Despite Gains, Apple Not “Innovative” Enough for Challenging Mobile Market


If the reaction to Apple’s latest earnings call says anything, it’s that the personal-tech bar has been set astronomically high

After setting new quarterly sales records for iPhone and iPad in Q1 2014, and clocking sales figures of over $57.5 billion, Apple’s stock proceded to fall almost 9 percent in after-hours trading on Monday. 

While the report was generally positive compared to ‘normal’ standards, it apparently wasn’t positive enough for investors, who said sales of the company’s flagship iPhones fell short of expectations, despite the fact that the company sold 51 million iPhone5S and 5C models in Q3, up from 47.8 million a year earlier. With the first-time, simultaneous launch of the smartphones in the US, Western Europe and China markets, analysts were hoping to see around 57 million handsets sold. 

And then there’s that word again, “innovation.” The charge to innovate, which has followed the brand around for nearly the last two years as it seemingly trudged through a product slump, has come up again, with anaylsts claiming that the reigning Best Global Brand must innovate again to get investors excited and to regain consumer mindshare.[more]

“What investors need from Apple is a sign that it is going to do something innovative in the near future that will help drive sales,” Max Wolff, chief economist at ZT Wealth, told CNBC. “They have to show they can at least copy the best-of-breed phones and do something innovative.”

That much-needed innovation may come in the form of Apple’s much-rumored entry into the wearables market with iWatch, as other brands like Samsung continue to gain ground in the space. Still, the smartphone market is the biggest battlefield with the most diverse market base. 

Trip Chowdhry, managing director at Global Equities Research, thinks Apple’s problems have less to do with devices.

“There’s still a problem at the executive branch at Apple. We can get excited about today’s results and the stock may go up, but I think there is still a need for change in Apple’s management,” he said. “The next 10 years in the tech industry will be about people who have an idea and the execution to innovate and defy odds. This belongs to people like Jeff Bezos, Elon Musk and Larry Page—not Tim Cook,” added Chowdhry.

While China sales rose 29 percent, North American sales fell 1 percent year-over-year, with Cook partially blaming cell phone companies’ long upgrade cycles. Still, the brand has struggled to make a real impression on emerging markets, with Samsung already out ahead of Apple in Q4. 

“Markets like China and India are quickly moving toward a point where sub-$150 smartphones are the majority of shipments,” Ryan Reith, program director for IDC’s Worldwide Quarterly Mobile Phone Tracker, told Bloomberg. “Cheap devices are not the attractive segment that normally grabs headlines, but IDC data shows this is the portion of the market that is driving volume.” 

Of course Apple tried its hand at the entry level market with its lower cost, plastic iPhone5C, although the smartphone ended up not being as low-priced as most imagined. In China, where the handset was indirectly aimed, sales of Apple’s expensive and flashy gold iPhone5S blew away sales of the colorful 5C, rendering the handset a bit of a dud in China and in the US. 

Fixated on what the brand is doing to maintian its “cool” factor, many analysts fall back on the loss of brand visionary Steve Jobs as the main reason for Apple’s recent struggles. “Apple is not seen as the really cool company any more,” ItWire notes. “Steve Jobs is dead, and to paraphrase Lloyd Benson’s famous comment to Dan Quayle: ‘I knew Steve Jobs, Tim, and you’re no Steve Jobs.'” 

Jobs or no Jobs, Apple still has a Job to do—and still has an opportunity with consumers worldwide who still don’t own a smartphone.

“If Apple can figure out how to get its devices into even a fraction of those hands—which it has struggled to do in emerging markets, compared to Google’s Android—maybe it could finally add enough billions to its balance sheet to make everyone happy.”