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.