Shares of Apple (AAPL) stock briefly fell below $500 today, the first time this has happened since February 12, 2012. Reports out of China are that Apple has slashed its order of iPhone 5 displays, a sign many are stating is proof that demand for the iPhone 5 is below Apple’s original expectations. With Samsung charging forward with their mobile smartphone sales and shipments, announcing today that over 100 million Galaxy-branded devices have been sold, and market research numbers showing Google’s Android operating system grabbing further market share every quarter, is the golden age of Apple finally over?
The truth, however, is that there was never a golden age of Apple. Apple certainly revolutionized the mobile industry, and the world for that matter, with the launch of the iPhone in 2007, but Apple’s business model has never, nor will ever, be one that is conducive of market dominance. Since the days of the first Macintosh, Apple’s end-to-end strategy, controlling both the hardware and the software, gives consumers beautiful products that are exceptionally engineered but yields little choice to consumers. This lack of choice is especially true on the area that matters most: price. Apple’s products are notoriously beautiful and are manufactured with the best parts available on the planet, but with this come prices that are generally double to triple the amount of competing products in the same market. As much as consumers would love to have Apple’s beautiful machines, the harsh reality is that many, if not most, cannot afford them. It’s the same as everyone would love to drive a fancy car, but the reality is we settle with a cheaper vehicle because it is what we can afford.
As Windows did with desktop PC’s in the 1980’s and 1990’s, Android is doing in the 21 st century with mobile devices. Android is given away for free for anyone to use, and can be customized by any manufacturer to meet their needs. There are now dozens of manufacturers making hundreds of different devices, at varying price points to fit any budget running Android. Android is the great equalizer among a sea of unequal devices. Android is leading the market because it should be, and not because it is a better OS (we can save that for another article) but because the math says it should be. Consumers and investors’ expectations of Apple have been unrealistic, expecting a company that literally has only four product lines (Mac, iPhone, iPad and iPod) to dominate a market. Sure these four product lines come in different configurations, but at the end of the day it is still only four products. Would Toyota be as successful if they only sold four vehicle models (they come in different configurations too)? What if your cable TV provider only provided four channels? What if McDonald’s only offered four different foods to choose from or Pepsi only offered four different types of soft drinks?
The truth is that the mobile business is no different than any other business, the more places your product exists the more dominant you will be. Speculators, consumers, and bloggers who say the “golden age” of Apple is over, giving way to Android are shortsighted in the fact that you are comparing two operating systems, one that is one only two product lines, and another that is on dozens of product lines from dozens of different manufacturers.
Sometime in the last five years, however, we were all duped to believe that Apple could break that mold, that somehow they could thumb their noses at proven business practices and dominate like no other company could. We somehow were caught up in the “reality distortion field” that Apple was worth more than any company on Earth with just four products. The reality is that Apple has always been a company with a limited product line, and in turn a limited market share. It wasn’t less than 5 years ago that Mac PC’s accounted for less than 10% of the overall market, and Apple was OK with that.
History, as it always does, is repeating itself for Apple. Apple and its falsely inflated stock are coming back down to Earth. In the 1980’s Apple revolutionized the desktop computing world with the Apple II and the Macintosh, only to succumb to dominance by a competitor in Microsoft whose product was available on dozens of PC’s from dozens of manufacturers, and generally at a lower price. Fast forward to 2013, and well you get the point.
