Wall Street does not just demand great profits, they demand ever-growing profits, and for the first time in a long time, Apple failed to deliver this last quarter, with iPhone revenue declining 15% YoY.
Apple promised to increase their service revenue, but another tried and tested way to increase profits is to cut spending on non-essential items, including pie in the sky projects.
Two weeks ago we heard that Apple laid off 200 employees from Project Titan, its autonomous vehicle group and today we hear that AR/VR pioneer and Hololens co-inventor Avi Bar-Zeev, who was working on Apple’s much rumoured Augmented Reality headset, also left Apple last month.
The move interestingly mirror’s Microsoft’s efforts to regain relevance, by cancelling inspirational but ultimately unprofitable ventures such as Windows Phone, Microsoft Band, Kinect, the Xbox smartwatch, HoloLens 2 and the Surface Phone, and focussing on more boring but more fundamental projects such as Azure. Apple’s turn to services and away from the next big thing may ultimately be exactly what the company needs to do grow their revenue again.
The big difference, of course, is that Apple’s brand, which is a big part of their value, is ultimately based on their image as an innovator, and it remains to be seen if a cloud services provider will inspire iPhone buyers to dig deep into their pockets.