With two weeks left in 2015, Apple's future is looking surprisingly uncertain given its status as the world's most valuable company. Its market cap over the course of the year has fallen from its peak of $775 billion to just over $614 billion as of Thursday. Its iPhone — which accounts for well over half its revenue — is expected to see its first annual sales decline next year. And so far, the company hasn’t found a way to pull the iPad out of its tailspin with a year-over-year decline in sales and revenue for six consecutive quarters.
As a result, CEO Tim Cook and new Chief Operating Officer Jeff Williams will face some challenges in the year ahead. Their success will depend a lot on how well new products and services stick. Here's a look at what's coming.
While it’s expected to face 2016 with a slew of new devices, Apple is also seeking new ways to drive revenue through services such as the App Store, Apple Pay, Apple Music, iTunes and more. As a whole those services accounted for $19.9 billion, or 8.5 percent of Apple’s revenue in its 2015 fiscal year, ended Sept. 26. That's a 10.2 percent increase compared with the $18 billion made last year.
Apple in 2016 will also increase its focus on business customers, a segment that topped $25 billion in its 2015 fiscal year. That’s up 40 percent compared with last year, Cook said in an October earnings call. Part of that drive has been through a partnership with IBM, which reached a milestone of over 100 enterprise iOS apps available across 14 industries and 65 professions, such as flight attendants, nurses and retail buyers, according to IBM.
Services and enterprise sales may seem like a drop in the bucket compared to the iPhone’s massive $155 billion revenue in 2015. But at the same time, 2016 is also expected to be the first year Apple sees a decline in iPhone sales (about 6 percent year over year), according to a research note issued by Morgan Stanley analyst Katy Huberty. Part of the reason for this is the global smartphone market has been slowing down, with growth expected to screech to a near halt at 1.2 percent in 2015, down from 27 percent in 2014, according to IDC.
Apple sold 231.2 million iPhones in its 2015 fiscal year, according to company filings.
As for the iPad, unit sales may not see the surge that came in the first couple of years after its launch. But analysts expect Apple’s latest 12.9-inch iPad Pro to help turn its tablet sales around in 2016. “Though early reviews for the iPad Pro have been mixed, we believe the Pro to be the only reason for Apple to gain tablet market share in the coming years as they target select enterprise and prosumer audiences,” Jitesh Ubrani, IDC senior research analyst, said in a press statement.
Here’s what else to look for from Apple next year:
The development of a new Apple smartphone is arguably the worst-kept secret in tech. Just a month or two after the launch of the iPhone 6S, whispers from Apple’s supply chain poured out seemingly nonstop. It’s still too early for actual images of the device to leak to the public. However, the iPhone 7 is expected to be thinner than its predecessor, possibly 6.5mm thick, about the thickness of an iPod Touch, according to a research note from KGI Securities analyst Ming-Chi Kuo.
Wireless charging, increased memory, water resistance and a lack of a headphone jack may be on the table as new features for the iPhone 7 as well.
Apple Watch 2
A successor to Apple’s first smartwatch is anticipated in 2016 with a number of improvements such as new material, less dependence on the iPhone, a thinner display and a FaceTime camera. However, battery life is expected to remain the same at about 18 hours depending on usage. Not much else is known about the Apple Watch 2. But a reveal event for the device is expected in March.
As for how well the current model is doing, analysts are taking their best guesses; IDC predicts 13 million units shipped by the end of the calendar year. To be fair, well before the device's launch, Apple said it didn’t have any plans to break out its sales numbers for “competitive reasons.” It has maintained that position on Apple Watch sales data to date. Unit sales aren’t available for the watch, but it did contribute in part to Apple’s “other products” category, which saw 27 percent growth to $10.1 billion, up from $8.4 billion last year. That segment also includes Apple TV, Beats products, the iPod and third-party accessories.
Well before an iPhone 7 is revealed, Apple is expected to unveil a 4-inch smartphone — the “iPhone 6C.” The handset is likely to take on the style of the iPhone 6S and 6S Plus with metal case design. On the inside it’s expected to come with an A9 chip, support for Apple Pay and a Touch ID fingerprint reader. However, newer iPhone features such as the pressure-sensitive 3D Touch display and the latest camera sensors aren’t expected to make it into the 6C. The handset is expected to launch alongside the Apple Watch 2.
iPad Air 3
The second-largest iPad is expected to receive an upgrade in the first half of 2016. Not much is known about its specs. However, it is not expected to come with the pressure-sensitive 3D touch display technology found in the iPhone 6S, according to a research note from KGI's Kuo obtained by 9to5Mac.
Apple Streaming Television Service
One wild card is a full-fledged live television streaming service out of Cupertino. It’s not for a lack of trying — Apple had been at negotiations since 2014 with content providers to launch its own video service. But Apple and media companies were unable to agree on its plans to sell a small package of channels for about $30 to $40 a month, according to unnamed sources speaking to Bloomberg. For now, Apple has suspended its plans. But it’s expected to focus on using its App Store and latest Apple TV streaming box for media companies to market their own services and apps. Its streaming box is expected to contribute $500 million in revenue for the December quarter, according to forecasts by Piper Jaffray analyst Gene Munster.
It’s been two years since Apple unveiled its huge cylindrical redesign for its professional workstation. But since then, it hasn’t received a single hardware update. That could change in 2016 as code spotted in Apple’s OS X El Capitan does point to an Apple code name that doesn’t match any of its released devices, according to MacRumors.
Apple’s highly anticipated electric car isn’t expected to launch earlier than 2019-2020, according to the Wall Street Journal. But in the years leading up to that it’s expected to build up its automotive research and development program and teams. One way Apple could help it along is by buying up some of the technology. An acquisition of Tesla’s battery technology would “greatly accelerate Apple’s entrance into the next-generation auto arena,” Daniel Ives, managing director at FBR Capital Markets, wrote in a Dec. 10 research note.
In the meantime, Apple has been busy in California this year, scouting locations to test its electric car somewhere in the Bay Area, according to the Guardian.
Services, Less Focus on Completely New Products
Apple isn’t expected to add any completely new products next year. But 2016 could be a time for Apple to pay greater attention to its services, such as a person-to-person payment upgrade to Apple Pay, Piper Jaffray's Munster told Business Insider’s Ignition conference on Dec. 9. Other areas Apple may focus on are its iPhone upgrade program, which could encourage users to upgrade on a yearly basis, and Apple TV upgrades such as an always-on Siri voice command system similar to Amazon’s Alexa.