. Which is how do we generate revenue growth with our lineup ?
Mac and iPad sales are flat or falling, the Watch is purely a niche play and along with TV are a rounding factor in a typical quarter. Yes Apple is seeing its "services" revenue growing, so iTunes, iCloud, Apps, etc - but even a small decline in iPhone sales easily consumes any of those gains.
In my opinion, the one feature that may help sell the phone is of all things the color choices. Even the Jet Black. Even though Apple warns of how easy it is to scratch the finish and how much of a fingerprint magnet it is, the return of black as a color both normal and jet will attract a certain number of users.
And even though some industry folks state that there are some 275M iPhones out there that are older than the 6, people are holding on to their phones longer and longer and Apple doesn't make it any easier by keeping their prices as high as they are. The top of the line 7 Plus with 256GB of storage is $969 - so with tax over $1000.
Sure they and the carriers offer payment/upgrade plans, but many folks would much rather spend $250 on a good mid-range phone than a minimum of $649 for a 32Gb iPhone 7.
If Apple experiences similar 17 - 20% declines in unit sales for Q1 - it will be a $10B hit to revenue for the quarter - assuming the same ASP. Apple has already seen a revenue decline of some $16B YTD versus 2015. The total revenue decline is 2016 could easily exceed $30B. That's more revenue than all of Accenture.
So expect to see a huge amount of Buy one - Get one free style promotions from the carriers and retailers. I can also see BT headphone bundles as well.
Personally I believe its going to be very hard for Apple to sell 74.8M+ iPhone 7 in their Q1. My guess is sales will be in the 60M unit range - so about a 20% decline over 2016 with revenue around $41B.
Bottom line is this - The iPhone 7 is an improvement over it's predecessors and reintroduces two black colors which may help boost sales. But I don't think that the Apple 7/7 Plus will outsell the previous 6s/6s Plus Models and that Apple will have a disappointing Q1.
In my opinion Apple needs to take a more Mercedes Benz approach to the market and have a better entry level model that gets customers integrated into their ecosystem, then provide good paths to the mid and upper range.
Regardless of the "secrecy" that Apple tries to apply to it's new phones, effectively every prediction about the new iPhone was confirmed, including the somewhat controversial elimination of the 3.5mm headphone jack.
Apple has a history of eliminating "legacy" features like floppy drives, CD/DVD drives, etc - so this a somewhat logical next step for phones. I think the new AirBuds are ridiculously priced @ $159 and with just 5 hours battery life aren't very practical.
Is the iPhone 7 better than it's predecessors ? Yes. Looking at it purely from things like performance, capabilities, etc., the iPhone 7 is an evolutionary step up from last years 6S models - so inline with Apples approach.
But the big question is - will it sell in enough numbers to reverse the decline in unit sales that have impacted Apple in the last few quarters.
For Apple the all important Q1 (Oct - Dec) period is when they see the largest sales volume. And let's face it, iPhone makes or breaks Apple. In Q1 2016 (so Oct- Dec 2015) Apple sold 74.8M iPhones at an Average Selling Price (ASP) of $690, which generated some $51.6B in revenue.
So far for 2016 - Apple has seen declines of 17% or more in iPhone sales in the last two quarters as more and more alternative choices are out there in the market.
Apple continued their recent approach of two new high end models the 7 & 7 Plus and then lowered the price of the 6s & 6S Plus. They did not upgrade the "SE" - the mid-market offering which as I've detailed in other recent posts is the new sweet spot in smartphone sales. To me this was a mistake.
Apple has to ask itself a serious question. Which is how do we generate revenue growth with our lineup ?
Mac and iPad sales are flat or falling, the Watch is purely a niche play and along with TV are a rounding factor in a typical quarter. Yes Apple is seeing its "services" revenue growing, so iTunes, iCloud, Apps, etc - but even a small decline in iPhone sales easily consumes any of those gains.
In my opinion, the one feature that may help sell the phone is of all things the color choices. Even the Jet Black. Even though Apple warns of how easy it is to scratch the finish and how much of a fingerprint magnet it is, the return of black as a color both normal and jet will attract a certain number of users.
And even though some industry folks state that there are some 275M iPhones out there that are older than the 6, people are holding on to their phones longer and longer and Apple doesn't make it any easier by keeping their prices as high as they are. The top of the line 7 Plus with 256GB of storage is $969 - so with tax over $1000.
Sure they and the carriers offer payment/upgrade plans, but many folks would much rather spend $250 on a good mid-range phone than a minimum of $649 for a 32Gb iPhone 7.
If Apple experiences similar 17 - 20% declines in unit sales for Q1 - it will be a $10B hit to revenue for the quarter - assuming the same ASP. Apple has already seen a revenue decline of some $16B YTD versus 2015. The total revenue decline is 2016 could easily exceed $30B. That's more revenue than all of Accenture.
So expect to see a huge amount of Buy one - Get one free style promotions from the carriers and retailers. I can also see BT headphone bundles as well.
Personally I believe its going to be very hard for Apple to sell 74.8M+ iPhone 7 in their Q1. My guess is sales will be in the 60M unit range - so about a 20% decline over 2016 with revenue around $41B.
Bottom line is this - The iPhone 7 is an improvement over it's predecessors and reintroduces two black colors which may help boost sales. But I don't think that the Apple 7/7 Plus will outsell the previous 6s/6s Plus Models and that Apple will have a disappointing Q1.
In my opinion Apple needs to take a more Mercedes Benz approach to the market and have a better entry level model that gets customers integrated into their ecosystem, then provide good paths to the mid and upper range.
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