They’ll love you forever, until they don’t …
I remember, not too long ago, when Qualcomm was the darling of Wall Street, the prince of processors, the regal radio rogue, the king of the hill and the towers on the hill—until they weren’t. And then their revenue slipped 7% in a seasonally down quarter, and the mobs called for a beheading and martial law in the boardroom. What in the world is going on here?
I also remember how those same true-blue, love-ya-til-I-don’t Wall Street tycoons were fawning all over little Mediatek and loving the David and Goliath battle with stodgy old now-boring Qualcomm—until they weren’t because mighty Mediatek’s revenue dropped 13%, almost twice as much as Qualcomm’s.
And then, the darling of darlings, the money-stuffing consumer electronics king Apple, reported that its smartphone sales dropped a staggering 64% from the last quarter, and that was the second quarter in a row with such a drop; it seemed people had all the iPhones they needed.
Mighty Samsung confirmed it and saw a tough time in the second quarter, acknowledging that sales of its flagship Galaxy S6 line had been “below expectations.” The company said that it would make “strategic adjustments” to the price of the product moving forward.
And yet in the case of Mediatek, Samsung, and Apple, there was no shareholder revolt, no call for a breakup, no insistence on an expanded watchdog board. Compared to those three, Qual¬comm had the smallest slide of all of them, and the most market share.
To which I say, huh?
So what’s really happening here? Maybe it’s the same thing that happens to every market … it changes. People don’t need a new phone every year, or two, or even every three years, and in fact, the pain of setting up a new phone with desired apps and favorite content far outweighs the fun of getting a new gadget. It’s much like a PC in that sense. How many times have you hear, Damn, I have to get a new PC? All the time. It’s not the cost of the machine, it’s the pain of moving apps, files, and utilities, and disk imaging isn’t that foolproof. In the case of a smartphone, there are even fewer tools.
So the phone market slipped a bit in Q2. As usual, the stock traders overreacted. But that’s to be expected since those same geniuses overreacted on the upside.
All markets have seasonal swings— all of them. Apple dropped (in unit shipments of iPhones) in Q2’13 and Q2’14. Qualcomm dropped a tiny bit in Q2’11 and Q2’14, HTC dropped and looks like it will continue to do so into Q3.
Obviously, the world as we know it is over. Mobile phones and tablets are passé, it’s time to dump those companies and move on to something new, like wearables, or automotive, or that newfangled thing, the IoT, eye of tea, or something.