Fetching a Rug: The Magic Apple is Poisoned

On Nov. 9, 2001, shares of Apple’s stock were at $18.71 at market close. The very next day, the first iPod was sold. The company was saved. Steve Jobs had returned after his forced exile, and the resurrection of his baby was underway. With the advent of the iPod, Apple went on a hit parade, revolutionizing all-in-one desktops, high-performance laptops, operating systems, the music industry, and the mobile devices industry with sleek design, catchy names, and black turtlenecks. Cupertino’s most famous residents also led the birth of the digital content industry and made the CD all but disappear. Apple stores set the bar for elegant, if not Spartan, design in retail space, and Apple “Geniuses” help many people to cut the tech support cord with India. To top it all off, Apple’s stock hit its all-time high of $704 on Sept. 19 of last year.  But it could be all at an end. That’s right, the golden days of Apple Inc. seem to be at an end, their fortunes squashed by an army of little green robots.

Android, Google’s version of the iPhone, is eating Apple’s lunch right now with help from mighty partners like Samsung, HTC, Motorola, and LG. As of November 2012, the last time comScore reported their market share figures, Android accounts for 53.7% of the US market, while Apple’s iOS devices come in second at 35.0%. The barrage of Android-based smartphones and tablets, ranging from entry-level to the highest of high-end prices, has overwhelmed Apple’s iPhone and iPad offerings. Why is that? In an increasingly tech-literate consumer population, the combination of higher customization, more choices, and, on average, lower prices are appealing to the smartphone buyers here in the US. Many industry experts also say Apple is not keeping up with industry standards while Android manufacturers continue to the push the envelope with innovations. For example, the iPhone 4 was widely speculated to be the first 4G iPhone but that functionality was left off when it was revealed, not arriving until two models later, with the current generation iPhone 5. Now, the iPhone 5 is without NFC, or Near-Field Communications, a recent smartphone trend that allows compliant phones to interact with other gadgets just by touching, as evidenced in a few subtly risqué Samsung Galaxy S III commercials.

The source of Apple’s woe, however, is not just Android. When Steve Jobs died, the Cupertino tech giant lost more than just a co-founder and leader; it lost its soul. Tim Cook, who had already taken over as CEO in Jobs’ final days, has proven unable to fill the massive shoes left behind by his visionary predecessor. While Jobs was more than capable of delegating tasks to his talented team of executives, his vision was the company’s most valuable asset. The turtleneck-wearing tech titan was well-known for making absolute declarations about products, services, and the future of Apple, and then going against many of said declarations. Just think about where we would be if he stuck to his promise made to Paul McCartney that Apple would never enter the music business in the trademark spat between then Apple Computer and McCartney’s Apple Records, or if Jobs had never gone back on saying that the world doesn’t want an iPod phone. While breaking his own declarations proved to be very successful on a few occasions, Tim Cook’s practice of breaking Jobs’ promises has been seen as desperate, the actions of an overwhelmed CEO trying to keep from drowning in a rising tide of competition. When it came to the growth in smartphone sizes, Jobs claimed that the majority of consumers don’t want such large phones and that the iPhone would not follow the trend. What happened there? Tim Cook unveiled the iPhone 5, a bigger variant of the traditional iPhone that follows the size trend. Jobs dismissed Amazon’s Kindle Fire, saying that there wasn’t any market for a tablet of that size and that Apple would never release a product in that segment. What happened there? Tim Cook unveiled the iPad mini, which is nearly the same size as those 7” tablets that Jobs so smugly put down. Tim Cook approved an update to the Apple TV software that Jobs had previously passed on, saying that it looked bad and performed worse. Mr. Cook has reached a point where “Think Different” means doing almost exactly what the rest of the industry has already done and then suing them for copying Apple.

This is America, where capitalism encourages the competition of the marketplace and it is believed that the consumer will reward innovation with sales. Unfortunately for Apple, it looks like they have run out of innovation and the spirit that made them different than all the rest of the tech companies. For years and years, the Cupertino company cashed in on catering to individuals who wanted to be just that, individual, with their computer purchases. The Cult of Mac, as it has come to be known, was a collection of people who embraced their beloved Apple’s slogan of “Think Different” and stood apart from the legions of computer users on generic Wintel machines. Today, Apple is the leading manufacturer of laptops and the number two manufacturer of smartphones behind Samsung. That is not thinking different anymore and it’s hurting Apple. iPhone 5 sales are not on par with what is to be expected based on past performance of iPhones, with more people opting for the last generation instead of Tim Cook’s ill-conceived offering, and component orders for the iPad have been slashed in the face of lower demand. The Samsung Galaxy S III outsold the iPhone 4S in the third quarter of 2012 to steal the title of best-selling smartphone in the US from Apple, and Google is reporting that their latest Nexus-class smartphone, the LG Nexus 4, is selling way too fast for them to keep up with demand.

And then there’s the Apple Maps fiasco. After Google refused to go above and beyond their contract with Apple for Google Maps and add on turn-by-turn navigation, a standard feature for Android for several years, Cook and Co. decided to build their own version. The result was so horrible that it elicited a rare mea culpa from the CEO himself.

Since September, Apple’s stock has been in freefall, as a seemingly-endless stream of disheartening reports pounds the company’s reputation with Wall Street. On Monday, Jan. 23, Apple reported their earnings for the previous quarter, which included the all-important holiday season. They missed consensus expectations for their earnings by a matter of cents as revenue fell short of the target, a very bad sign with holiday sales. As such, shares were trading down 6.5% an hour after close, or about $480 per share. That’s quite a fall from September, and unless Tim Cook has some magic up his sleeves, like an Apple smart TV, the fall is far from over.



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