The Apple (AAPL) killing fields are littered with the murdered capital of rival tech company shareholders. It’s all explainable of course by hi-tech warfare, and Apple’s use of disruptive technology. The company’s iPod introduction was akin to the first use of guided missiles in warfare, and its iPhone hit rivals like the first hydrogen bomb rocked Japan in WWII. The iPad was so novel when released that we would have to compare it to the stalking, nemesis of our terrorist enemies, the unmanned aerial vehicle. Who knows what Apple’s next product market breakthrough will be, but one thing we can be sure of, it will wow us while shocking the market it enters, and it will leave scores of competitors anguishing in pain.
Last week, two of Apple’s unlucky enemies, Nokia (NOK) and Research in Motion (RIMM), showed more signs of pain. Nokia, a stalwart mobile player until Apple’s market entry, has seen its shares shed approximately 76% since Apple’s June 29, 2007 introduction of the first iPhone (after adjustment for dividends and splits). Apple’s shares are up about 220% since that momentous occasion.
Nokia’s shares rallied on Thursday of last week though, rising 4% to close at all of $5.77. But the reason for Nokia’s good day was not due to stellar revenue growth or burgeoning demand for a new mobile unit, or Apple-like blowout results. Rather, the shares surged on news that Nokia would increase its layoff tally for the year by another 3,500. In fact, it was only April when the company declared 7,000 jobs would be shed worldwide. Now, as part of its reorganization due to the disruption caused by Apple, Nokia will close a plant in Romania, and cut jobs there, in Europe, and as far as Malvern, PA. This is the kind of good news Nokia shareholders celebrate these days, while Apple rises on earnings and in anticipation of new product introductions like its iPhone 5. Such is life in the orchard.
Meanwhile, in the killing fields, Nokia reduces its manufacturing capacity and realigns toward higher volume-capable and efficient Asian production. The company continues to have plants in Mexico, Hungary and Finland, but those are under review as well. The company said this latest cut will help it achieve targeted cost savings, and thus profit estimates are implied secure. The stock held on to value through a tough week as a result, but as discussed previously, it has also cost a good number of shareholders over the last several years.
Research in Motion (RIMM) also had some sad news last week, and its shares sank to a new 52-week low simultaneously. Best Buy (BBY) cut RIM’s Playbook by $200, setting off rumors that the embattled RIM might be about to discontinue the product. At least one analyst thought so, as John Vinh at Collins Stewart wrote in a report, “We believe RIM has stopped production of its PlayBook and is actively considering exiting the tablet market.” Vinh is a chip analyst, and he referred to significant layoffs at a Quanta factory where PlayBooks are manufactured, at the core of his reasoning. RIM’s response was that it remains highly committed to the tablet market.
The price cut for the PlayBook was certainly inspired by Amazon’s (AMZN) introduction of its first tablet, the Amazon Fire, at a relatively low price of $199. After the price reduction, the PlayBook still retails for $299 at Best Buy. That said, it is Apple which dominates the market it pioneered, as the company is seen by Gartner (IT) taking 73.4% of the market this year. RIM doesn’t appear to be holding up well, as it recently said it shipped 200K PlayBooks in its most recent quarter, sharply lower than the 500K it shipped in the quarter before.
RIM wouldn’t be the first to fall on the tablet battle front, as Hewlett-Packard (HPQ) retired its TouchPad tablet just last month. HP hasn’t fared well in its competition with Apple either, and it appears that picking up the near mortally wounded Palm, another Apple victim and pioneer on the smart phone front, did not help its campaign. Amazon has been the only formidable competitor to Apple thus far, and it is rumored interested now in acquiring Palm and its operating system from HP, according to technology site Venturebeat.
Indeed, the technology markets Apple competes in will inevitably support new competition, due to the nature of the industry. Extrapolation from Moore’s Law dictates that these quickly evolving product markets will undergo great change regularly. If Apple slacks in its efforts, perhaps with the less active involvement of its visionary founder, Steve Jobs, there will be others to invent and disrupt even the markets Apple currently dominates. We questioned whether Apple’s growth was tiring in a recent article, but in the current age, there is no question that it continues to trample competitors under its big feet.
The footprint continues to expand as well, and relatively untapped product markets still hold opportune capital resources Apple might exploit. The quickly changing movie rental business, for one, opens opportunity for both Apple and Amazon. Film streaming, a business where upstart Netflix (NFLX) seems to hold a vulnerable fort, is likely catching the king’s attention. Apple TV is already armed to take the smart television market, as it develops. From there, what’s to stop Apple from employing its application warfare strategy, already proven in the arenas of mobile music, smart phones and computing tablets. This is where I see Apple amassing troops next, and so the killing fields could soon memorialize the likes of Sony (SNE), Panasonic (PC), Royal Philips (PHG), Emerson (MSN) and Samsung (SSNLF.PK).
Apple’s great strides have been painful for the shareholders of its rivals, but at the same time, have pushed the envelope in electronics and have engaged the industry, if not a nation of entrepreneurs. The beneficiaries encompass not only Apple shareholders, but consumers globally, and society. I aptly quote Winston Churchill in conclusion, “Never in the field of human conflict was so much owed by so many to so few.”
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.