Why Apple Will Never Be Great Again

The market wasn't exactly blown away by Apple's iPhone 4S announcement yesterday.

Where was the NFC chip or 4G LTE connectivity that's already springing to life on Android handsets? Where were the radical redesign and wider screen that some industry watchers were predicting? Where was the "one more thing" zinger that blows the market away?

In the words of Marvin the Martian, "Where's the kaboom?"

There was supposed to be an earth-shattering kaboom!

Shares of Apple fell as much as 5% yesterday during the conference, before making most of that back to close only marginally lower. Apple bucked the trend on a day when the general market rallied.

Instead of gushing over the new iPhone's sweet specs, investors were left scratching their heads. So there's no iPhone 5? So there's no iPad-optimized Facebook app?

Retirement of a Salesman

There's probably no one taking the market's unenthusiastic reaction to the new iPhone as hard as freshly anointed CEO Tim Cook. This was supposed to be his time to shine, letting the world know that Apple could live on without Steve Jobs at the helm. Cook had a big test yesterday, and Mr. Market gave him a failing grade.

"I love Apple," Cook said at the beginning of his presentation.

Judging by yesterday's price movement, the feeling may not be mutual.

As a longtime Apple bull, my biggest fear was that the country's most valuable tech company would miss Jobs the salesman the most. His role at Apple has been largely exaggerated over the years. Cook has been handling the operations. Jonathan Ive is the design genius.

However, most of Apple's consumer successes wouldn't have been possible if Jobs wasn't there to sell the public:
  • Portable media players were dead until Apple rolled out the iPod.
  • Folks were perfectly happy ripping off digital music for free until Jobs convinced them that paying for downloads was the right thing to do through iTunes Music Store.
  • No one needed a tablet until Jobs let everyone know how magical the iPad was last year.
  • Will Apple be able to market televisions next year -- kitchen appliances in five years -- and teleportation tubes in 20 years -- without Jobs?
Apple Picking Season's Coming to an End

There's a solid valuation argument to be made for Apple. The tech bellwether closed yesterday at a mere 11 times what analysts believe it will earn over the next 12 months. According to Apple's recent quarterly reports, the class act of Cupertino is growing a lot faster than its earnings multiple. Apple has also historically landed well ahead of Wall Street's targets, so it's more than likely that the pros are underestimating the company's true earnings power.

There were also plenty of fundamentals-stoking developments during yesterday's "Let's Talk iPhone" event. Having Sprint (S) aboard as the smartphone's third domestic wireless carrier should immediately expand Apple's iPhone reach. There are now 250 million devices out there running Apple's iOS, and its latest refresh -- iOS 5 -- goes live next week.

However, Apple is already a $345 billion company -- and it may not be running on all cylinders in the near future.

iPod sales have declined over the past few quarters, with Apple selling 20% fewer iPods in its latest quarter than it did a year earlier. This may not be such a big deal given the booming growth with iPhones and iPads that also double as iPods, but it's still a fading category.

Macs and MacBooks may be next. Unit sales inched 15% and 13% higher, respectively, in Apple's latest quarter, but PC sales in general have been slipping in this country lately. What happens if the halo effect that has seen a revival in Mac computers on the strength of Apple's more portable gadgetry goes away?

It can happen.

Where Brown Spots Are Forming

It may seem like heresy to suggest that the iPhone and iPad are vulnerable, but let's start with the smartphone that popularized Apple's iOS.
  • Google's (GOOG) Android smartphones are outselling Apple. Really.
  • Everyone seems to leave Research In Motion (RIMM) for dead, but there were 70 million active BlackBerry accounts -- and growing -- as of its latest quarter.
  • Then we have Microsoft (MSFT). Apple fans may laugh at Steve Ballmer's sweaty antics, but Microsoft earlier this year agreed to pay Nokia (NOK) billions -- yes, billions -- to champion its operating system on its globally popular handsets.
Add it all up, and Apple may be more vulnerable than you think with its iPhone -- particularly when it comes to Google's open-source Android platform.

If Android-flavored smartphones continue to take off, it's really only a matter of time before Android tablets begin eating into the iPad's commanding lead. Maybe it starts next month with Amazon's (AMZN) Android-fueled Kindle Fire with its ridiculously low $199 price point. Maybe it doesn't -- but it's inevitable that the operating system that's outselling Apple's iOS will make a move in the tablet market.

Arrogance, closed ecosystems, and premium pricing burned Apple in the 1980s. History doesn't repeat itself, but it rhymes.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Apple, Research In Motion, Microsoft, and Google. Motley Fool newsletter services have recommended buying shares of Google, Amazon.com, Apple, and Microsoft, as well as creating a bull call spread position in Microsoft and Apple.

Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:
Mr. Phelps

It won't because Steve jobs died today......he was 56.

Steven P. Jobs, the charismatic technology pioneer who co-founded Apple Inc. and transformed one industry after another, from computers and smartphones to music and movies, has died. He was 56.

Apple announced the death of Jobs — whose legacy included the Apple II, Macintosh, iMac, iPod, iPhone and iPad.

"We are deeply saddened to announce that Steve Jobs passed away today," Apple said. "Steve's brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve."


October 05 2011 at 9:15 PM Report abuse rate up rate down Reply
Mark Hartman

Oh, please. This is the typical "It didn't happen the way I thought it should, so THEY must have been wrong" article.

Apple stock has virtually ALWAYS fallen when new products were introduced. I think this is mostly because who think like Mr. Munarriz can't understand Apple's long-term strategy, but also because such analysts, having little else to do, play an ever-accelerating game of Telephone with each other and the media, resulting in completely unrealistic expectations, which they then come to believe in themselves.

When Mr. Munarriz declares himself and the other hype-alists to be "Mr. Market," and arrogates to this unrealistic group the pompous pontification of a "failing grade" for Tim Cook based upon a historically-predictable pattern of a slight downturn in Apple stock (which at this writing is up 6.5 for the day), he merely puts more weight behind the ever-clearer vision of himself and his ilk selling innuendo and despair as a way to generate business.

Oh, in case it wasn't clear, I think that Mr. Munarriz is wrong.

October 05 2011 at 3:14 PM Report abuse rate up rate down Reply
Chris Weimar

What a headline! Apple is doing fine. As a shareholder I have no serious complaints. Siri alone could very well become a game changer. Additional carriers, faster rollouts, all price points, further carriers in China in the near future. There are many manufacturers making Android dveices so every week there will be new devices hitting the market. LTE and NFC are not critical to most buyers at this point, save for those that want to say they have it. Apple doesn't strive to be first with new technology, they strive to implement new technology in a way that makes it usable by non-technophiles. Apple is more about selling the user friendly experience and product integration. Consider the sales figures for the iPhone4 16 months after introduction. I think some people are mainly disappointed that the iPhone's appearance remains the same. The MacBook Air's and iMac's look the same as they did two years but are better than before and also selling better.

If Steve Jobs was presenting he would have been introducing the same product. His style might have been a bit different but people would have reacted about the same. Things will continue to evolve and next summer we will see a new form factor, with LTE and probably NFC, not to mention a bigger screen and more software enhancements. Everything happens in a context and compared to the competiton Apple is doing what it needs to do.

October 05 2011 at 1:10 PM Report abuse rate up rate down Reply
1 reply to Chris Weimar's comment

I already am using voice commands on my blackberry from 2009 you apple fanbois are so blind to drinking jobs cool aid I hope this opens your eyes, apple has had it's day now it's all downhill.

October 06 2011 at 4:50 AM Report abuse rate up rate down Reply

You're wrong. And dead wrong for that matter.

As a writer, you'd think you would assess the history of Apple's product lines. You sound like some retarded techy who thinks everyone should get everything they want, when they want it.

Are you familiar with the term "tiering". If not, grab a dictionary because you shouldn't be writing anything.

Apple didn't release LTE or change the design of the phone because of their TIERED product model. Do you know what that means? Look at the iPhone- first you had the 2G, then the 3G, then the 3GS- added video and upgraded the camera, better battery life, and slightly faster processing capabilities. Then you have the 4, which blows the 3G out of the water. See the trend? Instead of just releasing the newest thing possible Apple is tiering their product lines one step at a time. What does this mean? Constant and increasing revenue flows, something you surely don't understand. Have you used the Macbook Air? Each time that machine gets updated we are one step closer from leaving the modern laptop in the dust. Apple has a stranglehold on the market for Macs, if you weren't some whiny old guy, you'd see that the under 30 crowd is choosing Mac over everything else. Go to your nearest college campus , you'll see.

Nay-sayers like you have been proven wrong for years. The iPhone was first to have been to heavy and Apple didn't have a grip on the mobile phone market. Look where we are now...

Androids are outselling iPhones? Apparently, you have no common sense. This is a no brainer. Androids are the most produced phone in the world by Samsung, HTC, etc. Apple is the only company manufacturing and designing iOS phones. Yet again, another completely failed analogy.

I love writers like you, the disclaimer says you own nothing that you talked about (so you're just stating yet another ill-conceived opinion based on NOTHING).

October 05 2011 at 12:44 PM Report abuse rate up rate down Reply
2 replies to wesg's comment

Apple took it's share from blackberry now rim will have it's revenge.

October 06 2011 at 4:52 AM Report abuse rate up rate down Reply
1 reply to Washington's comment
Esaú Quero-quero Cor

I am pretty sure Iphone 5 will come, 4GLTE it still not good enough... that is why apple is waiting next year until is FAR more better..., Another integral piece of the puzzle, Jonathan Ive remains. Ive is the lead designer behind just about every great product Apple developed in the last decade and half...

October 06 2011 at 1:01 PM Report abuse rate up rate down
Esaú Quero-quero Cor

Totally agree with you...!

October 06 2011 at 12:59 PM Report abuse rate up rate down Reply