Tuesday, July 10, 2012
iPhone 5 may decide the Apple versus Samsung war
However, perhaps there's also a case for Apple to introduce an iPhone 5 that does indeed "put Samsung's Galaxy III to shame".
Perhaps it's true to say that Apple has led segments of the industry for long enough. Perhaps there's a case for the company to simply knuckle down and continue to do what it does.
It's in the nature of empires to grow until they lose their grip on the public consensus that drives their success.
Can Apple best the critical nature of the Android acolytes? I think that will be much harder to achieve -- their collective group-think seems selective. For example, look to Apple's actions to improve working conditions in China, this generates much criticism, but not yet any significant critical insight over those manufacturers producing low-cost Android devices. That selective blindness characterizes the dualistic "Apple is bad, m'kay" position many critics seem to hold. It depends if minds are closed while systems left "open".
Open versus closed
New industry-leading production processes might also offer Apple advantage. For example, the speculated upon move to Liquid Metal for the chassis of future devices, while expensive in terms of set-up of new production lines may also help reduce costs once such production is up-&-running.
I believe Apple can achieve this by simply reducing margins slightly (which may dent its overall profitability, while also coming some way to addressing the price/value arguments) and by continuing to build its relationships with trusted component suppliers in order to ensure good components at low cost.
To achieve this, the company will need to re-engage with a critical public. It also faces some pressure to address the common perception that Apple devices are more expensive than competitors.
Apple is expected to introduce the iPhone 5 and the much-mooted iPad mini in the September-October time frame. The company will likely be investing a lot of hope in these releases. Not only will it want to maintain its track record for breaking results records; but it will also be hoping the iPhone 5 will be enough to turn the tide of public opinion and to knock Samsung down the smartphone sales charts.
All hopes on Q4
We'll learn more on this later this month when Apple reveals its quarterly results, but my basic understanding is that the company will (as usual) exceed its stated and traditionally conservative targets. This leads me to speculate that with no major product launches (bar Mountain Lion and the iMac) scheduled until calendar Q4, Apple's July-September results may disappoint.
"We estimate June quarter sales for the Apple Monitor fell by 8 per cent sequentially and well below the historical uptick of 15 per cent," he writes. "This performance is below our Apple sales projection of down 1 per cent (Street has down 5 per cent) for 3QFY12, but still above the Company’s outlook that calls for a 13 per cent QoQ decline. Over the past five years, Apple has grown sales by 8 per cent sequentially in the June quarter. Keep in mind that the percentage change in sales for the Apple Monitor will deviate from Apple’s sales performance, but should move in a similar direction."
White warns of a decline in Apple purchases as shoppers look forward to new product introductions in the coming months.
As reported by Barrons, Topeka Capital Markets analyst Brian White reports that Apple's Taiwanese suppliers are reporting sales data he calls: "Well below historical seasonal trends". He sees a 13 per cent month-over-month decline in sales. He's seen a 1 per cent growth in June for the last seven years. 50-60 per cent of the business of the suppliers he is analysing come from Apple products.
The economy: Apple is not immune
Perhaps part of the appeal is to be found in cost. Outside of the comfort zone economic circumstances are worsening for most consumers, particularly in Europe. This is impacting markets everywhere, not just Apple.
In the UK, the most recent uSwitch survey puts Samsung devices in first, third and fourth places in the top ten list of popular mobile phones this week. The iPhone 4S is in third place, while the 3GS is tenth. Four devices from Samsung and two each from Sony and HTC populate the rest of the list. This pattern is visible in other markets.
In combination these and other factors means Apple now faces a range of foes, with Samsung the biggest enemy of the lot. Samsung's latest smartphones are outselling Apple's iPhone in some key territories.
I'll make no value judgement on this outcome, but the fact remains, at present Apple faces more negative sentiment than I've encountered in the last 14 years of reporting on the company.
Apple's PR problem is that the remnants of the Apple-hostile media seem to favor the controlling firm argument. Perhaps relevant is that Google spends more lobbying governments worldwide than Apple, Facebook and Microsoftcombined, raising some questionable conflicts of interest.
Government: Google it
The company has always led the pack when it comes to developing new product families and ideas. In the smartphone age this has led to litigation everywhere as the company seeks to protect its intellectual property, but somehow the Android wolf pack has managed to characterize its actions as those of a greedy controlling firm taking away some bastardized notion of "freedom of choice". They miss that the companies they instead champion can easily be seen as putting up barriers to innovation.
Apple also has a PR problem. It just isn't seen as the friendly little firm it used to be.
Apple has the App Store to help it keep its connection with existing customers, but Android users argue that many of the apps they most want to use areavailable for free on their platform. Android app developers are hoping to encourage in-app upgrade purchases from their users, as people on that platform aren't as likely to invest in the apps themselves. Yes, this also means Apple remains the best platform for developers hoping to create sustainable businesses -- no one makes a fortune by giving their product away.
Feeling the pressure
Things are getting tough in Cupertino: not only is economic gloom beginning to impact even Apple [AAPL] sales, but Samsung's smartphones are beating iPhone market share as cash-strapped consumers settle for the "not as cool" and cheaper Android option.
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