On its 9th birthday, Apple's iPhone finds itself at a crossroads

Posted:
in iPhone edited June 2016
No, the sky is not falling -- Apple will be fine. But as the company's cash cow comes off of its first-ever declining sales, the multi-billion-dollar question for the iPhone is: What can (or should) Apple do to return the iconic product to growth?




The iPhone at 9



Priced at $499 for 4 gigabytes of storage or $599 for 8 gigabytes, the first-generation iPhone launched in the U.S. on June 29, 2007. In a unique move, the handset wasn't made available until 6 p.m. that day, forcing consumers to wait until the evening for the heavily hyped device.

While the iPhone would go on to reinvent and shake up multiple markets --?including smartphones, media players and PCs -- back in 2007, its success did not seem so inevitable. In fact, just a few short months after the iPhone went on sale, Apple was compelled to slash the price of the 8-gigabyte model to $399 in a rather unprecedented move. The paltry 4-gigabyte model was also cut from Apple's lineup.

Early adopters who paid a premium for the iPhone at launch were provided with a $100 Apple Store credit toward future purchases. Still, the 33 percent price cut led to lawsuits alleging "price discrimination."

In all, the first-generation iPhone reached 6.1 million units sold before the product was discontinued. These days, Apple sells that many iPhones in just a few weeks.

Things wouldn't begin to truly take off for Apple's premium handset until the launch of the second-generation iPhone 3G, in 2008, as well as the debut of the App Store with what was then known as iPhone OS 2.0.

In hindsight, the early struggles of the iPhone were a minor blip on the radar in Apple's road to huge profits. Today, the iPhone accounts for about two-thirds of the company's revenue.

Adapting to change



While the first iPhone wasn't exactly a blockbuster success, it was Apple's willingness to adapt to consumer demands --?and quickly -- that paved the way for the company's eventual, astronomical success.

The $200 price cut just a few months after the June 29 launch was a first step, admitting that the $600 cost with two-year AT&T contract was a price most consumers were not willing to cough up.




Apple also famously refused to allow native apps on the first-generation iPhone, suggesting that developers instead build web apps that could be accessed through the Safari browser. That was another area where Apple would quickly change course, opening the App Store in the summer of 2008 and truly changing the trajectory for the iPhone.

After that, the iPhone became a rocket, with sales on an upward trajectory the likes of which the technology market had never seen. It was an astounding run, lasting nearly nine full years.

2016: Apple's iPhone stops growing (for now)



For Apple, all good things must come to an end.

Make no mistake, the iPhone is still a very good thing for the company, driving the majority of its profits. Apple's continued success depends largely upon the iPhone.

But the handset saw its first-ever year-over-year decline in sales in the March quarter of this year. Sales were still a massive 51.2 million units, but that was a significant decline from the 61 million iPhones Apple sold in the same period in 2015.

The reasons for the drop are numerous: a maturing smartphone market, slowing consumer upgrade patterns, and a tough comparison from the iPhone 6 product cycle.

Still, market watchers are wondering what Apple will do to return the iPhone to growth. Or, perhaps the more pertinent question is, is there actually anything Apple can do?

"iPhone 7" disappointment is already baked in



What's in a form factor?

If the numerous leaks to date are to be believed, Apple's 2016 iPhone upgrade won't feature any major external changes. In short, the "iPhone 7" is expected to look like a thinner version of the iPhone 6s, which itself was nearly identical externally to the iPhone 6.




Does consumer interest only grow if Apple shakes up the design of the iPhone? Some pessimists believe yes, which is why the apparent preordained disappointment of the "iPhone 7" has already been telegraphed by the media, and is reflected in the company's stock price.

Some are already looking to 2017 -- the 10th anniversary of the iPhone -- for Apple's next big thing. It's rumored that at 10 years old, the iPhone will get a major external redesign, with an all-glass body encasing a curved OLED display that will embed the Touch ID fingerprint sensor, FaceTime camera and speaker within the screen.

Writing off Apple's 2016 upgrade so quickly, however, would be foolish.

While it appears likely that the "iPhone 7" will look very similar to the iPhone 6s, we simply don't know what kinds of other changes Apple has in store, internally and otherwise. It's possible that the secretive company has a major surprise up its sleeve -- something that will make this year's upgrade a must-have for consumers, and returning the product lineup to growth.

Perhaps it's an overhauled camera system. Maybe Apple will follow the groundwork laid by the iPhone SE and introduce more aggressive pricing. Perhaps the company has kept the lid on some new, groundbreaking feature that we haven't envisioned yet. Maybe all three.

The truth is, we won't know until this fall --?likely in September -- when Apple finally reveals its cards. Will it be enough to see sales grow once again?

Dismissing the company that has largely defined the smartphone space for the last 9 years would be foolish. Because in the fast-moving, ever-evolving world of personal technology, you don't make it to 9 without doing a lot of things right.
badmonk
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Comments

  • Reply 1 of 41
    melgrossmelgross Posts: 31,986member
    Apple needs to be less conservative. We see patents from them that are far reaching, but rarely seem to make it to market. Some of that needs to see the light of day.
    jbdragoncyberzombiedasanman69bdkennedy1002aylklatifbptallest skilyojimbo007jony0
  • Reply 2 of 41
    irelandireland Posts: 17,686member
    Doomed, I tell you.

    Everything to do with Apple is doomed these days. The iPhone itself will be just fine.

    If Apple were to change anything about their business it should be make their accessories more accessible, re more affordable outside the US. And provide a larger free tier for iCloud storage. I personally think Apple should move to a pro model re iCloud storage. A pro model puts the pro iCloud tiers as the only paid-for options.

    Free: 100 GB (excludes Mac backup)
    Pro: $4.99 per month for 1TB (includes iCloud Time Machine)
    Pro plus: $9.99 per month 5TB (backup all your devices)

    Lest we forget, iCloud backup if it's good provides customer lock-in for Apple. They call this a win-win. It's in their own interests to provide value and features here at the right price. 100 GB just about allows all users to back up their iPhones and most users won't use the amount so in reality it's not 100 GB per customer.
    edited June 2016 netmagecanukstormicoco3neil anderson
  • Reply 3 of 41
    mreddiemreddie Posts: 13member
    Apple needs to enter a new category, as it did with the iPhone.
    I don't want Apple to become the "The iPhone Company".
    Maybe it will be the AppleCar, some holographic Device, some Virtual Reality device etc. ... who knows?
    6Sgoldfishyojimbo007
  • Reply 4 of 41
    6Sgoldfish6Sgoldfish Posts: 108member
    What should Apple do to return the iconic product to growth you say? Walt Mossberg gave a good overview in his article last March, post the iPhone SE launch.  
    - Battery life (even if it means no further decrease in device thinness) & charging speed
    - Bezels! Banish or seriously shrink this waste of space
    - Optical, or at least optical quality zoom
    - Water resistance & screen sturdiness
    - Increase storage (no more 16GB base)
    - Up the iOS game & improve native apps (eg Mail)
    edited June 2016 techguy911cullyrich gregoryLinz Hendersonzoetmbirelandbonobobicoco3timbitroundaboutnow
  • Reply 5 of 41
    rogifan_newrogifan_new Posts: 4,213member
    melgross said:
    Apple needs to be less conservative. We see patents from them that are far reaching, but rarely seem to make it to market. Some of that needs to see the light of day.
    Do you have an example of something that's not gimmicky?
    baconstang
  • Reply 6 of 41
    rogifan_newrogifan_new Posts: 4,213member

    What should Apple do to return the iconic product to growth you say? Walt Mossberg gave a good overview in his article last March, post the iPhone SE launch.  
    - Battery life (even if it means no further decrease in device thinness) & charging speed
    - Bezels! Banish or seriously shrink this waste of space
    - Optical, or at least optical quality zoom
    - Water resistance & screen sturdiness
    - Increase storage (no more 16GB base)
    - Up the iOS game & improve native apps (eg Mail)
    Regarding the bezels....and the home button goes where?
    jbdragonTurboPGT
  • Reply 7 of 41
    irelandireland Posts: 17,686member
    mreddie said:
    Apple needs to enter a new category, as it did with the iPhone.
    I don't want Apple to become the "The iPhone Company".
    Maybe it will be the AppleCar, some holographic Device, some Virtual Reality device etc. ... who knows?
    We all know they are working on a car. The cat's out of the bag long ago. Needs is another story.
  • Reply 8 of 41
    irelandireland Posts: 17,686member

    What should Apple do to return the iconic product to growth you say? Walt Mossberg gave a good overview in his article last March, post the iPhone SE launch.  
    - Battery life (even if it means no further decrease in device thinness) & charging speed
    - Bezels! Banish or seriously shrink this waste of space
    - Optical, or at least optical quality zoom
    - Water resistance & screen sturdiness
    - Increase storage (no more 16GB base)
    - Up the iOS game & improve native apps (eg Mail)
    I'm sorry you are being voted down. I see nothing controversial in what you're saying. But it looks like Apple are doing all the things you've mentioned or are well aware of them at the least. Craig mentioned device thinness/battery life trade-off on Gruber's podcast (the audio one) the last time he was on. They hear us.
    edited June 2016 tmay6Sgoldfishicoco3
  • Reply 9 of 41
    toukaletoukale Posts: 37member
    Why is Apple Insider worried about Apple's growth.  As a fan and user, that is the least of my worries.  Only stock holders should worry about things like that, and if they have a problem then they should get out of the stock.  This is my biggest worry with Tim Cook being in charge because with him in charge, he has shown a tendency to listen to wall street far too often at the expense of us users.  Lately Apple have began to be too much about margins and profits at the expense of the users and the experiences.   You see it with their inssistance on shipping 16gb models even though they know it kills the user experience for a lot of users.  They are many other examples.
    bdkennedy1002ireland
  • Reply 10 of 41
    Growth seems simple to calculate but is not always - the measuring period is also relevant. For example, measuring growth quarter by quarter is obviously flawed - we know that many products are seasonal (for example, the iPhone's large holiday sales). So we don't get worried when we see a decline from the holiday quarter to the next. But comparing year-on-year isn't necessarily correct either. For the iPhone, especially given the historic "S" tick-tock approach, perhaps the right approach is to blend TWO years rather than year-on-year. I know there is a little bit of moving the goalposts in this but, at the same time, the S factor is nearly always mentioned when trying to explain iPhone sales figures and it seems a bit odd to highlight but not address the issue. Just a thought. And this gets all screwed up if iPhone 7 is really just an iPhone 6SE...
    ai46lolliver
  • Reply 11 of 41

    What should Apple do to return the iconic product to growth you say? Walt Mossberg gave a good overview in his article last March, post the iPhone SE launch.  
    - Battery life (even if it means no further decrease in device thinness) & charging speed
    - Bezels! Banish or seriously shrink this waste of space
    - Optical, or at least optical quality zoom
    - Water resistance & screen sturdiness
    - Increase storage (no more 16GB base)
    - Up the iOS game & improve native apps (eg Mail)
    Regarding the bezels....and the home button goes where?
    It'll be controlled by your mind, of course. /s
  • Reply 12 of 41
    coolfactorcoolfactor Posts: 1,582member
    I'm curious why the fixation on "growth" as opposed to just having a healthy business with sales? Does the lack of growth equate to poor business? No.
    washaskigatorguybaconstangnolamacguyiphonenicklolliverroundaboutnow
  • Reply 13 of 41
    coolfactorcoolfactor Posts: 1,582member
    Apple charges $100 for a $10-20 part (laptop cables). They are going to be okay.
  • Reply 14 of 41
    Reclone Steve.
  • Reply 15 of 41
    jameskatt2jameskatt2 Posts: 720member
    An iPhone will always look like an iPhone.  Why complain about the form factor when it defines the product?

    Perhaps Apple should be simply be happy with $250 BILLION A YEAR in steady revenue from iPhone upgraders.  That isn't bad.  And Apple pays a lot in dividends - better than a lot of companies.

    Then Apple can build out its services arm of revenue to make even more.  

    Then Apple can make several billion more from building cars.

    It already makes more than any other tech company.  The only comparable companies are oil companies.
    edited June 2016 baconstangpatchythepirateai46nolamacguy
  • Reply 16 of 41
    mj webmj web Posts: 918member
    I don't see how this isn't Tim Cook "dropping the ball" -- once again! As if Apple's product line and upgrade cycles aren't predictable enough -- why not just dampen customers expectations even further by blowing iPhone univesally expected upgrade slot by an entire year? If Cook spent less time hosting GOP fundraising breakfasts (on company time) and marching in parades, maybe -- just maybe- he could barely do his job.
    larrya
  • Reply 17 of 41
    normmnormm Posts: 575member
    I'm sorry, but the premise of this post is simply wrong.  There has been no decline.  Last year there was a blip, with the big sales of big phones, and this year the sales are exactly back on the former exponential growth curve.  No decline!!

    https://d28wbuch0jlv7v.cloudfront.net/images/infografik/normal/chartoftheday_4149_iphone_sales_n.jpg

    jwdawsobaconstangpatchythepiratefastasleeplolliverbrucemclarrya
  • Reply 18 of 41
    washaski said:
    Reclone Steve.

    But a clone of a clone always introduces biodegradation. 

    We need a 100% Steve. 
  • Reply 19 of 41
    mac_128mac_128 Posts: 3,453member

    What should Apple do to return the iconic product to growth you say? Walt Mossberg gave a good overview in his article last March, post the iPhone SE launch.  
    - Battery life (even if it means no further decrease in device thinness) & charging speed
    - Bezels! Banish or seriously shrink this waste of space
    - Optical, or at least optical quality zoom
    - Water resistance & screen sturdiness
    - Increase storage (no more 16GB base)
    - Up the iOS game & improve native apps (eg Mail)
    Regarding the bezels....and the home button goes where?
    Your lack of imagination is seriously staggering. Particularly when none is required given you are a member of a tech forum where numerous good options have been discussed and rumored, including the immediately preceding article upon which you commented!
    edited June 2016 6Sgoldfishfastasleeplolliver
  • Reply 20 of 41
    Liquid Metal.
    melgross said:
    Apple needs to be less conservative. We see patents from them that are far reaching, but rarely seem to make it to market. Some of that needs to see the light of day.
    tallest skil
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