A Bite Out of the Apple

Apple continues to struggle. They’ve been the darling of the stock world for years and yet they are continuing to have trouble. Their Q4 results showed a revenue decline of 9%. Every company experiences this from time to time but what is troubling is the declines were almost across the board. Iphone sales down 5%, Ipad sales down 6% and Mac sales were down 14%. All core products and nothing but declines. Their other product category was also down a massive 21%. The one segment that wasn’t down was their service business. It rose a whopping 23.5%, keeping their performance from being an utter disaster. Their stock obviously took a hit due to this news. So what is the problem?

First off, Apple is not a product, it is a lifestyle. Your either all in or your not in at all. This significantly reduces your customer base. Not only do they charge a premium for each product they sell but they’ve also created an ecosystem that relies on each product they sell. Consumers want choice. They don’t necessarily want all their products from one company. They want the choice to choose the best device for each category.

Secondly, there is the issue of forced innovation. Apple likes to tell the consumer what is best for them. A good example is the headphone port on the new Iphone. Despite being an old technology, it is not an obsolete technology. I use these ports daily and I know many other people who do as well. Don’t tell me what I want, let me choose what I want. These both are big issues but I don’t believe they are the biggest problems facing Apple.

Ever since their founder Steve Jobs passed away, Apple has struggled to continue his legacy. He was not, despite what many believe, an innovator. He was however a perfecter. He found products that were struggling or not selling as well as he though they should be selling and perfected them. He gave consumers a reason to want and desire the products that for some reason other companies couldn’t sell. The two best examples were the Ipod and Iphone. Apple hoped to continue this success with the Apple Watch but it hasn’t worked out.

So maybe the biggest issue is investor expectations. Maybe Apple is no longer a growth company but instead a steady dividend cash cow like Intel or Microsoft. I do believe that Apple has a niche in the marketplace. A small slice of the market where they can dominate but it is just that, a small slice.

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