How the iPhone 6 ruined Apple

In his excellent book, Numerical Methods for Scientists and Engineers, Richard Hamming adopts the motto: The purpose of computing is insight, not numbers. Insight is certainly the purpose when we take numbers and plot them, but too often people don’t look beyond the obvious. So it is with Apple’s latest quarterly figures.

You’ve no doubt seen several graphs like this over the past couple of days:

Apple moving averages

(None have had such spiffy branding, though.)

The dots are plotting the raw quarterly unit sales figures, and the lines are plotting the four-quarter moving averages of those sales. Much has been written on the continuing decline of the iPad, despite all the good reviews of the iPad Pro, and on Wall Street’s downward reaction to the flattening of iPhone sales and Apple’s pessimistic guidance for the current quarter.

APPL stock price

Graph from Google Finance.

I have no interest in picking the scab that is the iPad, but I do think people are being unduly downbeat about the iPhone.

While it’s certainly possible that the great days of iPhone sales growth are over, I wouldn’t make that prediction just yet. In fact, I was surprised to learn that iPhone sales were merely flat. I was expecting a decline—not because the iPhone is losing popularity, but because the iPhone 6’s first quarter of sales was such a gigantic leap upward. The pent-up demand for a larger iPhone caused sales to increase nearly 50% year over year, to 74.47 million from 51.03 million the year before. This was the biggest percentage jump in year-over-year sales since the introduction of the 4S (which was goosed a bit because the 4S was delayed). I just didn’t think the 6S1 could keep up with that. And maybe it won’t.

But look at how things were going before the iPhone 6. Had the trend of 2012–2014 continued through 2015, iPhone sales last quarter would have been 65–70 million. Instead they were just under 75 million. It’s only in comparison to the huge holiday quarter of 2014 that last quarter looks dull.

I’m reminded of the devotion climate change deniers had to the year 1998. Because of an intense El Niño that year, global temperatures rose well above the trend line, and it remained the hottest year on record for several years. Deniers hit upon this fact, and claimed that global warming had stopped, even though the overall warming trend had continued. The iPhone 6 was Apple’s El Niño.

If sales don’t improve with the iPhone 7, I’ll be willing to believe we’ve reached “peak iPhone.” Until then, the only problem I see is that the iPhone 6 was too successful.

  1. I’m deliberately upper-casing the S in 6S because I don’t want it to be confused with a plural. I’ll follow Apple’s naming rules when they become rational again.