Just how bad is it for Apple?

Tim Cook's Apple has changed its business, preparing for a time when the iPhone does not bring in the huge profits investors have come to expect Image copyright Getty Images
Image caption Tim Cook's Apple has changed its business, preparing for a time when the iPhone does not bring in the huge profits investors have come to expect

I've been reflecting on Apple's news on Wednesday, that it was dramatically cutting its revenue forecasts for the first time in 16 years.

Commentary on this seems to range from minor blip to complete disaster. But here’s how I see it.

A few years ago, I could have told you the very day my phone was due for an upgrade, and I’d stride into a shop eager to get hold of the technology that had emerged in the year or so since I got my current handset.

No longer. Fact is, the quality of phones now means we're not desperately counting down to getting a new one. That, and iPhones cost $1,000 now, which doesn’t help (but isn’t in itself the reason for Wednesday’s news, despite what everyone on Twitter keeps yelling at me).

A better battery, a lack of big new features, terrific software that updates for free anyway… these are all factors that keep you happy with your device.

This isn’t a surprise to anyone, not least Apple, which has been preparing for the iPhone’s downturn for a while now by a) putting in place plans to entice you, such as the Upgrade Program and, b) starting to aggressively move into new areas.

Services, health and fitness, entertainment. It's done a simply spectacular job of building serious cash beyond selling hardware. The Services part of Apple makes almost as much money as Facebook's entire business. Apple is not a company in trouble.

China’s economy, on the other hand, is - and it’s meant the iPhone's decline has happened much more quickly than Apple - or anyone - had bargained for. And for that you suspect, privately, Mr Cook holds the current US administration partly responsible. The trade war is trickling down and affecting consumer confidence, Mr Cook told shareholders.

That's basically it. Now, what this might mean is a slow year (or more) while other parts of Apple grow to plug the gap. That process has started.

Apple could take a more drastic step and get its chequebook out and snap up a Netflix or a Disney, as some have suggested. Apple can certainly afford it, and it will keep investors more than happy while the other stuff is ironed out.

Or (or maybe, “and”) China's economy could improve, the trade war could be resolved, and Chinese Apple fans will no doubt go out en masse and shovel money into Tim Cook's pockets once again, making everything investors are worried about today seem like a brief, distant nightmare.

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