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Apple Inc. Tries to Breathe New Life Into Stalling U.S. iPhone Sales

By Ashraf Eassa - Feb 22, 2016 at 1:30PM

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Two ways the iDevice maker aims to return iPhone to revenue growth in this key region.

Apple's (AAPL -1.69%) largest region by revenue is the Americas, which brought in about $29.33 billion in revenue (and just over $10 billion in operating income) last quarter. This is certainly a lot of revenue and operating income, but what's curious is that sales actually declined year over year in this hugely important market.

The drop wasn't large -- on the order of 4% -- but it does suggest tepid customer response to the company's latest-generation iPhones. Indeed, evidence suggests that Apple may actually be losing share to competitors that build devices based on the Android operating system, such as Samsung (NASDAQOTH: SSNLF).

Apple appears to be trying to reinvigorate iPhone sales growth in the United States through two initiatives. Let's take a closer look at them.

Trade Up With Installments
The first is Apple's new "Trade Up With Installments" plan. The premise around this is simple: Trade in an old smartphone (Apple emphasizes old iPhones, but says that customers can "trade in eligible Android devices" as well) and get a new device at a modest monthly rate.

In theory, this should make it easier and affordable for customers with older-generation iPhones to purchase newer models.

There's nothing fundamentally novel here; people have always been able to sell older devices and use the proceeds to fund purchases of newer ones. The main benefit to this program is that it makes the process of getting value for the older device and applying it to the newer one very easy.

Although this sounds nice, it remains to be seen whether it will be effective. After all, the "iPhone Upgrade Program" sounded great, too, but that didn't stop iPhone sales from dipping in the Americas year over year.

Rewards program for retail employees
9to5Mac's Mark Gurman recently reported that Apple has initiated something of a sales contest for retail employees that will be in effect from Feb. 21 to March 26.

Gurman says that this new program is designed to incentivize retail employees to sell more iPhones and iPhone accessories.

Per the report, the "best-performing" stores (judged by a number of metrics) during the aforementioned time interval will "win gear from Apple's corporate gift shop in Cupertino in addition to a storewide party."

The best-performing people in each market, Gurman says, will win all-expense paid trips to Cupertino, California.  

These are nice, but won't solve Apple's fundamental problem
New trade-in programs are nice and giving retail employees incentives to work really hard to push iPhones might help a little bit, but it won't solve the fundamental demand problem that the company seems to be facing in the US.

CEO Tim Cook cited macroeconomic/currency headwinds as negatively impacting both revenue and potentially demand, but those excuses don't seem to carry much weight in a region like the U.S.

I think Apple is facing a combination of market saturation as well as potential market share loss in this country. The former can't be helped by new/better products, but the latter certainly can.

If Apple is able to deliver something truly awesome with the iPhone 7/7 Plus, then there's a reasonable chance that the company can start gaining market segment share against its fierce competition in the U.S./Americas. It would seem, though, that the iPhone 6s/6s Plus simply weren't enough.


 

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