So Apple had a pretty good financial day yesterday. The broad strokes: it reported $75.9 billion in revenue and a whopping $18.4 billion in pure profit, the biggest of any public company ever. And yet, not all was well among the company's investors and shareholders. Apple's first quarter results are always pretty insane because they encompass the holidays and the launch of its newest model iPhones. And every year, iPhone sales surge pretty dramatically come Q1. Every year, that is, except this one.
Apple sold 74.78 million iPhones this time, compared to 74.5 million iPhones in the same quarter last year. That's still a ridiculous amount of hardware to move in three months, but it hasn't stopped people from wondering what's up with those slowing iPhone sales. We can chalk it up to lots of things, and there's no single, definitive answer.
People bought the iPhone 6 and 6 Plus in droves, which isn't a surprise because it represented a significant design and performance shift from the previous year's iPhone 5s. Perhaps people didn't feel the need to jump into an improved, but visually identical device after cradling their iPhones for a year — S-series iPhones historically don't make for huge sales bumps. Meanwhile, Apple CEO Tim Cook pointed out that global economic conditions were dire, with currency values declining not only in established economies like Canada and the UK, but in growing ones like Brazil and Russia. Less spending power equals fewer people shelling out for iPhones.
"We're seeing extreme conditions unlike anything we've experienced before just about everywhere we look," he said during the customary earnings call.
Whether the last three months were just a fluke or a symptom of some deeper issues remains to be seen, though. Here's the thing: no incumbent is safe from market forces and fickle shifts in consumer taste. A report from IDC released this summer forecasted global smartphone sales to slow down in 2015, and the actual numbers were even worse than they expected -- worldwide smartphone shipment growth was less than half of what we saw in 2014.
Just look at Samsung, which released a new earnings report of its own today. The Korean tech titan has spent the better part of two years releasing new phones and seeing its power in the market erode thanks to lower than expected sales and dwindling profits. That road culminated with today's release, which saw the company's mobile and IT arm make ₩2.23 trillion ($1.84 billion) off total sales of ₩25 trillion ($20.67 billion). The numbers look pretty good if you're walking into this cold, but here's the killer context.
Samsung's arc is clear if you look at how much money the company pulled in from its mobile division over time. Its last big mobile peak was a little over two years ago when it made ₩6.7 trillion ($5.55 billion) in profit on ₩36.57 trillion ($30.3 billion) in phone sales. After that, the company spent nearly a year making less and earning less profit from its phone business before slowly starting to recover. The road to that recovery hasn't been easy, naturally, and it includes no shortage of corporate shakeups and painful admissions. Remember when Samsung didn't make enough Galaxy S6 Edges to go around and had to cut prices on the regular S6 to make it sell? Ouch. Hell, Samsung is still in a tricky position — this past quarter saw a dip in mobile sales after a brief recovery, and the company's still having trouble turning big profits.
That means Samsung is moving lots of inexpensive devices, a crucial part of its strategy to bulk up its influence in developing markets like China. Upstarts like Xiaomi and stalwarts like Huawei do a great job of churning out attractive, powerful devices that sell incredibly well in their home country. A report from Canalys issued this summer pegged them as the two biggest smartphone sellers in China, with Apple and Samsung trailing in third and fourth place, respectively. Couple that pressure with even more from good, cheap devices being snapped up by the country's growing middle class and it's no wonder Samsung's been having such a tough time.
The measure of a sustainable business is seeing how it reacts to the perfect storm of economics, technical innovation and people's tastes. For now, both companies' answers are similar: build relentlessly in search of capturing more lightning in a bottle. Samsung pushed out the mid-range Galaxy A9 to help its chances in China, and will unveil its Galaxy S7 at a press conference at Mobile World Congress in Barcelona. Apple has its next-generation iPhone 7 in the works too, along with what seems to be an updated iPhone 5s to keep small phone fans across the globe happy. Innovation and the winds of global economic change might carry these titans to even higher heights; right now, though, they've just got to buckle down.