News & Analysis
Is Apple unstoppable? The case against Apple
Bolaji Ojo
11/24/2009 1:17 PM EST
Yes, Apple is the wunderkind of the high-tech world, the one whose enchanted hand turns everything it touches into hot sales and even bigger profits generator. Even a Golden King can have feet of clay, though, and Apple is no exception as its history has shown.
Few people want to bet against Apple today. Analysts are straining to put out new 52-week price target for the company's stock price believing it cannot do anything wrong. The company's stock price has already risen about 167 percent in only the last one year to a high of $208.71 from a low of $78.20, yet some analysts' 12-month price target for Apple is a stratospheric $280.
It's time for everyone to take the blinders off. Apple's is a great success story, but like other companies that in the past rode the crest of a great growth wave to investors' delight, the momentum may be changing even for this high achiever. It's not too early to sound the alarm even though I believe Apple is likely to keep growing at a hot pace for a short while longer before peaking and possibly declining.
Some signs of a slowdown are already evident. The company's sales growth eased to a mere 12.5 percent in the fiscal year ended Sept. 26, 2009 compared with 35 percent and 24 percent in the two previous years, consecutively. Sure, the global economy was also declining and Apple was one of only a few companies to experience year-over-year growth but the company's products once looked like they could forever defy gravity.
With Apple now offering its iPhones to consumers in China and other parts of Asia as well as subscribers in more European countries, including Germany, the company would likely experience higher sales growth in subsequent quarters. However, there are other forces at play that will eventually crimp sales at Apple.
To all who believe Apple is infallible, I offer five factors that the company could ignore at a high future cost. A combination of any of the factors highlighted below will strain Apple's supply chain, dent its credibility with customers and investors, leaving it with mediocre growth and making a bet against the company not such an insane action:
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Jonathan.Kang
11/25/2009 12:00 PM EST
The mobile market is experiencing an incredible boom right now despite the economy. In this condition, vendors aren't competing so much as they are just trying to feed supply. Competition won't truly come to play until the market is saturated and the only way to gain new customers is to take them away from the competitor.
It's then that we'll see just how healthy Apple's future is.
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chandraC
11/25/2009 3:59 PM EST
Mr. Ojo
I have rarely read such a poorly constructed, ill-founded assessment of Apple's position in its markets. It is nearly 5 a.m. where I am and the US stock market is about to close which is the normal time for me to think about sleep!
However, I am so surprised by the poor validity of what you have to say that I will wait till tomorrow to reply properly. I hope you will take the time to read what I say then. I also want to see what Mr. Yoshida has to say before responding. I am not sure what your credentials are but I find your views about Apple in CE and Apple generally to be naive and simplistic.
Until tomorrow
Chandra
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sodell
11/26/2009 12:28 AM EST
The focus of most of this discussion is based on the idea that Apple's legitimacy in the market is coupled with short term stock prices. Apples future ultimately depends on what products it and its competitors make.
Apple is successful because they are the only exclusively premium-priced electronics company that deliver premium products. Until there is another company that is comfortable selling fewer products at higher margins and not trying to undercut the competition, Apple will have plenty of room in a spacious niche.
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junko.yoshida
11/26/2009 7:59 AM EST
As Imodu pointed out, I agree the rivalry building up in the CE market is going to be a big factor for Apple's future. However, one of the reasons why" target="_blank" style="">href="http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=221900968">why I still bet on Apple is the very fact that many traditional CE vendors have thus far failed to compete against Apple effectively on a new ground -- where impeccable user interface, design, apps and service matter. They are still too slow, too conservative and too bogged down by their legacy products...
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Scott K
12/23/2009 7:26 PM EST
I come to this thread a month late, but I'll chime in anyway. In your article, you state that Apple should be bolder about diversification and give Google as an example of how to do that. Yet in the last 10 years, Google's ONLY revenue generator has been advertising. Their first "product" still generates 97% of their revenue.
http://gigaom.com/2009/07/17/where-does-google-get-97-of-its-revenue/
In the same 10 years, Apple has gone from solely a computer company to one that generates substantial revenue from computers, music devices/content and smartphones, with none of those businesses representing more than half the company's total revenue.
http://brainstormtech.blogs.fortune.cnn.com/2009/10/28/how-apple-sliced-its-pie-in-2009/
I have a hard time buying your arguments when they're founded on such a profound misunderstanding of reality.
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