How can Apple Continue its Ascent?
Kevin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) has been on one of the most impressive runs for a tech company ever. The little Silicon Valley group remade itself from a niche computer company that never had more than a 5% market share to the king of gadgets with billions in income and a stock valuation of over $600. But many investors are asking questions. Can Apple continue its rise or is a fall inevitable? Will the company thrive or even survive without its iconoclastic leader? Will lawsuits work in the company’s favor? What would an Apple car look like -- Mercedes or 1985 Yugoslavian import?
All these questions will be answered soon enough (except maybe the car question) but failing to anticipate the outcomes could be devastating to those heavily invested, especially ones who bought in above $200. Without continued success and with hungry competition nipping at its heels, Apple is at a crucial point in its storied history. Investors could feel confident if Apple could do the following things to assure its continued ascent.
Manage upgrade fatigue. Analysts are finding that even the most loyal of Apple Fanboys and devotees are growing weary of buying products that are basically not the newest technology the day they are bought. It’s typical for Apple to have the next version of any given product in development and close to ready for the market by the time the previous iteration is just ramping up sales. While it is profitable to constantly get devotees to buy the “latest and greatest,” doing so every year wears down even the most loyal who could stop upgrading regularly.
Stop “app burn.” With over 650,000 apps available for Apple products, it is now impossible to monitor them all. Stories of disgust about the costly nature of certain apps, especially because of “freemiums,” are starting to circulate, which can scare off customers. Freemiums are apps that are free to a certain point then start charging. In one extreme case a child in Maryland racked up $1,400 in charges for one month playing a Smurf game. Apple isn’t responsible for these apps, but just the same it is a reflection on their product.
Avoid the “eggs in one basket” problem. The iPhone is responsible for 50% of Apple’s money. This lack of product diversity has some analysts concerned. Especially since market share can change rapidly in the cellphone business. Nokia (NYSE: NOK), Motorola (NYSE: MMI) and Research In Motion (NASDAQ: BBRY) have all taken turns leading in the cellphone market. Some, like RIMM, are all but destroyed.
Make another gadget. Many onlookers feel that Apple can’t stay this high in valuation, return dividends of great proportion or thrive at all without another game changer of a device or product. If there’s something left in the magic pipeline by Jobs, the time is coming to unleash it on the world.
Prove it wasn’t all Jobs the Messiah. Steve Jobs changed the game in seven different industries, launched many successful products, built the Apple we see today and almost destroyed Apple by leaving. Many investors are waiting to see if Apple can hold the course, increase stock value/dividends or even avoid collapse now that the ‘Wizard of Silicon Valley’ is no longer with us. Proving success capabilities in the absence of Jobs is vital to Apple’s long-term (and possibly short-term) survival.
Crush the infidels. Ok, that’s a bit extreme, but the point remains that Apple must make a robust defense against all comers and challengers. The lawsuit against Samsung is the starting point for such a defense and some view the lawsuit as a success even though it isn’t decided. The goal of the suit was to prevent any copying of products or any portions of the design. Samsung’s latest smartphone that competes directly with the iPhone eschews features that could be considered knockoffs of Apple prompting some analysts to claim the lawsuit’s goals are already achieved. Apple has deep pockets and can get as litigious as needed for future product defense.
Avoid silly and costly mistakes. By now most have heard about the Apple Car. If the current lawsuits have done anything major, it’s shed light on the inner workings of a very secretive company. Of all the revelations divulged by legal testimony, the proposal for an Apple car should worry the most. Doing something like building an expensive and costly structure to produce product completely outside of the company’s definable skill set could be disastrous to stock valuation. It would be time to sell Apple stock if news of any such product came out.
Apple can continue its meteoric rise, but it won’t be easy and the next two years PJ (Post Jobs) will be very telling.
thedeswolf has positions in Apple, but none of the other stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple 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.