iPhone Sales Slip Due to More Causes Than Tarnished Coolness Factor

By Wayne Rash  |  Posted 2013-01-15 Print this article Print

  • Perhaps worst of all, the iPhone is now being sold in Walmart on the company's Straight Talk plan for $45 per month. Although you still have to buy an unlocked iPhone from Walmart at the regular price, the company will finance it at $25 per month. This will sell a lot of iPhones, but for many teens, there's nothing more uncool than shopping at Walmart.
Making matters worse for the iPhone and Apple, the company has started to be seen as losing its edge. The biggest reason was certainly the Maps faux pas, which was so bad that Cook recommended mapping programs from competing mobile companies. The Maps mess was bad enough, but couple that with stories of WiFi problems and poor durability on the iPhone 5 (some people think it scratches too easily), and it looks like Apple's once legendary quality is slipping.

So does this mean that Apple and the iPhone 5 are dead? Well, no. Remember that what I'd said is that Apple's rate of growth has slowed, not that Apple has tanked. iPhone sales are still growing, The number of iOS users is still getting larger every day. You won't see Cook selling pencils on the street corner any day now.

What's happened is that other smartphone models have caught buyers' attention and have started to grow more. The Android-powered Samsung Galaxy S III is selling like hotcakes. Windows phones have shown surprising strength and are exceeding analyst predictions for sales. Because the overall mobile market is growing so quickly, Apple is still growing, but it's also losing market share.

The question is whether this slowdown in the rate of growth matters to Apple. There was once a time when what the company cared most about was profit margin. During most of its life, the Macintosh had a market share in the single digits, but had profit margins much higher than the rest of the industry because the Macintosh platform had the coolest applications anywhere.

Now the game has changed to market share and keeping that, Apple has to take a hit somewhere else and that turns out to be in profit margins. The stock market and market analysts are worried that Apple's margins will decline, which is encouraging them to sell their stock in Apple.

Worse, Apple hasn't said anything, and that adds uncertainty. One thing the market hates is uncertainty in the form of earnings. Those forces helped create the recent big drop in the price of Apple's stock. Apple will have the opportunity to end the uncertainty on Jan. 23 when it releases its earnings report. The big question there is whether that earnings report will give investors new confidence, or confirm their worst fears.


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