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Here’s Why Sean Egan Thinks That Apple Inc. (AAPL)’s Foundation Has A Few Cracks

Apple Inc. (NASDAQ:AAPL) had a pretty decent year so far, despite the fact that its brand new Apple Watch isn’t as big as its other products like iPhones and iPads. Apple Inc. (NASDAQ:AAPL) stock had gained more than 15% in the year so far, most of which had come in the first couple of months, post which the stock had just hovered around the $130 per share mark. Despite Activist investor, Carl Icahn’s open letter to Apple Inc. (NASDAQ:AAPL)’s CEO Tim Cook that the stock is worth $240 per share at the moment and his push to do more stock buybacks to realize the true value of the stock, Apple Inc. (NASDAQ:AAPL)’s stock price has not gone up. Apple Inc. (NASDAQ:AAPL) is also expected to add some new dimensions like Home devices and new TV service during its WWDC event in June. Many were expecting Apple to add $4,000 TV hardware to its portfolio, but Apple announced about backing out of this market last week. Founder of Egan-Jones Rating Company, Sean Egan talked on CNBC about how Apple has done fantastically to be in such a position and why he thinks that the foundation of Apple’s business is starting to get some cracks at the moment.

Apple Inc. (NASDAQ:AAPL), Logo, Sign on a building, brand, company, architecture

Egan said that from his firm’s perspective, Apple has done a fantastic job so far in building the company to be such a huge power in the tech world. But he thinks that the foundation of Apple’s business has few cracks in it. He pointed out that they are no longer the leader in what initialized Apple’s domination in the tech world, iTunes. He also mentioned about expectations surrounding Apple’s new TV hardware for the last 3 years, but Apple’s announced about dropping the idea almost a week back. He said that Apple had to answer a lot of questions though he feels that the stock is going to do decently for the next 6 months.

In the past Apple was in similar situation and they managed to innovate their way around the situation and emerge victorious. But Egan pointed out that they are at a strategic dead end, which meant that they cannot get out of this situation through innovation. Do Egan think that Apple’s ability to innovate might fade away?

“Yes, infact there has been a number of cases that have preceded Apple, where they were absolutely dominant in the category and then they lost that dominance. You have had BlackBerry, the term used was CrackBerry. […] Apple isn’t a software company as it is a hardware company, because if you look at iTunes, that market space is now dominated by Pandora and Spotify and once you lose that dominance, its hard to get it back. Additionally, they face a threat from disruptors such as wifi delivered phones. Google may be entering that in a big way, in fact there is some announcements recently and you have to look at other similar firms looking at a much cheaper and easier ways to deliver phone service,” Egan said.

He feels that Apple’s dominance might not last longer as many are expecting it to.

Disclosure: None

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