Arash Christopher Eslami's Blog

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Is Apple on the Ropes?


As I see it, Apple will be succumbing to a bitter fate of being dragged down from its high pedestal by the hands of Google and Samsung.  For many, this may seem a rather melodramatic hyperbole, and I would agree.  But then again Samsung has just taken out another big bite of Apple’s market share.  The latest numbers show Android—Google’s operating system—has gained a bare minimum market share of 20% while Apple has lost at least 4%, as high as 11% in Australia, in the four big Euro-markets: Germany, France, Italy, and Spain.

Apple is the biggest corporation in the world in terms of market cap.  Their $580 billion market cap is bigger than Exxon Mobil’s for at least over a year now.  The company, though, makes hardware: iPhone, iPad, iPod, Apple TV, and Macintosh.  They also make software.  Apple’s lion share of revenue comes from selling their hardware line.  So it’s no surprise that the company averages 40% profit margins as a result of high cost of revenue.  When you compare Apple to its rivals, i.e. Google and Microsoft with 65% and 75% margins respectively, then you see the advantages of being an internet or software based business.

Apple is in trouble because the Android operating system is the purveyor of all competing Google and Samsung hardware.  Android is killing iOS in Europe and they’re about even in the US and UK.  If Android begins selling more smartphones, tablet computers, etc. than Apple in these equal markets, then what recourse does the latter have?  None.  Hardware is their business.  Samsung is in the hardware business, too, whereas Google’s smartphones are simply stepping stones since the majority of their revenues come through the online business.

Mobile operating systems are becoming more important because people are migrating their online activities on the smartphone.  This is why companies like Facebook are scrambling to streamline their mobile app presence as fast as possible.  Smartphone online shopping, for example, is quickly rising with eBay and Amazon leading the way with over 12 million unique visitors in June on their mobile shopping apps.

Ebooks have just surpassed sales over printed books on Amazon in their UK market.  Amazon, already sells more ebooks in the US than paperback.  Assuming this trend continues, it seems as though people will soon tire of paying the iPad premium to the $200 Nexus 7 and, of course, Amazon’s more affordable Kindle Fire.

Apple still represents quality among buyers and businesses.  A prime example is the company Geode, which specifically designed a digital wallet for the iPhone.  If printed books are has beens because of ebooks, then this Geode technology might be the indicative fate of hard cold cash.

It will be interesting to see where Apple is in two years.  They’re a smart company who might benefit from making more endeavors in the online business.  They could buy Twitter, for instance, taking revenues from online ads.  More viable options in this fast changing environment will help Apple keep its rivals at bay.

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5 thoughts on “Is Apple on the Ropes?

  1. great post! why don’t people keep it simple?…if you want a great pic get a Nikon…if you love reading books get a Kindle, if you want to play games get a Sony PS or Nintendo Wii…i’m tired of convergence of technologies..it is such a compromise!
    While the first couple of Iphones were technological breakthroughs that deserved success, the followups were nothing but minor enhancements that sold well because they fulfilled an ego trip. Samsung has become a more attractive ego booster thanks to its appearance and android. Apple needs to bring about a drastic change in the look of its phone. The same old shape is not going to work anymore.

  2. I really think people are going to stop paying more for Apple products. It is that simple. Apple is quality, but so is Google. The Nexus 7 is a breakthrough as far as quality and affordability.

  3. Awesome post. I can see the Economics Law of Demand shining through with Google’s Nexus 7 – “The lower the price of a good, the higher the quantity demanded.” Apple will need to have their wits about them to stay ahead of the marauding pack. Interesting times.

  4. It should be fun to watch this play out.

  5. Business Views on said:

    Excellent analysis… let’s wait and see what will happen to the recent Apple’s case against Samsung in the US!!

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