(Image Source: Cult of Mac)
In my previous post, I've shared my opinions on why Apple's share price has dropped dramatically from its peak. Just on this Thursday, Apple released its second quarterly result in its fiscal year 2013. Within the after-hour, the share price slashed a massive 10% to below 500, though Apple stated that it is a record in revenue and sales of its iPhones. Such a contrast is due to the fear that Apple is slowing in the growth and the numbers didn’t hit the market expectation.
Analysts are commenting that Apple should tap the lower end market by introducing a cheaper iPhone. As high-end smart phone market is saturated, eurozone is still suffering from the financial crisis, and emerging markets’ potential is huge, this argument seems valid if Apple wants to sustain the hyper-growing trend.
In my opinion, this simply does not work.
As Tim Cook said in the media conference, Apple is “not interested in revenue for revenue’s sake”. Since many years ago, the company’s strategy has been delivering the best product to its users and it still is. A cheaper iPhone would definitely be compromised in some way, be it processor, screen or whatever. In short term, it might increase the market share and make the numbers look good. But it is definitely not aligned with company’s long term vision.
Moreover, Apple is a company more than selling hardware products. Its iTunes music store and App Store have generated considerable revenue as well. Apple gets more profit when an iPhone user purchases music or apps through its online store. However, a cheaper iPhone targets consumers who are more cost sensitive and they are less likely to spend extra money on the apps and entertainment. In fact, in emerging markets like China, many iPhone users do not even have an Apple ID to download. They are buying an iPhone just for the brand, a premium one. Therefore, the increase in the digital content sales would actually be very marginal even if a cheaper iPhone is introduced.
Lastly, to keep the momentum of growth going, Apple may still have to resort to its source of magic, innovation. iPod, iPhone and iPad, all are the revolutionary at its time and they create the demand rather than seek it. As iPhone’s demand is ebbing, maybe it’s time for Apple to surprise the world with another revolutionary product. There is already some rumour circulating saying that Apple may reinvent Television. And that is something we all are looking forward to.
It may be right to say it has come to an end of Apple’s fast rising era but it still has a bright long-term prospect with stable revenue and product of superior quality. Tapping low-end market may seem reasonable and practical to a common technology firm, but it is not the solution for companies like Apple. After all, innovation is the ultimate driving force for the business.
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