How To Explain Apple's First Annual Revenue Decline Since 2001?

Apple Logo
The Apple logo is displayed outside company's Regent Street store on September 29, 2016 in London, England Photo : Jack Taylor/Getty Images

Unfortunately for Apple, the company's revenue is headed in the wrong direction. For the first time since 2001, the high-tech giant experienced an annual revenue decline.

Apple's Revenue Figures

According to The Verge, Apple's annual revenue has declined to $217 billion in the 2016 fiscal year, from $233.7 billion in 2015. This represents 9 percent revenue decline in year-to-year figures. According to market experts, Apple's revenue decline can be explained largely by the decline in iPhone sales.

For the fourth quarter, company's revenue fell 9 percent to $46.85 billion. This comes short of $46.89 billion predicted by market analysts. Apple's net income dropped to $1.67 a share from $1.96 a share, or $9.01 billion from $11.1 billion a year ago. Wall Street analysts were expecting per-share earnings of $1.65.

Overall, Apple sold 45.5 million iPhones. That number represents five percent less than the 48 million the company sold in the same quarter a year earlier. In China, the larger market in the world, Apple's sales also continued to drop, falling 30 percent from a year ago.

Apple's iPhone sales are down 5 percent and iPad sales are also down 6 percent from last year. When it comes to Mac sales, they took an even bigger huge hit, down 14 percent. In case of the Mac, this can be explained by a lack of serious hardware updates.

The one sector that isn't in decline is Apple Services, including iTunes,  iCloud, and Apple Music. Sales of the company's Services grew 24 percent year over year, bringing $24.3 billion in revenue this fiscal year. Now, Services have become Apple's second biggest revenue driver.

What Apple Can Do?

It's becoming obvious that the high-tech giant needs to figure out fast a way to fix its fiscal issues. Given the expectations for next year's iPhone, it is likely that Apple will be able to come back to profit. However, for this to happen, it may take some time because the bulk of iPhone 7 sales will hit only in the next quarter.

At the moment, it's unclear if Apple's iPhone 7 will maintain sales like previous iPhones have. Consumers might wait until next fall when the company will unveil its 10th anniversary iPhone. The fiscal year 2017 could be impacted in a negative way by expectations of a radical redesign of the world's most popular smartphone.

Market analysts agree that the iPhone is the only product that can turn Apple's revenue to profit. The consumer tech giant has struggled to spark buyers' interest since introducing the popular iPhone 6 two years ago, hoping to make the iPhone an even-better seller year after year. But it proved to be difficult for the company to reignite interest.

According to CNET, the iPhone 7 Plus that has been launched last month is water resistant and comes with a new dual lens camera. However, its problem is that it looks too similar to the iPhone 6. It seems that consumers are not convinced to upgrade.

The year 2017 is going to be a crucial year for Apple. Preparing to celebrate the 10th anniversary of the iPhone, the company is reportedly planning its biggest hardware update ever to its flagship product. Everyone, from tech experts to consumers, knows it and the expectations are big.

For the iPhone 8, there's not just an assumption that it will be better than the current one. Everyone's expectation is that the next iPhone will be amazing. This mindset will put a lot of pressure on Apple and it is still uncertain how it will affect sales moving forward. 

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