Apple Feels Pressure to Launch the Next Big Thing

Apple reported revenue of $54.5 billion and a net profit of $13.3 billion for the quarter ended December 29—record results for the firm, which sold 47.8 million iPhones and 22.9 million iPads during that period.

Despite that success, the company’s stock plunged nearly 10 percent the morning after the earnings report. Wall Street, it seems, is convinced the company’s most innovative years are behind it.

While the iPad and iPhone continue to sell well, Mac sales were down, which Apple CEO Tim Cook blamed on a combination of internal constraints—the 21.5-inch version didn’t ship until the end of November, while the 27-inch launched in mid-December—and a weak PC market. He also thought the iPad had cannibalized a portion of the Mac market.

“Our base philosophy is to never fear cannibalization,” he told analysts and media gathered for the company’s Jan. 23 earnings call. “If we do, somebody else will just cannibalize it and so we never fear it.” However much the iPad has supplanted consumer demand for Macs, Cook suggested that Windows PCs are a much riper target: “On iPad in particular, we have the mother of all opportunities here, because the Windows market is much, much larger than the Mac market is.”

He believes that, eventually, the tablet market “will be larger than the PC market” at some future point—good news for Apple, which dominates tablets but lags far behind Windows OEMs in terms of PC market-share. “And so I see cannibalization as a huge opportunity.”

Yet pundits and analysts want more. “It’s not just about sales and earnings, but also about innovation,” Dan Lyons, editor-in-chief of ReadWrite, wrote in a Jan. 23 blog posting. “It’s been years since Apple did something truly revolutionary.”

It takes time to develop such products—six years separated the launch of the iPod (2001) from that of the iPhone (2007). The iPad was supposedly in development for several years before its 2010 debut. Apple may very well have a groundbreaking piece of hardware in the works, but for now it seems relatively content to release iterative upgrades to its existing portfolio—iPhones with larger screens, iPads with faster processors. And to be fair, that’s served Apple very well in the near-term; however much investors scream in agony, it’s hard to argue with billions in net profits.

In a way, Apple’s the victim of its own success: it’s had such an amazing run, over so many years, that everybody seems instantly disappointed when the company doesn’t do something truly earth-shattering. New products will come in due time; and meanwhile, despite the cries of doom, Apple isn’t exactly on the verge of destruction.

 

Image: 1000 Words/Shutterstock.com

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