Home
Mobiles
Mobiles Features
This Is the Biggest Threat to Apple's Business Around the World

This Is the Biggest Threat to Apple's Business Around the World

By Matt O'Brien, The Washington Post | Updated: 27 January 2016 19:19 IST

When is selling an iPhone not the same as selling an iPhone?

Easy: when you're selling it in a country whose currency is declining in value. So how many is that? Well, in the last 18 months, it's been pretty much all of them other than the United States. Indeed, the dollar has shot up about 22 percent against a trade-weighted basket of other currencies since the middle of 2014. And in Apple's case, that's meant what would have been $100 (roughly Rs. 6,800) of foreign sales in September 2014 was just $85 (roughly Rs. 5,779) by the end of 2015.

That's not good when you get two-thirds of your revenue overseas.

The strong dollar, in other words, has become an earnings albatross for Apple. It's getting paid in currencies that aren't worth as much, and, at least up till now, it hasn't made up for that by raising prices that much lest it lose market share. Even worse, it doesn't look like any of this is going to get any better anytime soon. That's because the Federal Reserve has begun raising rates at the same time that the rest of the world is either cutting them or even printing money.

Now there are two things to remember here. The first is that our slow-and-steady recovery really has won the race. Our unemployment rate is pretty much down to normal, and should get there soon considering that the economy has been adding an average of 284,000 jobs a month for the last three. It's enough that the Fed thinks it has to increase interest rates today to keep inflation in check tomorrow. Everywhere else, though, things are either stagnant or slowing down to the point that policymakers are doing whatever they can to try to jumpstart growth.

And that brings us to point number two. People move their money to where it can get the best returns. So would you rather buy a 10-year German bond that pays 0.45 percent or a U.S. 10-year bond that pays 1.99 percent? Investors, especially big European ones, have been answering that by turning their euros into dollars, which is just another way of saying that there's been more demand for dollars - so its price is rising. And it should keep doing so.

Consider this: Europe has promised to keep printing money through at least March 2017, Japan is printing its own with no end in sight, and China is facing big capital outflows itself. That means the euro, yen, and yuan would probably fall against the dollar even if we weren't raising rates - but we are. The Fed says it wants to do so four times this year, which seems far too ambitious, but even just one or two would be enough to send the dollar up, up, up to, well, not quite infinity and beyond. But high enough that our workers and our companies would both see their bottom lines bottom out.

So it's a great time to take that trip to Europe you've been thinking about, well, just as long as you weren't planning on selling any iPhones.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.