Analysts not impressed with the 'depth' of Apple's newest services, weak iPhone sales also predicted

Analysts not impressed with the 'depth' of Apple's newest services, weak iPhone sales also predicted
The global smartphone market is in a rut, tablets and computers have stopped growing many years ago, while smartwatches are saving lives around the world but not on a large enough scale to single-handedly satisfy the expectations of Apple investors. Unlike Samsung or Huawei, however, the Cupertino-based tech giant is adopting a wait and see approach as far as foldable handset designs and 5G connectivity are concerned, betting big instead on "services."

That's the broad and generic description of the company's most lucrative business division nowadays, which actually includes quite a few different things. We're talking App Store revenues, Apple Pay transactions, cloud services, and Apple Music subscriptions, as well as the recently released Apple News+ platform and a bunch of upcoming products unveiled with great fanfare a few weeks back, like TV+, Arcade, and that swanky Apple Card.

Combined, these "services" are considered Apple's best chance to keep investors happy with thriving profits during a time of hardware industry stagnation. But according to leading global financial services firm JP Morgan, as quoted by Apple Insider today, those glamorous recent announcements failed to impress in terms of "depth."

No clear positioning for success


Basically, what JP Morgan is summarizing in its latest investor note is more or less what most other analysts and market research companies have been saying before Apple TV+ was even formally unveiled. Namely, that Apple is entering a crowded and incredibly competitive segment without offering a great value proposition. There's simply nothing concrete about the Apple TV+ platform right now that Netflix or Hulu aren't already giving their subscribers at pretty reasonable prices.


Furthermore, while Netflix's ambitions are growing, with its own production studio in place and a massively popular original content library essentially expanding every day, Apple is barely getting started, promising a slew of interesting shows... that don't even have individual trailers yet.

All in all, despite "more breadth than investors expected" (guess the Apple Card took them by surprise too), the "depth" of Apple's non-hardware plans going forward is not looking very encouraging. As such, JP Morgan is basically urging Apple investors to remain patient as time will tell if this long-term gamble eventually pays off.

 

Until then, it's important to remember Apple reported all-time high services revenue of close to $11 billion in the final calendar quarter of 2018 without any help from News+, TV+, or Arcade platforms. And both Apple Music and Apple Pay are expected to continue growing in the next few months.

No clear sign of an iPhone sales rebound


While Apple managed to surpass Huawei again and recoup its second place in global smartphone shipments at the end of 2018, quarterly iPhone volumes reportedly declined by around 11.5 percent year-on-year. Based on information from the supply chain, JP Morgan is also forecasting a small drop in Q1 2019 sales compared to the first three months of last year, followed by another weak quarter between April and June in terms of revenue.


That's obviously bad news for a company that's been making unusual efforts to boost its numbers in key markets like China and India, although it shouldn't exactly come as a surprise. Besides, March revenue may have actually increased substantially both from a month-on-month and year-on-year perspective, while Q2's projected sales decline is described as less drastic than previously expected.

Bottom line, it looks like there's no end in sight for Apple's global iPhone demand problem, but at least there's a good chance the bleeding will stop soon enough. If not in Q3, surely during the holiday season, when the first triple camera iPhone model (s) are likely to be released.

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27 Comments

1. Vancetastic

Posts: 952; Member since: May 17, 2017

Being an analyst has got to be a sweet gig.

4. IT-Engineer

Posts: 526; Member since: Feb 26, 2015

Yup, but the truth is this: Steve Jobs managed to save apple from bankruptcy, he was not a great leader for an employee to work under but a great visionary, no one can deny that. Now is the time of services, cloud services to be more specific, not icloud or Dropbox, but what Microsoft, Google and Amazon are doing, Netflix has built a strong infrastructure after many fails and hiccups. Apple is beginning to fail in hardware department, weak iPhone sales world wide and yet the prices keep rocketing sky high, same mistake apple did in the 1980's. Their Macbook lineup has been failing miserably with keyboard design failures, yet they are still stubborn about it. They think that they can solve all these issues by making more money through services such the recent ones they introduced, yet they don't seem to care that they are entering a market with heavy competition that has years of experience and a wide fan base. To top that all up, they chose to keep their services closed to their own ecosystem, again same mistake they did back in the 80's and 90's. I hope they succeed, cause competition is good, but from what it looks, they are beginning to go down the hill. After all they forget that the consumer is not stupid.

6. scarface21173

Posts: 646; Member since: Aug 17, 2014

One thing apple have got is a massive customer base. They will sell a lot of services to begin with, but for how long i dont know. Hardware wise i cant see them improving much this or next year maybe a better camera and a few software tweeks notch will stay.

7. Vancetastic

Posts: 952; Member since: May 17, 2017

I think they are counting on the consumer being stupid, actually.

10. IT-Engineer

Posts: 526; Member since: Feb 26, 2015

I'm afraid so.

15. Vancetastic

Posts: 952; Member since: May 17, 2017

There’s actual evidence of this right here in the comments!

16. lyndon420

Posts: 6600; Member since: Jul 11, 2012

So true. And apple is being really snarky towards people by closing their apple accounts whenever someone speaks out about the data recovery issues and how phones can have their data recovered even without a cloud backup. Apple has instructed their employees to tell customers that recovering data/pics from their water damaged phones is impossible, when in fact it is highly likely that 95% of the time people can have their precious pics and data recovered. There's a woman in the states that has put out a YouTube video showcasing how she does it for people ($300 fee only if she's successful). Apple employees are told to push new device sales onto people instead of attempting to repair them...and I think that's shameful of apple.

2. darkkjedii

Posts: 30902; Member since: Feb 05, 2011

This is gonna be a very interesting year for Apple. iPhones need a kick in the ass (Qualcomm to the rescue), iOS needs a major overhaul, very interesting indeed.

5. IT-Engineer

Posts: 526; Member since: Feb 26, 2015

I seriously they give iOS and overhaul so it won't stay boring, cause i really want to buy and iPhone, but this iteration of IOS is keeping away.

3. blingblingthing

Posts: 919; Member since: Oct 23, 2012

"Namely, that Apple is entering a crowded and incredibly competitive segment without offering a great value proposition. " They changed the game when they entered the smartphone market in 2007. They are now lagging behind the competition for phones. They are bringing the same formula with their streaming service.

8. Guseinguliev

Posts: 101; Member since: Mar 04, 2019

we have in Kazakhstan iphone xs 64gb officially costs $ 1455, it's just a nightmare. In other countries, too, do not like.

11. Valdomero

Posts: 662; Member since: Nov 13, 2012

Better get a second-hand iPhone X or an Xr, honestly the Xs doesn't offer anything groundbreaking. I bought a new iPhone X because I had the money and didn't wanted to spend over $1k for it. Here where I live the Xr 64GB costs almost $1k brand new, imagine how much are the Xs & Xs Max.

9. midan

Posts: 2597; Member since: Oct 09, 2017

I visited my carrier store today and tried all the newest phones, not even S10 is as smooth as my old iPhone X. When you swipe iPhone or pinch zoom etc. You just feel the difference compared to Android phones. Those have those hickups and dropping frames and small freezes, device just can't keep up and it happened with almost 10 phones i tried. This same thing reviews are saying about Android phones and now i understand what they mean by that.

12. Vancetastic

Posts: 952; Member since: May 17, 2017

This is the most believable comment I’ve ever read.

26. Sammy_DEVIL737

Posts: 1529; Member since: Nov 28, 2016

Midan is a 21 yr old Apple sales girl with targets of lots and lots of dusty iPhone units to sell.

17. tedkord

Posts: 17198; Member since: Jun 17, 2009

You mean all those reviews, the majority of which make the S10 the best phone available. Very believable post.

19. IT-Engineer

Posts: 526; Member since: Feb 26, 2015

I have a question for you, and you have a multiple choice answers, here goes! Question: Do you get paid by Apple? Answer A Yes I do. Answer B No I'm just in an apple cult. Answer C No I'm just a troll. So what's it gonna be?

20. Vancetastic

Posts: 952; Member since: May 17, 2017

I’ll answer, because he won’t. B and C.

21. TBomb

Posts: 1283; Member since: Dec 28, 2012

Even if A is/was the answer, I guess we found out where all that Apple Tax is going (;^∀;^)

24. sissy246

Posts: 7035; Member since: Mar 04, 2015

LOL, ok we all believe that.

27. Sammy_DEVIL737

Posts: 1529; Member since: Nov 28, 2016

Lol and even such comments won't be able to sell those dusty iPhone units lying around in warehouse. :(

13. iloveapps

Posts: 724; Member since: Mar 21, 2019

When apple makes something new: Analysts and apple haters always said “Apple is Doomed”. iPod, iPad, iPhones, MacBooks, Apple watchs, Apple tv, Homepod, Airpods, Apple music and Apple services were all successful. Now these new services will be copied by other OEMs in the near future as it is the next big thing and will be successful. Remember HSBC says that Apple is too late to the game with their new apple card. Apple was never the first, but once they do, they become the standard, they become trendsetter.

14. midan

Posts: 2597; Member since: Oct 09, 2017

Some People just doesn’t stop underestimating the power of Apple userbase.

25. sissy246

Posts: 7035; Member since: Mar 04, 2015

No, you underestimate the Apple user fans, they are finely get smart and not putting up with apples bulls**t.

18. TBomb

Posts: 1283; Member since: Dec 28, 2012

I do see the services helping Apple's revenue, but I don't see them being the saving grace that everyone hopes it will be. Apple has a huge customer base, no denying that. But just because you have a huge customer base doesn't mean you're going to sell to every single one. This is especially true when people are comfortable with their services that are compatible with more than just Apple devices. This is important because for instance, my mom has an iphone, the rest of the family is Android, we can all enjoy a Netflix account, but AppleTV+ won't be a good match for 80% of the family, so there goes 1 customer. As for News, I don't quite understand it. I've never been an avid enough newsreader to buy a paper to start, but nowadays, every source is writing the same exact stories. Time has an article about the girl who helped image the first black hole. Google "Black hole image scientist" and you can get 37 articles and 23 videos all saying the same thing. I'd rather wait 24 hours and get the same information for free.

22. IT-Engineer

Posts: 526; Member since: Feb 26, 2015

Their customer base is no where near what Nokia's customer base was, and they fell down because they didn't listen

23. limporgyuk

Posts: 355; Member since: Nov 06, 2013

That statment only applies in America

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