Analysts bash Apple for not having new or innovative ideas, but what they’re really complaining about is that Apple doesn’t copy other companies that are selling cheaper phones with larger screens. Furthermore, Apple’s future products have always been surrounded by a cloud of mystery, where as competitors constantly brag about their great products that rarely succeed. That’s not an issue of innovation, but rather an issue of Apple deciding it is not yet time to enter this space, and keeping future developments a secret until they are ready.
If you’re an avid reader of Business Insider, Washington Journal, or Bloomberg you’d think that Apple is heading the way of RIM in the late 2000s. Downwards. And fast. Judging by the drops in the stock price (beyond the recent slight upturn), the market agrees.
Let’s assume that Apple is indeed losing. With that assumption in place, let’s consider which company or companies are doing better compared to Apple? Who’s the winner with long-term growth potential?
Is it Google?
If you look at their stock price, definitely. If you look at their business model, their profits are mostly based on the desktop browser-based advertising business. A business that’s facing shrinking profits. Sure, Google is working on making each advertisement hit more valuable, but its mobile advertising strategy has not succeeded. Let’s look at the numbers:
- Google bought Motorola for 12.5 Billion dollars. Motorola has lost money for Google each quarter since purchase
- Advertisement revenue from the iPhone by far exceeds Android phones even though Android is ‘winning’ the numbers game
- Most of Google’s new ventures (since Search and gmail) have failed or are in the process of failing miserably. Google + is just the latest example of something Google tries pushing down on users with little actual usage-success.
- Slogans like ‘don’t be evil’ and Android ‘being open’ are largely smoke and mirrors.
Google will continue to see an upward trend (So did RIM during the iPhone boom) but there’s significant future risk potential here considering Google is losing out on this trend to mobile advertising. Google does, however, use a shotgun strategy where they get into a lot of businesses in hopes that a few still stick. Which will be the next business to stick? I’m not sure, but I’m sure something will.
Is Microsoft?
Microsoft’s success of late has been based on momentum and the stock market is finally starting to realize this. They do have a large corporate cliental (that continues to look elsewhere) drawing in tons of revenue. Microsoft Windows & Office division is their biggest cash cow, by far. Much like Google with gmail, Microsoft has had a second success with XBox that has been turning a profit. What have their other ventures done?
- Windows 8 is largely considered a flop on the scale of New Coke. So much so, that Microsoft is going back on its ‘no compromise’ design choices
- Bing is wasting away money as Microsoft tries (and fails) to buy the business
- Hotmail took far too long to upgrade to a modern web email client
- The Surface brand is a clear failure with $900 million in product write-offs (that doesn’t include resources that were focused on this loser)
Microsoft Azure is doing better in cloud services. However, as users move away from Office, what future does Microsoft have? Like Google, Microsoft has launched flops along the way. They’re trying to adapt to the market, but their only recent success has been XBox. Their next XBox update (XBox One) has had a rough start already.
Is it Facebook?
Facebook is dealing with a lower growth rate of new users, but they’re succeeding in turning more of a profit on a per-user basis. Out of the companies mentioned so far, Facebook continues to innovate their website and keep ahead, or at least not far behind, the curve.
Still, Facebook’s phone ended up flopping terribly, and their Android app is a big miss. The stock price is doing terribly. While Instagram was a good defensive purchase, are when are they going to make a billion dollars back on this buy?
Is it Amazon?
After all these years, they barely make any profit, and their CEO is worth five times more than the stock has made in profit from day one. I like Amazon a lot, I understand their business strategy, but this is not a high profit-growth stock. I don’t think it ever will be. Amazon is an awesome company, and they’re innovating, but they’re not making any money because they refuse to sell their hardware at a profit.
Is it Samsung?
Yes. It’s Samsung. Over the past year Samsung has shown Apple-level growth and they’re dominating the global smartphone market. Samsung is growing revenue and profit.
What’s their not to like about Samsung and their Galaxy line of products? Hey, here’s a few things:
- They own one part of the solution, just the hardware, and they’re vulnerable to Google with Android
- Samsung makes TVs, DVDs, phones, alarm clocks, insurance, banking and whatever else they might be doing in Korea. None of these products make them as much money as their Galaxy line of products, and there’s little growth in these other areas
- Samsung continues to lack original thinking. This isn’t necessarily a bad thing when it comes to making money, but it means that while other companies innovate, Samsung will continue to lag behind while they try to copy other success stories.
Even Samsung released disappointing numbers last quarter, and they continue to have trouble competing against Apple in the US. Samsung’s continued growth requires innovation, and judging by their business model, Apple will get there first when it comes to the next big product.
So what about Apple?
Name a product in the last decade that Apple released that was a failure? Sure, there was that speaker dock, and a few other things, but for the most part Apple has seen fantastic growth. There’s the iPod, iPhone, iPad, and their success with their MacBook and iMac lines (the later two are not necessarily growing, but only Lenovo seems to be showing any sign of success here).
Up until the last quarter the iPad was growing at rates faster than the iPhone. The iPad mini is a huge success. The iPhone continues to see fantastic growth. Yes, everyone’s a critic that Apple hasn’t been selling as well into poorer markets, but they continue to grow even with this issue. No one ever asks why Apple isn’t selling more MacBook Pros in India, do they?
Regardless, Apple’s issues are easily resolved should they choose to. Apple can, if they want, compete in the cheaper space with a new phone. Apple can, if they see it feasible, make a phone with a larger screen.
What are Analysts Really Saying?
They’re telling us that while other companies release plenty of products that fail, Apple’s ‘wait until a product is ready’ approach takes too long. They’re ignoring the huge success story of most of the new product Apple has launched in the last decade. And they’re ignoring that Apple has traditionally had a long gap between releasing new innovative products.
The difference between Apple and most of these other competitors is quite simple; we don’t know what Apple is working on because they won’t tell us until the product is ready. We do know all the crap the other companies have been working on, and their new ventures rarely succeed.
Which company would you put your money on?
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