Is the Apple Bubble Finally Bursting?

April 28, 2016
By: Andrew Bindelglass

Over the past 13 years, Apple (News - Alert) has been one of the most successful companies in the world of tech, posting sales growth in 51 straight quarters. That streak has finally come to an end, with Apple projecting a decline in sales. What’s worse is that this does not appear to be a problem that will correct itself right away, and could last throughout the rest of this year.

The primary culprit behind this drop in sales has been a lack of new iPhone (News - Alert) sales. Apple is reporting a 16 percent drop in iPhone shipments over this quarter. To be clear, this does not mean that the iPhone is becoming unpopular; on the contrary, it is as popular as ever. The problem is that people seem to be more willing to hold on to their old iPhones for much longer rather than upgrading, a trend that Bob O’Donnell, chief analyst at TECHnalysis Research LLC, expects to continue.

“I see nothing on the horizon from a component or a technology perspective that’s going to drive these major upgrades,” O’Donnell said. “We’re going to see people hold onto these things longer, just like we saw with PCs.”

The concerns for Apple run deeper than the decline in iPhone sales, although they are tied to this fact. What has made Apple so successful in the past is that it was able to create multiple iterations of highly popular products. Think back to ten years ago, for example, when Apple was rolling out early iPhones in addition to several types of iPods (Video, Shuffle, Touch, etc.) and other popular products. Apple’s product diversity has decreased in recent years as their products have become more versatile (For example, the newer iPhones adopting many of the features of old iPods, thus rendering them almsot obsolete).

It is very possible that Apple has made itself in to a “one trick pony” that will live and die with the sale of the iPhones. Investors will need to keep a close eye on the tech giant to see if they come up with any more innovative products, or if they can reestablish the allure of the iPhone and get customers to upgrade more frequently. 




Edited by Stefania Viscusi