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Is Apple’s bubble beginning to burst?

28/07/15
Is Apple’s bubble beginning to burst?
Fifteen years into the new century and Apple continues to dominate the market, but some analysts claim its star is beginning to wane. PLMR’s Rhiannon Evans-Young and Leon Emirali argue whether the tech giant’s dominance can continue.

NO, says Rhiannon Evans-Young

Last week, Apple reported a 38% boost in profits, with CEO Tim Cook calling it “an amazing quarter”. With demand for iPhones continuing to soar, as well as ongoing demand for Mac computers, the tech giant shows no sign of loosening its grip on the consumer market.

The iPhone is now the smartphone of choice for teens, adults and, increasingly, businesses the world over. The beauty of the Apple brand means that once you’ve got your hands on one gadget, you are likely to become a convert to the operating system and end up acquiring more.

Despite a dip in the share price following the latest profit announcement, blamed by analysts on lower than expected returns, this is all relative and it is safe to say that the Apple bubble shows no sign of bursting. With more money than the US Treasury and $100bn in reserves, this behemoth is leaving all other tech companies in its wake.

Some might point to speculation over disappointing Apple Watch sales, or the decline in demand for the iPad, as cause for concern, as well as an over-dependence on iPhones. But with a company of Apple’s size and wealth, which brings with it a vast pool of talented innovators, sights are always set on the next frontier of technology. Whether its wearables, transport or ‘things’, the next generation of Apple products are likely to continue the trend of being products users want and ones that trump competitor offerings. The age of Apple continues unchallenged.

YES, says Leon Emirali

Whilst Apple’s achievements cannot be understated, many tech commentators are speculating that Apple’s star is beginning to wane.

Following the rip-roaring successes of the iPod, iPhone and iPad, the Cupertino tech giant has been accused of complacency and a failure to innovate at a time when its competitors have desperately scrambled to keep up. Apple products were once seen as the sexiest, shiniest and most advanced on the market. Now, its latest offerings are perceived as a safe pair of hands, but certainly nothing to write home about.

One could argue that a fundamental flaw in Apple’s business model is its willingness to cannibalise its products.  In 2006, the year before the iPhone was released, Apple sold 39 million iPods. Last year, Apple sold just 14 million iPods as the built-in MP3 player on the iPhone effectively rendered the iPod obsolete. Similarly, the iPad experienced a significant decline in sales around the same time the company launched the iPhone 6 Plus ‘phablet’. Despite the cannibalisation strategy working for Apple in the past (notably around the introduction of the iPad, which took sales away from Macbook, but ultimately led to an expanded market for consumer computing hardware), this high-risk strategy isn’t ‘one size fits all’.

Worrying for shareholders, Apple has so far refused to release figures around how many units of the Apple Watch were sold, leading some to believe that sales of its first new product line since 2010 were less than impressive. With an apparent lack of innovation and a buoyed set of ambitious competitors, the warning signs are showing for Apple.

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