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How Apple's new speed bump could make it a stronger company

Michael Simon | Jan. 29, 2016
The last time sales were stagnating, a new product category emerged to change everything.

iphone6s peek
Credit: Apple

By the time the markets closed on Wednesday, Apple had lost about $37 billion of its market cap. It’s a big number, but one that was totally expected; despite setting another quarterly record for revenue, income and iPhone sales, its outlook for the second quarter was uncharacteristically weak, and investors are preparing for the unthinkable: the first ever period of non-growth for the iPhone.

It was bound to happen. Nothing grows forever—particularly something that has gotten so big so fast—-but Wall Street doesn’t operate with that kind of logic. It demands continued growth, and none of Apple’s products seem poised to fill the void left by diminished iPhone sales.

So, 2016 might be a bumpy ride for Apple. While the company will almost certainly scoop up nearly all of the handset profits and still have a balance sheet most companies would kill for, there’s a distinct possibility it will lose its status as biggest company in the world (based on market capitalization) to Alphabet, while struggling to meet the lofty year-over-year sales goals set in 2015. But if history is any indicator, Apple might actually benefit from this surprising downturn, and come away all the stronger for it.

History repeats itself

The fall of 2000 should have been a great time for Apple. Heading into the all-important December quarter, it had a whole slate of new, exciting products, and its vision for the desktop of the future was finally beginning to take shape.

At the Macworld New York expo in July, Steve Jobs had unveiled a sweeping and revolutionary change to its desktop line, with new iMac and Power Mac G4 models, new displays, a brand-new optical mouse, and the jaw-dropping Power Mac G4 Cube. And at the September Paris Expo it had released new iBooks and ceremoniously shipped the very first Mac OS X Public Beta.

But instead of riding good tidings into the holiday season, Apple fell on hard times. On the afternoon of Sept. 28, 2000, it released a media alert that warned of lower-than-expected fourth-quarter earnings. In response, Apple’s stock lost 50 percent of its value in a single day, and it would be years until it rebounded. But it might have been the best thing that could have happened.

Slow and steady

Apple’s “speedbump,” as Steve Jobs described it, wasn’t due to a lack of interest in its products. The iMac was still one of the most desirable PCs around, and the small and svelte Power Mac G4 Cube had swept everyone off its feet in the Big Apple. Rather, Apple was hit with the same economic realities that had hit chip-making giant Intel earlier in the month.

 

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