Your phone acts as a GPS navigation system, a streaming music player, a reader, a browser, an alarm clock, stop watch, etc etc. In careful examination of the Samsung S3 to S4 — the latest evolution on the market — the changes are much more incremental than they were in the past. The ability of the phone to read where you are looking, for example — a function always on, draining your battery — does little to improve the user experience.
I’m not saying phones won’t improve. I’m saying we are reaching a plateau where change will be much slower, with the accompanying decreased consumer demand to upgrade. This affects not only Apple Inc. (NASDAQ:AAPL), but all smartphone makers. The challenge is, unlike Google Inc (NASDAQ:GOOG) and Microsoft, Apple derives the majority of its profits from the iPhone.
Gaping Holes?
The iPhone and iPad filled holes for consumers. Of course, the smartphone was already in existence with Research In Motion Ltd (NASDAQ:BBRY), it’s just that Apple did it much, much, much better and developed the App ecosystem enabling developers to increase the iPhone ‘s capabilities, and thus its appeal.
Bill Gates envisioned the tablet long before Apple brought it to market, but Apple was the first make the tablet a user experience to remember, while everyone else was caught sitting on their hands.
The question is, where are the holes in the market today that one derives outlandish profits from? Wearable technology/computers? Possibly. And yes, there is the TV. The difference between now and 2007, is the likes of Google and Samsung, are not being caught unaware and are creating their own product. The longer that Apple Inc. (NASDAQ:AAPL) takes to release its own version of the product, the less chance of success it has.
Final Word
Apple appears cheap right now, with a P/E around 10. After you back out an estimated $145 a share in cash, it trades even lower. That said, Apple Inc. (NASDAQ:AAPL) needs to introduce a revolutionary new product to make up for iPhone profit center that is being chipped away at. Otherwise, Apple will experience quarters of negative growth, sending its stock price down further.
The article Why Apple Will Continue to Fall originally appeared on Fool.com and is written by Margie Nemcick-Cruz.
Margie Nemcick-Cruz owns shares of Apple, Microsoft Corporation (NASDAQ:MSFT), and Google Inc (NASDAQ:GOOG). The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL), Google, and Microsoft Corporation (NASDAQ:MSFT). Margie 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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