iPhone Sales Slip Due to More Causes Than Tarnished Coolness Factor

By Wayne Rash  |  Posted 2013-01-15

iPhone Sales Slip Due to More Causes Than Tarnished Coolness Factor

The iPhone is no longer cool. Moms, dads and even grandparents are using Apple's flagship product. Worst of all, teachers are using iPhones. To people in their late teens and early 20s who are the drivers of much of technology adoption, this is an anathema.

According to a story in Forbes, Tina Wells, CEO of the Buzz Marketing Group, is saying that "Apple is done." Teens cite the fact that their parents and teachers are using iPhones, and they complain about Apple's failure to innovate in the iPhone 5 as reasoning for the decline of coolness. What is cool? Apparently the Samsung Galaxy S III and the Microsoft Surface tablet.

The lack of coolness in the eyes of young people may be one factor in a slowing of the iPhone's rate of growth. Other factors may include aggressive marketing on the part of Samsung and Microsoft along with several missteps on the part of Apple.

Some even suggest that Apple CEO Tim Cook has committed the unforgivable sin of not being Steve Jobs. The reality, of course, is that several factors, no single one of which by itself would cause an insurmountable problem, are taking the shine off the iPhone 5.

  • Apple has failed to keep up with what the market wants. Phone screens are getting larger for a reason, and it's not just to watch movies. Apple's iPhone 5 includes a 4-inch screen. It's competing with the Samsung Galaxy S III, which has a 4.8-inch screen, and the Nokia Lumia 920 which has a 4.5-inch screen. While those fractions of an inch may not seem like much, they vastly enhance usability, as I found out when I bought an iPhone.
  • Apple has failed to embrace the latest in mobile technology in some areas. Remember those Samsung television commercials showing lines of people waiting at the Apple store? You know the ones where two young men touched their Galaxy S III phones to share playlists and contacts? Apple didn't incorporate near-field communication (NFC) into the iPhone. Even BlackBerry has NFC at this point.
  • The iPhone still doesn't have support for things that users want, like SD cards or a USB connection (without having to buy expensive accessories), which buyers are finding hard to understand when every other phone on the planet seems to have them.
  • Meanwhile, Apple has been failing to make progress in other areas, like updating the Mac Pro, Apple TV and keeping the iPod relevant.

iPhone Sales Slip Due to More Causes Than Tarnished Coolness Factor

  • 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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