The Day Apple Dreaded: iPhone Sales Falter in China and the Company Revises Sales Down

Trading on Apple shares was halted as the company warned of much lower sales than the guidance it had issued just two months ago. A punishing holiday season turned into lower than expected iPhone sales, which are the economic engine of the company. After-hours trading immediately sent shares down by more than 7 percent.

The guidance issued at the company’s last earnings announcement was for revenue between $89 billion and $93 billion, expenses of $9 billion to $9.1 billion, and gross margins between 38 percent and 38.5 percent.

The new guidance pegs revenue expectations at $84 billion, sharply below the low end of the previous estimates. Gross margin will be roughly 38 percent, at the low end of the previous range. Total expenses will be about $9.25 billion, or above prior estimates.

The earnings announcement for the holiday quarter won’t happen for a few weeks yet.

According to a letter from Tim Cook to investors, there are multiple reasons for the cut. He said that the company knew the timing of its iPhone launches could be a problem, shifting back as they did by a fiscal quarter. The number of launches was complex and caused logistics problems getting everything built and shipped. In addition, a strong dollar made overseas sales costlier for buyers.

But those were constraints on the top end of sales. The big issues were “expected economic weakness in some emerging markets.” Specifically, the big slowdown was in Greater China. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” the letter said.

At the heart was a slowing economy in China, in part likely because of the trade war with the U.S., but also a result of purely internal problems in the country. Whatever the balance, the result was “fewer iPhone upgrades than we had anticipated.”

Cook went on and tried to put some shine on the situation, pointing to almost 19 percent year-over-year growth in the combination of services, Macs, iPads, and wearables and other products. But while good for the future, that doesn’t matter.

Apple faces what happens to many businesses, particularly smaller ones. They become prisoners of one product line or a particularly big customer. When that happens, all you can do is try to diversify, because the day will come when the source of money trips and what was a profitable dependence begins to hit financial results.

Apple has tried to do that, but none of the new growth comes close to the magnitude of the iPhone contribution. And China was supposed to be the new engine of growth when none of the other product lines–iPads or Watches–showed itself possessing the potential once shown by the company’s smartphones.

The 10,000 Foot View of Your Business You Must Take Before Picking a Software System

That’s so vague, and that’s exactly the reason why so many companies struggle to make meaningful process working “on the business”, year after year. Let me help to clarify these confusing terms, and give you the direction that you need to make a dent this year.

The “system” is the tool that you use to get the job done. It could be a big piece of machinery, but for most of us, it is the different software tools that your company runs on.

“Processes” are the sequence of steps that you and your team take to do the work — the actions, regardless of the system. The problem is, too many entrepreneurs start with the system.

Instead of focusing on how you manage a client project, you focus on how the project management tool works.

You can get lost in a sea of software, and end up jumping ship from one to the next chasing features that may or may not matter to your business. But, if you understand your process first, it’s like going to the grocery store with a list, and not an empty stomach.

I was working with a retail store once that used spreadsheets to manage their inventory, credit card terminals for each sale, PayPal for online transactions, handwritten sheets for their packing lists, and a bloated database tool for customer information. Instead of stepping back and looking at the business as a whole, they solved one problem at a time with another software, creating a complicated mess of their operations.

It shouldn’t be so hard. Whatever industry you’re in, here’s how to fine tune your process first to make sure you’re investing in something that can stick. 

Map your process.

Break out the sticky notes! I’ve banned those little yellow clutter-causers from my office, except for when we’re working on processes. Then, we break them out of their special hiding place and go nuts!

If you don’t have sticky notes, use a whiteboard or a blank sheet of paper, and draw each linear step in your product fulfillment or service delivery process. Each step (or sticky) should represent a significant step in your process. So, combine small things like “open this URL” and “go to this page” and “enter this password” into something broader like “log into online store.”

Your core company process should stretch from how you attract prospects, close a sale, onboard the customer, deliver the product or service, collect payment, and and continue to engage the customer. 

Find your bottlenecks.

The simple act of writing out the steps of your process is bound to surface some inefficiency. Where in your process are there bottlenecks — or slow downs — today? Where are there too many handoffs where information or tasks could flow more seamlessly from one person or department to another?

Now, you don’t need to fix your entire process in one sitting. That isn’t the point. But, you do want to identify where you have some work to do. These inefficiencies or areas for improvement could be supplemented or solved with the right system. You are building your shopping list. 

Become a ‘manual’ master.

A client hired me once wanting to build a custom software for a new way to facilitate meetings. The idea was full of assumptions about how the users would behave, and what problems they were trying to solve. 

Instead, I suggested that he use index cards to replicate the functionality manually, and offline, for a full month before we quote out the software. That way he could validate some assumptions before investing a dime in a custom software project. The idea was dead a weak later, and he saved a lot of money. 

Similarly, think of the software tools and systems that you invest in a way to improve the efficiency of your manual process, not a gamble on a brand new, untested way to work.

Scale with a system.

Now, with a proven manual process and a wish list of requirements, you are ready to go system shopping. 

It’s easy to get overwhelmed by the thousands of tools available. If you’re software shopping, check out review sites like Capterra an G2Crowd, or maker communities like Product Hunt to see how each system is differentiated before diving into demos. 

With hardware, consider renting a device before making a big purchase, or talking to another customer that is successfully using the equipment. 

The system you ultimately select should increase your capacity by eliminating bottlenecks and making your proven process more efficient. Your process shows you generally how to get from point A to point B, like a path through the woods. As you test that process, the “path in the woods” gets more and more defined, and perhaps you invest a little in clearing the leaves and branches, or building stairs on a steep hill. 

When do decide to build a highway from point A to point B — your system —  you should be confident in the path, and eager to increase the traffic down the route.