A Cautionary Tale for Apple Inc. (AAPL) Investors

Page 1 of 2

There’s a company that defined the future for a generation. It pioneered new innovations in a range of technologies, and its brilliant co-founder forged a brand admired around the world. But without that leader, the company has struggled and ceded its leadership to upstart competitors.

If you think I’m talking about Apple Inc. (NASDAQ:AAPL) and Steve Jobs, I’m not.

Apple Inc. (NASDAQ:AAPL)The company I’m describing is Sony Corporation (ADR) (NYSE:SNE) , which redefined and reinvented the electronics industry for 30 years. Beginning with the transistor radio in the ’50s, Sony pioneered dozens of innovations in the ’60s, ’70s, and ’80s that pushed technology forward and changed the way we were entertained. Led by visionary co-founder Akio Morita, the company invented or popularized ubiquitous standards such as the Walkman, the compact disc, the 3.5-inch floppy disc, and the camcorder. Sony ensured its own profits and success by producing high-quality products that commanded higher prices than the competition, much like the iPhone-maker that would follow in its footsteps.

Like Steve Jobs, Morita knew how to create a brand identity and had a knack for marketing and recruiting talent. On a trip to the U.S. in the ’50s, he noticed that American workers were much more mobile than their Japanese counterparts, and when he returned to Japan he began encouraging talented employees at other companies to join Sony. Like Apple Inc. (NASDAQ:AAPL), Sony was also known for developing its own in-house standards and technologies, and even its failures, such as the Betamax video system, were considered technically superior to rivals such as JVC’s VHS system.

After Morita left the company in 1989, Sony embarked on a string of acquisitions, including CBS Records and Columbia Pictures, and began to reinvent itself as a media conglomerate rather than a technology innovator.

But without Morita, Sony never recaptured the magic it had with its run of groundbreaking inventions and cultural touchstones such as the Walkman, and now it seems to be just one of a million electronics and media companies. Sony recently sold off its trademark U.S. headquarters in New York for $1.1 billion, and it’s looking to sell one of its Tokyo buildings for a similar amount. Nearly 25 years after Morita’s departure, Sony shares are worth nearly the same as their 1989 value today, while the S&P 500 has gained nearly 400%.

Is Apple Inc. (NASDAQ:AAPL) the next Sony?
No one knows what Apple’s future holds, but the hit parade over the past 10 years that’s included the iPod, iPhone, and iPad seems to be coming to a close. As we saw in its latest quarterly report, Apple Inc. (NASDAQ:AAPL)’s gross margins are shrinking and profits have stalled, evidence that their products no longer command the premium they once did. The halo is fading.

With new products that simply seem to be stripped-down iterations of old ones, such as the iPad Mini and an expected cheaper iPhone, the company seems to have to switched to a harvest strategy, trying to maximize the value of old products, instead of creating the kinds of products that consumers don’t know they want, as Steve Jobs famously said.

Rumors continue to swirl about an Apple TV, which was once thought to be coming in the fall of 2012, but talk of a smart TV continues to be just rumors for now. Though that market figures to be rich with potential for a company with Apple Inc. (NASDAQ:AAPL)’s brand loyalty and tech savvy, it’s up to the kids in Cupertino to make it happen.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!