The #iCrisis – the decline of the $1 trillion lock-in company

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We are close to seeing the launch of the best smartphone of the last decade. Potentially also the best tablet, voice-controlled speaker, smart watch, laptop and more. But none of these products will stop the future decline of Apple. Apple will however first have the best financial year ever and likely break the $1 trillion evaluation in 2018 and with that write history.

Why will Apple start to decline soon?

There are multiple reasons:

  • Apple never excelled at Cloud and Data
  • The Apple Watch will soon be a commodity
  • Amazon Echo won the voice control ecosystem
  • Tablets and SaaS will replace Macs
  • The smartphone is evolution now, no longer revolution
  • Open ecosystems are win-win for all, closed are win-most for one
  • Losing IoT, blockchain and others

Limited Cloud and Data business

Unlike Google, Apple never made large scale cloud offerings and makes few money from customer data. The bulk of Apple’s revenue comes from hardware and app sales. IPhone hardware margins have been going down over the years. Now that the market of smartphones is saturated, this will dramatically reduce future revenue growth. Mobile apps are also a commodity now. Very few new mobile apps have come to the market in the last year that have been anywhere as successful as apps like WhatsApp, SnapChat, and similar. So future revenues are more likely going to come from data where Apple is not a market leader but its direct competitors are.

Smartwatch commodity soon

Existing phone suppliers were no match for the Apple Watch when it came to offering a desirable product. Competitors in 2018 will come from famous designer and watch brands that are finally converting the smartwatch from a geeky gadget into a fashion statement. Due to the closed nature of the Apple products, all these brands are pushing the Google Gear 2 platform. These companies know fashion marketing and making luxury products better than Apple. There will soon be both cheaper and more expensive smartwatches that look better. The Apple Watch will get high-end competition from Louis Vitton, Tag Heuer and many more, while at the same time having to compete with Movado, Michael Kors, Guess and hundreds of other know brands. Apple has artificially limited its Smartwatch market share to iPhone customers giving competitors 70-80% of the market to fight for without Apple competition.

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Alexa won

Amazon’s Alexa already won the heart and minds of the only group that matters for new technologies: developers. 2018 will see an avalanche of new voice skills and Alexa enabled devices. One Apple product is likely to get lost in a sea of Alexa-enabled Sonos, Bose, and other high-end voice-enabled speakers. Not to mention voice-enabled fridges, thermostats, toys, cars, WiFi access points and many more.

Macs are the best PC’s in a world of tablets

Apple’s high-end iPads are the worst competitors for its Macs. Less and less people will want a slow booting PC and will want apps on tablets. Now that MS-Office is tablet-enabled, and most enterprise software is being “SaaSified”, PC’s are out and tablets will become the new normal. Software vendors will support both iOS and Android for which iPads will have no competitive advantage.

iPhone 9 will be selling worse

The iPhone 8 is magical because of all the publicity around the iPhone being a decade old. However the iPhone no longer is leading in innovation. It has become a fast follower at best with full phone covering touchscreens and other “innovations” being introduced late. The Android ecosystem is winning the battle both in features and price. Every year Apple has a harder time to justify the iPhone premium. With a $1,000 price tag there is a lot of premium to justify. In general most consumers are happy with the storage, screen and camera qualities of the phone they bought last year. Smartphones have lost their renewal appeal. Onwards we will see evolution, not revolution. Apple without growing iPhone revenues will have a hard time justifying a $1 trillion valuation.

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Open wins

In an open ecosystem all partners can make money. In a closed ecosystem partners can only eat the crumbs left behind when the dominator has finished eating. Apple products are without argument easy to use, well-designed and fashionable. However Apple can only launch a handful of products each year. Open ecosystems like Android, Alexa, and more can launch thousands of new products in 12 months. After a decade competitors have studied the Apple UX and marketing advantages and no longer bring out ugly complex products with bad publicity campaigns. Open will win from lock-in.

Apple is losing the technology future

Name one Apple IoT device that is market leading? Apple is nowhere in deep learning, blockchain, augmented reality or any other technology that will reshape the next decade. Apple has become a money printing machine but new ink is becoming harder to get by every year.

Conclusion

The #iCrisis is something Apple management needs to urgently focus on. Smart investors will draw their own conclusions if solutions aren’t found soon. Apple made amazing products in the last decade but just like Microsoft and Intel in the PC-era, Apple became complacent due to its Mobile-era success and will unlikely be very relevant in the next-era unless they change dramatically and even then it might be too few, too late…

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