Even after its substantial share buyback program and dividends, the company is still a cash rich company. However, considering that technology industry is relatively less capital intensive as some other industries investors may ponder if Apple is using its cash resources optimally.
Investors must keep in mind
Google Inc (NASDAQ:GOOG)’s Android directly competes with Apple’s iOS. The company continues to invest in four major areas: Core ads, YouTube, Android and Chrome.
Google Inc (NASDAQ:GOOG) recently unveiled a $35 device, Chromecast, in order to offer Web content for TV screens, which is also compatible with mobile devices running on Google’s Android platform as well as Apple’s iPhones and iPads. Chromecast’s price positioning is lower than Apple TV (priced at $99). I believe the technology is fairly similar in both products; however, Apple TV justifies its cost by offering more features.
Google also released a new version of its Nexus 7 tablet computer, as the company looks to increase Android’s market share and gain a healthy lead over Apple’s iPad. During the last few years, Android has posed tough competition to Apple’s iPhone, as the operating system held a 69% market share during 2012 compared to 19% for iPhone. For tablets, Apple’s market share has hovered at around 39% compared to 79% during 2010, while Android’s share has escalated rapidly to 59% during 2012 from 20% in 2010.
Similarly, Samsung Electronics Co., Ltd. (KRX:005930)’s IT & Mobile communication business is also posing a serious threat to Apple’s iPhone, as it occupied 30.4% market share with a sale of 213 million units during 2012. Samsung’s mobile phones and tablets, running on the Android platform, offers similar apps and other features as Apple’s iPhone; however, it is positioned at a much cheaper price.
This has facilitated it to corner a significant market share in developing markets such as India and China. It becomes essential for Apple to innovate and come out with slightly cheaper offerings of its iPhone in order to offer a tougher competition to Samsung in such markets.
I believe, innovation, whether in the form of in-house R&D or through acquisitions of companies that design innovative products, will be the key to Apple’s success in the future. Long term investors should still hold on to this stock, as the launch of iWatch and Apple TV is expected soon.
The article How Is Apple Positioned in This Tech War? originally appeared on Fool.com and is written by Kiran Gulati.
Kiran Gulati and Equity Dimensions has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Kiran 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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