Editor's Choice

What's Next For Apple?

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

Previously, the mobile phone industry was dominated by one single player and the industry was anything but competitive. Today, however, the smartphones industry is as competitive as it could be, with some of the major players trying to adapt and use the latest technology available. Apple (NASDAQ: AAPL), along with Samsung, is one of the dominant forces in the current smartphones industry and even though some believe that Apple's good years are behind it, the company still has a major chunk of the market.

Samsung, in recent years, has probably done the most damage to Apple, with Google's Android OS being one of the crucial factors. Nokia (NYSE: NOK) and BlackBerry (NASDAQ: BBRY), on the other hand, are 2 of the companies which have dominated the market previously, but are now struggling for a decent market share.

After unveiling its revolutionary iPhone in 2007, Apple has never looked the same in terms of bringing in "the next big thing." Also, Google's Android OS has done quite a lot of damage to Apple's market share, which has dropped to 18% in Q1 2013.

<img alt="" src="http://g.fool.com/editorial/images/50923/sai-cotd-051413_large.jpg" />

The chart above (Source: Gartner) shows how Apple has lost so much of its market share in the last 2 years. The same can be said about BlackBerry, as the company is trying to survive in the current market, rather than become a leader in the industry. Microsoft Windows Phone OS, on the other hand, is showing potential and we'll have to wait and see if the OS could go as big as the Android OS.

Valuation

Apple, with a market cap of over $408 billion, is currently trading around $435. After dropping below the $400 mark a couple of months back, Apple's shares jumped nearly 6% after its Q2 earnings report, which looked relatively solid. The company made revenue of $43.6 billion with a profit of around $9.5 billion.

Previously, there had been a lot of controversy over Apple's cash returns to shareholders, especially with the company's excess funds; however, some investors did get a reason to smile as the company increased dividends to $3.05 a share along with a repurchase scheme worth $60 billion.

Nokia is currently trading around $3.7, with a market cap of around $13.8 billion. Nokia's shares did tumble after its latest earnings report didn't leave many reasons to be optimistic about. Even though Nokia's Lumia sales were up to 5.6 million units, the company's overall unit sales were down by nearly 30%, which further contributed to the operating loss of $196 million.

BlackBerry, on the other hand, is currently trading around $14.2 with a market cap of $7.3 billion. Even though the BlackBerry 10 sales haven't been bad, nothing much can be said about the company at the moment. The Z10 has been performing well and looks set to beat sales estimates; however, BlackBerry still finds itself struggling in the smartphones industry, mainly because it was too late in adapting the latest trends in the smartphones market. Also, the availability of BBM on Android and iOS should give another reason for loyal BlackBerry customers to ditch the company.

Apple is still one of the hottest stocks, not just in the tech sector, but in the stock market and we'll look at the company's SWOT analysis in order to get a better picture of where the company stands at the moment.

Strengths

Currently, Apple's biggest strength has to be its massive and loyal customer base, which seems to be declining. The strength could easily turn into a weakness for the company if it fails to give consumers something more in the future. Aside from this, the company's size, scale, marketing budgets and retail stores are other strengths. Apple was and will remain a brand and even though if the company makes a couple of poor decisions in the future, their brand name will still attract some consumers.

Apple's financial performance is another strength and it finds itself in a very good position. The company still has massive reserves, with over $140 billion in cash reserves. Keeping investors satisfied or investing in newer projects shouldn't be difficult for the company.

Weaknesses 

Perhaps, the company's biggest weakness is its declining market share. Everyone knows that Apple creates trends, rather than following trends; however, the failure to capitalize in the latest smartphone market trends could cause the company a lot of trouble in the future. The same thing could be said about BlackBerry, as the company was left behind after it ignored the current market trends. 

After Steve Jobs left the company, Apple's management has been looking relatively shaky and Tim Cook's appointment hasn't generated many positive responses. Apple is still going through a management change and several employees have or have planned to leave the company, which is why the new management will need to step up and take the right decisions.

Another possible weakness for the company is its target audience. Apple is known for its expensive products, which not many people can afford. Therefore, the company targets only a limited group of people. Companies like Nokia and Samsung, on the other hand, target mass audiences with different types of mobile phones depending on the budgets of different customers. If Apple manages to release a cheaper version of the iPhone, then it could finally target customers with lower budgets.

Opportunities

Apple, if it wants to, can benefit from numerous opportunities that are available to it. Unlike BlackBerry, Apple's brand name is just too big to ignore and even though the company is late, it can still capitalize by following other manufacturers. Apple only has one product in its smartphone range; the iPhone. If the company can release different versions of the iPhone, then I don''t see why it can't get back much of its lost market share. Reports are suggesting that Apple is considering a Phablet, iPhones in different colors and even a cheaper version of the iPhone. If the company manages to do one of these, then there would be a lot to be optimistic about at Apple. Not only will this help the company improve market share in its existing markets, but it will also help Apple enter into newer markets.

Aside from smartphones, consumers are still waiting for the next big thing from Apple, which could be the iWatch or maybe the iTV. There have been several rumors and it looks like Apple will finally be releasing its next big thing, soon.

At Apple's recent event, the company did unveil its latest iOS 7, which looks quite promising. Even though many claim that such a late change in software won't be able to help Apple gain its lost market share, the new iOS is definitely something to look forward to as we finally get over Apple's 6 year old operating system.

Threats

Possibly, Apple's biggest threat is Google's successful Android OS and more specifically, Samsung. Google's OS has turned around the smartphones industry, with several manufacturers using the Android OS. Samsung uses the OS in different versions of its Galaxy smartphones, with the S4 being one of the hottest smartphones of the year.

Apple doesn't only face threats from Samsung, but companies like Sony and LG have also improved in recent years. Sony's Xperia Z smartphone is definitely competitive and the company looks set to improve its market share by the end of 2013. 

Aside from Android, the Windows 8 Phone OS has also seen an improvement in market share, where Nokia still dominates.. The Lumia series has been performing at its peak and Apple will need to watch out for the improving Windows 8 OS. BlackBerry, while still struggling, is still seen as a threat as it gives an alternative to consumers who have had enough of Apple's iOS or Google's Android OS.

Conclusion

The smartphones industry is as competitive as ever, with Apple being one of the company's you should closely monitor. The company has been on a downfall after hitting the $700 mark last year; however, ignoring Apple's chances of a turnover is not fair. The company is too big to fade away in the industry and there is a lot to be optimistic about Apple in the future. Apple's upcoming strategies and decisions will be crucial in order to determine whether the company is heading in the right direction.

Nokia and BlackBerry, on the other hand, are still somewhat struggling with poor market share. However, both companies entered 2013 with high spirits and offerings from both the companies have a lot of potential. If the Windows 8 Phone OS continues to pick up pace, then Nokia will definitely gain market share while BlackBerry will rely on its old customer base and has based its future on the BB10 platform, which has been looking promising.

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Yasir Idrees 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!

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