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Apple’s Sales Are Still Declining, But There’s a Silver Lining

Oct 26, 2016

Apple has had finer earnings reports than the one it released Tuesday.

Sales are declining, and analysts aren’t impressed with the company’s projected return to growth: Extra days in the coming quarter lower the bar. CEO Tim Cook also is characteristically mum on Apple’s next big thing. Cars, TVs, and large-scale content generation are interesting, but specifics are in short supply.

Speaking of supply, there was a silver lining in the details of Apple’s report. Cook repeatedly said Apple (aapl) was having trouble satisfying demand for its newest phones, particularly the oversized iPhone 7 Plus. Reading between the lines, Apple appears to be having trouble achieving the kind of manufacturing yields it needs to produce the phones in sufficient volume.

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“We’ve seen this before,” says veteran analyst Gene Munster of Piper Jaffray. “Historically this is how they’ve talked about production problems, to say they’re supply constrained.”

At a time archfoe Samsung’s competing product is no longer for sale, Apple’s needing to work out the kinks of a new phone—specifically its advanced camera—is unfortunate but not the worst-case scenario. It is evidence that Apple’s quality-control process in intact. Low yields, after all, trump exploding phones.

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