This was not supposed to happen to Apple Inc. (Nasdaq: AAPL). The world's biggest company by market value and the most successful consumer electronics company had had invincibility conferred upon it and should never have missed analysts' quarterly financial forecasts. Its share price should continue to defy gravity and must never come under the kind of pressure it's faced in the last few days. Apple disappointed us by appearing to be all too "human."
Who would have thought that? Apple's sales have more than doubled in just the last two years and are projected to top $156 billion in its fiscal year ending in September. That would represent an astonishing 263 percent increase from $43 billion in fiscal 2009. But as some observers have pointed out, Apple's roaring success is, ironically, behind its latest slide. What company can continue to grow 30 percent or more annually, year-after-year, without tripping? Apple's growth came at the expense of its competitors, and anyone expecting them to just stand aside as a rival ate their lunches doesn't understand the capitalist system.
So, here are the bigger lessons from Apple's earnings miss. First, it confirms the company can't walk on water. That should have been clear to everyone, but many in the electronics industry, the investment community, and the general consumer community were beginning to see Apple as infallible. Even now, there are those saying Apple's latest problem -- if one could call it a problem -- offers a buying opportunity. I am not an investment analyst, but after years of monitoring events in the high-tech and economic world, I know Apple will trip up again. It shouldn't surprise anyone.
In fact, Apple is facing too many hungry competitors not to occasionally or regularly fail to meet inflated expectations. Plus, boiled down to its core, Apple's business model is based on the success of a handful of products. The iPhone, for example, accounts now for more than half of the company's sales. Sure, it's a winning product, but will it forever continue to wow the market? And when it fails, what else will Apple use to maintain its stranglehold on the wireless handset and tablet PC sectors as rivals catch up, which they inevitably will?
If I were a supplier to Apple, I would be concerned about its product rollout schedule, and I would be looking eagerly for ways to diversify my revenue base. Analysts insist that Apple will bounce back in the fall when it is expected to introduce the latest update to the iPhone. It's possible that the second calendar quarter revenue miss happened because buyers were holding off on buying the iPhone because they want the updated device. But this is a bad business proposition. Even if many of its potential customers are happy to wait six months or more to get the latest product, other consumers will simply opt for the alternative. And, in this case, there are plenty of alternatives.
One final lesson here for the entire wireless communications industry: No single company has successfully stayed atop the leader board in wireless handsets for as long as, say, Intel Corp. (Nasdaq: INTC) has dominated the semiconductor industry. I believe a new market leader is bound to emerge within years and eclipse Apple in wireless handsets, and the smartest components executives should be trying hard to identify and warm up to the next market leader. This may be Samsung Electronics Co. Ltd. (Korea: SEC), which has already become the top wireless handset vendor in the world, but still lags Apple in the amount of profits made from the sector.
I will even go long and say Apple's leadership of the tablet PC market, too, will end in the next three to five years. Today, researcher Strategy Analytics announced Apple overwhelmingly dominated the tablet PC industry in the second quarter, with its share of the market rising to 68 percent of the 24.9 million devices shipped. Google (Nasdaq: GOOG)'s Android-based tablets were flat at 29 percent, and overall shipment increased 67 percent for all devices, according to Strategy Analytics:
Apple continued to shrug off the much-hyped threat from Android and the iPad's global tablet share is at its highest level since Q3 2010...
Global Android tablet shipments grew by more than half to 7.3 million units. Despite high expectations for companies like Amazon, Samsung, Acer and Asus, the Android community has yet to make a serious dent in Apple’s dominance of the tablet market. Unspectacular hardware designs, limited uptake of cellular models and a modest number of tablet-optimized services have been among some of the main reasons for Android’s mixed performance so far.
Just as it reigned atop the smartphone market for years before Samsung caught up, Apple will be dominant in tablet PCs for a while longer, but rivals are bound to catch up. Google's Nexus tablet and Amazon's Kindle will help whittle down its leadership. Just as Nokia Corp. (NYSE: NOK) zipped past Motorola Mobility Inc. (NYSE: MMI) but then lost its crown, Apple's domination of the smartphone market has already ended (Samsung now ships more smartphones than Apple), and it will eventually lose the profit trophy, too.
I believe apple will continue to dominate the smart phone market if they are ready to experiment with more varieties, may be in terms of firm factor or may be in terms of complete design itself. The strength of apple is the quality of their sw, hw n overall functionality. Even though Samsung is selling more smart phones they have loads of software issues.
What you say might happen when the iPhone 5 comes out in the market. Although the overall quality of the phone is great I think the final buying decision is made on the basis of the OS. Samsung now sells more smartphones than Apple and most of these smartphones are on the Android platform. The success of Android has lead to an increase in sales for Samsung and other manufacturers. So, I think if Apple comes up with some innovative ideas in their iOS they will be able to regain any customers that shifted to the Android.
as we all know, Apple's product success is dependent on the dedicated fan base that has increased within last few years due to some revolutionary product design and implementation. With fierce competition and market share at stake, competitors are bound to catch up as Samsung has done. So, Apple has to keep a step ahead in its product improvement and mostly has to diversity and come up with new products almost every 5-7 years. Not to say more, the expectations are bound to be more.
I think they still hold the torch for the foreseeable future because although Samsung may have 'caught up', they will have to maintain the steam to get the same type of fan base that Apple already has. They are still essentially trying to catch up.
@pocharle - no question, Apple is still at the top of the dame, and will be for some time. Market expectations will fluctuate each quarter, but Apple will continue to be a force in the industry.
Samsung and the android Eco system will be able to fast copy the good things from Apple and gain more market share. I think this is quite similar to the OS market : Microsoft windows used to be quite dominant in the past but now there are alternatives such as Linux or mac OS which are equally easy to use.
But it's all about niches. Emulation is the greatest form of flattery. As long as iOS is the predominant app platform, Android can copy but the barrier to entry for many Android developers will be a bit higher since there is so much differentiation among devices.
@pocharlie: Because of the recent restrictions by Apple on the apps, Android has beome more developer-friendly and a lot of developers are switching towards Android platform. Google anticipates that the number of Android developers will exceed those of Apple and other platforms within the next two years.
But that might not necessarily be a good thing for developers. Apple puts restrcitions on what you can publish because they want quality for their users. Android pretty much lets you publish whatever you want.
So does that mean quantity in Andorid marketplace will be better than quality in the Apple marketplace?
Which would you choose if you wanted to use some apps?
Restrictions might could go either way. I mean that by controlling app development one can also control what gets sold in the market and consequently control the quality.
Which one is better is a difficult question. I think for the time being Apple seems to be doing better because of its high market share. But in due time if the Android catches up it will surely attract more developers.
I think also the key advantage that Apple has is lack of diversity. All apps run on all devices because they are the same. Developers will run into issues with Android because there is so much disparity in devices.
That's what also keeps the fanbase happy to know apps, etc will work with all of their i products. Then there's the complementary iCloud to bring it all together.
Great! Congratulations! :) You will have no complains at all. Since I jumped in I have been very happy, as I have never been before with any other of my devices.
I am an iPhone user since the past few years. And I have also tried the Android. It is safe to say Apple enjoys a greater fan following than Android. As far as my observation goes. Personally, I am also content with what they have to offer especially the apps.
I guess I am comfortable in using the iPad, iPod and the iPhone. I haven't tried the Google Nexus tablet so I am not in a position to comment on it. But having used an iPhone and another Android phone I think I prefer the iPhone. One of the reasons could be that I was hooked onto it a few years ago and never bothered to change.
I fought it for a while too being a PC but their design and interface is so much better than anything else you'll use. The tons of $$$ they put into research & design pays off.
Very true. I have slowly been getting there. I now have a computer and an iPod. As my Windows phone continnues to p*ss me off, I might actually consider getting an iPhone!
Yes, it doesn't matter how long it takes you to get there, once there, you stay forever. That is exactly what happened to me with the laptops, until one day I exploded, and got my Mac, which I adore. The ROI is all worth it.
An always well functioning laptop that never presents a problem, and is always fast, never crashes, never freezes, etc let me accomplish more in less time, and is a pleasure to use is always worth its value. I haven't regret for a minute the change. It has been a good investment.
As far as know, people only have problems with an Apple computer when they can't adapt to it after being PC users. Other than that, Apple users are happy users. :)
Most likely that was the only reason why you got Apples back.
Mainly compatibility issues with some programs. In addition, the security was beefed up so certain things do not just "Run" they way they used to. Nothing serious. Just little things here & there that I've heard complaints about (but isn't that always the case with Apple users...)
I don't think it's common to hear any complaints. It sounds strange. I haven't had any issues with anything. What compatibility issues with what programs, for example?
I think everything runs super smothly on a Mac. As I said, not even one day I have had any problem with my Mac. Never. I could never say something like that with any of my PCs.
@Susan: Thanks for adoring Apple / Mac. I am also considering getting Mac as my laptop crashed in infant phase of life. What Mac model do you suggest for modest user?
Sorry to hear that. How long exactly did it live? I know exactly how it feels when your computer crashes. It's especially bad if it's your work tool. If you want a laptop you could compare the specs of the McBook Pro and the MacAir; it depends on what you need. :) A Mac will not crash, and they are super fast.
It is just little over one year. I am very dissapointed loosing time and data. This time I maty like to get MacBook Pro. I need to study them for day or two.
It sounds like one of my laptops, a Sony Vaio (supposed to be one of the best PCs in the market, just another piece of rubbish). I had problems with it almost since I bought it -it went to tech service twice, one of the times it was for the HD that had crashed-, then the motherboard crashed, and it was the end of it.
I have a MacBook Pro; I have been happy with it since day one until today, now a little over a year. It never had an issue of any kind. It's a pleasure to work with it. It's the most reliable machine I have ever had. It's super fast and silent, and I love it. All the apps for Mac make it even better. All the money I spent (wasted) on PCs went to the trash can, not one PC I had was as good as my Mac. None of them. This Mac is worth every penny I paid.
Let me know if I can help you with anything you would like to ask, and I could answer for you.
I also stumbled into the 'Restore purchases' option. It is amazing. I cannot tell you how many people I know purchase the same apps multiple times on different devices because they didn't it was available.
In fact it is very straightforward to kickstart android app development. The tools are free and can be run on any platform. For Apple, to develop apps at least you must have a mac computer :)
pocharle, I think so too. Apple has been very successful in the past and with their current consumer base they will most likey continue to dominate the smartphone market.
"The strength of apple is the quality of their sw, hw n overall functionality."
@elctrnx_lyf: I think one big advantage that Apple has is that they own both the hardware and software and they have full control over it. In the case of hardware vendors like Samsung, they are dependent on OS like Android and they have little control over the software. This advantage is essential to Apple in bringing about growth.
"Apple disappointed us by appearing to be all too "human."
At first when I read it I thought with the word "too human " that you mean the move (to press Foxcom to improve its working conditions) that Apple did . And I was wondering why that is wrong but after a while I realize your points and totally agree with your point of view.
It is not only share price and market share. Apple wows its customer with most innovative products and its fans loves and trust it for that. It is important that Apple just do that. Share price and market share is secondary and follows if you do good work. Wish wish to get more trendy products from Apple.
As I mentioned before, if Monsanto incorporates Apple code into their GMO corn, and people eat it, that might explain why so many people feel as if they cannot live without Apple. It is because they are becoming Apple.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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