Apple wasn’t at its best in 2016.
This year was the first time in 15 years that its sales and profit were less than the year before. That’s not to say Apple didn’t make a lot of money in 2016—it did. But it also released a bevy of new products across the year, including a new iPad Pro, Apple Watch, iPhone, and entirely new Mac laptops, that did not seem to capture the same level of excitement in consumers as previous models have.
Even though it was always going to be difficult to keep the momentum from 2015 going, Apple had a very strong first quarter (which is actually its holiday 2015 quarter). The rest of the year, however, looked a lot like 2014—not terrible, by any stretch of the imagination, but just not as impressive as 2015 was.
Sales of iPhones constitute the bulk of Apple’s revenue, accounting for anywhere between half and three-quarters of its revenue in any given quarter. So when iPhone sales slumped in 2016, so did Apple’s profit. Many considered the new iPhone 7 to be somewhat of a letdown, with a form factor that’s exceedingly similar to the iPhone 6 and 6S that preceded it, the lack of a headphone jack, and few upgrade-worthy features.
Similar complaints were levied toward the new MacBook Pros, which replaced every single port that people have used over the last few years with future-proof USB-C ports. The machines were also seen as underpowered for the price. To get the top specifications available, you had to buy a machine with Apple’s new Touch Bar, a small touchscreen that replaces the traditional function keys atop the keyboard, which has also been as a hindrance for many who regularly use the physical function, escape, or volume keys.
As a result, Apple had a middling year on Wall Street by its standards. Its stock began the year at about $103, and closed at roughly $117 on Dec. 20. That’s a healthy return of over 13%, and pretty much in line with how the S&P 500 fared over the same period, but far below the massive yearly gains Apple has had in years past.
Some, including myself, have called Apple boring for its uninspiring product launches in recent years. In many ways, it seemed that 2016 was a year for Apple to regather itself. Nothing it released felt particularly new, even when it was. The iPhone looked the same, as did its new iPads and Apple Watches, and even the Macs were essentially the same design as the MacBooks unveiled in 2015. The only entirely new product it unveiled during the year was the AirPods, a set of wireless headphones—which is only the second entirely new product Apple has released during CEO Tim Cook’s six-year tenure. They’ve been met with mixed review, and were delayed multiple times, only to eventually go on sale about a week ago.
A new hope
But 2017 may well be an entirely different ball game. Apple is, in some ways, starting afresh. It will be moving into its massive new spaceship-shaped headquarters in Cupertino, California, which will be an unending parade of indigenous trees, curved glass, and steel. It’ll be a home for the Tim Cook-era Apple, and the staging ground for every new product the company will unveil in the coming years. And there’s a chance there may be a few in 2017.
Next June will be the 10th anniversary of the first iPhone. Some analysts have surmised that Apple released an underwhelming iPhone 7 for two reasons: firstly, it’s getting more and more difficult to innovate in smartphones every year, and secondly, the company wanted to make a splash with its 10th-anniversary model. Analysts at Morgan Stanley have referred to 2017 as a “supercyle” upgrade, where nearly every product line will be updated in the year, anchored by the iPhone. There are rumors that the next iPhone will feature a curved glass screen with no home button, wireless charging, fingerprint scanning without a fingerprint scanner, and myriad futuristic-sounding technologies. These big changes could well convince those who have held off from upgrading their smartphones (or jumped ship from the iPhone) in recent years to spend big on the next iPhone. As Apple’s overall revenue is so inextricably tied to iPhone sales, a strong year for the smartphone will certainly translate into a big year for Apple.
And the iPhone won’t be alone. There are rumors that Apple will update its Mac desktop computers (and its accessories) this spring for the first time in years. Cook has alluded to updates with recent comments on internal Apple message boards, although it’s not entirely clear whether these will be complete overhauls, or just minor refreshes. Either way, Mac sales, along with Apple’s accessories business (which it lists as “Other Products” on earnings reports, and includes the Watch, Beats headphones, and routers) and its services (such as iTunes and App Store sales) are trending up.
Whether Apple can reverse the slide in iPad sales, however, remains to be seen. Its smaller 9.7-inch iPad Pro, released in March, was regarded by many reviewers as the best iPad the company has ever released. But iPad sales were stagnant in 2016, while more traditional Mac sales crept up, suggesting that between a large iPhone and laptop, many people don’t have much use for a tablet. Recent rumors have suggested that the next iPad designs may look similar to what we’re hearing about the next iPhone, with a mainly edgeless display and no home button. It’s possible that some iPhone-excitement spillover may benefit the iPad in 2017, but it’s still looking to be the company’s weakest standalone product—assuming you count the Apple Watch as an iPhone accessory.
And there may be much more beyond fancier iPhones and iPads. The company appears to be working on some sort of smart glasses that are relatively far along in their prototyping. It’s not entirely clear whether these would be like the Bluetooth video-recording glasses that Snap (of Snapchat fame) recently released, or something more like an Apple Watch for your face, with augmented-reality displays populating information over the real world. Either way, they will certainly sell by the truckload if Apple does release them, and they’re at least as useful as the Apple Watch, which likely shipped at least 12 million units in its first year. (Apple hasn’t released official sales figures.)
Given the massive increase (in pure dollars) in Apple’s research and development spend in recent years, it’s likely that there could be other surprises along the way in 2017 and beyond. In the years between Steve Jobs’ return to Apple and the release of the first iPhone, Apple spent roughly $4.8 billion on R&D—that’s less than half as much as it spent in 2016 alone. So what else could Apple be working on? There’s talk of an Amazon Echo competitor, an internet-of-things controller and home speaker based on Siri, some sort of virtual reality system, another wearable, and of course, some sort of car. While it’s unlikely that Apple will unveil any sort of vehicle in 2017, it’s entirely possible that it could officially announce its automotive intentions next year, especially given that it often previews products before they’re available (as it did for the better part of six months with the Apple Watch), and its recent letter to the US government imploring for parity between companies that want to test autonomous vehicle technology. It seemed like a rather unnecessary letter to write if the company wasn’t seriously considering (and planning on testing) a self-driving car in the near future.
But whatever Apple releases in 2017, it’ll invariably be dissected in intricate detail, examined from every angle, and hyped across the internet. And we’ll be there to see if Cook can make Apple great again.