These days, when I think of Apple Inc. (NASDAQ:AAPL), I no longer think of Steve Jobs and his effortless charm. I think of Tim Cook, clumsily replying to Kara Swisher at the D11 Conference by vaguely insinuating that Apple was more interested in smart watches and televisions than smart glasses. Cook’s unclear answers are representative of the once-great company as a whole – unfocused, unsure and reactionary. In contrast, Jobs’ Apple was laser-focused, confident, and proactive.
There is a lot of evidence suggesting that Cook doesn’t know where to go from here – Apple Inc. (NASDAQ:AAPL)’s stock buyback, dividend, and bond sale all indicate that the company could become a slow-growth tech stock like Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM). The iPad Mini and iOS 7 also suggested to investors that the road ahead would be reactionary, rather than revolutionary.
Therefore, if Apple Inc. (NASDAQ:AAPL) is no longer the “Apple” of the tech world, which company could fill its shoes? In my opinion, Sony Corporation (ADR) (NYSE:SNE) could step up to give both Apple and Samsung a run for their money over the next few years, based on some current business strategies that promote gutsy innovation over slavish imitation.
Investing in wearable tech
As Tim Cook continues pondering the possibility of a smartwatch, Sony Corporation (ADR) (NYSE:SNE) recently introduced the second version of its Android smartwatch, the SmartWatch 2, at Shanghai’s Mobile Asia Expo. The SmartWatch 2 is water-resistant, enabled with NFC (near-field communication) technology for electronic payments, it can display maps and it be used to remotely control smartphone cameras and presentations.
This is a big step up from Sony Corporation (ADR) (NYSE:SNE)’s original SmartWatch, which was released early last year as the successor to the Sony Ericsson LiveView watch. Both previous devices could interact with Android smartphones remotely, control music libraries and display incoming messages. However, none of Sony’s smart watches have made much of an impact in terms of overall revenue growth.
A growing market that Apple continues to neglect
Looking forward, market research firm ABI forecasts that 1.2 million smart watches, from Sony Corporation (ADR) (NYSE:SNE) and its smaller competitors, could be sold by the end of the year, generating $370 million in annual revenue. Even if Sony were to control the entire smart watch market, it would merely make up 0.5% of its annual revenue of $72 billion. However, by 2015, ABI estimates that global shipments could increase twenty-fold to 41 million units, which could make the smart watch market a much more lucrative one than it is today.
It’s absurd that Apple Inc. (NASDAQ:AAPL) has fallen this far behind Sony Corporation (ADR) (NYSE:SNE), since a smart watch was nearly created with the sixth-generation iPod Nano in September 2010. The Nano could be clipped onto a watch strap, and its appearance could be altered with a wide variety of digital faces. At the time, all Apple needed to do was upgrade the Nano’s software and add Bluetooth to create the iWatch. Instead, here were are, three years later, and Apple Inc. (NASDAQ:AAPL) is merely hinting at an iWatch to come later this year.
Could phablets and smart watches work together?
Another market Sony Corporation (ADR) (NYSE:SNE) has expanded into is the phablets category, currently dominated by Samsung’s Galaxy Note series, which accounted for roughly 75% of all phablet shipments last year. However, Sony completely blurs the line between phone and tablet with its new Xperia Z Ultra, which has a 6.4-inch screen that dwarfs the Galaxy Note II’s 5.55-inch display. Although the Ultra is smaller than Huawei’s recently introduced phablet, the 7-inch MediaPad 7 Vogue, Sony is seriously pushing the acceptable size limit of a smartphone.
Although the Ultra seems like a goofy attempt to capture some of the phablet market from Samsung, I believe that it could gain some serious ground when used in tandem with the SmartWatch 2 and a Bluetooth headset. Many consumers could stow the Ultra in a bag, while using the SmartWatch to check on basic information and tasks while using a Bluetooth headset to make calls or listen to music. To view movies, make video calls or games, the Ultra could be brought out and used like a normal tablet.
I suspect that Sony Corporation (ADR) (NYSE:SNE) will market these devices together, and consumers will realize that smart watches are not simply superfluous and redundant luxury items, but rather useful peripherals for inconveniently large (but desirable) phablets.
Again, Apple Inc. (NASDAQ:AAPL) hasn’t shown any interest in phablets yet, although several analysts have predictedthat the company could be forced to release one soon. As I mentioned in a previous article, this would be a dangerous move that could cannibalize sales of its iPhones and iPads, which comprise over three-fourths of its top line.
Is Sony poised to make a comeback?
As a company, Sony still has some major problems. In fiscal 2012, Sony’s troubled Home Entertainment & Sound segment reported a 22.5% decline in sales, as it continued ceding market share in LCD TVs to Samsung and LG Display Co Ltd. (ADR) (NYSE:LPL). Sales at its game division also dropped 12.2% as consumers awaited a new generation of consoles, led by its Playstation 4 and Microsoft Corporation (NASDAQ:MSFT)’s Xbox One.
However, sales at its mobile division rose 102%, thanks to the success of its Xperia smartphones and tablets. Its financial arm and movie studio segment also reported 15.6% and 11.4%. revenue growth, respectively, and were the company’s most profitable business segments.
In other words, Sony’s steady growth in smartphones, movies and financial operations could eventually offset its losses in televisions. The release of the PS4 could also reverse losses in its gaming segment, and sales of smart watches might eventually take off along with the increased adoption of phablets. If the PS4’s “second screen” features prove popular, gaming and mobile segments could also rise in tandem.
Is Sony the next Apple?
Investors should remember that Apple Inc. (NASDAQ:AAPL) remained stagnant for a long time before rising to its current valuations. I believe that Sony Corporation (ADR) (NYSE:SNE) could turn around soon, if sales of its mobile devices continues to soar. Currency impacts and a rapidly shifting marketplace could prove difficult for Sony to navigate, but at least it is trying very hard to stay on top of the game. I’m beginning to doubt that the same can be said about Apple.
The article Is Sony the Next Apple? originally appeared on Fool.com and is written by Leo Sun.
Leo Sun owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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