In a perfect demonstration of how writers seeking to advance a narrative can take a molehill of flawed data and create a mountain of fearsome clickbait, Axios just dug up IDC’s “embarrassing” smartphone data from the March quarter in an effort to portray Apple as doomed.
If you can draw a picture of Apple being eaten up, it must be true, right?
IDC’s “embarrassing” data
You might recall that IDC’s Q1 2019 sales estimates for global smartphone shipments was “highly inaccurate” to the point of “embarrassing,” according to well-regarded analyst Neil Cybart of Above Avalon.
IDC had estimated that Apple only shipped 36.4 million iPhones, which would represent a shocking 30.2 percent annual drop in sales. However, IDC’s figures simply weren’t possible given the iPhone revenues Apple itself reported for the March quarter.
As Cybart explained in a tweet, “IDC isn’t close with their iPhone unit sales estimate for the quarter that Apple just reported. Apple sold way more than 36M iPhones. Plug 36M into an earnings model & you will find out that number is impossible to achieve given Apple’s stated iPhone revenue. Embarrassing for IDC.”
IDC isn’t close with their iPhone unit sales estimate for the quarter that Apple just reported. Apple sold way more than 36M iPhones. Plug 36M into an earnings model & you will find out that number is impossible to achieve given Apple’s stated iPhone revenue. Embarrassing for IDC pic.twitter.com/C3CwVClZto
— Neil Cybart (@neilcybart) May 1, 2019
IDC’s iPhone data was far below the estimates of Canalys, Cybart’s Above Avalon and Counterpoint Research. IDC’s data was so bad that it even prompted Counterpoint Research to issue a press release explaining that its own data tracking was not similarly flawed.
On top of that, China’s Xiaomi took the unusual step of insisting in its own press release that IDC had also gotten Xiaomi sales estimates wrong, although its shipment figures were not nearly as underestimated by IDC as Apple’s were.
IDC’s data was not only off by multiple millions of iPhones sold within the three month period, but its conclusions on the direction of Apple’s sales trajectory were also grossly overstated. Rather than being down by more than 30 percent over the previous quarter, Apple’s iPhone unit sales decline was much closer to the 17.3 percent revenue drop the company itself reported. To anyone with any understanding of the phone market, IDC’s data was clearly dead wrong.
Running with IDC’s embarrassing data, two months later
Yet almost two months later, Axios writer Dion Rabouin picked up IDC’s flawed report and generated a series of mini-reports that all centered on the idea that iPhones were down by 30 percent and Apple had nothing in the pipeline to make up for those lost revenues. It needed a “next act.”
In the first piece, Rabouin wrote that “smartphone sales are slowing down, but data shows Apple is doing especially poorly. Consumers are slower to upgrade their iPhones, and they’re switching brands.”
Of those three confident claims, only one is correct. That’s the one Apple itself noted, that consumers have been slower to upgrade iPhones. There is no data supporting the idea that consumers are “switching brands.”
And if you ignore the “embarrassing” data IDC presented, Apple’s performance in unit sales is not nearly as bad as the “other” smartphone makers outside of Samsung and China’s largest cheap handset vendors, which fell by more than 20 percent year over year—a collective drop of more than 20 million phone units, compared to Apple’s drop of around 12 million fewer iPhone sales.
Of course, the whole idea that Apple is “doing especially poorly” when it is, in reality, the only phone maker earning major profits from its sales is another example of failing to understand what unit sales really mean. Apple is not focused on selling the most units. It’s aiming to remain sustainably profitable so won’t end up the next Blackberry or Nokia.
Hey Axios: some things have occurred since March
Additionally, anyone who is digging up data from March should at least acknowledge that it’s now June, and Apple’s two largest competitors by volume have since looked down the barrel of a shotgun and pulled the trigger. First, Samsung rushed out its Galaxy Fold with such spectacular incompetence that it cast a negative halo over its entire phone business, which is already severely troubled.
Additionally, Android’s rising star Huawei—after mocking Apple over its ability to source 5G chips—just lost its own silicon nuts via the Entity Listing that destroyed its ability to source ARM and Intel parts and the resources to continue developing its own custom silicon using critical American chip design tools.
Huawei also lost its relationship with Microsoft and Google on the OS front, meaning it can’t sell MacBook and MacBook Pro clones, nor can it sell Android phones with Google services or the official builds of Android. And China’s retaliation plans will hit Android and Windows the hardest domestically.
Presenting flawed March data from IDC without noting that Apple’s top two rivals—presented at the time as leaders, but since having suffered such dire circumstances—certainly appears to be pure journalistic incompetence. What is Samsung’s next act? What is Huawei’s? No, let’s worry about Apple, which made more revenues and profits selling iPhones in the March quarter than “leaders” Samsung and Huawei put together.
Three stories, one IDC cup
Rabouin relied on IDC’s “embarrassing” cup of data not only in that initial context-free piece, but also to set up a second one, titled “Apple’s needs a next act.” It quite incredibly opened with the line, “With the iPhone’s global dominance waning, there’s a growing chorus of skeptics betting that Apple is headed the way of Blackberry and Nokia.”
Yes, remember when Blackberry and Nokia not only made the most smartphones–albeit within a much smaller market and earning far less than Apple today–but also dominated global sales of tablets, released the only popular smartwatch selling into the billions of dollars, claimed virtually all of the profitable PC sales worldwide, and lead sales of music hardware?
For some reason, Rabouin can remember that happening, but can’t remember that IDC’s data from two months ago was lit on fire as deeply flawed to the point of being “embarrassing.” The weird thing is that Blackberry and Nokia were never in Apple’s position. They were instead the Samsung and Huawei of ten years ago, churning out tons of units and not making anything close to what Apple earns today, without any real ability to meaningfully expand beyond the phone business.
So why is Axios applying apocryphal memories of the fragility of low profit, high unit volume sales leaders in smartphones to Apple rather than to the companies that are actually cranking out today’s mass volumes of barely profitable phone sets? And why is it musing about the “next act” of a company that has successfully expanded its success from PCs to music devices to phones to tablets to wearables and now Services, rather than taking a hard look at any of the ostensibly successful “volume leaders” extolled by IDC, who can only, and just barely, sell phones at break-even?
Get ready for more illogical nonsense
Apart from memory issues, Rabouin also experienced some logical problems. “While Apple still generates ridiculous cash flow, the nearly $900 billion megacompany’s growth is built on its ability to reinvent and dominate entire product categories, which it hasn’t done lately.”
If Apple is still “generating ridiculous cash flows” based on “its ability to reinvent and dominate entire product categories,” how is it that it’s currently doing that if it can’t innovate “lately”?
That’s another baseless assumption that people who don’t understand how Apple makes its money get tripped up on. It’s similar to the assumption that if Apple is selling 12 million fewer iPhones at around $750 in the same quarter that Huawei sells 20 million more Androids at $250, that must mean that Huawei is clawing its sales from Apple customers, even though that is simply numerically impossible.
Additionally, there is no data supporting the assumption that huge waves of iPhone users are adopting cheap Androids for their phone, but for some reason are not similarly abandoning premium priced Macs, iPads, Apple Watches, and AirPods for generic hardware from Huawei, Samsung and other high-volume, low priced makers.
“But the iPhone is fast losing market share,” Rabouin continued, “and Apple services like streaming music, streaming video and home speakers show no signs of generating similar cash flow.”
Streaming music and Home Pod sales certainly aren’t generating iPhone-like revenues for Apple, the same way that Spotify and Amazon Echo aren’t generating iPhone-like revenues. But while those are the central hits of Spotify and Amazon Alexa, they are not representative of Apple’s revenue-important sales. Why would a tech industry writer suggest that they were?
Apple’s Q1 revenues were more than twice that of “unit shipments leader” Samsung Mobile, and its earnings were over 15x greater
Apple’s sales of Macs, iPad, and Wearables each generated about five billion dollars in the March quarter. Its Services segment contributed another $11.5 billion. Over the previous six months, sales of all three grew significantly, meaning that Apple indeed continues to “reinvent and dominate entire product categories,” while it generates enormous cash flow. The only way to deny that is to ignore Apple’s core businesses and focus on things like “speakers,” which haven’t been very profitable for anyone.
Rabouin again repeated IDC’s embarrassing claim that “Apple saw a 30% decline in shipments in Q1” and claimed that customers globally were “switching brands,” despite the data showing that Apple’s sales across its product categories have been growing, not losing out to Android tablets or Windows PCs or Tizen watches. The growth of low-end Android phones is not fed by disgruntled owners of ultra-premium iPhones no matter how many times a hack repeats that nonsense.
We know what Apple is cooking, why doesn’t Axios?
After painting Apple in decline with no way out, Axios hedged its bets by noting that “Yes, but: This could all turn around — because we really don’t know what Apple is cooking. The iPhone itself was a second act for Apple, which nearly died in the late ’90s.”
Even there it was wrong. iPhone wasn’t Apple’s second act; iPod was. And both iPad and Apple Watch have grown as large or exceeded Apple’s previous “acts” of the Mac and iPod. Services are now even larger than iPad and Wearables together. So Apple is not looking for a “third act,” but rather is quite adeptly rolling out its sixth, with no mystery of how or what might be involved.
We are quite aware of “what Apple is cooking.” In March it held an Apple Event entirely devoted to its new Services, including Apple Arcade video games, News+ periodicals, and TV+ original content, and its new Apple Card.
Axios attended that event but didn’t even mention one of those initiatives in its “Apple needs a next act” piece. Instead, the article ended with “Our thought bubble from Scott Rosenberg, Axios managing editor for technology: The iPhone was such a monster product that Apple is unlikely to repeat the success, and for investors that may be argument enough to see the company as overvalued. But in Silicon Valley, there’s still plenty of respect for Apple’s potential to keep innovating.”
It then published its “Apple needs a next act” piece twice, once in a summary that ended on the idea of “plenty of respect for Apple’s potential to keep innovating,” and a second version that ended on a more fearsome note from some Cornell professor who disagreed with Silicon Valley.
“But folks outside Silicon Valley are starting to see a different story,” that version of the piece added. “Aija Leiponen, professor of applied economics at Cornell’s SC Johnson College of Business, told Axios in March she’s been wary of Apple’s new offerings.
“‘Maybe there will be another breakthrough, but I don’t see it right now.'”
What an incredible feat of journalism to take flawed data from IDC and build it out into three news articles, one of which presented the IDC data from two months ago as fresh news, one of which centered a narrative of “Apple is doomed without a next act” around it, and one of which ended with the site’s own editorial manager effectively admitting that there wasn’t really any news here at all, and that there’s “still plenty of respect for Apple’s potential to keep innovating.”
Apple News featured Axios embarrassing twaddle four times in a row
Even more bizarrely, Apple News picked up all three clickbait pieces—which reused the same text, nearly verbatim—and presented them as four featured articles related to Apple in its Stocks news feed yesterday, effectively repeating the same nonsense clickbait piece four times in a row. No wonder why nobody understands what’s going on at the largest and most successful tech company in the world.
This article was originally posted here