The Apple board is concerned about its “dry spell” in producing innovative products. Apple has been missing in action for a while – October 23rd, 2012 was the last time, Apple launched the iPad mini. Ever since then the Cupertino giant has been largely missing in action. Twitter and Blogospehere – which was alive and abuzz disecting Apple’s latest launch or new launch have largely falled silent and one gets to read more about Cook versus Jobs comparison which is reminiscent of Apple’s Phoenix tale.
This post is to put Apple’s profiling Apple’s share of problems.
1. iPhone and iPad both played a significant role in its growth since 2009. However there is slowdown in Apple sales and prices have gone southwards for a while now. In other words, loss of momentum. Apple seems to be not only losing its pricing power but also its sales growth despite the lower prices.
2. Going by Apple’s own statement- the loss in pricing premium and numbers is not just a temporary loss-
“The Company expects its gross margin percentage to be lower in 2013 than experienced in 2012, and the Company anticipates gross margin to be between 36% and 37% during the fourth quarter of 2013. The lower gross margin expected in 2013 is largely due to anticipation of a higher mix of new and innovative products with flat or reduced pricing that have higher cost structures and deliver greater value to customers and anticipated component cost and other cost increases.”
Financials Q3, 2013 (page 30)
3. The decline in numbers can also hurt the iTunes, software and services, and accessories segments.
4. More importantly, the loss in momentum is showing on its technology leadership – and top of the mind recalls. Apple is suddenly a “has been” from “aspirational” and “ahead of the curve”
5. There have been fiascos such as the Apple Maps which have robbed the sheen and the Halo. Apple was never accussed of being a “half baked device/service”
While it is understood that Apple needs to target the China and the SE Asia markets with its low cost iPhone – iPhone 5C which should take on the mid range Androids and Windows Phones – this would translate in reduction of the overall margins. At the same time, Samsung Galaxy SIII has taken over as the Smartphone tops – disrupting iPhone’s positioning in consumer mind as the best smartphone.
Gartner estimates that tablets were a 17.6 million market in 2010 and are expected to be 63.6 million units strong in 2011.That is an incredible 261.4% growth. The growth figure is expected to touch 326.6 million units by 2015 according to Gartner.ISuppli puts the 2015 number at 275 million units. Gartner had reduced its forecast for growth in computers sales from 9.3 per cent to 3.2 percent in 2011 and from 12.8 per cent to 10.9 per cent in 2012. This dominance and takeover of the computing world by tablets has so long been good news only to Apple even as Android struggles to get better at the tablet game. iPad 2 single handedly outselling all competing tablets combined and is expected to account for 73.4 per cent of worldwide tablet sales in 2011, down from 83 per cent share in 2010. Gartner expects Apple to maintain 50% of the global tablet marketshare in 2015.. Android tablets are on pace to ship 11 million units in 2011, accounting for 17.3 per cent share in the market up from 14.3 percent market share in 2010. Gartner’s forecast for the Android has been lowered by 28 per cent from last quarter’s projection. The reduction would have been greater had it not been for the success of budget tablets in Asia, and the expectations around the launch of Amazon’s tablet. To many, the third front would be the Microsoft Windows tablets which aren’t yet there on the horizon (not yet!).And yet, late arrival might limit its appeal, especially to consumers, as Apple and Android will be well established in the market by then. The current buzz around Windows 8 driven by the demonstrations seen at the BUILD conference might be short-lived if Microsoft’s push to use the new OS across devices comes at a compromise in usability. Also, the late arrival might limit its appeal, especially to consumers, as Apple and Android will be well established in the market by then.
It is certainly a most tempting thought! Imaginations tend to get fired up in context of the Google-Moto acquisition even while,currently, Microsoft is most keen and focussed on WP mango launch and its success. If and when they are able to establish the WP consumer acceptance, there could be a scenario of taking over Nokia.I would endeavour to answer this Question on two levels
The Benefits of Microsoft acquiring Nokia
Mobility majors (Apple & Google) have in-house hardware competencies. In case of Google it was acquired through Motorola. The idea of having in-house hardware competencies was to have end to end capabilities in terms of service provision to consumers. Apple leads the way here with a seamless hardware and service coupling for creating an unparalleled user experience. It also gives them a global reach into consumer markets through were well tiered distribution channels. Also remember, Microsoft is not averse to forays into devices as in the case of Zune,XBox and Kinect. If WP acquires critical mass, Microsoft has a case for acquiring Nokia and staking out devices.
Why Microsoft wouldnt acquire Nokia
It is one thing to do end to end and quite another thing doing it well. More and more organizations are focussing on their competencies and getting out of the low margin hardware businesses. The example here is HP or even IBM for that matter. Microsoft could continue focusssing on creating software, services and unique consumer experiences (Kinect anyone?).Microsoft has enough and more discrete elements in terms of software services which if it is able to integrate will be revenue stream into future.
My guess on the future of the Microsoft-Nokia tie up is that if WP matches upto the scale that Microsoft envisions it to, we might see Microsoft acquiring Nokia.
Canalys has stated the obvious in terms of smartphone platform market shares: Android rules and has captured 48% of the smartphone market in Q2 of 2011. Smartphone adoption continues to grow rapidly across the world, reaching a total of 107.7 million units shipped in Q2 of 2011, a 73% year-on-year growth.Android was the biggest driver of smartphone shipments in Q2, as Android-based smartphone shipments were up 379% year-over-year, coming in at 51.9 million total units shipped.Successful Android-based products from vendors such as Samsung, HTC, LG, Motorola, Sony Ericsson, ZTE and Huawei, as a catalyst for the platform’s growth. As written about earlier Apple has over-shot Apple and is the No.2 smartphone platform. Android’s growth has powered Samsung as the No.2 smartphone maker globally.
Android was the number one platform in 35 of the 56 countries Canalys tracks, resulting in a market share of 48 percent. Nokia’s leadership position has proved most resilient in key emerging markets, and it still leads in the BRIC countries: Brazil, Russia, India and China. The problem for Nokia is that demand for its Symbian-based smart phones has dissipated very rapidly, particularly in operator-led markets, such as Western Europe, where it’s been strong in the past. It badly needs the first of its Windows Phone devices to launch as soon as possible to arrest a decline and, hopefully, silence its critics.Even while Nokia-WP tie-up was announced in February, the first of these devices will be launched only towards end of 2011.Nokia is set to have several more difficult quarters before a possible reversal of fortunes.
RIM had a challenging quarter in North America, with its market share slipping to 12%, down from 33% a year ago. However, Blackberry continues to see significant interest and uptake of its devices, for example in Indonesia and South Africa where it is the leading smart phone vendor. Nonetheless, it must continue to innovative and recapture lost momentum. It’s critical that the next-generation BlackBerry OS 7-based products launch ahead of the upcoming holiday season to compete in the market.
Smartphone are not only about Devices – It entails software, games, maps, LBS, navigation, applications and APNS, user interfaces, back –end integration with services, developers, content and aggregators, eco-systems and partnerships with other constituents of eco-system. What goes into the smartphone rivalry are ecosystems against one another trying to engage and enrich consumer experiences around media that is carried through by the device. As such the Samsung and Apple rivalry is actually the tipping point of a much larger war between Apple and Android. There are some patent-led issues around the device which is what Apple and Samsung are fighting about. But the bigger context here is the battle royale between Android, Apple and Microsoft (Hopefully in an year’s time).
Apple versus Samsung, thus in real terms, is Apple versus Android. Samsung is the largest contributor to Android smartphone volumes globally and a lot of cutting edge Android services have been featured in Samsung smartphones. Android also has HTC, Motorola among its other significant device partners. Nokia is yet to perfect the Smartphone domian, not so much in terms of devices- rather in terms of the eco-system, technology, partners and the likes. So the focus remains on getting that right. That is where the partnership with Microsoft comes in. Microsoft with its own competency in the online digital space is the third part of this very unique and interesting competition that is now maturing. While Microsoft has joined this late, but Nokia’s inherent strengths as a device manufacturer and distribution is what Microsoft WP (Windows Phone) could ride on to get at par with Apple and Android. Nokia is presently making the migration from proprietary Symbian to WP and the fall currently is because while Symbian is slipping, WP has not kicked in yet.
All these three majors: Apple, Android and Microsoft come with different competencies. Apple for instance is the innovators brand but is very stringent in terms of control on its innovation and integration across its devices. This adds a great deal of exclusivity to the Apple Brand. Android on the other hand is “open” and encourages wide diversity of partnerships across its platform. Android obviously has its competence in Google’s presence across all web based platforms and huge repertoire of web based services. Microsoft is the legacy company which is trying to re-invent itself in a swanky new avatar that is more relevant to the mobile generation. The market dynamics will depend upon factors such as experience and engagement with the users, range of services offered and the time to market for innovations. The objective is to host the user life and lifestyles on platforms in a seamless manner creating a stickiness and monetization ability for the platforms. Currently the Android platform has made major inroads in this segment. However, it is Apple who is the most successful in terms of monetizing its user base and that is what really matters. Microsoft hasn’t really started and one will have to wait for the Nokia-WP partnership to kick in, before we place our bets on Microsoft.
Two years after Nokia and Intel tom-tomed a ground braking tie-up for new devices and platforms, the first baby of the marriage is born: The N9. For many who were fatigued by the Nokia Symbian (so called) smartphones, this was a good beginning, except that this is the end. Stephen Elop has pronounced that Nokia will not be supporting Meego development going forward. Given that the Meego powered N9 is one of the best devices that have come out of Nokia in the last year and two, and all encouraging responses, Nokia’s decision to pull the plug on Meego is baffling.
Tomi Ahonnen, one of the greatest critics of Stephen Elop has had a few strong views about Nokia and its American CEO often culminating into (almost) personal attacks.
“This guy is a clown, he deserves to be in a circus”
“Nokia’s new CEO is sounding less and less like a deranged psycopath these days, and more and more like a confused schizophrenic.”
“The Patient Heart Has Stopped. Now the Doctor ‘helps’ by starting to strangle the patient too”
Elop’s latest pre-disposition about Microsoft and WP is indeed a little queer. For want of anything better, he looks like Microsoft’s commissioner in charge of converting all of Nokia to Windows. How else could one miss the reading on N9 and Meego? It isnt about deserting one platform for another, it is about a viable alternative. By moving away from the Meego, Nokia is dangerously putting all its stakes on WP… an extremely heavy bet! WP as a platform has a few deficiencies yet which were far better settled by the Symbian and Meego. The current spate of actions from Elop favour Microsoft more than they do for Nokia.
Nokia’s inconsistency with Intel and consistency with Microsoft may be read to be a new found “focus” on the platforms but one must take into account that a Linux based Meego is possibly more acceptable to developers who are already developing on the Android platform than Microsoft WP which is not the de-facto standard in the industry.Microsoft WP7 platform has the smallest number of apps and its app store is the least-used app store of the major internationally launched smartphone platforms.
Nokia’s Symbian has traditionally had a migration path and Nokia even built a migration from Symbian to MeeGo via its developer tools called Qt. Thus any apps now developed for Symbian would also run on MeeGo. The developers of Symbian were particularly pleased with this extra effort that Nokia had invested in its ecosystem. WP7 operating system did not have a migration path from Symbian. WP did not have a migration path to or from MeeGo. It did not even have a migration path from the previous Microsoft OS, Windows Mobile. The previous Microsoft developers were particularly upset that Microsoft refused to support them in migration.Microsoft’s WP7 is not compatible with Android. Its not even compatible with Microsof’t's own previous OS, Windows Mobile.