Apple's Q3 Report Expected to Be Light on Good News

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Apple shares closed at US$105.08 Monday -- down 60 cents -- as the market steeled itself for what's expected to be a gloomy quarterly earnings call on Tuesday.

Apple will underperform the smartphone industry and become the only global top-five brand to see shipments decline in 2016, predicted Ming-Chi Kuo, a KGI Securities analyst who previously has made several accurate calls on the company.

Global iPhone shipments will fall short of the estimates of 210 million to 230 million units this year, Kuo wrote in a note to investors, totaling 205 million in the best case.

Demand for replacement handsets with large screens has slowed, and demand for the forthcoming iPhone 7, expected in the second half of this year, does not appear strong.

Increased competition, the time needed for the commercialization of new user experience technologies, and the need for a makeover could contribute to relatively week iPhone 7 sales, suggested Kuo.

Apple needs to come up with more innovative features, he warned.

It appears that Apple Watch sales haven't been robust -- Apple has said little on the subject -- and there has been increasing rumbling that innovation has died out at Apple.

"Our research has repeatedly indicated that Tim Cook has created a bozo explosion at Apple, so we think all this negative commentary may be accurate," said Trip Chowdhry, managing director at Global Equities Research.

Getting Apple back to its glory days will involve removal of "the zero vision and zero passion ... Tim Cook, Apple CFO Luca Maestri, and totally incompetent Apple retail head Angela Ahrendts," Chowdhry told the E-Commerce Times.

They should be replaced with "new passionate and visionary CEO Jonathan Rubinstein, father of the iPod and iMac and on the board of Amazon.com; and former CFO Fred Anderson," Chowdhry suggested.

Further, Apple "doesn't need any head of retail," he maintained.

"Apple has traditionally downplayed everything," pointed out Jeff Orr, a senior practice director at ABI Research, "but these past four quarters, it has had record revenues -- and that's impressive in this day and age."

Further, Apple tends to end its financial year on a high note, and it allows itself to ramp up over the next financial year, he observed.

Apple "hasn't really talked about any inventory issues or any quirks within product portfolios," Orr told the E-Commerce Times. "Their product introductions remain on cadence from generation to generation, and they're bolstering the higher end of products."

The company "did a good job of talking expectations down," he continued.

"They're telling you that markets are going to naturally slow down," Orr explained, "because at some point, they'll have as big a market as they can have when there's a competitive market."

Apple has other promising initiatives that currently remain below the radar.

It has "significant ongoing effort in machine learning services," Chowdhry told investors earlier this month.

It's buying Nvidia chips "at the same rate as Google for its GPU Cloud, which indicates its machine learning effort is significant;" he noted. Its machine learning services may include Maps apps, music apps, games, and messaging apps on all platforms.

Another factor is that many enterprises over the past six months have shifted away from supporting both iOS and Android devices to limiting their support to Apple products, Chowdhry observed.

Although Apple Watch sales have not met expectations, "it's important to look at the big picture," said Brent Iadarola, a vice president of research at Frost & Sullivan.

Apple is well ahead of the pack in terms of providing compelling applications, which are necessary to complete the smartwatch experience, he told the E-Commerce Times.

"Expect Apple's next big bump in market momentum for the smartwatch category to come from embedded cellular connectivity," Iadarola predicted.

Apple's weekend Apple Watch announcement -- that starting in June apps developed for it must run on the watch alone -- is significant, noted ABI's Orr, as it seems to lay the groundwork for a standalone platform.

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

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