Apple results to show iPhone X problem and Cook’s plan to fix it
Apple Inc. earnings this week will confirm what most investors have finally accepted: The iPhone X didn’t live up to the hype. The results should also provide clues on the company’s next strategy for its most-important product.
Chief executive officer Tim Cook and other Apple executives have a “major prove-me” period ahead, beginning with a new sales forecast and a conference call with analysts on Tuesday, GBH Insights analyst Daniel Ives said. He and other analysts cut their iPhone sales estimates, and Apple stock is down almost 8 percent in the past two weeks.
Concerns were fanned by suppliers reporting weak demand for high-end handsets, another sign the smartphone boom that made Apple the most-valuable company is ebbing. It’s also under pressure in China, where some consumers are shunning pricey iPhones and local rivals like Oppo and Vivo are grabbing market share.
On Tuesday, Apple is expected to report fiscal second-quarter iPhone unit sales grew just over 2% from a year earlier. For the fiscal third quarter, unit sales will be down 5% year-over-year, according to average analyst forecasts compiled by Bloomberg.
Expectations were higher when Apple launched new phones late last year. However, the iPhone 8 and 8 Plus looked similar to the iPhone 6 and 6 Plus models from about three years earlier.
The iPhone X had a bright, edge-to-edge display and 3-D facial recognition, but the $999 starting price was too much for some consumers.
That left a hole in the market for a breakthrough iPhone close to the previous price -and Apple is already working on filling this demand. The company is preparing a new lower-cost iPhone that looks similar to the iPhone X and has some of its most-appealing features, Bloomberg News reported earlier this year.
When the X launched last year, Apple paid handsomely for the new Face ID system, stainless steel casing and sharper, more efficient OLED screen technology. The iPhone X’s parts cost $115 more than the iPhone 8’s, according to a November analysis. That made it difficult to price the product much below $999, without slicing Apple’s legendary profitability.
The new, lower-cost iPhone will use an LCD display that’s about half the cost of the OLED screen in the iPhone X. In addition, Apple will launch a giant iPhone with a 6.5-inch screen and an update to the current iPhone X size, people familiar with the matter told Bloomberg News earlier this year.
While results on Tuesday will likely show slower Apple growth, this broader iPhone strategy could revive sales when the new devices come out toward the end of 2018.
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