Is Apple's Strength Becoming a Weakness?
Jonathan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
No, but no one, does a better new product launch than Apple (NASDAQ: AAPL). Its Super Bowl commercial for the MacIntosh is considered to be one of the greatest ever. When the iPhone 4S was released last year, there were crowd control problems at Apple stores. If the iPhone 5 comes out in the fall, as widely reported, there will be similar "problems of a high class" nature for Apple.
No issues like that come to mind for the Galaxy Nexus release from Samsung and Google (NASDAQ: GOOG), nor the unveiling of the Lumia 900 by Nokia Corporation (NYSE: NOK) and Microsoft (NASDAQ: MSFT). It is tough to imagine rioting when the Blackberry 10 from Research-in-Motion (NASDAQ: BBRY) finally makes it on the shelves. The long wait between new iPhones from Apple creates long lines at the stores upon arrival.
But these lengthy periods of time between new product launches leave a great deal of room for maneuver for the competitors of Apple. The high tech crowd is not a patient lot, certainly not willing to go without and endure the wait of a year for the new iPhone. By releasing the iPhone 5 in the fall, Apple will have the new smart phone on the shelves for the peak holiday shopping season.
But, in bringing the Blackberry 10 out in January 2013, as reported, Research-in-Motion will have its new smart phone before its core commercial group at the peak of business IT buying, the first quarter of the year. The spring of 2013 will then be wide open for a new smart phone launch, just like the introduction of the Lumia 900 last Easter weekend. Microsoft and Nokia, along with Samsung and Google, also have new products ready for market to compete with the iPhone 4S and iPhone 5. These will all be in position to profit from the back-to-school shopping period that Apple missed in 2011 with the October 4 introduction of the iPhone 4S and is now missing in 2012 with the iPhone 5.
While the competitor smart phones may not be as good as Apple's, the prices are a whole lot better. The year between new iPhones leaves a great deal of time for marketing departments to price products to achieve optimal sales. Nokia just reduced the price of the Lumia 900 in the United States. In China, Xiaoma, in less than a year, has sold more than 3 million of its MI-One smart phones at $320 each, with the iPhone 4S priced at $790.
iPhones are the standard bearer, at this stage, for smart phones. That is particularly true in China and other foreign countries. About this, Israel Ganot, the founder of Gazelle, an electronics recycler, notes that, "There is insatiable demand for iPhones outside the U.S., mostly in emerging markets."
But there is also a very strong demand for "good enough" smart phones, too. iPhones are much like a high-end sports car that tops out at over 200 miles per hour: just how many times does the average driver reach that speed, or ever want to, for that matter?
According to a recent article in Forbes, "The price of a 'good-enough' Android or Windows smartphone is down to just $100, with lower prices ahead." In addition to the "lower prices ahead," there will also be greater improvements. That the smart phones and laptops of today are so far superior to those of previous years manifests how much product improvement can take place in a short period of time in high tech consumer items.
Waiting for the iPhone 5 has also has reduced the sales of the iPhone 4S. According to Peter Oppenheimer, Chief Financial Officer for Apple, "iPhone Sales continue to be impacted by rumors and speculations about future products." That is not a positive factor when competitors have "good-enough" smart phones available that are selling at much cheaper prices.
Apple needs its iPhone sales to wow, particularly in China. The iPhone generates more revenue for Apple than all of Microsoft's products combined. China is expected to provide much of the growth in future earnings for Apple. But the China market evinces the vulnerability of Apple due to its bringing out a single, high priced smart phone once a year.
In China, Samsung sells the most mobile phones, at 21.8%. Apple is next at 18.9%. Then comes Nokia at 10.3% and ZTE and 10.1%. Huawei has 9.8% of the market. Lenovo has 3.5%. And Motorola has 3.5%. Not in there with a major market share, yet, is Xiaomi, described in the same article in Forbes as being, "China's hottest smartphone company."
Things change in the smart phone and mobile phone industry....fast. A year is a very long period of time. Last year, Nokia Corporation sold more mobile phones than any other company in the world. Now it is in a fight for survival. The same applies for the current situation of Research-in-Motion, which was over $32 a share a year ago and is now trading around $7.
By waiting a year between iPhones, Apple is not only conceding the most important element in innovation, that of time, but also the one commodity in which all firms are equal. Other smart phone companies have utilized the period since the launch of the iPhone 4S to maximize the marketing edge by making products more appealing and optimizing the pricing differential. A huge advantage is being ceded to very formidable competitors by Apple in the months between the introduction of new iPhones, both in time and money.
jonathanyates13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
