to feel the impact of the Wuhan virus outbreak, but there's more to the Apple problem than the pandemic the bleeding and apple had begun. Well before the virus from China struck the company issued a similar warning last year to the first ones are Apple in the last 16 years it cut its Revenue Outlook by nine billion dollars the reason slowing iPhone sales especially in China Apple CEO. Tim Cook made an admission in a letter. He said in fact most of our Revenue ooh shortfall to our guidance and oh 100% of our year over year worldwide Revenue decline occurred in Greater China across iPhone Mac and iPad. Almost a year later. The losses have grown in October. Apple shares fell by close to six percent Revenue in China drop by 29 percent the lowest since 2014. Why are the numbers down last a an analyst at Goldman Sachs said that this is the beginning of a long-term story wrong.
home compared Apple situation to Nakia he said Nokia relied on customers upgrading their phones frequently, but people started waiting longer and longer to upgrade their phones because they did not need a new one frequently. Apple faces the same problem people like to repair not to replace last year Tim Cook listed repairs is one of the many reasons why apple is unable to sell new phones. The company seems to be depending too much on the glories of the past newer phones and computers will Will not help its cause the launch of the iPod the iPhone the iPad the App Store. These were moves that not just launched a new business vertical for Apple. They made it a dominant force in that market, but for almost a decade now Apple seems to have fallen behind on Innovation instead of conquering new lands. The company seems to be more focused on defending it's tough.
I skate to where the puck is going to be not where it has been Steve Jobs love this quote from Wayne Gretzky. I skate to where the puck is going to be not where it has been Apple seems to be failing to live up to these words words that its founder lived by for any new innovation whether it's a company or a country. They need to spend on research and development Apple despite its massive cash coffers is understanding on Innovation when compared to its
Guys here are some numbers during the second quarter this year. Apple spent four point eight billion dollars on research and development R&D. That is 8 percent of its total revenue. Sounds like a lot but when you compare this trap and Spears it isn't a lot in the same quarter Microsoft spend five point two billion dollars on R&D that is close to 14 percent of its total revenue. Google's parent company alphabet spend six point two billion dollars on R&D. That is almost 16 percent of its Revenue. mergers and Acquisitions is another way for companies to bring fresh ideas and new products into their fold, but apple is going slow on this front, to according to one claim. Apple has spent only 2% of its cash flow on mergers and Acquisitions since 2012. Despite the tough competition what keeps apple going is its brand value buying an Apple product has an aspirational value if you buy anything Apple you feel that you belong to that higher class, even if it means
Selling out substantially more money. There's a term for it the Apple tax an apple can charge the stacks because of its brand values but in recent years even Brand Apple has taken a hit. Here's a chart when Apple launched its new series of iPhones this year. It did not generate the same bus as it used to on Google the launch of iPhone 5 was the peak and since then it has seen a steady decline time. And again, we've heard about the poor working conditions. In fact factories that make Apple products recently The Washington Post reported that Apple try to weaken a bill aimed at preventing forced labor in China last week pictures from an Apple Factory in India went viral angry workers destroyed parts of this facility allegedly over unpaid wages and while all of this may not have a direct impact on sales. It does hit perception it tarnishes Brand Apple in the market and in the media and then there's a charge of cutting Corners recently Apple decided to
No longer include wall Chargers and earbuds in the boxes of new iPhones. Apple says it is for the environment to limit a waste since people already have phone chargers at home. They may not need a new one. Guess what they do. No one is buying this argument fewer people are buying the iPhone by October revenues from iPhone drop by 21% for Apple people still need Chargers or your phones, but they're simply by from elsewhere. They still add to the E-Waste by the way up. L was not saving the environment it was saving its margins. It was trying to maintain the profitability of the iPhone parts for a 5 G phone cost more Apple sold about 217 million iPhones in 2018, and it just 5% these people decide to add the airports to to their cart. That's an additional 700 million dollars in gross profit for Apple Brazil seems to have seen through these tricks. It is forcing Apple to include a charging brick in their iPhone.
Boxes well done. We see in the world of technology things can change at lightning speed. Apple face is a dual challenge today to not only survive the cut throat competition but to remain a dominant player in the market, so it cannot be business as usual for Apple focusing purely on the bottom line will not help incremental upgrades and cutting Corners may give apples profits of boost, but Apple needs to go beyond existing product lines enter new territories build products that are new and different. Isn't that bring new customers else face the risk of meeting the fate of the Nokia's and the blackberries of the World. Perhaps Apple can find some inspiration in one of its old taglines think different