Lack of innovation and stiff competition are some of the biggest reasons consumer electronics giant Apple is losing its mojo.
This is according to analysts, commenting on Apple's financial results for its fiscal 2019 first quarter ended 29 December.
The company posted quarterly revenue of $84.3 billion, a decline of 5% from the year-ago quarter, and quarterly earnings per diluted share of $4.18, up 7.5%. International sales accounted for 62% of the quarter's revenue.
iPhone revenue declined 15% from the prior year, while total revenue from all other products and services grew 19%.
Nonetheless, the iPhone maker says services revenue reached an all-time high of $10.9 billion, up 19% over the prior year.
Revenue from Mac and wearables, home and accessories also reached all-time highs, growing 9% and 33%, respectively, and iPad revenue grew 17%.
"While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter's results demonstrate the underlying strength of our business runs deep and wide," says Apple CEO Tim Cook.
"Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That's a great testament to the satisfaction and loyalty of our customers, and it's driving our services business to new records thanks to our large and fast-growing ecosystem."
Earlier this month, Apple lowered its revenue guidance from $93 billion $84 billion, ahead of its earnings call. Cook blamed declining sales in the Chinese market for the decline.
For the first time, Apple lost its number two smartphone maker position to Chinese telecommunications giant Huawei last year.
According to market analyst firm IDC, the arrival of Huawei in the second position marked the first quarter since 2Q10 when Apple had not been the number one or two smartphone company in terms of market share.
Last year, Apple became the world's first trillion-dollar public company, as a rise in its share price pushed it past the landmark valuation. The company hit a $1 trillion market capitalisation 42 years after it was founded.
Apple's net worth is now about $768 billion, according to Macrotrends.
Critical consumers
Commenting on Apple's decline, Saurabh Verma, head of ICT at Frost & Sullivan in the MEA region, says: "Lack of innovation is the sole reason. The recent versions of most of the Apple products are a mere upgrade of the processing power and the form factor or the size of the device."
Verma notes both iPad and iPhone were revolutionary products when they were initially launched, as were some of the successive models.
However, he says, in the last three or four years, consumers have become more critical of the newer versions of the devices.
"Additionally, the market is now flooded with alternate (and even better) options, and most importantly, at highly competitive prices, which has further triggered the question: Is it really worth buying Apple when, as a consumer, I can get the same or better functionality, and processing power from another device at a much lower price point?"
However, Verma believes Apple products are still far ahead in terms of delivering a better user experience and being perceived as a premium brand.
"Apple has been continuously expanding its product portfolio, and 2019 could be a year for Apple launching more and a variety of wearable products to bounce back. But the question would be if these products would be as revolutionary as iPhone was," says Verma.
iPhone dependency
Arthur Goldstuck, MD of World Wide Worx, comments that the main problem for Apple is that it is too heavily dependent on one product, namely the iPhone.
"Associated with this, Apple has not produced a major new product category for some years. In combination, it means Apple no longer wows the market, and the halo effect of being the coolest brand on the block is beginning to evaporate.
"The massive profit margins on iPhones (the highest in the industry) is also seeing something of a backlash, as people realise they can get better phones for far less. Finally, in recent years, the enhancements on new iPhones have been marginally incremental, giving even loyal fans little reason to invest in new editions."
According to Goldstuck, the iPhone lies outside the top three most popular phones in SA, behind Samsung, Huawei and Mobicel, at least.
"It probably has between 2% and 4% of the market, mainly because it does not have a range that covers the top-end, mid-range and low-end markets as Samsung and Huawei do."
Arnold Ponela, research analyst at IDC, says across the globe, Apple is losing market share to Xiaomi and Huawei.
He adds the two Chinese brands are growing in popularity and proving to be a viable option for most consumers. The basic functionalities that Apple offers can now be found in other devices sold for much less.
Ponela says Apple is very popular in SA, although the challenge is that its products are a bit expensive so most people cannot afford them.
"In South Africa, Apple products are only afforded by a few elite and their strategy is to focus on value. In terms of value, Apple only competes with Samsung. Huawei has accelerated its adoption of new technologies and this is definitely a threat to Apple. The first quarter of 2019 will show us if Huawei will really topple Apple in the market for flagship phones."
Stagnant market
For Ryan Smit, MD of local research firm BMIT, Apple posted disappointing results mainly because global smartphones sales have stagnated over the past 18 months.
"This means Apple can now only increase sales of their iPhones through gaining market share over competitors such as Samsung and Huawei, which have increased their share of the market considerably in recent years."
Smit adds that Apple has been a market leader in categories such as music players, phones, tablets, as well as digital products such as applications and music, for the past 15 years or so.
However, he points out that competition in all these areas has increased significantly, with much of Apple's competitive advantage being eroded.
"For them to return to their previous glory, they would need to find new ways of differentiating themselves in existing market segments or build whole new segments of the market like they did with products such as the iPod, iPhone and iPad, which is becoming increasingly difficult."
Brian Neilson, BMIT director, observes that in former years, there was a big gap in the market for Apple to exploit.
"After years of Sony Walkman cassette players and Palm Pilots, there was a latent market begging for iPhones and iPads, although devices like the Nokia Communicator 9200 and BlackBerry phones were well loved by aficionados in their time.
"Major competitors are able to innovate and bring products to market much more rapidly now, and Apple has lost significant advantage in this regard.
"Coupled to this, there has been a big shift in the market towards mid-priced smartphones in the R4 000 range, while new releases of high-end devices are no longer such a novelty, and owners are not replacing them as regularly as they used to."
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