What Apple Needs to Do to Keep Its Growth Streak Alive
Sluggish iPhone sales took a bite out of Apple's impressive 13-year growth streak, marking the first sales slump for Apple's flagship product. Now Wall Street analysts are looking to Apple to find new sources of revenue.
The success of the iPhone, which was first released in 2007, has been a consistent driver of growth for the company. Apple sold 51.2 million iPhones this year, "lower than the exceptional year-ago quarter," Apple CEO Tim Cook said Tuesday in an earnings call. He warned that the following three months would also be challenging for the company.
Apple posted second-quarter revenue of $50.6 billion and quarterly net income of $10.5 billion. By comparison, the company reported revenue of $58 billion and net income of $13.6 billion in the same quarter last year.
Gene Munster, managing director and senior research analyst at Piper Jaffray, said Apple needs to broaden its product base to continue winning over consumers and to keep shareholders happy.
One new product could be the rumored self-driving car. Apple's ambitions to develop an autonomous vehicle are an open secret in Silicon Valley. The company has poached top auto executives, including most recently Chris Porritt, a former vice president of engineering at Tesla, according to 9to5Mac.
"A bigger theme is they have to get into other categories. That is going to be the longer term. Investors want to see what they are spending $10 billion a year on in research and design," he told ABC News.
Despite Apple's warning of another lackluster quarter, Munster said he expects iPhone sales to increase following the expected release of a new iPhone this fall.
"People are upgrading at about the same pace as they always have, it’s just the iPhone 6 was so successful, it pulled forward demand," he said. "Given the new form factor, it caused people to upgrade more quickly and now we are going back to a normal upgrade cycle."
The Chinese market still holds potential for Apple even though sales in China declined 26 percent year-over-year in the March quarter, Patrick Moorhead, an analyst at Moor Insights & Strategy, told ABC News.
"There is still growth left for Apple in China, particularly the western regions, but India is the next huge growth area," he noted. "India is a tough market as it’s not centrally driven by carriers, but Apple is making headway there. The mid-range space with the iPhone SE will be Apple’s proving ground there."
Apple's iPhone upgrade program, which allows people to trade-in their old devices for the newest model, is "slowly gaining traction," Munster said, and could add to the bottom line in coming quarters.
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By Alyssa Newcomb
Source: ABC News
