Did Apple Just Peak?

[Adergaard]

I wanted to get your opinions on this piece from the infinite number of apple blogs out there.

The essence of it all boils down to Apple in fact peaking about now since it's had such an incredible run so far, Jobs is not with us anymore, and the fact that everyone seem to have their products now which takes down the hipnessfactor.

Any merits to it? What do you think.

Fwiw, my thinking here is that as long as Apple can find new markets to explore, and does so in time (ahead of the heard) they can continue to rule.

 

[thejadedmonkey]

I think they peaked a while back. A few years ago, I was in love with the brand, now I'm lack-luster. And I'm generally one of the people that start the curve, rather than finish it (or so I've noticed).

The only thing that makes me pause, is what would people turn to? There's nothing like the Apple TV on the market, or the iPad, or the iPod. Even if there was, the ecosystem around it is lacking.

Android has the best opportunity to gain an ecosystem, but I have yet to hear anything great about an Android tablet. Not that they're not good, but not great.

Of course, the big unknown is Microsoft's Windows/Phone 8. It has a great chance of being the new big player in town, but Apple has a lot they can give up before they're de-throned.

 

[Adergaard]

The only thing that makes me pause, is what would people turn to? There's nothing like the Apple TV on the market, or the iPad, or the iPod. Even if there was, the ecosystem around it is lacking.

Android has the best opportunity to gain an ecosystem, but I have yet to hear anything great about an Android tablet. Not that they're not good, but not great.

Of course, the big unknown is Microsoft's Windows/Phone 8. It has a great chance of being the new big player in town, but Apple has a lot they can give up before they're de-throned.

First off, thanks for taking the time.
Secondly, I totally agree with you with the small exception that IF they can come up with something in the TV-space, or why not the Camera/Photo/Capturing-space, can't they hold on to the number one spot for yet a few years to come do you think?

 

[Liquorpuki]

I'd wait to see if they have a game changer in the TV market. Apple makes its biggest strides by blowing up new markets. They haven't done that since the iPad.

That IFS guy's 3 reasons totally negate the market expansions that make Apple successful.

IE w/ that 3rd reason - when Apple took over the MP3 player market, everyone eventually owned an iPod. Did they peak? No, they blew up the smartphone market and introduced something new that nobody had - the iPhone. Then eventually everyone owned an iPhone. Did they peak? No, they blew up the tablet market and introduced the iPad. Now everyone owns the iPad so we're waiting to see what they do with TV's. That IFS guy is oblivious to this pattern.

 

[Adergaard]

I'd wait to see if they have a game changer in the TV market. Apple makes its biggest strides by blowing up new markets. They haven't done that since the iPad.

That IFS guy's 3 reasons totally negate the market expansions that make Apple successful.

IE w/ that 3rd reason - when Apple took over the MP3 player market, everyone eventually owned an iPod. Did they peak? No, they blew up the smartphone market and introduced something new that nobody had - the iPhone. Then eventually everyone owned an iPhone. Did they peak? No, they blew up the tablet market and introduced the iPad. Now everyone owns the iPad so we're waiting to see what they do with TV's. That IFS guy is oblivious to this pattern.

You put forward a very compelling case with the comparisons to the mp3 market pre ipod, phones etc. I tend to agree there.

About the TV market. The reason I'm quite "pessimistic" there is that the innovation, or thee major leap, seem to have already happened there i.e. the death of DVDs, Blu-rays, the need for recording, as you can now get most things you want to see from the Internet anyhow. But sure, Apple can surely make a sleek looking TV, if nothing else, and that's worth waiting for in itself.

However, I can't help thinking that there's something in the first reason covered by the IFS guy. I know Apple is larger than one person, but the shoes of Jobs is probably really big to fill and from what I've understood about how Apple operated under Jobs it was his final say so that pointed the way on almost everything they did. From the biography it's evident that he alone championed the look and feel of the iPad, for instance. Can we really see Cook having this "feel" for the market?

Thanks for your input.

 

[eternlgladiator]

I don't really agree that with the writers reasoning. Yes Apple is at the top right now but I think Liquorpuki made the best point about blowing up markets. I don't have any knowledge of specific items but I'm sure apple has some wild stuff being worked on that will do the same eventually. I'm not really of the mind that apple with blow up the television market but anything is possible.

I do think the writer was on point with the part about Tim Cook not being Steve Jobs and needing to make his own mark rather than trying to fill shoes that I think we all agree he can't fill.

History says all business models peak at some point and begin a decline but comparing carefully planned product launches and break thought to the odds of flipping a coin is unfair. Apple's products are carefully researched, put together and planned down to the smallest details. No amount of research or prep work can predict the way a coin will fall. It is easily foreseeable that some products will launch worse than others but that doesn't mean its bad. Apple operates around 50% profit margin on most items so its pretty tough for them to lose even with a relatively poor product launch.

 

[Liquorpuki]

About the TV market. The reason I'm quite "pessimistic" there is that the innovation, or thee major leap, seem to have already happened there i.e. the death of DVDs, Blu-rays, the need for recording, as you can now get most things you want to see from the Internet anyhow. But sure, Apple can surely make a sleek looking TV, if nothing else, and that's worth waiting for in itself.

The tech is only a small part of what makes them successful. You could argue that outside of the capacitive touchscreen, the iPhone was nothing innovative compared to the Treo's, Blackberry's, Nokia Communicators and Windows Mobile phones that used to be popular. But look at complementary technologies they innovated. IE they introduced the App Store and tied it into iTunes CC's and created an over the air hub to get stuff on your phone. Before this, to get software on your phone, you had to go on Handango or some website for the purchase, connect your phone to the computer, and run the install. The iPhone made it 100 times easier. Now in 2012 every mobile device has to come with an app store.

The tech should be marginal but the ties to the ecosystem and user experience should be highly innovative. They should be transforming the TV industry like they did the music industry with the iPod/iTunes, etc. At least that's what I'm hoping for.

However, I can't help thinking that there's something in the first reason covered by the IFS guy. I know Apple is larger than one person, but the shoes of Jobs is probably really big to fill and from what I've understood about how Apple operated under Jobs it was his final say so that pointed the way on almost everything they did. From the biography it's evident that he alone championed the look and feel of the iPad, for instance. Can we really see Cook having this "feel" for the market?

I was one of the guys who thought Cook wouldn't fill Jobs' shoes and I was wrong. He's done a great job maintaining their momentum and dealing with problems, both PR and otherwise. The stock reflects it. The biggest test for him will be the TV launch so we'll see what happens there. And yeah Apple was a cult of personality around Jobs and while he did make the final decision, that Isaacson book pointed out he took credit for the work of guys like Ives and Cook and adopted their suggestions as his own sometimes. He was also directly responsible for some missteps like that iPhone 4 antenna issue. Guys like Ives and Cook haven't gone anywhere so I don't expect Apple products or operations to fall apart.

 

[callmemike20]

Apple hasn't peaked. Rather, their growth is going to slow. A company cannot sustain increased revenues/profits by 20%+ per year forever. Even if they could, regulation would eventually kick in. The slope of their growth will eventually decrease.

This is when a company enters sustaining mode. Modest gains are still apparent in a good market and they are no longer "immune" to slight losses due to economic events. Note that a sustaining mode still allows for new products. These new products just won't have as great of an impact as the company has seen in the past.

As a previous poster said, Apple will continue to revolutionize various industries. Plenty of growth opportunities still exist for Apple. However, with their recent dividend announcement, it's obvious their growth slope is slightly decreasing.

No one can see into the future and tell you when Apple will enter this "sustaining" mode. It can be next year or even 20 years from now.

Coca-Cola (KO) is a great example of this. KO is a great company and still the dominant player in their industry. Everyone loves their product and they are still experiencing a modest growth. However, KO isn't increasing at a constant rate of 20%+ per year. Many of their new products do well for them, but they don't cause long lines at grocery stores.

AAPL is still a good buy. I think you can still earn solid growth, and a solid dividend as the growth slows.