Did the Apple Bend-gate controversy negatively affect Apple who established themselves as the market leaders in terms of quality? Can Apple survive into the next iteration of the iPhone? Or is this end of the product line as we know it?
Does the iPhone 6 Plus bend under pressure? (Source: Unbox Therapy via YouTube)
It all began when reports on social media surfaced suggesting that the slightly larger iPhone 6 Plus could be bent in trouser pockets. This myth was further perpetuated when a YouTubber decided to test this theory by purposefully apply pressure to his iPhone 6 Plus (Video linked above.) Actual numbers of people affected by, for instance, inadvertently sitting on their mobiles were not forthcoming. But the discussion spread worldwide and “Bendgate” became an internet meme, even meriting discussion on BBC Radio 4’s Today programme.
(Source: Mike Rundle @flyosity via Twitter)
But how would all this affect Apple and hinder the sales of the iPhone? According to Forbes these were some eventualities;
- People putting off or not buying an iPhone - Due to all the publicity about 'bendgate' there are probably a number of people who will put off or maybe not even buy an iPhone. If 100,000 people decide to not buy an iPhone it would decrease Apple’s revenue by about AED 295.71 million (assuming AED 2,953.43 per iPhone which is the average of an iPhone 6 and 6 Plus 64GB models.)
- People buying an iPhone 6 vs. 6 Plus - If people decide to opt for the smaller of the two screen sizes then the revenue hit is much smaller at AED 36.96 million (100,000 units times AED 369.64 delta of the two models) or 0.016% of December quarter’s projected revenue.
- 14 day return policy - Apple has a policy that you can return a product, if you bought it directly from Apple, within 14 days. Since the iPhone 6 and 6 Plus only went on sale within the week of the scandal anyone who had one should been able to return it.
- Redesigning the iPhone - Apple has purchased a large amount of equipment for its suppliers to use to build products, the bulk going to iPhones. Any redesign could increase the company’s capital commitment, which can be easily handled but could be in the tens if not hundreds of millions of dollars.
Apple Stock has steadily risen in past Two Years (Source: Google Finance)
However the iPhone 6 and 6 Plus was a resounding success internationally and Apple Inc (AAPL) stock has recovered from its decline after the "Bendgate" issue as it climbed once again to the AED 369.64 mark at AED 371.27 as of Sept. 26, 2014. Apple shares were up 2.6 percent following the drop in price when news of a bending iPhone 6 Plus took the Internet by storm.
Apple tried to counter #Bendgate by inviting some members of select media inside its secret testing lab where the company subjects all its products to extensive "stress tests." The Cupertino-based tech giant claimed it had tested 30,000 iPhone 6 units inside the facility and reported that out of the millions of customers who bought the new iPhones, only nine people had actually filed a complaint. Apple had previously released an official statement and said the bending iPhone 6 Plus were "extremely rare" cases.
Fast forward to January 27, 2015—Apple today announced financial results for its fiscal 2015 first quarter ended December 27, 2014. The Company posted record quarterly revenue of AED 275.75 billion and record quarterly net profit of AED 66.54 billion, or AED 11.31 per diluted share. These results compare to revenue of AED 212.91 billion and net profit of AED 48.42 billion, or AED 7.65 per diluted share, in the year-ago quarter. Gross margin was 39.9 percent compared to 37.9 percent in the year-ago quarter. International sales accounted for 65 percent of the quarter’s revenue.
The results were fueled by all-time record revenue from iPhone and Mac sales as well as record performance of the App Store. iPhone unit sales of 74.5 million also set a new record.
“We’d like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high,” said Tim Cook, Apple’s CEO. “Our revenue grew 30 percent over last year to AED 275.75 billion, and the execution by our teams to achieve these results was simply phenomenal.”
“Our exceptional results produced EPS growth of 48 percent over last year, and AED 124.57 billion in operating cash flow during the quarter, an all-time record,” said Luca Maestri, Apple’s CFO. “We spent over AED 29.57 billion on our capital return program, bringing total returns to investors to almost AED 380.73 billion, over AED 210.7 billion of which occurred in just the last 12 months.”
Apple’s board of directors has declared a cash dividend of AED 1.74 per share of the Company’s common stock. Apple bounced back from the controversy with aplomb, however with the next iteration of the iPhone due soon, only time will tell if lessons have been learned.