They say pride comes before a fall, and the cocky geeks who run Apple should have seen this moment coming.
The world’s first trillion-dollar company, a technology giant that has basked in praise for decades as the darling of Silicon Valley, has announced that its sales are slowing for the first time in 16 years.
The shock announcement, made by chief executive Tim Cook on Wednesday, knocked 9 per cent off Apple’s share price, its biggest one-day fall in five years, (£333bn in the last three months) and sent New York’s Dow Jones stock exchange plummeting, fuelling fears of an economic slowdown.
Critics have long cautioned that there are too many rivals in the luxury smartphone market, offering arguably better and much cheaper phones, for Apple to keep getting away with pushing up its prices [File photo]
As investors shuddered, the head of the U.S. tech giant blamed his company’s results on economic weakness in the Greater China region — which includes China, Taiwan and Hong Kong and accounts for about a fifth of Apple earnings — where people could no longer afford its products.
Humiliated, Mr Cook was forced to admit there was waning demand for its main product, the iPhone, despite recently playing down talk about its decreasing popularity.
President Trump’s recent sanctions on China may certainly have fuelled anti-American sentiment in Asia. But analysts believe Apple’s woes are more specific to the company.
The Chinese, whose average annual disposable income is less than $4,000 (£3,166), are not the only ones showing growing reluctance to fork out as much as £1,480 for a phone or £640 for a watch.
Perhaps the only area in which Apple has really been innovating recently is its new show-off £3.8 billion headquarters in Cupertino, California, the greatest wonder of the corporate world [File photo]
For Apple’s determination to charge ever higher prices for products only marginally better than their predecessors is starting to annoy even its most loyal customers.
After all, Mr Cook, who replaced Apple’s visionary co-founder Steve Jobs as chief executive in 2011, also took the opportunity to admit that they were also in trouble in more developed markets, such as America and Europe.
There, once loyal Apple customers are doing what had been almost unthinkable: ignoring the company’s calls to upgrade their expensive iPhones every year.
From the point of view of critics, Mr Cook’s explanation was infected by the hubris for which Apple is notorious. For nowhere in his letter to shareholders did he own up to what many others see as the root of his problems: Apple, they chorus, is just too greedy.
Last year alone provided fresh evidence that Apple, a company with a fanatical cult following, is taking its devotees for mugs.
The world’s first trillion-dollar company, a technology giant that has basked in praise for decades as the darling of Silicon Valley, has announced that its sales are slowing for the first time in 16 years [File photo]
For those who have lost track of the many versions of the iPhone — which provides Apple with two thirds of its revenue — 2018 saw the unveiling of the iPhone XS and XS Max models, which can now be bought from £1,000 and £1,100 respectively.
Although these latest models operated more quickly than their predecessors, Apple aficionados realised their old 6S and 7 iPhones ran just as well, despite being cheaper. The same thing had happened the previous year.
There was still a rather pathetic stampede at Apple shops by diehard fans who cannot live without the latest product, but other Apple users are either sticking with their old iPhones or giving up on them completely.
That shouldn’t be too surprising. Critics have long cautioned that there are too many rivals in the luxury smartphone market, offering arguably better and much cheaper phones, for Apple to keep getting away with pushing up its prices.
Yet it has continued to do so, not only with phones but also with products such as the iPad and the MacBook Air laptop computers.
Wednesday’s profits bombshell is further vindication for those who say Apple has lost its way under 58-year-old Mr Cook.
While few disagree that Steve Jobs was an egotistical monster, he was a genius at innovation and marketing who kept coming up with new products that consumers concluded they couldn’t live without.
He founded Apple in 1976 with schoolfriend Steve Wozniak and the company enjoyed success with the Macintosh computer in the Eighties before its fortunes dwindled, leading to Jobs being ousted in 1985.
In January last year, French prosecutors announced that they were investigating Apple over alleged planned obsolescence — creating something with an artificially limited life — in its iPhone, which is a crime under French law [File photo]
He returned to the helm in 1997, then shepherded the company to astonishing growth with a string of pricey products that millions of people decided they had to own.
Apple became, well, the apple of Silicon Valley’s eye under Jobs, who died aged 56 in 2011, but its creative spark has dwindled since his death.
The company hasn’t had a blockbuster new product for years. Instead, Apple has relied largely on tweaking existing products or copying those already on the market from other companies, such as the Apple Watch and the HomePod, a smart speaker.
Sceptics compare Apple’s fortunes under Mr Cook to those of the once-mighty software giant Microsoft, which, after co-founder Bill Gates stepped down, missed every key technological advance — notably smartphones — of the 21st century.
But Cook realised there were other ways to make sure customers keep buying your gadgets — for instance, deliberately making them so they need replacing.
In January last year, French prosecutors announced that they were investigating Apple over alleged planned obsolescence — creating something with an artificially limited life — in its iPhone, which is a crime under French law.
A month before, Apple admitted that previous iPhones had been deliberately slowed down through software updates. In October, Italy fined Apple ¤10 million euros (£9 million) for introducing planned obsolescence into the iPhone.
Morality isn’t something built into Apple’s ethos. Although the company insists it complies with all tax regulations in the countries in which it operates, it has been attacked for doing business through offices in low-tax Ireland and Jersey to minimise its bills.
It has also been criticised for accumulating huge ‘offshore’ cash reserves, revealed last year to be as high as £198 billion.
Apple’s quality control has also become a growing concern, with its products fast losing their reputation for being well-designed and reliable.
In November 2017, Apple’s security sloppiness reached alarming levels when it emerged that users of its new computer operating system, High Sierra, could gain access without using a password.
For those who have lost track of the many versions of the iPhone — which provides Apple with two thirds of its revenue — 2018 saw the unveiling of the iPhone XS and XS Max models, which can now be bought from £1,000 and £1,100 respectively [File photo]
A hacker needed only to type ‘root’ into the surname box, leave the password field blank and press the enter button a few times, and he or she could get into a computer.
It followed another embarrassing bug with High Sierra which meant that when some users asked the computer software for a password hint, it simply revealed the password in full.
Perhaps the only area in which Apple has really been innovating recently is its new show-off £3.8 billion headquarters in Cupertino, California, the greatest wonder of the corporate world.
The 2.8 million sq ft campus, which looks like a grounded spaceship, was designed to the demanding specifications of Mr Jobs.
Guidelines for the wood that could be used in its construction ran to 30 pages alone, while the 90,000 sq ft staff canteen has glass doors the size of those used on aeroplane hangars. (Not surprisingly, a number of staff were soon sent to hospital after running into the pristine glass.)
Angry Apple shareholders who have questioned why the company is blowing billions on a new office will feel even more justified in kicking up a fuss after today.
If Apple’s fortunes really are permanently on the wane, its ‘mother ship’ will go down in the annals of business history as a pretentious, overblown monument to a tech company with far more money than sense.