Some time ago I voiced my concerns with Apple. Suggesting that their fascination to be the lead in every consumer electronic device would result in more headwinds and a greater possibilities of failure.
Yes, Apple recently missed its earnings. They still moved massive amounts of product and the growth in the Apple iPads was just monumental. I am not concerned with the previous quarter, I sit fearful of what is yet to come. When it comes to Apples stock, investors have certain expectations, often lofty. In the past Apple has beat earnings but missed selling a certain number of other products, in turn devastating the stock. My concerns sit on the possibility that Apple will not be able to meet expectations when their portfolio of products becomes more diversified, as it will in the coming months. Apple has for the longest time been able to push out great products and continually beat expectations. What happens when they are unable to sell as many products, because they are unable to be first-in-class in all their product offerings?
This may strike you as an unrealistic expectation. Why would Apple not sell more than expected? People always expect the most and best of the tech giant. I see why these high expectations are justified, but times, they are a-changin’. For years now the staple Apple product has been the iPhone. It has revolutionized they way we interact with the world and most importantly it makes my daily life that much easier. As Apple branches out into other arenas and attempts to change the way we interact with other household electronics, the Apple iPhone story may fall by the wayside. Not only that, but today’s competition is not going out without a fight. With the possibility of three top of the line products for sale by Christmas, what happens if one of these products flops, with minimal sales?
Could Apple stock now have too much risk associated with it?
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Now it seems that these ideals I mentioned months ago are coming to fruition. Apple lately announced it was entering into the internet radio arena in the coming months, though it has no advertisement wing to fuel these royalty cost. We have seen the launch of new products which have repeatedly had their own struggles. I forewarned the possibility of struggles and the closing of the “Apple Bank,” we now see this actually happening with Apple trading below $500. We have seen Apple launch a mediocre tablet at an Apple price, showing that they cannot effectively have the best product in every arena. Apple succeeded by doing a few things to perfection, now they wish to go back to doing everything halfheartedly.
Today I see many touting Apple. Suggesting that now is the time to buy. Demand for their products remains great. The bulls continue to brush off any discerning Apple news. Apple undoubtedly makes a great product. Though as I have said time and time again, the tech space poses impossible challenges. Staying on the cutting edge remains difficult no matter how many millions or billions you can spend. Microsoft just recently launched the Surface tablet that they put countless amounts of R&D into, with no guarantees for success. No one can sit here and say that the Apple T.V. will sell out in stores, that the public will love it. It’s a product in a marketplace and there are no guarantees.
It comes down to this simple concept: Apple will not be able to do everything better. Yes they have been able to make better products or software over the years. No one can slight them on that front. Looking at Tim Cooks call to move away from Google maps to an obviously inferior product, we see a different Apple. Not only that, but we see headwinds in the future. Apple has laid the foundation for the smartphone and tablet industry, no one says that the competition is not allowed to buy the plot where the foundation lay and build a better house (or consumer retail product in this case).
“It is always the great buildings and the tall tress which are struck by lightning.” – Herodotus The Histories