Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL) Could be the Next Big Tech Miss

So far, this earnings season has seen big misses from such tech giants as Google Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), eBay Inc (NASDAQ:EBAY) and Intel Corporation (NASDAQ:INTC). When Apple Inc. (NASDAQ:AAPL) reports next week, investors should be prepared for the Cupertino tech giant to continue the trend.

Apple Inc. (NASDAQ:AAPL), for all intents and purposes, remains a company largely dependent on one product: the iPhone. In just the last few months, there’s been a wave of evidence suggesting that demand for smartphones in general has cooled significantly.

That’s not likely to result in a great quarter for Apple, especially given that its flagship phone is a generation behind its competitors.

Apple’s dependence on the iPhone

Don’t be fooled. When it comes to Apple, there’s really only one product that matters. Sure, the iPad accounts for a large and growing portion of the company’s revenue and profit, but the iPhone is still king of the company.

Last quarter, the iPhone accounted for half of Apple Inc. (NASDAQ:AAPL)’s revenue. Factoring in iTunes’ sales, which accounted for about 10%, it’s even bigger than that. Even more impressive, the iPhone generates about two-thirds of Apple’s profit.

Of course, that profit figure was based on estimates from last year. Given the ongoing trends in the smartphone market, the ratio could soon change.

The smartphone market is saturated

But that change won’t be good for Apple Inc. (NASDAQ:AAPL)’s shareholders. While the company’s long-term future may rest with the iPad, that’ll be because the market for iPhones has shrunk.

Based on recent events, it’s clear that the market for smartphones (at least in the US) is largely saturated. At this point, it may be reasonable to assume that everyone who could afford and desire an iPhone, already has one, and while consumers will upgrade to the newer model every few years, the growth in iPhone sales seen over the last few years won’t be repeated.

So far, 2013 has seen the release of four flagship smartphones: Samsung’s Galaxy S4, HTC’s One, Sony Corporation (ADR) (NYSE:SNE)’s Xperia Z and Research In Motion Ltd (NASDAQ:BBRY)’s Z10.

With the exception of Sony Corporation (ADR) (NYSE:SNE)’s offering (which was only recently brought to the US), all the other phones have seen a very tepid reception. Samsung’s Galaxy S4 had a strong launch, but demand rapidly tapered off, and Samsung shares plummeted after the company reported disappointing earnings last month. Like Apple, Samsung remains largely dependent on its Galaxy handsets for a big chunk of its profit.

For HTC, the story was nearly identical — a strong launch, but not enough to make for a good quarter.

Research In Motion Ltd (NASDAQ:BBRY) shares were eviscerated when the company announced that it had shipped less than 3 million BB10 devices last quarter, leading some (such as myself) to question BB10’s future as a viable mobile operating system.

But what’s even more notable about these devices is that they are all a generation ahead of Apple Inc. (NASDAQ:AAPL)’s iPhone 5. Granted, specs aren’t going to sway an Apple devotee into switching operating systems, but all the aforementioned phones boast sharper screens, faster processors and better cameras than the iPhone 5.

Consumers aren’t upgrading

AT&T Inc. (NYSE:T) and T MOBILE US INC (NYSE:TMUS) have announced new plans to allow subscribers to upgrade their phones more often. Too bad no one wants to upgrade anymore.

The Wall Street Journal reported on Wednesday that fewer people are upgrading their smartphones. Last year, the US upgrade rate turned negative.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.