WASHINGTON - The world's most profitable company became less valuable this week when California-based Apple Inc. reported the first decline in iPhone sales in 13 years.
Apple CEO Tim Cook blames the struggling Chinese economy for Apple's weaker earnings, but analysts say other factors may be at play including the increasing saturation in the smartphone market and a shortage of new products.
More than two billion people around the world own a smartphone – nearly one in five of them are iPhones. The phone’s success has been key to Apple’s transformation into a global technology leader, but the days of people lining up around the block for the next great iPhone may be over.
Industry analyst Ross Rubin told VOA via Skype that in some ways Apple has become a victim of its own success.
“Apple of course competes in the premium segment of the market -- very strong in the U.S., Japan, Western Europe,” he said. “And those are economies where we're starting to see increasing smartphone saturation.”
That market saturation is why Apple is likely looking to new markets, says business professor Greg Autry. The company recently released a new budget model called the “iPhone SE” which some see as a way to appeal to more consumers in the developing world.
“India is obviously a highly-populated market, with again a growing middle class, and there is opportunity there,” Autry said. “But it isn’t growing as smoothly as China did during its growth period.”
Ultimately Apple needs to move beyond the iPhone, according to Frank Gillett, an analyst at research and advisory firm Forrester. That could come either through converting Android users, who now make up the biggest share of the smartphone market, or expanding its online software and cloud business.
“Now, if they came out with a breakthrough product or price, then you might see a change, particularly if it's different than the other smartphone makers in this market. But absent that kind of innovation in price or features, I think we're in a much more gradual and uncertain market," Gillett said.
It’s not a drastic turn of events for Apple which earned revenues of more than $50 billion in the first quarter. But for many investors, it could raise the question of whether Apple is still the innovative, technological powerhouse it used to be.