Apple Must Innovate Its Way Out of Market Slump

NEWS ANALYSIS: Apple’s falling stock price, sliding price/earnings ratio and disappointing iPhone 5 sales are signs that the company has to start innovating again if it wants to get back on a growth track.

In other words, Apple is acting like any other publicly traded company in that it’s selling slightly better products as the technology becomes available, but it’s not driving the technology the way it once did a few years ago and it’s not innovating, it’s simply upgrading.

Contrast this with Microsoft, which has quietly managed to become innovative again. Regardless of whether you like Windows 8, or Windows Phone 8, both of these are some of the first real differences we’ve seen in user interfaces in years. In fact, Microsoft’s move into real innovation is significant enough that financial analysts are suggesting that the company could become the dominant player in mobile platforms. Analyst Charles Lewis Sizemore, writing in the Sizemore Investment Letter, in fact predicts that Microsoft will eventually muscle out Apple and “crush” Google in the smartphone and tablet world.

Sizemore explained in an interview on CNBC that Google’s business model simply doesn’t make sense. He also suggested that handset manufacturers really don’t want to be stuck in a solitary relationship with Google, and predicted that Samsung and others would be introducing Windows phones in the very near future.

What this means to Apple is that its future is even more clouded. Apple’s latest quarterly earnings report show that iPhone 5 sales are softer than the company would like. Meanwhile, it appears that Microsoft, which could be a formidable competitor, is gaining steam and in the minds of some analysts, is about to reach critical mass.

In case you’re interested, that critical mass will happen when at least one major handset maker adds Windows Phone 8 to its lineup. Can you say “Samsung?” When that happens, and it’s about to, Microsoft’s mobile market share will rise dramatically.

So what can Apple do to keep from losing ground to arch-rival Microsoft? First, Apple needs to reclaim the title of being the top innovator in the tech arena and it can’t do it just by buying up small companies. Then it needs products that actually work like they’re supposed to, in contrast to the poor quality of Apple’s Maps and Siri applications. Then it needs to actually invent something, anything, that shows that the company hasn’t lost its innovative edge, and folks, Apple TV isn’t that something.

Finally, Apple executives need to demonstrate that they’re running a public company responsibly. Besides defending their cash hoard, Apple needs to take a break from the legal and verbal battles that make the company look like it’s more interested in greed than service. Those stupid fights with Microsoft over SkyDrive or Office for the iPad are just two examples.

Apple already has more money than it can spend. Maybe it’s time to look after current and future customers by giving them what they want and need, and inventing the next big thing.