Lack of innovation could lead to Apple's demise
By kateoflaherty, Apr 24 2013 11:05AM
When Apple revealed its first profit decline in a decade, the firm's share price had already plummeted. Investors are nervous, and it's no surprise.
Apple's closed strategy and lack of recent design innovation were sure to hit the firm eventually. With growing competition from Google and its open Android OS, Apple's bumper profits were always going to be difficult to maintain.
Apple's results beat analysts' expectations, at $9.5bn profit in the second quarter and $43.6bn in revenue. This compared to revenue of $39.2bn and net profit of $11.6bn in the same quarter a year ago.
But share price has halved since last September, when shares hit a high of $700, making Apple the most valuable company in the world. This compares to the period before yesterday's results, when shares plummeted to around $400.
Apple knows it needs to adjust. Yesterday, CEO Tim Cook announced the firm is adding $50bn to its share buyback programme and $8bn to its cash pile, bringing it to $145bn. He promised that despite shareholders' worries, "the most important aspect for Apple will be creating innovative products".
Rumours that Cook is to be replaced will be fuel to those who say the death of Apple's former CEO Steve Jobs was the catalyst for the firm's decline. Perhaps so, as Apple is guilty of a lack of innovation in recent times.
The iPhone 5 failed to replicate the popularity of its predecessors, with only minimal design changes and limited new features. At the same time, competitors such as Samsung have captured the interest of the consumer with alternatives such as the Android-powered Galaxy range.
It will also be interesting to see how things work out for Apple in the retail and operator space. The technology giant has always controlled these relationships - and the networks and retailers had no choice but to cooperate.
The mobile market is a rapidly evolving landscape, and demand for Apple products still remains alongside the late Steve Jobs' legacy. But Apple's walled strategy - led by Jobs - has played a part in its latest decline. Whether the firm now rises or falls will depend on its ability to adapt this strategy in the face of competition from rivals such as Google's Android.