Apple (NASDAQ: AAPL)’s shares, driven down by concerns
about iPhone sales in China need news to reverse the
slide. Rumors in the media are that Apple will release the
iPhone 7 late in September. Under the circumstances it
will rate as among the most important iPhone events since
the product was created in 2007.
While the company may call the smartphone the iPhone
6S, if Apple adds enough features, it will be the
equivalent of an all-new iPhone. Whether or not it is
called the iPhone 7, the new product will be the most
critical contributor to the recovery of Apple’s shares, not
just because of the China challenge, but because its
Watch product has been a failure. This leaves Apple
without another leg to stands on.
As an aside, it is worth noting the the concern about
China iPhone sales is built on a shaky foundation. The
company which presented the China smartphone sales is
Canalys. The firm is well respected but is certainly not
one of the premier tech research firms in the world. This
is the content of its findings about Apple in China:
As market consolidation continues in China, one in three
smart phones shipped were from Huawei or Xiaomi in Q2
2015. Xiaomi regained its crown as the largest smart
phone vendor in China with 15.9% market share,
according to Canalys estimates. However Huawei is hot
on its heels, growing 48% sequentially – the fastest
growing vendor in the top ten. Huawei’s 15.7% share
leaves a very slim lead for Xiaomi. Apple fell to third
place, followed by Samsung and Vivo.
Although Apple’s last quarter could hardly be considered
a disappointment, the company continued to paint itself
into a corner regarding China sales. , To some extent,
the anxiety about Apple’s worldwide finance results was
overblown. Apple posted quarterly revenue of $49.6
billion and quarterly net profit of $10.7 billion which was
$1.85 per diluted share. That compared to revenue of $
37.4 billion and net profit of $7.7 billion, or $1.28 per
diluted share, in the year-ago quarter. However,
international sales accounted for 64% of the top line.
Greater China sales last quarter were $13.2 billion of
Apple’s $49.6 billion total. The growth rate for the
region, year over year, was 112. The rate was not even
close in any other region.
If revenue growth mostly relies on sales of the iPhone,
and the iPhone 6 is at the end of its highest demand life
cycle, the iPhone 7 release has to be a blockbuster. The
iPhone 6 posted sales of 10 million during the first
weekend it was available. To impress investors, that
numbers for the new iPhone better be closer to 12
million or 13 million in the days after launch. Otherwise,
Apple can be criticized for a slowdown in demand for its
major product line.
So, the future of Apple’s share price will be determined
by just a few days of sales…..and the earliest accurate
report on earnings in China. It used to be Apple just had
to post exciting iPhone numbers. Now, it just has to
post them in China
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