Who's Gunning For Apple?
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There is no doubt that Apple (NASDAQ: AAPL) has done some amazing things in the last decade or so. The huge run up in the share price clearly reflects that. However, the recent drop shows that investors are starting to realize that the company isn't perfect. No company is. That said, as the share price comes down, investors might be tempted to buy what looks like a value. But is it?
Apple is everybody's target. While on one level that's an enviable position to be in, it also means that competition is fierce. That makes missteps increasingly costly, as everybody and their brother looks to take advantage of them. Anyone thinking about an investment in Apple should take the time to consider the company's competition.
Here's a list of some of the best positioned companies gunning for Apple:
Google (NASDAQ: GOOG)
Google is probably the biggest threat to Apple. The two companies have taken vastly different approaches to their businesses and, in that, Apple seems to have a competitive disadvantage. Google's business is built largely on advertising revenue. Its goal is to get more ads in front of people so it gives away a lot of its intellectual property simply to gain more eyeballs.
Apple keeps everything close to the chest and, in the end, has found itself a consumer products company. It has to keep selling more devices to make more money. Google lets other people sell devices, providing the building blocks for those products free of charge. Thus, Google's Android operating system is used by many manufacturers and it has access to more customers.
These two companies have something of a love/hate relationship that has recently been more hate than love. This is particularly true as Apple kicked some of Google's applications off the base iPhone only to have Google ramp up its app efforts. Unfortunately for Apple, those efforts have been well received. This complex relationship is one that investors need to watch carefully.
Amazon (NASDAQ: AMZN)
Although it may not seem like a direct competitor in some ways, Amazon is an increasing issue for Apple. For example, in the tablet space, Apple is a clear leader, but Amazon's Kindle has been getting more and more 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 Apple has to be concerned. Moreover, the Kindle app allows Amazon to piggyback off of Apple's success and diverts potential iTunes customers to a competitor. Of course, Amazon's app also works on Google's platform. Amazon is investing heavily in its future today, so profitability looks weak. However, Apple would be foolish to count this major competitor out.
Microsoft (NASDAQ: MSFT)
Microsoft is playing catch up in the mobile operating system space. Its initial effort wasn't well received and was quickly dismissed by the market. However, Microsoft has massive amounts of money and a stick-to-it attitude, especially when the market it's trying to enter is so important. Thus, it has teamed up with Nokia (NOK) to help fund that company's efforts at creating a competitive smart phone.
Although it is still early in the game, Nokia's new phone has received rave reviews and posted impressive sales numbers. While Apple clearly beat Microsoft on the music player front (few people still remember the ill fated Zune), the mobile space is far too important for Microsoft to concede as easily. With plenty of cash and an impressive new product showcasing Microsoft's mobile chops, it looks highly likely that Apple will have to keep a close eye on this industry powerhouse.
BlackBerry (NASDAQ: BBRY), AKA Research in Motion
BlackBerry, which just changed its name from Research In Motion, went from the industry leader to the also ran in the smart phone world. The company's fall from grace had much to do with ego, a sad fact of life for companyies built by people with strong personalities. However weak, the company isn't dead. In fact, it still has some market share in the smart phone space, particularly on the important and often highly profitable business side.
With a new collection of phones just coming out, BlackBerry could reassert itself as a viable competitor. One of the nice features about the company's new phones is the ability to separate work from pleasure, the inability to do this has long been a complaint about the iPhone. Although the big fuss over the new BlackBerry 10 is the touch screen model, Research in Motion plans to bring out a version with its famous keyboard, which should keep die hard BlackBerry fans happy. Note that the company just announced a name change to align its name with the name of its product—BlackBerry.
One of Apple's biggest problems is that it has to keep being hip and cool, while at the same time bringing out innovative new products. That's hard to do. Worse, since it doesn't share its technology, it needs to keep selling more and more of its own devices to keep the top and bottom lines growing. While China should offer plenty of growth opportunities, it doesn't change the long-term competitive issues the company faces. When everybody's gunning for you, you're eventually going to get shot.
ReubenGBrewer has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Microsoft. 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!