Tech News Share: Three Possibilities of Apple Falling Apart

Connie Wisley
February 11, 2015 Preview 2189 Preview 0
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Therese Poletti, the columnist of MarketWatch, lists three major threats, pointing out that if Apple lost the ability to be independent of continuous innovation, it may be reduced to a mediocre business.

The review article from Therese Poletti is following:

Apple’s AAPL, +0.16% $682 billion market cap is about double that of Microsoft Corp. MSFT, -0.05% or Google Inc. GOOG, +0.01% Seen another way, consider that Apple’s first-quarter revenue of $74.6 billion was greater than Hewlett-Packard Co.’s HPQ, -0.11% $69 billion market value. In the December quarter, Apple’s revenue grew at a 29% growth rate, underscored by 34,000 iPhones sold every hour.

But some investors wonder if Apple now has reached its apogee, a point at which the company starts to lose its cutting edge. Already Apple’s outlook for a slower March quarter, which also includes the impact of foreign currency, raises a question about its ability to keep generating rapid, robust sales growth.

What could sour Apple? Here are three potential threats investors need to watch:

1. Dependence on the iPhone and upgrade cycle

Almost 70% of the company’s revenue in its most recent quarter was from iPhone sales, particularly in China, along with the upgrade cycle to the newest iPhone 6 and the larger iPhone 6 Plus. The company launched the iPhone 6 family in China in October, a few weeks after the U.S. launch, after the government allowed the sales and Apple reached agreements with China’s three biggest telecom carriers.

Nomura analyst Stuart Jeffrey says the December quarter represented “a bit of a super-cycle in replacement” of old iPhones. “If guidance is correct, then one could make the argument that the heavily motivated iPhone buyer in FYQ1 was mostly an existing iPhone owner, resulting in sales slowing sharply through the year,” Stuart wrote on a note last month entitled, “Too good to last?”

Moreover, the average selling price for the iPhone, at about $687, is the most expensive iPhone ever. Jeffrey noted that if his analysis of iPhone sales is accurate (80% of iPhone sales were iPhone 6 and 6 Plus), the numbers included an “amazing mix of high-priced phones in the mix.”

2. The Apple Watch could start slowly — or not at all

The Apple Watch is expected in April, but beyond the serious Apple faithful, it’s not clear that the watch will rival the iPhone or even the iPad, which is experiencing a decline. “Apple Watch has potential to evolve into a meaningful product category over time,” wrote R.W. Baird analyst William Power last week. He projects initial shipments of 16.9 million units for calendar 2015.

Yet wearable computing is still evolving. Google Inc. had a rough start with Google Glass and is now overhauling the product. While the Apple Watch is not the “Internet on your face” like Google Glass, Apple has a lot riding on the device, which could become a big wild card in its growth plan. On the bullish side is Ronan de Renesse, an analyst for Ovum, a market-research firm in London, who expects the overall wearable market to hit $27 billion by 2020, up from $3 billion in 2014, and that Apple could see as much as $16.5 billion in revenue from the Apple Watch by 2020.

3. The iPad is losing its pop

Apple CEO Tim Cook showed no worry about the year-over-year drop in iPad sales in the December quarter and told analysts he was very bullish and optimistic about the iPad going forward, saying the tablet has a longer upgrade cycle than the iPhone.

Last week, an analyst at KGI Securities, Ming-Chi Kuo, wrote in a note that he expects iPad shipments this year to see their steepest decline since the product was launched five years ago and forecasts a 30% decline in year-over-year shipments from 2014.

But the biggest question is whether Apple can sustain its product-development momentum to create new blockbuster products like the iPhone. After the company’s barn-burner of a quarter, Cook told the Wall Street Journal that the iPhone “certainly has legs to it.”

If Apple can keep innovating on its own, it may avoid the fate of older tech giants, such as Hewlett-Packard and IBM, which are forced to buy their future rather than build it organically.

We all don’t have a deep understanding about the future directions of Apple, with the change face of agile, it is possible to appear this kind of phenomenon as Therese Poletti said. But we also should believe Apple's strength and creativity. Can Apple overcome those problems? Let's wait and see.

Connie Wisley
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Connie has been writing for Mac productivity and utility apps since 2009. Each review and solution is based on her practical tests, she is aways energetic and trustworthy in this field.

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