For Apple, 'everybody's looking to unseat the king'
The Apple logo is seen on an Apple store in San Francisco Monday, Oct. 19, 2009. (AP Photo/Russel A. Daniels)
Published Sunday, July 29, 2012 7:20AM EDT
When Apple announced quarterly returns that missed expectations Tuesday, it left many analysts and investors pondering what the future holds for the world’s most profitable company.
The technology giant closed the quarter reporting an increase in earning of 21 per cent from the year before -- well below the 33 per cent that analysts were anticipating.
While the results would please most companies, Apple typically blows past analyst expectations. In the last 10 years, the California-based company has only missed the mark twice.
After all, Apple posted the most profitable quarter in U.S. corporate history at the end of 2011, with revenue of $46.33 billion and a net profit of $13.06 billion.
Analysts chalked up Apple’s sagging quarterly results to several factors including increased competition in the smartphone market, slower sales in Europe where consumers struggle in unstable economies, and customers opting for the less expensive models of the popular iPhone and iPad.
Tuesday’s quarterly results came on the tail end of a hard week for the company.
On July 19, a U.K. court ruled the company must state on their own website that competitor Samsung did not copy the iPad. It was also ordered to take out similar advertisements in popular British newspapers.
Apple successfully delayed the ruling until after a patent dispute between the two companies is heard in October. The two companies are currently involved in a multi-billion dollar legal battle over a number of technology patents.
To top it all off, the company attended a major hacking conference on Thursday for the first time.
The annual Black Hat convention brings together industry representatives, members of federal agencies and hackers to discuss the latest issues and trends in computer security.
Apple, which brandishes a popular -- if exaggerated-- reputation of being immune to viruses, has always been noticeably absent from the convention until this year.
Representatives from the company not only attended the convention, they also hosted a talk about the security technologies built into Apple’s operating systems.
Whether the move is a sign that Apple is admitting its vulnerability or not, there is no doubt that as the company’s products surge in popularity, Apple users risk falling victim to cyber attacks.
In May nearly 600,000 Mac computers were infected by a virus that collected personal information from users.
All this has many wondering what’s next for Apple, which for some time now has largely dominated the tech industry.
Reinventing the next product
“Don’t write off Apple yet; don’t listen to the hype mongers,” says Andy Walker, technology analyst and strategist for Cyberwalker Media. “Everybody’s looking to unseat the king and it’s not going to happen overnight.”
Walker told CTVNews.ca that while the company may be experiencing a slowdown, it’s only a matter of time before its culture of innovation and reinvention brings it back up.
Walker believes Apple’s hold on the throne depends on its ability to reinvent products consumers want.
“Where they do well is they go from one market to the next, reinventing product categories. They did that with the music player, then they did it with the cellphone and now they’ve done it with the tablet -- in fact they created the tablet market,” he said.
“If they’re going to continue down the path of leading the way, they’re going to have to find new categories.”
One area Apple appears to have set its sights on is television.
The company made its first foray into the television world with the release of its Apple TV in 2007. It has since released two more generations of the digital media receiver.
Consumers never took to Apple TV-- which allows consumers to rent content through the iTunes store -- in the same way they did the iPod, iPhone and iPad. Sales of the device have been lacklustre in comparison.
One limitation of the product is that it can’t compete with networks in providing live events and broadcasts, said Walker. But this may be something Apple will try to change.
Before his death, rumours swirled that Steve Jobs was in talks with Hollywood and network executives about integrating content delivery with Apple devices, said Walker. And rumours persist that this is where Apple will go next.
“That would be logical as the next frontier to crack,” he said. “There’s lots of space for innovation and if they can dominate there, they’ll continue their lead.”
Since the 2011 biography of Steve Jobs was released there’s been a lot of attention focused on how the company might change TV and what kind of features they might add, says CNET writer and reporter Josh Lowensohn.
In the biography, Jobs is quoted as saying that he had “cracked the code for television sets,” and had learned how to control them better.
While no one knows precisely what Apple is planning -- the company is well known for its secrecy -- the rumours centre around the release of a large television that will deliver content based on a subscription rate, said Lowensohn.
“The question is how they can take their existing model which is based on rentals and purchases, and bring that to something like TV where people are used to paying a fixed monthly price and getting everything they can watch,” he said. “Apple’s really never been close to that in the past few years.”
Lowensohn said one possible direction for Apple is to switch to a model where consumers can choose and pay for only the channels and programs they want.
He also believes Apple may also be working towards creating a television platform that can be added to continuously -- something like “an app store for your TV.”
However other companies such as Samsung and Vizio have already created similar platforms, said Lowensohn. “So it’s unclear at this point how Apple can actually do that better or how it can make it work.”
The latest rumours also indicate that Apple may be working on an interactive TV that can be controlled by voice commands and physical movements. Apple already offers similar voice-command technology in its iPhones.
And while in the past Apple has succeeded in revolutionizing the way music is enjoyed and consumed, Lowensohn is unsure if the same can be done for TV.
“The problem with TV is that it’s a completely different type of activity. It’s passive, you sit there and enjoy stuff -- it’s not something you can make that much better,” he said.
Other obstacles Apple may have to consider is the price point and longevity of a TV, said Lowensohn.
Unlike smartphones and computers, televisions are pricey items that consumers typically keep for a number of years, he said. “It’s not something people buy for only one or two years.”
Lowensohn believes a future television from Apple would start around $1,500 to $2,000.
Marketing to enterprise
Some analysts believe that Apple may also attempt to enter the enterprise market.
While the iPhone has become one of the world’s most popular smartphones, it has yet to make significant gains in business and government, says analyst Walker.
In those worlds RIM’s BlackBerry is the phone of choice, with IT managers citing security as a top priority.
Now, with RIM going through its latest struggles and the iPhone and iPad gaining popularity, IT managers must deal with employees storing company information on their Apple devices, said Walker.
“Apple can’t ignore that reality and if they’re really smart they need to go out and address the business market in a way where businesses can adopt their products,” he said.
Walker says this may explain Apple’s appearance at the Black Hat conference.
“If you’re going to sell to businesses you’d better make sure your security is rock solid,” he said. “You have to take that very seriously.”
Apple: a victim of its own success?
Walker believes that Apple’s current setback may simply be a byproduct of its own success.
In creating the iPhone and the iPad, the company has created devices that are so successful and popular that others have done “a really good job of copying them,” he said.
According to Walker, the market for smartphones and tablets have matured enough that competitors Samsung and Google have been able to create comparable products.
In June, Google unveiled its highly anticipated Nexus 7 tablet.
Critics hailed the tablet, which offers many of the same features as the iPad, but costs around half the price. Demand for the tablet has been so strong that the company sold out of its 16-gigabyte model by mid-July.
Microsoft is set to launch its own tablet called the “Surface” this fall, which will also increase Apple’s competition in the tablet market.
“Apple’s created a bit of a monster,” said Walker. “It invented the smartphone and tablet categories and it proved that there were billions and billions of dollars worth of profit in it. It’s the price of success really.”
CTVNews.ca contacted Apple for an interview. The company declined to comment.