Apple Profit Dip Shows iPhone Maker Isn't Immune to Market Forces

By Wayne Rash  |  Posted 2013-10-29 Print this article Print

So now Apple is dealing with a higher cost of sales in its mobile market. That higher cost includes the cost of more advertising, promotional and marketing costs along with some pressure on pricing to keep its partners loyal. All of these things are the normal effects of the competitive industry that Apple is finding itself in. To his credit, Tim Cook has realized this rather than pretending that the laws of economics don't apply to Apple.

There are a few things that Apple can do to raise its profit margins, assuming the company feels it's necessary, although the only people who seem to care are those previously mentioned Wall Street analysts. These are, after all, huge profits for any other company.

The first is to develop a phone that retains the Apple cachet, but costs less to make than the iPhone 5 in its various iterations. The problem with the iPhone 5C is that the only places you're really saving money are in the plastic case and the lack of a fingerprint reader. Low cost markets such as China and India can't afford either phone, but there's no reason Apple couldn't follow the lead of some Android vendors and Nokia and come up with a cheaper phone while retaining margins.

A better idea, at least from Apple's position, might be to introduce a new unique product that, like the iPhone, is a must have for cool people while having features that are wildly popular. But it can't be a phone, or a tablet, or even a watch or a TV console. It needs to be something that people can really convince themselves that they need, that provides a useful capability that they can't get anywhere else.

What might such a new product be then? If I really knew the answer to that, I'd be out looking for venture funding. But imagine what would happen if Apple were to make a dedicated personal search appliance. Suppose it had a voice interface better than Siri, could access the Internet seamlessly and provide a voice response that was useful, and have a screen for times when only a picture would do? Would this sell like the product Apple needs?

Clearly, I'm not an Apple developer or product designer, but assuming Apple needs something beyond what the company is already selling, then it needs to be something revolutionary. That means the next Apple breakthrough can't be just another iPhone.


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