Is Apple Really in Trouble?
It may be easy — and fun — to call time on Apple... it’s premature, too.
Admit it.
A teeny-tiny part of you is kind of glad Apple is getting a bit of a bashing in the stock market, and tech sector analysts are suddenly throwing all sorts of shade over its performance and prospects.
Admitting it, only makes you human.
After all, there’s not much we enjoy more than watching the mighty fall — or at least stumble.
They don’t come much bigger, or less lovable, than Apple.
As is its wont, the stock market has been abuzz with negative commentary about Apple reporting its slowest profit growth since 2003, and the weakest level of sales in 14 quarters.
Sales of various iProducts climbed an impressive 18 per cent in the first quarter, but it compares with 73 per cent growth a year earlier.
The first point about all reports, suggesting Apple’s imminent demise: absolutely everything about the company — its swagger, its reputation, its clout — is exaggerated.
When the new iPad was released last March, the company’s share had risen by 83 per cent in the previous year, and by 50 per cent in the first 10 weeks of 2012 alone.
It was the largest company in the world, by market cap, its shares were worth $565 billion — more than the entire American retail sector combined.
Apple accounted for 4.5 per cent of the S&P 500, and 1.1 per cent of the entire global equity market.
It’s not just hard to sustain — especially after the death of the company’s founder and resident genius, Steve Jobs — it means, even the slightest motion creates enormous waves.
It becomes incrementally more difficult to meet earnings expectations when a share price is soaring.
A large base makes impressive earnings growth tough to sustain.
Another important contextual consideration is the increasingly complicated field in which Apple — and its aggressive rivals — are playing.
Where it once had a cozy corporate relationship with Google (Google CEO Eric Schmidt was on Apple’s board for about three years), it now has an intense rivalry, leading Apple to abruptly, if temporarily, ditch Google Maps from its operating system and insert its own, flawed version.
It’s Google’s Android technology causing Apple the greatest grief — something not likely to be alleviated any time soon.
The popularity of the rival technology allows Samsung to take a huge bite out of Apple’s core business.
Apple has always been about profit margin over sales volumes.
Even though it accounts for16 per cent of mobile phone shipments, in the third quarter of 2012, Apple’s stylish, and expensive, devices accounted for 60 per cent of profits.
Last year, a record 700 million smartphones were shipped to market.
Apple accounted for 19 per cent of the market, Samsung for 30 per cent.
The growth rate of about 45 per cent over 2011 levels is a far cry from the 64 per cent growth between 2010 and 2011.
It has led to brooding about the possibility the market has matured to the point where gains will steadily diminish.
That’s where the innovation piece kicks in.
If there’s one thing at which Apple excels, it’s creating demand where none already exists.
Since 2001, it introduced three products — the iPod, iPhone and iPad — meeting demands consumers themselves hadn’t yet identified.
It did so in such a compellingly stylish way, even in a global recession its gadgets were “must have” items, commanding premium prices in a commoditized market.
The flair for innovation has, ironically, contributed to the recent jitters about Apple’s future.
For one thing, naysayers point out the visionary CEO, Steve Jobs, is gone.
So far his successor, Tim Cook, hasn’t really dazzled anyone with his fresh take on anything.
The company’s research and development budgets, as a percentage of sales, have been on the downslide for a couple of years, all the more notable because Samsung began spending aggressively, on new product development and refinements.
This raises the question of whether every company, ultimately, runs its course and collapses, given it’s an almost impossible challenge to make profound innovation a permanent thing.
That said, some of the clever people who keep track of such things observe Apple’s approach to innovation may be quite sustainable, because it’s a very clever aggregator.
Instead of developing greenfield technology and product, it does the corporate equivalent of a mashup.
It borrows a bit of this and a pinch of that from various sources, then, simply and stylishly, packages it all together, to sell it at a top price.
There are challenges and market shifts ahead, but it’s hard to sound the death knell for a company with $117.2 billion in cash on its balance sheet... so far.
Sir Isaac Newton proved pretty conclusively: a falling Apple can lead to some profound new insights.
Even though it accounts for16 per cent of mobile phone shipments, in the third quarter of 2012, Apple’s stylish, and expensive, devices accounted for 60 per cent of profits.
Last year, a record 700 million smartphones were shipped to market.
Apple accounted for 19 per cent of the market, Samsung for 30 per cent.
The growth rate of about 45 per cent over 2011 levels is a far cry from the 64 per cent growth between 2010 and 2011.
It has led to brooding about the possibility the market has matured to the point where gains will steadily diminish.
That’s where the innovation piece kicks in.
If there’s one thing at which Apple excels, it’s creating demand where none already exists.
Since 2001, it introduced three products — the iPod, iPhone and iPad — meeting demands consumers themselves hadn’t yet identified.
It did so in such a compellingly stylish way, even in a global recession its gadgets were “must have” items, commanding premium prices in a commoditized market.
The flair for innovation has, ironically, contributed to the recent jitters about Apple’s future.
For one thing, naysayers point out the visionary CEO, Steve Jobs, is gone.
So far his successor, Tim Cook, hasn’t really dazzled anyone with his fresh take on anything.
The company’s research and development budgets, as a percentage of sales, have been on the downslide for a couple of years, all the more notable because Samsung began spending aggressively, on new product development and refinements.
This raises the question of whether every company, ultimately, runs its course and collapses, given it’s an almost impossible challenge to make profound innovation a permanent thing.
That said, some of the clever people who keep track of such things observe Apple’s approach to innovation may be quite sustainable, because it’s a very clever aggregator.
Instead of developing greenfield technology and product, it does the corporate equivalent of a mashup.
It borrows a bit of this and a pinch of that from various sources, then, simply and stylishly, packages it all together, to sell it at a top price.
There are challenges and market shifts ahead, but it’s hard to sound the death knell for a company with $117.2 billion in cash on its balance sheet... so far.
Sir Isaac Newton proved pretty conclusively: a falling Apple can lead to some profound new insights.
No comments:
Post a Comment