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  • Has Apple Reached the End of the Fast Growth Curve?

    December 5th, 2012

    Curious that the death of Apple has been forecast for a couple of decades now. Sure, Apple got real close once, with a near-death experience in the 1990s. It has been reported that Apple was mere months away from going belly up. But that was long ago and far away, and it's impossible to believe that Apple is confronting any such danger now.

    Sure, the landscape has seriously changed. Despite the recent drop in the stock price, Apple remains one huge company when market cap is considered, and sales and profits remain at record levels. But every little potential sales blip is being examined with a microscope for the slightest evidence that we no longer care about Macs, iPhones, or iPads. All right, sales of the iPod are going down and down, but the functions of that product have been subsumed by the iPhone and iPad. Other than the iPod touch, most customers seek a cheap music player without the frills, but want to remain in the Apple ecosystem.

    It's easy to say that Apple is going at things in the wrong way, claiming that the alleged walled garden actually restricts customer choice. You are locked into a single place with which to buy apps on your iPhone or iPad, and the Mac isn't Windows, although you can easily run Windows on a Mac without going through a lot of stress. But when it comes to upgrading a Mac, as you know, the possibilities are slim. You can upgrade RAM on some, not on others, and replacing hard drives on anything but a Mac Pro -- which is long due for a major refresh -- is a seriously difficult chore. And don't forget those models with Flash drives that are soldered directly to the logic board.

    Why is Apple so user hostile?

    Of course, all this is in keeping with the philosophy of the Mac, that it's a personal computing appliance, not something for PC power users to take apart and replace everything inside. In theory, you want to get work done, not fiddle with your system, which is hardly a productive thing to do.

    Yes, you can quibble with some of Apple's decisions, but those decisions don't seem to be hurting sales. Where PCs aren't doing so well, even with Windows 8, it appears that Mac sales are pretty consistent, although don't expect much or any growth this quarter. The late arrival and limited availability of the 2012 iMac is a key factor. But that doesn't mean there's no potential for Macs. Once Apple boosts production to meet demand, things are apt to get better. But Windows PCs are readily available, and it doesn't seem that customers are flocking to that silly procession of swivel and reversible touchscreens that accompanied the release of Windows 8.

    The other argument has it that Apple can't continue to boost sales of the iPhone forever, and that Samsung is already beating Apple in the number of smartphones sold. True enough, though Apple seems to get higher profits, at least for now. But where is it written that a company must be number one in order to succeed? If that's the case, why have we been putting up with Macs all these years? It was never number one, not even during Apple's formative years.

    With iPhones, and with iPads for that matter, it's all about consistent growth in profits and sales. If another company's products grow faster, so be it. Apple only suffers when revenue is down, and that hasn't been a factor in years, despite the wishes and hopes by critics that it's going to happen any day now.

    There's also the silly assumption that Apple has to launch a revolutionary product every single year. Since 1984, the defining Apple products have been Macs, iPads, iPhones and iPads. Other product lines have come and gone. That's pretty good for 28 years, but hardly an annual revolution, and the jury is still out about the ultimate fate of Apple's current hobby, Apple TV. And, yes, I know about the LaserWriter and the desktop publishing revolution, but it wasn't long before you could buy printers of equal or better quality from other manufacturers.

    Remember, too, that in today's accelerated timeline, the iPad, which debuted in 2010, arrived three years after the iPhone. If Apple keeps to that schedule, the next trendsetting product is possibly due next year, and some suggest it'll be an Apple connected TV of some sort. Or maybe something that hasn't been predicted by the rumor sites.

    Sure, if Apple's sales flatten overall going forward, and years pass with nothing more than product refreshes, I suppose there will be legitimate reason to believe the gravy train has gone away. Right now, though, except for alleged Wall Street analysts who try to talk Apple's stock price down -- no doubt earning huge profits in the bargain -- there's no real evidence the company is on the skids, or even close.

    There's also the curious contradiction of some people saying, as the result of the surprise fall refresh of the standard iPad, that Apple is releasing new products too quickly, while others maintain Apple isn't refreshing them fast enough. Need I go on?



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    4 Responses to “Has Apple Reached the End of the Fast Growth Curve?”

    1. Ted Schroeder says:

      Though I don't know that it's true, I have read that for AAPL, the ratio of traders to investors is 10-to-1. That means that there's a lot of money managers and hedge funders that are trying to time the market and generate profits versus people who buy the stock and sit on it.

      This makes for what has been described as the slingshot effect. The traders sell and short the stock to drive the price down and then ride it back up. This might happen with AAPL next month when sales figures for the holiday season are released.

      I think the halo effect (people buy an iPhone then switch to Mac) has not been as great as some expected it would've been.

      And while it's possible that Apple is unlikely to come up with a product or products that have skyrocketing sales like the iPod and iPhone and iPad have had, they are still a big company that makes a lot of money.

      If I had to guess, I'd say that the next big innovation is the Mac itself and the unification of iOS and MacOS into some kind of iCloud/thin client solution. It's risky because they don't have a great track record in this area.

      The big piece of the puzzle that's missing is TV and that is - as Steve Jobs said - a 'go-to-market' problem. One possible solution (for the US) would be for Apple to buy Comcast, if the government would let them.

    2. DaveD says:

      As you have stated indirectly, Apple is a trendsetter. I believe what drives Apple is that it never looks back. It seeks the next great thing while staying focused and keeping things simple. It never stops making changes/improvements and drops products/services of little or no value.

      If Apple is successful in getting its "stuff" in the hands of the consumers and they want to use it frequently then Apple is in a better position of making money.

      Apple has made tons of money and the profit flow continues.

    3. Joe S says:

      One thing that you did not mention is that there are a lot of people that have a vested interest in Apple failing, or at least very embarrassed by its success. Although AT&T and Verizon make a lot of money off the iPhone, they resent losing their iron fisted control over product. Then there is the Chinese phone company that wants a cut of the iTunes money. The old line PC manufacturers, Microsoft, Intel, HP, Dell and Lenovo are not happy losing market share and more importantly profits to Apple. They are wandering down the road to irrelevance and they know it.

      Gene Steinberg Reply:

      @Joe S, The wireless carriers still make lots of money from the iPhone, despite Apple's controls over the process and the product. The iPhone helped create a large smartphone market for consumers, and other companies profited with competing products, particularly Samsung. It's a win-win situation for Apple to continue to innovate, and for other companies to follow where they lead.

      Peace,
      Gene

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