Data Sheet—A Simple Solution for Apple’s iPhone Troubles

You may have heard overnight that there was a little news about the first second third fourth-ranked U.S. Company by market capitalization. In a blab-fest worthy of Dr. Phil, Apple CEO Tim Cook issued a 1,370-word letter to investors about a surprise 5% revenue drop, then went on CNBC for another 15 minutes of excuse-making.

Instead of bringing in $91.5 billion in the holiday quarter, as Wall Street analysts expected, Apple’s revenue totaled just $84 billion. That’s down from an all-time record of $88.3 billion a year earlier. The main culprit was slipping sales in China, Cook said. Apple’s stock, already down 30% in the past three months, fell another 9% in morning trading on Thursday. That pushed Apple’s market cap below those of Amazon and Google. (It was already trailing Microsoft.) But Apple’s CEO said he remains “confident and excited” about Apple’s long-term future.

Whatever the implications for the company and the wider tech sector, the news certainly brought out the best in the tech journalism sector. Recommended reads must start with Bloomberg columnist Shira Ovide, who chastises Cook for not warning investors years earlier about the forces conspiring to stall smartphone sales. Independent Apple columnist and blogger John Gruber put out several pieces, led by a particularly unflattering comparison between Cook’s wordy tumble of excuses and Steve Jobs handling of a similar episode in 2002. Investor and writer Om Malik sees a wider problem for Western luxury brands like Tiffany, Coach and, now, Apple—all of which have become too reliant on China.

I’ll add just one more log to the fire. Cook’s primary strategy for dealing with the global smartphone slowdown (unit sales peaked in 2016) has been a simple one: higher prices. It worked with 2017’s introduction of the iPhone X, but it appears to have failed badly for 2018’s lineup. By the end of the year, Apple and wireless carriers were offering increasingly lucrative trade in deals. When I walked into a local Apple store a few days before Christmas, a notification from Apple popped up on my screen along the lines of “You could trade in this iPhone 7 Plus right now, and get a new iPhone XR for just $449.” One simple response to the current problems: lower prices.

Or as smartphone market analyst Neil Shah put it on Twitter this morning, Apple’s China struggles arose because of “insane pricing which has backfired” plus improving local competition. “Apple still is in a great position & needs to re-calibrate its pricing vs value (proposition) strategy,” he concludes. Hopefully, Tim Cook is listening.

NEWSWORTHY

The lunatic is on the grass. Apple wasn't the only tech company with bad news for investors on Wednesday. Tesla said it sold fewer electric cars than analysts expected and was—tell me if this sounds familiar—cutting prices. Tesla shares fell 7%. The problems probably didn't originate in Norway, which set a world record in 2018 with 31% of all new cars sold running on electricity.

There's someone in my head, but it's not me. Developers are taking to Amazon's Alexa ecosystem. The number of "skills," or mini programs available by voice command, on Alexa doubled in 2018 to almost 57,000 for U.S. Users. Amazon released a list of the top skills for 2018, ranging from trivia and math games to cooking advice and a podcast player. While Amazon bolstered its free app selection, Roku announced it was adding options for customers to subscribe to premium cable channels like Showtime and Starz via its set-top boxes. Roku shares surged 6% on the news.

The lunatic is in the hall. Hackers who favor disgraced YouTube star PewDiePie hijacked thousands of Internet-connected Chromecasts, smart TVs, and Google Home devices to play a video supporting their hero. The trick relied on misconfigured home routers rather than flaws in the video playing devices.

I'll see you on the dark side of the moon. There were no new episodes released in 2018 of HBO's global hit fantasy series Game of Thrones, as showrunners David Benioff and D. B. Weiss took a page out of author George R.R. Martin's book of dawdling and delays. Silver lining? The fantasy drama lost the title of most pirated TV show to AMC's The Walking Dead.

(Today's headline reference explainer, in honor of China's dark side of the moon landing.)

FOOD FOR THOUGHT

In yesterday's news items, we included a sad clip of Bill Gates saying his nuclear power startup, TerraPower, would not be able to continue working on its pilot project with China. But the bit actually originated in Gates' end-of-year essay, which is far more interesting and valuable. Called "What I learned at work this year," the December 29 essay covers the status of all of the major projects Gates has focused on, from seeking to eradicate Polio to ending global warming. It's a great read.

Here's Gates on the controversy around gene editing:

The ethical questions are enormous. Gene editing is generating a ton of optimism for treating and curing diseases, including some that our foundation works on (though we fund work on altering crops and insects, not humans). But the technology could make inequity worse, especially if it is available only for wealthy people.

I am surprised that these issues haven’t generated more attention from the general public. Today, artificial intelligence is the subject of vigorous debate. Gene editing deserves at least as much of the spotlight as AI.

I encourage you to read up on it whenever you have a chance. Keep an eye out for articles in your news feed. If you are willing to read a whole book, The Gene by Siddhartha Mukherjee is very well done. This story is one to follow, because big breakthroughs—some good, some worrisome—are coming.

IN CASE YOU MISSED IT

Spotify Reveals Top Workout Trends, Playlists, and Songs Going Into 2019 By Rachel King

From Bad to Worse: Tech's Biggest Stumbles in 2018 By Eric Zeman

How to See the 'Top Colors' From Your 2018 Instagram Posts By Emily Price

These Are the Top Skills Businesses and Job Recruiters Are Looking for Most in 2019 By Rachel King

Party Like It's 1923: New Out-of-Copyright Works and Where to Find Them By Jeff John Roberts

The EU Can’t Agree on a Digital Tax—But Silicon Valley's Still Going to Pay By Grace Dobush

BEFORE YOU GO

As noted above, China's Chang’e-4 spacecraft successfully touched down on the far side of the moon on Wednesday in a region known as the Von Kármán crater inside the South Pole-Aitken basin. Chang’e-4's next task will be to deploy a roving robot to examine the inside of the crater. Maybe it can dig up some more old Pink Floyd classics?

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Coins2Day newsletters.