Business Daily
Date: 28.01.2016
Page 11
Article size: 164 cm2
ColumnCM: 36.44
AVE: 69244.44
Why Apple s problem is not a saturated market
phone models are only slightly bet­
ter than the version they superseded.
ROBERT CYRAN
TECHNOLOGY
Most companies would
yeam for what may be Ap­
ple's worst quarterlyreport
since it launched the iPhone in 2007.
Sure, the $550 billion tech giant's top
line nearly fiatlined as demand for its
smartphones stalled in the last quar­
ter of 2015, but sales did edge higher
than ayear earlier despite the dollar's
strength, the gross margin topped 40
per cent and profit hit a record $18.4
billion.
Even so, Chief Executive Tim Cook
may be in for a dose of model­cycle
purgatory. The company's latest 6S
That's one reason for less dramatic
sales growth than in the past, Apple
says iPhone sales will actually shrink
in the current quarter ­ the first time
that has happened.
That will hurt, as the handsets
represented more than 65 per cent of
the company's $76 billion of sales last
quarter and a greater chunk of profit
Apple should roll out a new phone,
with more dramatic improvements, in
the autumn, if history is a guide. That
leaves awhile for Apple investors to
fret over the possibility the company
has lost its edge ­ or, perhaps even
worse, that the smartphone market
really is close to saturation. After all,
sales only grew 10 per cent last year,
according to consultancy IDC.
The day will eventually come, but
several things indicate Apple's problem
isn't asaturated market. Thattends to
provoke ferocious competition, but
there's no sign Apple is feeling the
need to slash prices.
Its sales in China increased 14 per
cent in the quarter from ayear before,
despite the Middle Kingdom's eco­
nomic deceleration.
India and Africa, remain relatively
untapped. And for all the attention,
iPhones are not Apple's only product.
For the next few quarters, however,
Apple's gadgets look relatively unex­
citing, and sales growth will suffer
accordingly.
Investors can shrug offthispain,as
the company's $216 billion cash hoard
means there is plenty of room to in­
crease buybacks and dividends.
Moreover, the company only trades
at about 10 times estimated earnings,
even including all that cash ­ about a
third below the typical S&P 500 Index
company. That's an excessive discount,
even for a juggernaut that maybe slow­
ing down.
IheautlwrisaReutersBreakingviews
columnist
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya