In spite of having a number of solid growth prospects, the share price of Apple Inc. (NASDAQ:AAPL) keeps going south, as more and more analysts are issuing bearish views and weak outlooks. With so much negative sentiment, it might be worth taking a look at some headwinds that Apple faces in the near-term, and possible remedies.
1. Competitive Pressures Are Surging
Samsung’s dominance and rapid growth in the global smartphone marketplace is a major concern for Apple. Samsung is launching newer tablets, which ramps up the competition even more in an already crowded space. According to comScore, Google’s Android OS, which is used by multiple hardware manufacturers and Apple Inc. (NASDAQ:AAPL)’s iOS are dominating the U.S. smartphone space with roughly 90% of the market. This market share dominance gets stronger with the two platforms’ well developed ecosystems, making it difficult for other competing platforms to narrow the gap.
Apple makes consumers sticky with a huge content ecosystem from iTunes. Users have thousands of books, movies and songs in iTunes, which makes them reluctant to move. However, with increased competition especially from Samsung, Nokia Corporation (ADR) (NYSE:NOK) and Research In Motion Ltd (NASDAQ:BBRY) around the world, this market share dominance can diminish over time. Competition from other software and hardware firms is only going to accelerate.
Research In Motion Ltd (NASDAQ:BBRY)’s newly launched BB10, along with newer and fresher devices and much more enhanced app ecosystem, makes it a stronger force. BlackBerry now has in excess of 100,000 apps, and sold more than 1 million Z10 devices. And its Q10 device, which is the Qwerty-keypad version, should gain more traction among Blackberry enthusiasts, as well as enterprise customers.
2. Product Cycle Risk
The recent product cycle of Apple Inc. (NASDAQ:AAPL) has failed to deliver the growth and market share, as investor expectations from the company was very high. From a purely product life-cycle standpoint, compressed margins, increased competition, and lower market share are characteristics of a company which has entered the maturity phase in the product life-cycle. And Apple fits the bill for all of the above mentioned characteristics and needs to ramp up its innovation and introduce newer and differentiated products rapidly to gain more market share.
While the likelihood of the company striking up newer carrier partnerships definitely exist. Apple Inc. (NASDAQ:AAPL)’s ability to get newer carriers to adopt its products is vital for the company’s growth. The market for most of its iPhone and iPad product lines has already been heavily tapped by the company in most developed markets, the company’s ability to win over customers in key emerging markets will be crucial. The slower pace of carrier additions will increase investor skepticism.
3. Secular Decline of PCs
The sales of PCs are going through a secular decline, as consumers increasingly access the internet through a number of alternate devices including smartphones, tablets and even through e-Readers. And Apple’s sales from the Mac line is going down as well, as consumers increasingly prefer iPads as an alternative.
In the most recent quarter, the number of Mac units sold declined 22% compared to Q1 FÝ 2012, a trend that is most likely to continue. Apple Inc. (NASDAQ:AAPL) is not the only PC maker getting hurt, other PC manufacturers like HP and Dell are also feeling the heat.