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Tim Cook, China is a key, iPhone is a mountain

via:博客园     time:2019/1/12 11:49:01     readed:234

Apples have a bad start. On January 2, local time, Cook sent an open letter to investors, "spooked" Apple's shares in the first trading day of 2019, after more than 7. The following day, Yu Wei unabated, nearly 10% plummeting has broken the Apple 2013 since 2013 the day biggest drop. By this time, Apple's market value had lost more than $400 billion from its October trillion peak.

In the open letter, which triggered the stock price shock, Apple revised its revenue forecast for the first quarter of 2019 to $84 billion, down from its previous estimate of $89 billion to $93 billion.

For Apple, this is the first time in 16 years.

Cook mentioned China. 11 times in his letter He cited weakness in iPhone sales in Greater China as the main cause and made a big comment, further blaming slowing economic growth in China and trade frictions between the United States and China. However, as recently as November last year, in the same political and economic situation, Cook once declared that Apple's business in China was "very strong."

As soon as the China Open letter came out, Apple was widely seen as playing down its pricing and product innovation problems, while turning a blind eye to the dangerous situation in China that has become increasingly weak in the past two years. Analysts at Goldman Sachs then compared Apple to Nokia, the former mobile phone king, and even Kara Swisher, a prominent US technology media man, asked in the New York Times: "is this the end of the Apple era?"

There was a lot of noise in his ears, but Cook didn't think so. In an CNBC interview on January 9, he said Apple was at its best and that the growing ecosystem "had never been so strong and could be underestimated by its opponents."


The sudden change of "painting style" in Chinese Market

The first quarter, which began in October, was prime time for Apple sales, as new items were on sale and the holiday shopping season was blessed with surprises in previous years. But in the first quarter of 2019, due to be released on January 29, Apple, which is proud of itself, is unable to deliver a satisfactory report card.

"while we have predicted some challenges in major emerging markets, we have not foreseen the extent of the slowdown, especially in Greater China," Cook said in a letter to investors on January 2. "in fact, Most of our shortfall in revenue, and a drop in global revenues of more than 100 percent from a year earlier, occurred in Greater China's iPhone,Mac and iPad product lines. "he further declared that iPhone revenues were lower than expected. Especially in Greater China, is the main reason.

Cook then talked about China's economic slowdown and trade frictions with the United States, in an attempt to blame China's macroeconomic situation for Apple's "failure" in the fourth quarter. "the Chinese economy began to slow down in the second half of 2018," he said, adding that "China's economic environment is further affected by the escalation of trade tensions with the United States": "as the climate of uncertainty increases, it affects financial markets." This atmosphere also seems to affect consumers. In the quarter, our retail outlets and channel partners in China are also falling in traffic. "


Cook also cited a number of other factors affecting performance, including currency pressure from a stronger dollar and a similarly weak global demand for iPhone because of lower battery replacement prices, but not much.

The time was set back for November 1 of the year. On the same day's earnings call for Apple's fiscal fourth quarter in 2018, Cook said Apple had 16 percent growth in China in the last quarter. "We had a very strong business in China last quarter," Cook said. IPhone, in particular, achieved strong double-digit growth there. "at the time, Cook made it clear that he was" not going to list China as a country with difficult growth, "he said.

In just two months, China, the world's largest smartphone market, has become a drag and a challenge from what Mr Cook calls "Spears".

Shira Ovide, a Bloomberg technology columnist, criticized Cook's "painting style" mutation when he talked about the Chinese market, saying Apple had deliberately delayed informing the outside world of the company's woes in China. "the situation in China may be changing too quickly," he said. But the general trend in the smartphone market is not new. Why hasn't Cook admitted this before? "she said Apple, as a public company, runs counter to its primary mission to be open to investors in its business." it just keeps denying the reality until it can't deny it. "

Daniel Ives, an analyst at Wedbush Securities, a market research firm, said Apple usually had the ability to forecast iPhone sales to "three decimal digits," and as a result, Apple suddenly revised down its revenue expectations. "this is Apple's biggest miscalculation in the iPhone era," he said, adding that Cook's emphasis on macroeconomic problems is probably only about 20 percent, and that 80 percent is Apple's own, "basically. This is Apple's problem at the executive level. "

Hal Eddins, chief economist at (Capital Investment Counsel), an Apple shareholder investment consultancy, agrees that Cook's rhetoric about China's macroeconomic dimension It is likely to be "using trade turmoil as an excuse to cover up some of their own mistakes over the past year." Some analysts question that Apple's own behavior is the crux of the problem: with Chinese mobile phone makers increasingly competitive, products that have become less impressive and the "relentless pursuit" of high pricing in recent years, Make the sales volume of apple product and market share, lose gradually.

In his letter of January 2, Cook also said: "Market data show that the shrinking of the smartphone market in Greater China is particularly pronounced." while this is a fact that is happening, he did not mention the fact that the "contraction" is under way. Apple's market share in China is falling fast, while Chinese rivals such as Huawei, OPPO and vivo are on the rise. Apple's market share in China has risen from 11.2 in the first quarter of 2018, according to IDC. It fell to 7.5 in the third quarter, while Huawei has been in the lead, with an average market share of 25.5. It is not fully aware that its pricing power in price-sensitive markets has declined, compared with competitors' products that are more "good and cheap."


Kiranjeet Kaur, an analyst at market research firm IDC, said: "Apple's sales in China have been doing poorly for several quarters, in part because their prices are already too high, above the $1000 mark," said James Cordwell, an analyst at Atlantic Equities, an investment bank. Investors are now confused about the extent to which Apple's "aggressive pricing practices" have exacerbated the current "embarrassing" decline in revenue expectations and, in the long run, What effect will this have on Apple's future pricing of the iPhone.

Some analysts point out that if Apple continues to maintain its high-end pricing strategy, then the user's replacement cycle will also become longer. Potential new customers may choose cheaper alternatives. "this is a challenging and intractable problem for Apple," said Toni Sacconaghi, a prominent Apple analyst. "there is no simple solution."

Repeat it on the shoulders of giants

The trickier problem is that Apple's iPhone sales dividend from the mobile Internet era seems to be peaking, but iPhone sales still account for more than 60 percent of Apple's total revenue. Cook's own halo, to a large extent, also thanks to the "standing on the shoulder" of the iPhone product line sales success. Under his leadership, Apple launched new products, such as the Apple Watch and the AirPods, that did well in the market, but they are still far from iPhone's role as industry changers in those years.

This is a story of "trees planted by forebears and cool times for posterity." But everything has a cycle, and now the miracle created by the iPhone product line is slowly fading away.

Sacconaghi said Apple may be facing macroeconomic challenges in China, but this is not the biggest problem the tech giant needs to deal with: "Apple has not given a strong enough reason to attract consumers to buy new phones. I think it's a central challenge. "

BayStreet Research, which tracks device sales, said that just four years ago, American consumers updated their phones every 24.4 months, but in the latest quarter, the cycle has increased to 36 months. American consumers are expected to see a further extension of the replacement cycle this year, averaging 38.7 months. The New York Times believes that people are no longer buying iPhone. as they have in the past. In developed countries, with almost one smartphone, it is hard to get new users. In terms of smartphone buying trends, emerging markets such as China are becoming the same as developed countries. As a result, Apple is increasingly relying on older iPhone users for iPhone sales.


That is to say, with 60% of revenue still dependent on iPhone sales, as the smartphone market gradually begins to saturate, innovation breakthroughs in mobile phones are becoming less and less, and prices are rising, Apple is now relying on an important revenue base. Is disintegrating.

In the eyes of Goldman Sachs analyst Rod Hall, this is similar to the once-spectacular Nokia. More than a decade ago, in the last boom, Nokia saw a wave of replacement, and as the market became saturated, it began to rely on users to upgrade their devices. More similarly, the 2008 financial crisis hit Nokia's expectations and users changed their phones less often, opening the start of the smartphone era.

On that basis, Rod Hall cut its stock price forecast for the next year to $140 from $182 and said it would cut revenue for the whole of 2019 further.

Service Business is not a permanent solution

For the first time in 16 years, a revenue warning has raised questions about Apple's future.

According to Michael Gartenberg, Apple's former head of marketing, the letter sent on January 2 to investors "may be one of the toughest things Cook has ever done as CEO." Cook also clearly understands that sales of iPhone devices account for more than half of the company's business revenue and are not sustainable. As a result, in recent fiscal quarters, Cook has placed particular emphasis on the growing role of service revenue in overall revenue growth. In a letter to investors on January 2, Cook said that although downgrade revenue expectations were disappointing, But Apple is still doing well in many other areas. "We are on track to double the size of our business from 2016 to 2020 with service revenues of more than $10.8 billion this quarter, a new quarterly record in every region."

Services, including App Store,iCloud,Apple Pay,iTunes and Apple Music, have become one of Apple's biggest growth engines and are currently the company's main source of revenue outside its mobile phone business. The growth rate has exceeded the sales of mobile phone hardware for several consecutive quarters. Apple estimates that the services business will reach $50 billion a year in 2020.

"in retrospect, a new strategy is emerging for Apple to sell fewer iPhone and devices such as Mac and watches at higher prices than its mass-market competitors," the economist Zachary Karabell wrote in Wired magazine. Then provide the millions of affordable devices, millions of users, with apps and content they are willing to pay for. No one knows how this will work, but in a world where smartphones and computers are saturated, this is certainly a viable way to do as much as Apple does at a price that many manufacturers offer at a lower price. "


However, for hardware companies, such a transition is not easy. IBM, now a consulting software service, is still profitable, but not as big or influential as it used to be. The split is also true of HP. Struggling on the brink of death, BlackBerry is no longer involved in hardware, but is now a tiny, meagre software and encryption company. For Apple, these lessons are not a good omen.

In terms of Apple's business, the focus on transformational breakthroughs in the services business also seems to be a growth ceilings. Apple's services business, after all, basically uses the iPhone as its "infrastructure," and even AirPods and Apple Watch, new products of the Cook era, depend on iPhone devices or the iOS ecosystem. Finding a breakthrough based on iPhone is sure to sustain growth in the short term, but in the long run, it is not a permanent cure.

"Apple needs to go beyond its core products," said Mark Gurman, a Bloomberg correspondent who has long tracked Apple's movements. In other words, Apple needs to find its next iPhone outside of the iPhone.

How Apple, the industry leader, will adapt to the new situation and move forward will undoubtedly be a fascinating spectacle. Karabell says Apple is where it is today. Once again, let's focus on the key question facing big companies: what should companies do when they hit the ceiling? How to find a new "amulet" when the old model of development became obsolete and pedantic?

Looking for the next iPhone

Years after Jobs opened the era of iPhone, the bearish prediction of the collapse of the iPhone empire is becoming an increasingly likely future. Cook's Apple needs a new "surprise" to the world.

For more than seven years as Apple's CEO, Cook has led the company with great success. More accurately, it is unprecedented success in the commercial sense. Apple's share price has risen nearly 200 percent, its annual revenues have doubled, and last August it rose to become the first company in U.S. history to surpass its trillion-dollar market capitalisation. On the surface, investors and analysts have selectively ignored the lack of breakthrough products such as the 2007 iPhone in the Cook era.

IPhone released in 2007, and many in the technology industry likened the event to the Cambrian outbreak of (Cambrian explosion). The Cambrian explosion of 5.2 billion years ago was a landmark evolutionary event in the history of life on Earth, during which the diversity of life grew explosively, said Kara Swisher, co-founder of Recode. Without iPhone and later Android, there would not have been today's Uber,Lyft,Tinder and Spotify. She called the "big bang" of smartphones centered on iPhone "the latest innovation explosion," but said it was time for smartphones to run out of steam.

This is a serious challenge coming to Cook. "this will be the most decisive moment in Cook's career," said analyst Daniel Ives.


Based on a segment of the market that Apple has begun to invest in beyond the phones it has developed, HSBC has outlined possible directions for Cook's future success: AR glasses, transport and autopilot, and digital health.

Apple's smart glasses are likely to be the first everyday product to be used in augmented reality and are expected to be available as early as 2020. The glasses will build virtual information from a real-world perspective, such as weather updates or news feeds of user concern. Google and other companies have tried to put AR glasses into everyday use, but so far, The related design work is not yet perfect.

Apple has also been working on artificial intelligence and self-driving cars. But most industry insiders believe Apple is still far behind rivals such as the Alphabet. Tesla and Waymo have made a lot of achievements in the field of autonomous driving, and related technologies are gradually maturing. Apple originally planned to design a complete self-driving car independently but has now begun to seek partnerships with automakers to gradually shift to the role of providing software services.

Apple has seen some hope in the digital health sector, which faces tough regulatory restrictions. CNBC says the, Apple Watch's health capabilities have surpassed the wearable fitness technology leader, Fitbit.. Apple has also begun working with medical professionals to use the smartwatch data to provide better patient care. While the digital health business is seen by HSBC as the fastest-landing, Apple Watch of Apple's next three growth engines, it also dominates the wearable technology market, but reflects Apple's financial statements. It's still just a less important category of "other products".

Analysts at HSBC believe the three businesses, particularly the latter, are likely to push Apple, which is now hardware-centric, towards a more software-centric strategy.

In the future of the three major layouts, AR glasses were once highly anticipated by Cook. Cook has repeatedly shown his interest in AR technology, saying that AR glasses will be as transformative as the original iPhone. Now, however, Cook seems to have a new idea. In an interview aired on January 9 by CNBC, he said Apple will have "significant" service launches this year, and that the new service will be "something Apple has been studying for years," especially in the medical sector. The biggest contribution Apple can make to humans, he said, will be in the health field.

In fact, not just Apple, but all technology companies, are looking for the next generation of growth. The next "iPhone", will it be a VR,AR or a self-driving car? Artificial intelligence or robots? Encrypted currency or digital health? No one can give a definitive answer, and no one can even say where the next mainstream trend will lead the future. Innovation is a more subtle thing than people think. Money, opportunity, timing and execution are essential, and above all, there is a great idea behind it.

In this darkness, the "apples" of this era are fumbling. The only certainty is that, outside of smartphones, Mr Cook carries huge expectations regardless of his choice to bet on any frontier.

What is Apple's next "iPhone"? what is the "post-iPhone era"? This is an inescapable proposition for Cook, standing at a turning point in Apple's history. He needs to ignite a spark that sets off the next generation of technology, just like the one who changed the world with a iPhone 12 years ago.


What Tim Cook left out about China in Apple's revenue guidance

Apple Makes Rare Cut to Sales Guidance

Apple's iPhone Warning Comes Years Too Late

Responsible Editor: song Desheng

Source: visual China

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