Apple Might Have Passed Its All Time Peak: 10 Reasons Why

By Don Reisinger  |  Posted 2013-01-24

Apple Might Have Passed Its All Time Peak: 10 Reasons Why

Apple’s calendar fourth-quarter (fiscal first-quarter) performance was the prime example of the quandary the company currently finds itself in. Apple generated $54.5 billion in revenue and recorded a net profit of $13.1 billion.

Those phenomenal numbers alone would normally make market analysts cheer and send investors rushing to buy more Apple shares. After all, Apple generated $46.3 billion in revenue and sold 10 million less iPhones in the same quarter a year ago.

However, Apple’s quarter was considered a miss by Wall Street. Analysts had been hoping for much higher revenue, and the company’s $13.1 billion profit matched its net income during the fourth quarter of 2011, when its revenue was billions of dollars less. Combine that with talk of a weaker-than-expected calendar first quarter and some market watchers are wondering whether Apple has passed a peak it can never hit again.

But making such prognostications is an admittedly risky business. Apple naysayers for years have been saying that the company is at its height, only to see its business soar to new heights. But there’s a chance—and it’s just a chance—that Apple’s peak might have come and gone.

Here are the reasons why.

1. It’s just a matter of time, regardless of the company

The possibility that Apple might have passed its peak might have nothing to do with the company itself and everything to do with the fate of all enterprises and the law of diminishing returns. At some point, every company hits its all time peak and for many reasons no amount of new investment in new products or businesses can bring together the combination of circumstances that supported such incredible growth. Given Apple’s profit figures, it appears the plateau may be setting in.

2. It’s far behind in the most important market

China is the world’s most important market for technology companies. Apple knows it. Samsung knows it. And Microsoft knows it. That’s precisely why all of the tech giants are competing so hard in China. The trouble for Apple is its iPhone is not selling as well as it would like in a country where many consumers view Apple smartphones as too expensive. If that continues, Apple could find itself in deep trouble.

3. Margins are getting tighter

As noted, Apple was able to generate a high of $54.5 billion in sales during the fourth quarter. However, the company’s profit of $13.1 billion matched the prior-year quarter, which was able to earn on $46.3 billion in revenue. Apple’s margins are getting tighter each quarter. That’s bad news for any company.

4. Competitors are catching up

So, why are Apple’s margins shrinking? The company might just need to blame it on its competitors. Companies like Samsung and Google are delivering high-quality products at prices that beat Apple’s. The iPhone maker is now forced to respond by offering more products and keeping its pricing low, despite rising component costs. Competition might just be leading to Apple’s decline, which is the way free markets are supposed to work.

Apple Might Have Passed Its All Time Peak: 10 Reasons Why

5. Making up for iPod declines

Apple’s iPod was once the most important product the company sold. In fact, just 10 years ago, the device was keeping Apple afloat and generating boatloads of cash. However, the iPod’s sales and profits have waned, and now, there’s a multibillion dollar hole starting to form in the company’s financials. Unless Apple releases something to plug that hole, its best days might be behind it.

6. Tim Cook is more business-like than innovative

Apple was built on innovation, it faltered in the 1990s when its leadership tried to be more corporate and it thrived in the 2000s because of innovation. Tim Cook is a skilled business man, but he is not a visionary or an inventor as Steve Jobs ways. Cook likes to solve problems with business-school ideas. In Apple’s world, that doesn’t work. And we’re starting to see that once again.

7. Mistakes are happening more often

There was a stretch in the 2000s that saw Apple make few mistakes and no major ones. In the past two years, however, the company has been hit hard by a host of issues, including a poorly conceived Siri, a troubled Maps application, and a relationship with manufacturing Foxconn contractor that made the company look bad. Apple is actually not infallible, despite the image of Apple that Steve Jobs used to project.

8. Shareholders are losing confidence

Apple’s shares have fallen off a cliff. In the last year alone, Apple’s shares hit a high of more than $700. Now, though, the company’s stock is in the $400s and could fall even more in the coming weeks. Shareholders are starting to lose confidence in Apple. And if that’s not a sign of trouble, what is?

9. Macs are the quiet disappointment

Lost amid the talk of Apple’s revenue and profit during the last quarter is the fact that Mac sales actually disappointed Wall Street. In fact, consensus pegged Mac sales at 5.2 to 5.3 million Mac unit sales. During the period, Apple sold 4.1 million Macs. Now observers are starting to ask whether iPad sales are even cannibalizing Mac sales. That’s something everyone should keep an eye on in the coming quarters.

10. Too many, too close

Apple has fallen into the trap of selling too many products with features that are too close to those that it already offers. There are simply too many iPhones and iPads and MacBooks on the market right now. Consumers might like choice, but a company can’t give them that choice to the detriment of its own operation. It appears now that Apple needs to go back to its strategy of offering one or two really great products in a respective category, and getting away from the lure of offering too many devices and models with features that are too similar to others it sells.

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