The Future Of Apple?

Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Sony (NYSE: SNE) was once a leading player in the consumer technology space--it's now an industry laggard. The company's fate is a cautionary tale for industry leaders throughout the business world, but particularly for Apple (NASDAQ: AAPL), the industry's current darling.

Sony Made Music Portable
It's hard to believe today, but at one point in time people had to be connected to a wall or in a car to listen to music. So-called boom boxes were portable, if you could lug around the fleet of D-cell batteries they required on your shoulder. You could have used the handle, but back then it was cooler to put the boom box on your shoulder.

Then, one magical day, Sony made the “Walkman” and the world rejoiced. Perhaps it wasn't so exciting, but it was the first time that people could carry around their music and listen to it with ease. It was a revolution in the way music could be played, though storage of music remained a major problem. First there were cassette tapes, and then compact disks. (If you remember those days, you'll probably also remember spending hours making “mix-tapes” for your "friends.")

Style and Substance
That wasn't the only Sony hit, either. It seemed everything the company touched was stylish, more advanced, and more reliable than what competitors were creating. One of the key's to its success was the style component. Sony simply made cool looking gear, from the Walkman to the television to the computer. Its gear lived at the high end of the price and quality spectrum, so profits were notable.

Somewhere along the way, however, the company lost its stride. Quality remained a hallmark, but Sony was no longer as cutting edge or as stylish as it once was. This had a huge impact on sales, which have been volatile for more than a decade. It latched on to the television market, a notable success early on, but as prices for new TVs have fallen, so too have Sony's profits.

Peaking in 2008, revenues have fallen pretty much every year since. Earnings, meanwhile, have gone away, substituted by losses. Sony, while still a giant company, has major problems to fix. It's hard to believe that a company with such a dominant industry position could falter, but it happened. Hubris is partly to blame.

The Xperia
The recent news that Sony is set to release an iPad clone called the Xperia just makes Sony look late to the party. The company is currently focusing on the mobile sector, so the Xperia fits with that goal. However, the mobile revolution started years ago, and without the same product chops that it had a decade or two ago, Sony looks like an also-ran with notable problems to fix.

It was Apple that helped kick-start the mobile craze with the iPod, essentially the digital successor to the Walkman. A trio of i-hits has taken Apple far and helped to rejuvenate its personal computer business. The iPhone took the cell phone industry to new heights and the iPad has successfully made a computer-like product easy to use and portable. Creating cutting edge products that are both high quality and highly stylish are Apple's hallmarks.

In that, Apple seems a lot like Sony in the latter company's hayday. And Apple has a notable ego about it, perhaps deservedly so. However, Sony should stand as a warning to what can happen when you are at the top of your game.

A Target for Everyone

One of the things about Apple is that it is everybody's target. For example, in the tablet space Apple is a clear leader, but Amazon's (NASDAQ: AMZN) Kindle has been getting increasingly competitive. A large part of that is Amazon's massive customer base. The recent music push, in which Amazon will give customers free online digital versions of music purchased through the company's website, is a clear attack at the dominance of the iTunes marketplace.

Will the Kindle replace the iPad? Probably not, but coupled with Amazon's reach in music, books, and video, it is a competitor with which to be concerned. So, too, is Google (NASDAQ: GOOG), with its ubiquitous Android operating system. The problem with Google is that its business model is very different from most competitors, since it just wants to control the advertising and doesn't care as much about proprietary devices.

Proprietary Problems
That, in fact, is one of Apple's biggest problems. It doesn't share very well and it never has. When the company squeezed out Steve Jobs and tried to go mainstream with its personal computers, it wound up teetering on the brink of irrelevance. When Jobs came back aboard, and the company went back to controlling everything, it got its stride back.

However, part of that stride has been based on being hip and cool. Effectively, the company is selling retail technology gadgets. There are lots of companies in the space and being the hip and cool company usually doesn't last forever. Sony, for example, held that spot at one point. Is Apple going to turn into Sony overnight? No. But investors need to examine Apple more closely so they fully understand the risks they are taking when they invest.


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ReubenGBrewer has no position in any stocks mentioned. The Motley Fool recommends, Apple, and Google. The Motley Fool owns shares of, Apple, and Google. 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!

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