Six worrying questions surrounding Apple's revenue miss

Why Apple's 13-year long growth streak came to an end is pretty clear - people are buying less stuff, especially iPhones - but a deeper look at the numbers brings up a number of disturbing questions.

So, Apple's 13-year long growth streak has come to an end. Why it happened is pretty clear - people are buying less stuff, especially iPhones - but a deeper look at the numbers reveals a few questions.

Question #1: What's behind that big drop in iPhone average selling price (ASP)?

During Q1 16 the iPhone ASP rose to $690, but this quarter saw a significant fall to $640 (to a level not seen since Q1 14). This was to be expected following the launch of the cheaper iPhone SE, but the effect of this won't be seen until Q3 16. Also, as was explained during the conference call that followed, there's weakness in currencies to take into account.

But still, it was a pretty big drop.

One plausible explanation is that the momentum behind sales of the iPhone 6S/6S Plus came to an end much quicker than previously, possibly as a result of there being so much speculation surrounding a "cheaper iPhone" in the run-up to the unveiling of the iPhone SE. But that leads on to a second question - was the iPhone SE cheap enough for people who were holding out for a cheap iPhone?

Question #2: What happened to the Mac?

We know PC sales are in the gutter, but the last quarter was a brutal one for the Mac, with sales falling to almost 4 million, a level they have not been near since Q2 14. And this happened despite double-digit Mac growth in a number of markets, including Russia, Korea, Singapore, Taiwan, and the UAE.

Not only that, but it is the biggest unit decline in Mac sales ever.

What happened? Is it just the lagging "PC sales effect" finally catching up with the Mac, or has the Mac lineup become too lackluster with its focus on thinner and lighter?

Question #3: Where's the iPad Pro effect?

Despite unveiling the 12.9-inch iPad Pro, with a price tag starting at $799.99, the average selling price needle has hardly budged from the $430 mark that it has hovered around for the past few quarters.

Bottom line, cheaper iPads clearly still rule. So what's Apple's plan with the more expensive offerings?

Question #4: Where's the iPad upgrade cycle?

While it seems that iPad sales have stabilized at around 10 million - for now - there's still no sign of an upgrade cycle.

Apple could trigger an upgrade cycle by pulling the plug on iOS support for the iPad 2, currently the oldest iPad supported by Apple, and which back in November of last year made up 20 percent of all iPads out there, but that comes with a risk attached. That risk being that owners decided that they could live without an iPad altogether, which wouldn't be good for the ecosystem.

There seems to be a real risk that outside of a band of hardcore users, the iPad is one of those devices that you buy once, use a bit, but aren't then moved to upgrade it or buy another when it comes to the end of its life.

Question #5: How well is the Apple Watch doing?

Apple doesn't talk about Apple Watch sales, and instead lumps its earnings in under "other products" along with Apple TV, Beats products, iPod and Apple-branded and third-party accessories.

Can we tell anything about Apple Watch sales by looking at this one number?

Well, go back to a year-ago quarter and the Apple Watch doesn't appear on the books, and between then and during that time revenue from this "other" category has grown 30 percent, or about $500 million.

$500 million is equivalent to about a million Apple Watches for the quarter. Sure, iPod sales will have surely declined in that time, but by how much it's hard to say. But what we can say is that the Apple Watch isn't really much more than a drop in the ocean.

Another factor to consider too is that Apple "services," which include stuff like AppleCare, Apple Pay, licensing and such, pull in almost three times the revenue than the "other" category.

Question #6: One more thing?

With iPhone sales showing signs of weakening, and the safety net that the iPad or Mac might have offered vaporizing, Apple clearly needs a "one more thing," product to keep the dollars coming in.

What will this be? A car? A TV? A spaceship? Who knows, but it's clear that if Apple wants to keep up the momentum that's it has built up going from the iPod to the iPhone and then the iPad, then it's time for something new.

See also: