Barclays out with a cautionary note on Apple after the battery fiasco:
$29 to replace one’s old iPhone battery. Amidst public criticism and lawsuits over slowing down older iPhones, Apple recently decided to offer battery replacement for $29, reduced from $79 cost previously, starting Jan 2nd and throughout 2018. While this is a good PR move for Apple to resolve the issue, we are concerned it could be a mild headwind for iPhone unit sales if more iPhone users decide to take the offer instead of upgrading to a new device. Our base case scenario analysis suggests that around 16M iPhone units could be at risk in C2018 due to the battery replacement offer, creating 4% downside risk to our current C2018 revenue estimate.
Our math behind the base case – According to iPhone adoption data from Mixpanel (a data analytics vendor), as of Jan 2nd, 77% of iPhone users are using iPhone 6, 6 Plus, 6s, 6s Plus, 7, 7 Plus, and SE. Based on a conservative estimate of 675M total iPhone installed base as of Dec-Q, this implies 519M users are subject to or mostly “eligible” for this offer. Due to the large base, even a small percentage opting for battery replacement over upgrade could have meaningful impact on iPhone sales. In our base case scenario, 10% of those 519M users take the $29 offer, and around 30% of them decide not to buy a new iPhone this year. This means around 16M iPhone sales could be at risk, creating ~4% downside to our current revenue estimate for C2018. We also provide scenario analysis tables on units and revenue impact with a wider range of assumptions on percentage that takes the offer and those that choose not to upgrade in C2018.
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