Why Apple Has Gotten Rotten In The Tech Industry (Part 5- Apple’s Future)

This is Part 5, the Final Part of the Series “Why Apple Has Gotten Rotten In The Tech Industry.”

To read the other four parts in this series:

Part 1 (Google)

Part 2 (Samsung)

Part 3 (Amazon)

Part 4 (Other Competitors and Challenges)

Having gone through the challenges that Apple is facing from equally capable companies such as Google, Samsung, Amazon, and Pebble on several fronts, including the smartphone, tablet, and smartwatch categories, what does the future hold for Apple?

As was mentioned earlier in this series, expecting Apple to widen the gap to where they were far ahead of their competitors is unrealistic; those days are gone.  For Apple fans and investors, one must accept this fact: the rest of the industry has caught up, and in some ways, the rest of the industry is outdoing Apple in the tech industry, especially in terms of innovation.

Does this mean that Apple is finished in terms of being a profitable company in the tech sector?  No; Apple just needs to raise its game when it comes to innovation, both in the tech industry and beyond.  The good news is that there are rumors of them doing just that.

There are more rumors by the day that Apple is looking to connect its impending iWatch to the health industry.  As this 9to5Mac article points out, specifically, it’s the mobile healthcare industry that Apple is targeting.  That would certainly explain why Apple has taken a long time to release its iWatch, and it is an industry that the other main tech companies have not targeted.  That, alone, should appease Apple fans and investors, as this could be the impetus Apple needs to get some of its value back closer to its all-time high of $700+ (currently under $550 as of the time of this blog post).

Reportedly, the new iOS 8 operating system will include an application called “Healthbook” that will enable the iWatch to monitor one’s fitness (weight lost, calories burned, steps taken, etc.) and one’s health (heart rate, blood pressure, hydration levels, etc.).

While that is exciting, there are still some hurdles to take care of.  As this CiteWorld article points out, Apple is entering a different playing field that is more tightly regulated in virtually every country than either the music or entertainment industry.  Thus, Apple will not be able to easily and quickly differentiate themselves from other competitors in the field as they did for a long time in the tech field.

In addition, Apple likely would have to gain the proper clearance from such regulatory organizations as the FDA and the Department of Health and Human Services in order to be able to market the iWatch as a medical device.  Note that this is just at the U.S. Federal level; many states and some cities have their own regulatory rules when it comes to health devices.  This doesn’t even take into account the European Union and other regulatory bodies in the countries of Europe and Asia.

Thus, the iWatch’s ability to penetrate the health industry is far from a done deal, and any roadblock could seriously hinder or even derail the full plans for the iWatch to disrupt the health industry and give Apple some much needed momentum for the company.

Apple introduced iRadio in June 2013 after years of rumors that Apple was going to get into the online radio market.  Many were predicting that Pandora, whom many considered to be the online radio leader, would suffer irreparable damage as a result, possibly leading to its collapse.

However, despite iRadio being in existence for over six months now, Pandora, as well as Spotify, are still kicking out the tunes.  In fact, Google also got into the act with its All Access Streaming Music service.  While iRadio added a nice feature to iOS7, it really didn’t distinguish itself from the other services, and in fact lacked features that Google All Access and Spotify provide – the ability to stream virtually any song any time the user wishes.  Surprisingly, iRadio is cheaper than Pandora (the most similar service to iRadio) – $24.99/year versus $36/year.  Of course, there are free versions in both, supported by ads.

This is another example of where Apple took a long time to develop a product, finally deliver it, but not distinguish itself from its competitors.  When it comes to Internet radio, it’s likely that most still think of Pandora or Spotify before Apple or Google (I know I do – and I use my iPad every day, but have only had iRadio on two times total in the last few months), showing the importance of being a first or early mover in the market.

At one time, most stock analysts and fans thought that Apple was the model company when it comes to tech, but that is no longer the case.

Ben Reitzes, analyst at Barclays, just downgraded Apple to “equal weight” from “overweight.”  That’s significant because, he has had Apple as “overweight” for 10 YEARS. Yes, 10 YEARS! As he states in this Benzinga article, he believes that iPhones will become more costly to make due to such new features as Sapphire glass, curved glass, and new batteries.  This will lessen Apple’s margins on its flagship smartphone product, thus leading to less profitability.  Reitzes doesn’t believe that AppleTVs or smartwatches will help to raise Apple’s valuation either.

This type of judgment on Apple is something that has not been seen in quite some time.  Even when Apple’s stock was dropping like a rock in 2013, most analysts brushed it off and thought that Apple would immediately come back in terms of value.  I know some analysts were even predicting that Apple would rise to $800, even $1000+ during 2014.

While that may still be possible, current evidence would suggest otherwise, as Apple is currently trading above $520, down about $1 (2.2%) on the day as of the time this post is written (about 12:15 PM ET on Monday, February 24, 2014).  While it has gained from the $385.10, the low it hit on April 19, 2013, it’s also a good margin away from the recent high of $575.14 on December 5, 2013, never mind the fact that Apple hasn’t been above $600 for over a year now.

Thus, more people are starting to realize that Apple is facing a much tougher tech environment, and Apple has been slow to adapt.  Every time Apple has more negative news about it or a positive development about a competitor surfaces, it does more damage to Apple than in the past.

Add in the fact that Apple has admitted that it has a “bug” that fails to encrypt sensitive data on iOS and Macs, and this just further intensifies the black cloud hanging over Apple.  This type of bug sounds more typical of Microsoft and Windows, yet the former tech leader is experiencing such a “bug” and is still working to resolve it on Macs (they have issued an iOS patch for iPhones and iPads).  Worse than that, as this Reuters article reveals, this bug has been present for months, but has only been identified very recently.  Thus, many Mac users may have inadvertently exposed their sensitive data on public WiFi without even knowing it until now.

This is another reason why Apple is being looked down upon, especially amongst the younger generation; Apple is not the most transparent company in terms of its operation, a quality that younger generations look more for than older generations do.  That is one problem Apple is facing.

Another problem Apple is facing is one that I mentioned earlier in this series: More and more people are looking at paying less for their technology.  This is likely to hold true in China, which is why most don’t think Apple will ever lead in market share there (they were up 1% in Q4 2013, a total of 7% market share, good for fifth place, 12% behind market leader Samsung – source).

Whereas at one time people thought that Apple was THE only choice in getting quality tech, even at higher prices, the competition has shown that that is no longer the case.  Add in the fact that the competition’s tech is cheaper, and it’s not surprising that other companies have more market share in places such as China, Android dominates the world (and leads in the U.S.), and times don’t look that bright for Apple right now.

So, what can Apple do about this downtrend?

Two things:

1. They need to be more adaptive to the competition – they can’t take as long in coming out with new products.  I pointed out both the delays in producing the iRadio and in the smartwatch.  Just as the iRadio didn’t do a whole lot for Apple or that much against its competition, I don’t expect the smartwatch to do much either, even if it is targeted more toward the health sector.  As mentioned earlier in this post, Apple has many governmental hurdles and restrictions to deal with before the smartwatch can even become a medical device reality, and that’s across many government levels.

2. Apple also must be more innovative in its product line.  While the health industry is one that its competitors aren’t in (yet), the delays aren’t helping Apple’s cause to be more innovative in the health industry.  As for its other products, the iRadio wasn’t that innovative, as noted above, and new models of the iPhone and iPad aren’t innovative enough anymore to outdo or even match its competitors.

Further proof that Apple has to pick up its “tech” game to make a comeback: I just seen in the latest Best Buy weekly flyer that Samsung has released its new, larger tablet, the Samsung Galaxy Note PRO 12.2.  Apple has plans to release a 13″ iPad, but that won’t be until later this year or 2015, again leading to them being behind the ball when it comes to innovation.  Apple does plan to target more of the enterprise industry than the main consumer industry, but the innovation behind such an idea has again been taken away from Apple thanks to Samsung coming out with such a product first.

In essence, Apple must improve the innovation in its product lines and its ability to get them to the market quickly (preferably first).  It is no longer good enough for them to just release a product and have everyone look upon Apple positively; it must now react to competition that wasn’t really present even a few years ago, and certainly not five years ago.  This is the only way, in my opinion, that Apple will start to gain value in the eyes of its fans and investors again.  Apple isn’t going away in the tech industry, but it’s no longer the tech leader, and it won’t be again either without it being more innovative and being more efficient in getting its technology out to the market before its competitors do.

I hope you enjoyed this series.  Feel free to post your comments below.  I will keep an eye on Apple and the tech industry in the coming months, delivering a few posts here and there.  If you have questions or would like to see an expansion of this series, looking at another specific aspect of Apple and/or the tech industry, feel free to leave a comment below.  Thanks!

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