Apple and innovation have been almost synonymous in the tech industry for some time, but worries have surfaced in recent weeks that the creative wheels have stalled for Apple in the post-Jobs era. From the iPod to the iPhone to the iPad, Apple have consistently created devices that have captured imaginations and widened profit margins. But is such massive growth sustainable and are investors, tech analysts and the public right to worry that Apple have lost their innovative spark?
Why now?
Have Apple Lost Their Innovative Spark?
Steve Jobs passed away more than a year ago, so why is it only now that the market has become restless? After all, it was under Tim Cook that Apple topped out their stock price at over $700, and even at the tail end of 2012 the tech industry seemed to have nothing but faith in Apple. However recent profit reports showed that while Apple achieved record profits in the last quarter, there was virtually no year-on-year growth in said profits. While the iPhone 5 and iPad Mini have sold well, they have not lit the imagination of consumers in the way that the first innovative products of their respective lines did when they debuted in 2007 and 2010. This has led to a stalling in growth at Apple and such worries have caused their stock to drop by over $200 since September 2012.
Following the crowd
One of the most worrying trends in the past year has been Apple’s tendency to follow its competition instead of leading the way. Apple’s decision to put out an iPad mini was almost forced by consumer interest in smaller tablets like those produced by Amazon, Samsung and Google. Instead of anticipating customer demands, Apple was forced to play catch up. This was compounded again in recent weeks when Apple responded to Microsoft’s announcement of a 128GB Surface Pro tablet by announcing their own 128GB iPad.
In particular, South Korean giant Samsung has been pulling punches that have left Apple reeling. The popularity of their large screen phones prompted Apple to opt for a larger iPhone 5, and their consistent growth has shown their Galaxy line to be a viable alternative to the iPhone – especially now that it competes well in price and with the Android operating system. Much is also being made of Samsung’s investment in OLED ‘bendy screen’ technology, although for now nobody knows if it will triumph over Apple’s Retina offering.
Value to growth
Many analysts have predicted that the stalling of growth at Apple was inevitable: no company can go on growing forever. However that does not mean Apple is heading for crisis: on the contrary it has become a ‘value’ stock much in the same vein as Microsoft. Apple stock will soon be invested in because of the value placed on the safety of the stock, and not because investors want quick grown and turnaround profit. This is not necessarily a bad thing: while chasing profits does sometimes spark mad innovation there is also a safety in a predictable future that will allow Apple to send time developing its next venture. Critics have sometimes criticized Apple’s new products as rushed and half-baked, and as a ‘value’ company they will be more able to take their time and focus on the design detail that makes them so great.
What comes next?
According to CSS Partners, a well-recognized investment management company, many analysts are predicting the appearance of a long awaited Apple television, but as many have pointed out televisions have long update cycles and have much smaller profit margins than computers or phones. Apple’s profits have always rested on being able to bring out new versions every year or so, and they seem to have simply arrived at a point where there is no new ‘gadget’ of this kind to create.
Yet such pessimism in my opinion is probably unwarranted. Apple is almost a marketing company before it is a tech company, and as long as it does not lose the undefinable X factor that inspires its cult following, Apple will continue to prosper. Whether or not Apple loses some of its innovative spark, it has built such a solid user base through virtual monopolistic control of digital media downloads and brand loyalty that it will continue to turn large profits for the foreseeable future.
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