‘Falling from Grace’: Could Apple Really Become the Next Nokia?

Nokia Credit: Sukit Kijkankwin / Shutterstock
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In a memo issued to investors earlier this week, Apple CEO Tim Cook lamented how “multiple factors”, including lower than expected iPhone sales performance, explain why his company has reduced its revenue guidance for the Holiday quarter ending December 30, 2018, down to $84 billion from its early-November projection of between $89 and $93 billion, according to a CNBC report.

“Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline,” Cook said, adding that “While Greater China and other emerging markets accounted for the vast majority of year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be.”

Cook cited several other variable market-specific factors that may be playing into the iPhone sales slump we’ve been reporting on for weeks now. As per those reports, Apple’s stock (NASDAQ: AAPL) has [and continues to] be battered by a barrage of negative news citing slashed iPhone sales, production and overall outlook, which as of Thursday morning have collectively knocked 39 percent off AAPL’s value. The stock has dropped from its all-time high of $232.07 per share back in October, to its current trading price of just ~$143.84 per share.

Problems Loom?

Of course, this massive drop in value has caused a stir on Wall Street already, with multiple investment firms and analysts weighing in on what the future may hold for Apple — especially as the tech-giant, itself, points to uncertainty in the likelihood of further iPhone market penetration.

The latest to chime in is Goldman Sachs’ analyst Rod Hall, who in a separate note to investors this week warned of Apple’s future troubles — and specifically how the iPhone-maker will more than likely have to lower its iPhone sales outlook throughout the rest of 2019 too, to account for transitions in the Chinese market.

“We see the potential for further downside to FY19 numbers depending on the trajectory of Chinese demand in early 2019,” Hall said in a note to his clients obtained by CNBC on Wednesday.

According to that report, most analysts had expected Apple to pull in $91.3 billion in revenue during the Holiday quarter — which is ~$7.3 billion more than Cook’s updated estimates.

Sadly, this all merely amounts to more bad news for the company, whose stock shed an additional 9 percent during Wednesday and early-Thursday trading upon the release of Cook’s memo, and is now down to its lowest trading price since April 2017. 

Another Nokia?

In his assessment of Apple’s outlook, Hall not only slashed his 12-month forecast for the company’s stock (down to $140 per share from his previous estimates of $182 per share), but he also went even further, likening the iPhone-maker’s struggles to those of Nokia — the now-defunct Finnish phone-maker whose devices once dominated the mobile market.

The analyst points out how Nokia “became reliant” on customer upgrades years after its’ Symbian-powered flagships like the E62 and N900 had “saturated the market”.

But when customers began waiting longer to upgrade their handsets, woes ensued for the company’s bottom line and ultimately its very existence as a world-leading smartphone vendor.  

Hall then points to a similar theme present in Cook’s memo, in which the Chief Executive specifically wrote that Apple’s finding it more difficult than ever to get users to upgrade to the latest iPhones — although certain models are still flying off shelves.

“Beyond China, we don’t see strong evidence of a consumer slowdown heading into 2019, but we just flag to investors that we believe Apple’s replacement rates are likely much more sensitive to the macro now that the company is approaching maximum market penetration for the iPhone.”

Of course, Nokia was ultimately pushed out of business by companies like Apple and Google with their significantly more advanced iOS and Android OS devices. And while it’s highly unlikely that Apple will ever suffer a similar “falling from grace” — as the Finnish phone-maker did years ago, before being brought back to life by HMD Group — Hall’s report nonetheless echoes the sentiments of several others before it in predicting a very uncertain year ahead for Apple’s iPhone.

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