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Vash Patel
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I'm a student studying biotechnology formally, and stocks and options in my free time. I initially started researching the market and how to invest during my freshman year at Penn State to see if it was possible to pay for school by investing. Researching one thing lead to learning another and... More
My company:
Axis Org
  • Apple Isn't Equipped To Compete In The Smartphone And Tablet Market 7 comments
    Aug 14, 2012 2:23 PM | about stocks: AAPL, GOOG, BBRY

    It seems everyone is a bull on Apple (NASDAQ:AAPL) these days and rightfully so. Apple, as of July of 2011, has more cash lying around than the US government. What's not to love? Everyone from analysts to iPhone users love the stock and it's hard to find a bear amongst the noise. Well, I'm here to tell you I'm a bear on Apple in the long term.

    With Steve Jobs at the helm, Apple has completely revolutionized every facet of technology. Jobs was a visionary to say the least and his business savvy was something you don't see even in the best of Fortune 500 companies. One of the biggest things that fueled Apple's growth was its unbelievable level of corporate secrecy about upcoming products. In fact, one of the reasons I don't see Facebook (NASDAQ:FB) becoming the next tech high flyer is because they simply can't replicate Apple's secrecy. That said, I think we're nearing the end of Apple's astronomical growth cycle and here's why.

    For one thing, iPhones have saturated the market to their upper limits, in my opinion. The only way to continue making money from them is with newer versions. This has worked so far, but how long will it continue? The differences between the newer generations of the iPhone are getting smaller and smaller. Things such as a higher resolution screen are sold to consumers as major upgrades, when in fact, improvements over time are an industry standard.

    Apple has had an advantage to Google's (NASDAQ:GOOG) Android thus far in that they had to develop iOS for one type of phone with very specific hardware. This allows them to optimize it to work smoothly without beefing up the power of the hardware. Android, on the other hand, is developed to work on a million different devices, each with their own hardware capabilities and limitations. This leads to a less smooth experience and longer timeframes for software updates (since phonemakers have to wait for Google to release the update and then modify it to work properly on their devices).

    Now, with Android taking up over 50% of the smartphone market, Apple's advantage is dissolving before our eyes. Hardware makers like HTC are rolling out software updates faster and faster as more and more Android devices become available and they're getting much smoother. Finally, Android provides one key advantage that Apple is missing out on: choice. With Android, consumers have the liberty of choosing a handset starting as low as $49.

    The iPad is more of the same story. It's the bestselling tablet in the world because it's very smooth and user-friendly, but how long before Android tablets catch up? It's going to get difficult to compete in a landscape where tablets like Asus's Transformer series will likely start to gain traction because of their versatility. What's more, Apple has provided consumers with the perfect time to switch to Android if it decides to change the dock connector for upcoming products. Consumers that may have held back making the switch because of the slew of Apple compatible products they own will have no reason to stick around anymore.

    We also have the rumored 7 inch tablet. This sounds like a company reaching for one last breath before finally giving out. I may be burned at the stake for saying this but it seems as though the creative juices are finally running out at Apple. The 7 inch tablet is the middle ground between the iPhone and the iPad. Those who already have the iPhone AND the iPad are unlikely to go out and get a 7 inch tablet because there simply is not any good reason to do so. The only thing that I can see happening is the 7 inch tab cutting into sales of the iPad and iPhone. This is not going to help the company grow.

    Unless Apple comes up with something drastically different in its upcoming models of iPads and iPhones, it's likely that consumers will start to get bored and move to Android. If you have friends that have made the switch already, you know what I'm talking about. Android allows users much more freedom over the device they spent hundreds of dollars on.

    I don't see Apple's price crossing above $750. In fact, I doubt it willreach $750. I would not be surprised at all to start seeing the price decline gradually as Apple loses ground to Android. The decline may be delayed with the release of iPhone 5 and a 7 inch tablet but that's a temporary fix. With RIM's (RIMM) BlackBerry 10 OS set to debut in January of 2013 competition over the smartphone/tablet market is only heating up. Apple did well in an environment devoid of any other device of similar capacity and had a great run. Now that they have laid the groundwork for the other guys, they're not keeping up with the times. While Android is becoming more powerful and less restrictive, Apple is sticking to its guns with complete control over its app market and mandatory software updates.

    Feel free to add your two cents in the comments or strike up a conversation with me about Apple , Google , RIM or anything investing related on twitter!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: AAPL, GOOG, BBRY
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Comments (7)
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  • pocohonta
    , contributor
    Comments (662) | Send Message
    The near term constraint for Apple is to secure enough suppliers because the demand for new Apple products will far exceed its supplies in September. The 7" iPad won't arrive in time for back-to-school season but the iPhone 5 will. The target market for 7" iPad should be for the education sector to replace textbooks and for younger demographics with budget constraints. Watch out for the Apple TV (not the rumored iTV but perhaps the next upgrade to the $99 device) to be the next big thing. And don't forget the "iPatents."
    14 Aug 2012, 02:39 PM Reply Like
  • Vash Patel
    , contributor
    Comments (139) | Send Message
    Author’s reply » I hadn't considered the possibility of the iPad mini being marketed towards education. Still, school boards are already jumping on the iPad bandwagon and what Apple would be doing is giving them a cheaper option which means less revenue.


    Patents will expire eventually and if the creative teams can't keep coming up with more good stuff that won't be a reliable source of income.
    15 Aug 2012, 01:10 AM Reply Like
  • Russell Gold
    , contributor
    Comments (244) | Send Message
    "For one thing, iPhones have saturated the market to their upper limits, in my opinion. The only way to continue making money from them is with newer versions. This has worked so far, but how long will it continue?"
    Apple hasn't even come close to taping the emerging market. China/Russia/Brazil/India I say they can increase iPhone sells 10 fold over the next 3 to 4 years. Cheaper iPhones will flood the emerging markets, while the more expensive iPhones 6 7 8 9 and so on we still be in a 400 to 800 price range.


    The whole cycle starts again with the iPad mini.


    The question is what's the iProduct?
    Apple cloud 29.95 a year, might pick some subs. Internet providers are cutting down on monthly MB usage. Cloud makes for a great place to store all your information/movies/music and everything else.


    Conclusion.... Apple has a long way to go before we can start cutting them down.
    15 Aug 2012, 12:51 AM Reply Like
  • Vash Patel
    , contributor
    Comments (139) | Send Message
    Author’s reply » I don't believe iPhones will gain traction in emerging markets. Based on my experience (primarily in India), the average consumer is much more tech savvy than your average American. Androids provide more bang for their buck. You can make an Android run like an iPhone but not vice versa.


    If you own an iPad and an iPhone, there's no reason to get an iPad mini. The only people they cater to is those who want an iPad but can't quite afford it. That may fuel sales for a while but as I said before, it won't be able to compete with the more versatile Android in the long run.


    Apple cloud would be a great revenue source if they were the only cloud service around. To be honest, cloud computing hasn't even gotten off the ground yet and the competition is already fierce. Apple has an advantage right now with so many devices in the market and the fact that their cloud is up and running, but Android will allow users to plug into multiple cloud services (which gives consumers more options, as I stated in the article) which I don't foresee Apple allowing.


    Apple thrived this long on exclusivity and that advantage is all but disappearing.
    15 Aug 2012, 01:04 AM Reply Like
  • Russell Gold
    , contributor
    Comments (244) | Send Message
    Hey Vash


    ...."on my experience (primarily in India), the average consumer is much more tech savvy than your average American...."


    ~ Not even going to touch on that statement. I've seen the photos of tens of thousands individuals standing outside to be the first iPhone purchaser. Brazil is the same. I suspect you are correct about India.


    As far the iPad mini, it's the price that matters. It is rumored the price for the mini is $249. That's going to compete with the Kindle and the Nook this Christmas.. The Mini is going to do very well in the US and around the world.


    You are right about the Cloud... still uncertain who will take this market.


    "Apple thrived this long on exclusivity and that advantage is all but disappearing."
    It just depends Vash. If you like Apple's operating system, you'll use Apple products. If you think the Android is for geeks, you'll use the iPhone. That's the way I see it. Not just a fad, it's about being the most popular. Apple is hands down the most popular gadget maker in the world.
    15 Aug 2012, 01:14 PM Reply Like
  • camus111
    , contributor
    Comments (47) | Send Message
    absolutely worthless article. aren't you late for class? your nose needs wiping--at least.....
    note: my original comment was first published and then mysteriously removed
    15 Aug 2012, 03:54 PM Reply Like
  • Vash Patel
    , contributor
    Comments (139) | Send Message
    Author’s reply » I didn't remove it but maybe it's because it contained absolutely no real content like your second comment.
    15 Aug 2012, 05:10 PM Reply Like
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