Apple’s new year isn’t off to a great start. Instead of celebrating another stellar quarter, Apple CEO Tim Cook wrote a lengthy letter to investors warning about subpar iPhone sales and an overall dip in revenue to the tune of about $6 billion. That mean Apple is only going to make around $84 billion in revenue over the 3-month holiday quarter, an impressive number for sure, but one that represents a five percent dip from the same quarter last year and confirmation that all is not right in Cupertino.
But while the news today is certainly grim, it could represent something of an opportunity for Apple. With some of the pressure of both the stock price and its streak of quarterly earnings growth, Apple could use this as a chance to implement some changes going forward, as it re-evaluates its lineup and strategy for the next round of product launches. Here are five ways Apple’s bad quarter could impact the rest of the year and beyond:
Prices may drop
The most obvious way for Apple to boost growth is to lower prices. 2018 ushered in a disturbing trend, as prices rose significantly across all of Apple’s product lines. Unsurprisingly, Tim Cook failed to mention this fact in his letter, but it’s hard to believe that higher prices didn’t deter people from upgrading. During the lead-up to Christmas Apple pulled out every trick in its arsenal to boost sales, including raising the credit on trade-ins, but nothing gets people to open their wallets quicker than an honest-to-goodness price cut.
Wearables are certain to expand
If there’s anyone who understood that the iPhone’s bottom-line dominance wouldn’t last forever, it’s Apple. And the tracks are already being laid for the next phase: wearables. Cook specifically pointed to the strength of Apple’s burgeoning wearables lineup in his letter, a category which he says “grew by almost 50 percent year-over-year, as Apple Watch and AirPods were wildly popular among holiday shoppers.”
There are already rumors of AirPods 2 with water resistance and Hey Siri support on the way, and we can bet the farm on a new Apple Watch arriving in the fall, but Apple’s plan for wearables won’t be limited to existing products. Apple is reportedly working on a set of studio headphones and a pair of AR glasses, so we may start to see new wearable devices from Apple much sooner than later. Also, let’s not forget that the iPod didn’t truly take off until Apple opened it up to Windows users, so perhaps 2019 is the year Apple lets Android phones play nice with the Apple Watch.
Cheaper devices may return
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9.7-inch iPad (6th generation)
Along with higher prices, Apple also continued to chip away at its entry-level products. Aside from the $329 iPad, Apple offered very little in the way of affordable alternatives to its high-end devices. The iPhone SE was axed, the iPhone 8 gave way to the higher-priced XR, and the once-budget Mac mini transformed into a relatively expensive pro machine. But there are signs that Apple will bring back the entry-level tier sooner than later. Rumor has it that Apple is working on a new iPad mini, which would add some extra value to the tablet lineup, ands we could also see the return of the iPhone SE and a sub-$1,000 MacBook. You know, products that we want and can afford.
Services will become even more important
Over the past couple years Apple’s Services category has masked much of the softness in hardware sales. According to Cook’s letter, Apple broke another record as people spent more on apps and in-app purchases, subscribed to Apple Music, upgraded their iCloud storage, etc. But with a billion-plus active devices out there, the ground for growth is extraordinarily fertile for growth.
We already know that there’s a new video service on the way, and we could see an expansion of iCloud benefits, a la Google One. But the golden goose here is Messages. Currently free and tied to the Apple ecosystem, Apple could turn it into a cash cow by making it a paid service—for Android users. Google has continuously dropped the ball on developing a messaging app that can rival Messages, and I think a Messages app that lets Android users sync between devices and text from their PC would be extremely successful. Even with just a few million subscribers, Apple could easily pad its Services revenue with a cross-platform version of Messages for $2 or $5 a month.
Future features may follow international trends
If China is truly to blame for flagging iPhone sales, Apple may begin to start giving far-east customers a reason to upgrade. We saw a glimpse of this with the dual SIM slots on the new iPhones—a feature that’s far more important in Asia than it is in the U.S.—and Apple could increasingly look to that portion of the world for future innovations. That means things like a heavier investment in AI beyond, high-speed charging, an emphasis on low-light photography, disappearing bezels, and, of course, lower pricing options. And it’s not like U.S. buyers wouldn’t want these things either.