Apple Q4 Result - the Good, the Bad and the Ugly

Today Apple release their FY Q4 financial results.    Here is the good, the bad and the ugly...

 The Good...

 Apple sold slightly more iPhones than Wall Street analysts had expected 45.5M vs 44.8M.   Personally I believe the strong US sales of the iPhone 7 was driven by of all things, the color choices.

 Services revenue grew 24% to 6.3B from 5.0B in 2015.

 The Bad.....

 While Apple sold more than analysts expected - it was still a 5% units sales drop (45.5M vs 48.0M in 2015) and a 13% revenue drop 28.1B vs 32.2B  in 2015.

 This means the Average Selling Price (ASP) for the iPhone is dropping - $618.72 in 2016 vs $670.37 in 2015.   

 Mac, iPad, Watch and TV sales also fell.   Mac sales fell 14% to 4.8M, iPad sales fell 6% and the "Other" group of TV and Watch fell 22%.   

 Overall Apple saw it's annual revenue drop for the first time since 2001 - from 233.7B in 2015 to 215.6B in 2016.  

 The Ugly.....

 The sales loss in China continues.  In Q4, sales in "Greater China" fell by 30% to 8.7B compared to 12.B in Q4 of 2015.   

 As I've stated in other posts, the Worldwide smartphone market is changing. The ASP sweet spot in China is around $250.   Apple is more than double that and without a truly competitive product at that price point, Apple is going to miss out on what I call the next billion customers

 And while some Apple watchers have predicted major sale increases in 2017 via what they describe as the big lump of folks due for an upgrade - so 4S through 6S owners, I say not so fast.   

 The big difference now versus back in 2012/2013 when the 4S was introduced for example is that there are so many more choices out there and more coming at lower price points than Apple.  

 Now sure - if those users went all in on the Apple ecosystem they may have some stickiness, but that is changing at well.  Folks can use OneDrive or Box or whatever cloud storage and one could argue you get every bit as good an experience with Android as you do with iOS.

 Apple needs to build a new entry/mid level phone if they want to continue to capture share.  Otherwise they are at the whim of the upgrade cycle.

 With all of that said - on the other side of the coin, Apple's biggest competitor - Samsung just suffered some major brand damage with the ill-fated Galaxy Note 7.   And even with new Galaxy and Galaxy Note devices coming out soon, it may not change any downward impact on Samsung sales.    The Q3 IDC numbers should be out soon and so we'll see how much of an impact the Galaxy Note 7 has had on Samsung.

 Bottom line is this.   Apple's Q4 saw a 9% decline in revenue from 2015 and it's first overall decline in annual revenue since 2001.   It's sales in China are dropping and only services is growing.   

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