The crucial number in Apple's next quarterly earnings call, for Q1 in fiscal year 2016, is 74,468,000. That is the number of iPhone unit sales Apple sold in the same quarter last year, the number Apple must beat to show continued iPhone growth.
Many analysts now believe that iPhone sales have gone into decline, as consumers take a breather before Apple introduces an all-new iPhone 7 in September/October 2016.
According to a new note to investors from Brean Capital analyst Ananda Baruah, there is a way for Apple to show an increase in iPhone sales even though the total number of iPhones the company is making may have declined. Baruah predicts that Apple will ship as few as 70 million phones this quarter, but will sell 75 to 78 million of them. The difference will be made up by Apple running down excess inventory of previously made iPhones, Baruah says:
Despite all of the supply chain 'noise' through the Dec Q, our view on builds hasn’t budged (70M – 75M) and neither has our view on ships (75M – 78M). We believe 1) the Street had unreasonably strong expectations coming into the Dec Q (generally set ~76M – 85M units shipped) and 2) that AAPL has had a very close eye on being able to achieve what has become a Dec Q Street iPhone estimate of 76M – 78M; we think that the company can deliver this number by building 70M – 75M and shipping the balance from inventory.
A cynic might regard this as an accounting sleight of hand. But unit sales are more important than the technical accounting period in which the phones are shipped. An increase in unit sales is an actual increase in consumers owning iPhones, so it would be a "real" sales gain that would allow Apple CEO Tim Cook to avoid a crushing round of headlines about "the iPhone in decline."
While a decline — even a decline in actual unit sales — would be a mere statistical blip, it would be a huge psychological sea change for Apple and the smartphone universe. The iPhone is the single most successful phone on the planet. It has changed computing since its launch in 2007 — a majority of internet traffic is now on phones, not desktop machines. And it has only ever become more popular.
The idea that iPhone sales could decline cracks open the door to a series of questions Apple has never had to face before. What if the iPhone has limits, a ceiling to its growth? What if its historic trajectory will be more like the iPod or the iPad, which have both seen sales sink in recent years? What if the iPhone is not forever, but merely the temporarily dominant device of a certain historic period, like the Mac?
We are nowhere near that scenario yet, of course.
Baruah believes that Apple will eventually see an increase of 5% - 10% iPhone unit sales growth in all of fiscal 2016, even though other analysts believe sales might decline by as much as 10% across next year. Those extra sales will come from the summer launch of an iPhone 6c, the small, slightly cheaper iPhone that many believe the company will launch to replace its "plastic" iPhone 5c, Baruah believes.
