How Can Apple Deal With Rising Competition?
Terry is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Strange things have happened to Apple (NASDAQ: AAPL) lately and the stock price has not been all too friendly to its shareholders as of late. Apple seems to be in a bit of a bind as the stock price fell recently when the company missed its iPhone and MAC sales estimates. The company also had guided down for the 2nd quarter of 2013 and the stock took a dramatic dive. The key thing to note is that Apple is heavily reliant on its iPhone sales and thus, in my opinion, is the key factor for the company's continued success. Can Apple live up to Wall Street's estimate for the 2nd quarter of 2013? Can it fend off competition from Samsung, Nokia, and other smart phone makers? lets take a deeper look into the need for Apple's stock to live another day.
The main thing Apple seems to have trouble with is competition from other smartphone makers in the sector, especially Samsung. In the most recent quarter for earnings things looked far greater for Samsung in the Galaxy S3 vs. iPhone 5 battle, as Samsung was able to sell 17 million more smartphones for the quarter! This puts Samsung ahead of Apple and if the trend continues over the next few quarters Apple will need to rethink their strategy against competition.
Earlier in the year Apple took Samsung to court to try and ban all the phones it sells in Europe on patent infringement claims. In my opinion a company won't do this unless A.) it has a valid reason for exactly copying the phone itself, or B.) it is facing increased competition. In the case of Apple I would have to go with option B. Sad to say with the loss of Steve Jobs, Tim Cook at the helm has had trouble innovating new ideas at Apple and it's showing with the last three disappointing earnings reports.
There is no doubt that Samsung is leading Apple in terms of smartphone sales worldwide and if Apple is to succeed it has to change its strategy slightly and innovate its phones to compete substantially against its peers. By quality of life changes I'm referring to small changes like maybe allowing SD slots on the new phone models or innovating the user interface in a new fashion. Tim Cook needs to figure something out as the stock price seems to be stagnant after that huge dive down after earnings.
What I would recommend is for Apple to slow down the pace of the amount of phones it releases, as they are tossing out phone after phone with hardly any changes. In my opinion this is too much and Apple is alienating its own user base. It needs to get back into the roots of taking its time to release the phones when they are ready and when they have new innovations attached to them. I hope for investors's sake that Apple can innovate and stave off its competition the next few quarters. Otherwise it will leave many investors anxiously exiting the stock! To elude to the point of Apple needing to succeed, iPhone sales are very important because they account for about two thirds of Apple's earnings. So any drift down in the future on iPhone sales could add more downward pressure to the stock and on the company's earnings as a whole!
The good news is that Apple's shares have recovered slightly this past week and the equity seems to be priced attractively relative to earnings, but the bottom line is that it has to fend off its competitors and not allow new technology to steal its thunder. BlackBerry (NASDAQ: BBRY) recently has showed off its new phone, Blackberry Z10, and hopes to steal some of Apple's pie.
Blackberry came out with its new name and new design of its phone. Management has done well lately as they have incorporated more options for their user base. By this I mean that they have added one phone that is a touch screen phone and have made another one for old school fans that has a Qwerty keyboard that customers can use for typing. Another positive sign is that management knows that their phone has better security and going forward they predict sales of the Z10 to compete against Apple and other smartphone makers. Whether Blackberry or Samsung can steal more share from Apple remains to be seen. Time is looming and we need to see the type of innovation that Apple was once capable of!
Overall I believe that Apple can make a comeback and get back into the top spot in smartphone sales. The company's management has done it once and if they incorporate all of their old strategies and create some new ones, they can make an iPhone once again that Apple fans will have no trouble waiting in line to buy. But there has to be some innovation and they have to create a better phone than Samsung, Blackberry, Windows phone, and other smartphone makers. If they can do this with ease, then I feel that their stock will rebound.
Rennrunn has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!