The widening impacts of Apple's iPhone letdown

After the close on Tuesday, Apple (AAPL) confirmed that the smartphone revolution has truly come and gone. And that's a problem not just for Apple.

In 2015's final quarter, iPhone sales grew by just 0.4 percent -- the weakest result since the product's 2007 launch -- and are expected to drop on an annual basis in the current quarter for the first time ever. The company is now forecasting its first year-over-year revenue drop since 2003 in the current quarter as China sales stall and a lack of innovative new products reduces demand.

The stakes are now a lot higher for the debut of the all-new iPhone 7 later this year. All the more so since the Apple Watch has had a tepid response; the Beats acquisition hasn't produced meaningful results; the "Project Titan" self-driving electric vehicle project is a mismanaged pipe dream; and Apple Music isn't moving the earnings needle.

No wonder shares were down more than 2.5 percent in after-hours trading following the earnings release, to around $97.40 after closing during the day at $99.99 (chart below).

Something more is clearly needed, and not just for Apple shareholders. The company's fading fortunes will touch just about everyone.

For one, the company's $555 billion market capitalization means that pretty much every IRA and 401(k) account features Apple as its single largest stock holding. It's the main component of the S&P 500 (at 3.3 percent) and the Nasdaq 100 (at 11.1 percent). Alphabet (GOOGL), parent company of Google, isn't far behind with a market cap just shy of $500 billion.

And Apple is a big part of the Dow Jones industrials index as well (at 4.1 percent), although because the Dow is a price-weighted index, Goldman Sachs (GS) claims the top spot with a share price near $155 and a 7.1 percent weighting.

Where AAPL goes, the overall market tends to follow. In fact, the S&P 500 SPDRs (SPY) and Apple have maintained a 73 percent statistical correlation over the past five years. That means 73 percent of the movement in the overall stock market follows the moves in Apple.

The dimming of the excitement over smartphones also has negative consequences for everything from Apple's physical component suppliers to app and game developers and the guy in your local mall replacing cracked phone screens. As the growth in the number of new customers experiencing mobile computing power in their pocket slows from exponential to something far less exciting, so too will the fortunes of these ecosystem companies.

Shares of component suppliers like Cirrus Logic (CRUS), Skyworks Solutions (SWKS) and Avago Technologies (AVGO) have been slammed over the past month after Nikkei Asian Review reported Apple would cut production of its iPhone 6 by nearly a third in 2016's first quarter, meaning fewer orders and lower revenues.

The share price of mobile game-maker Zynga (ZNGA) is down 85 percent from the post-IPO high it set in 2012.

The drop in smartphone sales -- and iPad sales, for that matter -- is also a negative for retailers like Best Buy (BBY) because hot products pump up the volume of customers. Best Buy is down nearly 28 percent from its September high.

To be fair, Apple's quarter overall was hardly a disaster: It raked in better-than-forecast earnings of $3.28 per share on record revenues of $75.9 billion. And more than a billion active Apple devices are in use. Yet after all the successes, all the innovations and all the heightening of expectations, the results simply weren't good enough.

But don't forget: With a cash stockpile totaling nearly $216 billion, CEO Tim Cook has plenty of wherewithal to turn it around. For the sake of investors large and small and a vast ecosystem of tech companies, let's hope he does.

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