Apple's business hurt by partners it can't control
May 11th 2009 7:00AM
Updated Dec 3rd 2009 11:43AM
Apple (AAPL) makes perfect products. At least that is the opinion of millions of customers who buy its Macs, iPods, and iPhones.
Since each of these is doing better than its competitors in gaining market share, Apple clearly does have an advantage in terms of features and functions. The "cult" around the company and its creation of new technologies certain does not hurt its sales.
Like any other large branded company, the most significant thing that can undermine sales and the consumer experience is what the company's partners do. If a retailer that carries Macs does a poor job displaying and demonstrating them, the overall marketing of the product suffers.
Apple is now up against a limitation that may undermine its iPhone sales. The handset is Apple's fastest growing product and many analysts believe that it is at the core of the firm's future earnings growth.
According to The Wall Street Journal, "As the proportion of customers with iPhones grows -- 5.9 million 3G iPhones were activated in the last three quarters, 7.5 percent of AT&T's total subscribers -- the resulting growth in downloading and Web browsing will strain AT&T's network." Put more simply, owning an iPhone may not be such a great experience if AT&T (T) cannot improve its network.
Apple's primary reason for upgrading its 2.5G phone, the first generation of the product, to a 3G product is that many of the handset's features rely on a fast wireless network. Once the quality of those features is compromised, the iPhone begins to look to the consumer like a lot of other handsets on the market.
Outsiders have observed that Apple has long insisted on controlling the development, manufacturing, and marketing of its products in a way that no other consumer electronics or PC firm can match. If Apple's partners cannot take full advantage of the features that it offers in its products, it is faced with losing its image as having the extraordinary experience that cannot be matched by its competition.
Douglas A. McIntyre is an editor at 24/7 Wall St.