Is iPhone the Next BlackBerry?

Oh, the silly things I worry about sometimes.

Apple (Nasdaq: AAPL  ) just launched the iPhone 5. The handset isn't all that different from last year's iPhone 4S, but it's not just a handful of new software features wrapped around a faster processor, either. The screen is bigger and supposedly more colorful, this is the first iPhone to connect to high-speed 4G LTE networks, and Cupertino even put some effort into improving call quality.

So yeah, this is without a doubt the best phone that Apple ever produced, and it surely deserves breaking sales records. Early reports say that Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) exhausted their pre-order reserves in a matter of hours, so trying to order one right now is kind of like craving Springsteen tickets in Sweden. (The Boss always sold out every show before I could get my hands on a ticket.)

So what's wrong, then?
Sales reports show that iPhone and Android handsets own a combined 86% market share in America nowadays. Both platforms are growing, and they steal customers from Nokia (NYSE: NOK  ) and Research In Motion (Nasdaq: RIMM  ) all the time.

RIM's BlackBerry phones were leaders in the early days of mobile computing, facing off against now-defunct rivals such as Palm and the immature Windows CE 6.5. Life was good for a while; at one time, RIM owned the largest market cap on the Canadian stock exchange. That peak reminds me of Apple's current status as the biggest equity in the world.

And the bigger they are, the harder they fall. BlackBerry missed a turn or two, started losing market share to Apple and Android, and is now fighting for its life. Shareholders who bought in at the top have lost about 95% of their investment.

History does not repeat itself, but it does rhyme
That former giant was not immune to changing consumer preferences and made things worse by not adjusting to the new demands quickly enough. Apple may be walking down the same well-trodden path toward utter disaster.

I mean, it's been two years since Apple introduced the basic design that's still in use with the iPhone 5. Come next summer, that look and feel will have three years of beard hanging from its chin. The iOS software is much the same as it was in the very first iPhone, five years ago. A light dusting of new features doesn't outshine the lack of innovation.

How long can Apple keep singing the same old song at a slightly different pitch, before a rival stumbles over a new, fresh, and seriously exciting killer feature?

When that happens, I wouldn't be surprised to see Cupertino resting on its considerable laurels until it's far too late.

Too big to fail?
Oh, the stock isn't going to zero, unlike some other smartphone players I could mention -- Apple's bank account is flush enough to keep the company alive for decades even if the business model falls apart. But Apple could very easily become just another also-ran in a very crowded field.

Nowadays, RIM hangs its shrinking hat on two hopes: that the upcoming BlackBerry 10 software will save its bacon, and that low-cost, low-margin BlackBerrys can keep the party going in emerging markets as smartphones replace basic feature phones. A radical redesign could make a difference, but Nokia already showed us what happens to those who depend on high growth in profit-free markets. It's not a pretty picture.

So when Apple hits a glass ceiling in high-end markets like North America and Europe, I wouldn't put much hope in having lower-end markets save the day. Apple was never built to work that way.

Enjoy the iPhone 5 sales bonanza, Cupertino. I'm afraid it'll be your last hurrah in the smartphone market. Can the iPad make up the difference when the iPhone becomes old hat? Don't bet your house on it.

Take action, dear Fool
These are just some of the reasons I have a thumbs-down CAPScall on Apple. In short, I don't see a company that was built to last.

I'm admittedly kind of alone in Fooldom here: Apple is an active recommendation of five different investment Foolish services. But I don't write these articles to get invited to parties. It's not healthy to ignore warning signs just because everyone else is bullish. Raise a glass to the "motley" side of Fooldom.

If you want to see Apple drawn in a much brighter light, you should grab our premium research report on the company. In it, you'll find a much more bullish view of Cupertino. The report has already sprouted a deeper dive into the iPhone 5, and comes with a full year of timely updates to boot. Go ahead and consider the opposite view -- you won't hurt my feelings one bit.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (17) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 17, 2012, at 8:28 PM, goldster wrote:

    What ALL the articles fail to mention is that NOKIA receives $10-$15 in royalties for every i-Phone sold.

    That is an enormous amount of revenue....for doing nothing!

  • Report this Comment On September 17, 2012, at 8:51 PM, CaliforniaPool wrote:

    I own and HTC. My previous phone was iPhone 3. There are so many problems w/Android HTC. The touch screen is not as responsive as iPhone. This is not about an being a fan or not. A thin glass and being thinner -- happens to be a "feature." None of the other devices incorporate that into their design. Software/hardware is seamless on iPhone -- even my old iPhone 3 is smoother than HTC. This is coming from someone that's used iPhone and HTC -- each for 2.5 years. And I'd rather have a phone that's intuitive than one that's going to "program me". A taller phone means they are doing something somewhere else. They aren't copying samsung on that. Their glass screen alone is where they've put their technology development. And they made it thinner w/better display. Remember the old computers -- the DOS computer monitors w/ black w/green text? Now imagine looking at your computer w/all the colors and vibrancy. Would you even imagine going back to a black w/green monitor? These are technological advances that are features.

  • Report this Comment On September 17, 2012, at 8:51 PM, Genathan wrote:

    Interesting set of observations, but one can't help feel a slight touch of wishful schadenfreude from Scandinavian also-rans.

    I would agree that Apple has lost some market share relative to Android and there will undoubtedly be a new "next big thing" in the not too distant future. But as it stands, there are three basic needs for the smart phone business: good battery life, decent and reasonably priced phone coverage, and speed for all web-based applications.

    In all these things, both Apple and its chief competitors are marching forward. Apple itself is not all that innovative--indeed, less so than Google. But what they still do better than anyone else is turning other people's innovations (and occasionally their own) into superior consumer products.

    Food for thought as we march into the third decade of mobile phone use.

  • Report this Comment On September 17, 2012, at 8:55 PM, DefunctAcct wrote:

    Strange article. It fails in two critical areas. First, there is a lack of accurate historical references. Second, there is a false assumption of what is and what is to come. Investment requires hard data, not emotions and wild guesses.

    RIM?

    1. Did not change BB hardware or software meaningfully until 2011;

    2. Rejected touch interface;

    3. BOS, as it is/was, limited RIM's ability to adapt;

    4. Purchase of new OS in early 2010 took longer than expected to integrate;

    5. CEOs came out against Apps, calling them passé;

    6. Distracted by Playbook effort which ended up a flop.

    To this day, RIM has nothing that can match iOS or Android. For these reasons, RIM is where it is.

    Where, precisely, is Apple even similar to RIM? How are they comparable? Please explain and provide some facts.

    Looking forward:

    (A) Article proclaims lack of "innovation". Questions:

    1. Is Apple not working on iOS anymore?

    2. Is iPhone physically not improving?

    3. Is the iOS ecosystem not improving? Same as 2011? 2010? 2007?

    (B) Two Years Since Basic Design

    1. What is the definition of Basic, in this case?

    2. What is non-Basic design?

    (C) iOS is the same as the first iPhone, "light dusting" won't work.

    1. What are these "light dusting"? Care to enumerate?

    2. So iOS has NOT CHANGED AT ALL since 2007? Much the same?

    If you are a real investors and you area reading this article and make it to this part of my comment, then I ask that you perform your own research for the honest facts and the hard data and make up your mind.

    I do not wish to provide any answers to my questions. I also do not want to provide any content-filled rebuttals because it would just make the author of this article ever more lazy. Why should we (you and I) do his research for him? He does not pay us for our analysis, does he? :-)

    Cheers!

  • Report this Comment On September 17, 2012, at 8:59 PM, dmvcal wrote:

    Hmmmnnn. That AAPL does stumble around. Their time is waning. Started to buy AAPL @ 17. Still buying it. Why? Because they need my compassionate support. Unlike creative power houses like Nokia, Windows mobile, Samsung, Rim. Thanks for the valuable input.

  • Report this Comment On September 17, 2012, at 9:03 PM, DefunctAcct wrote:

    It is interesting that many keep repeating the line that Apple does not innovate and that it simply takes other people's work and make them better.

    Worse yet, they keep saying Google innovate.

    Hmmm..., so Google bought Android, "borrow" Apple's touch interface idea and shipped Android. That is innovation! Yep!

    Apple create Mac OS/X itself, and iOS from that. Apple created the current generation of cell phones that use touch interface and the ease of use flows. That is not innovation! Mm.. Mm.. NO! Interesting.

    Android just went through a long legal struggle with Oracle for lifting Java code wholesale. There was even internal email amongst executives who anticipated legal actions. That is innovation! Yep!

    Apple created the AppStore, created the first 10-year-old friendly cell SDK, but that is definitely NOT innovation, nope!

    Apple's Mac OS/X finally caught on and forced Microsoft to finally do some hard work to revamp the Windows VISTA to be Windows 7 and beyond. No, no, that is NOT innovation.

    All my years of working in the valley, since the days of Amdahl and Rolm, I have seen my share of copier and innovator. This new generation of late-coming self-proclaimed "tech analysts" is really confused.

  • Report this Comment On September 17, 2012, at 9:11 PM, JHawkinTexas wrote:

    I don't need to BBQ the author for such an absurd article. I'll leave that to the capable hands of other fanboy bloggers.

    No, my question has to do with the number of negative leaning articles sponsored by Motley Fool on Apple over the past few weeks. It seems like they're being used as a mouthpiece for the hedge fund community who is too impatient for a correction in Apple to just let it happen.

    Prove me wrong. Publish a comprehensive list of Apple related articles on Motley Fool over the past 8 weeks along with a rating of positive or negative bias.

  • Report this Comment On September 17, 2012, at 10:02 PM, DefunctAcct wrote:

    "Fanboy"? Yet another very lazy poster who simply repeats what is popular or in vogue. Or may be he poster has reading comprehension problem or someone who completely misunderstood this Motley Fool article.

    For any investor to become a "fanboy" of a product is disastrous. For any such investors to further become a "fanboy" of a corporation guarantees investment failures.

    Risk assessment must be a constant exercise for any responsible investor and that assessment requires truth, facts and hard data.

    Why move a chunk of money out of a profitable investment, as this author suggests, based on emotion, lies, half-truths and false claims? Nor do I want to invest in a company without any clear understanding of its product strategy, management capabilities and that company's whole sector.

    The author of this article is openly calling on readers to "act"; based on his horribly deficient analysis. This is at best naive and ignorant but at worst, irresponsible and unethical.

    For this reason, this is my last straw putting up with Motley Fools :-) and its contributors. They have been incompetent before, but this crosses an ethical line; personal opinion or not.

    Cao!

  • Report this Comment On September 17, 2012, at 11:02 PM, dgresl00 wrote:

    Anders - The primary error in your analysis is that Blackberrys were purchased at their height because the IT Enterprise guys as most corporations said "If you want to get your work e-mail, you have to buy a Blackberry". Consumers purchase IPhones because they want to and because they are part of their Apple ecosystem with the IMac, IPad, IPod, etc. Apple has you locked up with the ITunes Library, the ICloud and because their products work seemlessly and simply without needing to be a techy. They are now starting to infiltrate the Enterprise world with the IPad and a soon to be released IMac. The growth has just begun on that front. Please, sell it short and watch the rest of us make money.

  • Report this Comment On September 17, 2012, at 11:02 PM, ramaus wrote:

    Note: Apple & Microsoft pay net royalties to Nokia.

    I'm betting NOK is more likely to move from $3 to $4 than AAPL from $700 to $933 in the next few months. (same % increase)

  • Report this Comment On September 17, 2012, at 11:57 PM, Fruitfan wrote:

    Ramaus you are missing one very glaring fact about NOK vs AAPL.

    Apple is at it's all time high and going higher..Nokia is trading at over a 50% discount from its 52 week high and way off it's all time high..so I would hope that they can eek out 4 bucks a share before Apple breaks 900.00. So far the windows phone is just not getting the attention they hoped. Apple has one thing that Android, blackberry and windows all would kill for..the most addictive, highest walled garden of an ecosystem any company has ever had in any industry. Once you get sucked into the Apple ecosystem good luck getting out

  • Report this Comment On September 18, 2012, at 12:01 AM, Fruitfan wrote:

    I find the Apple jealousy on here so amusing. Apple will fail in 2013? Apple uses false sales numbers? Actually Apple is the only one to report sales instead of shipped units. Samsung to take over in 2013? They better sell a lot of phones since they currently owe Apple over a billion dollars for stealing there patents

  • Report this Comment On September 18, 2012, at 4:52 AM, koril wrote:

    OMG guys !!!

    i love you all AAPL fans.. and yup its true apple is a must buy, but do not trust me 100% yet :D

    Try and amaze yourself with the gadgets and stocks

    My only regrets are that some of you bought the stocks later than i do :)

    peace.. hopefully AAPL reach $800 soon

  • Report this Comment On September 18, 2012, at 5:12 AM, nessrapp wrote:

    I totally agree with you 100% so you're not alone.

    The truth is everything that goes up must come down. MSFT had its high days, so did NOK, and RIMM.

    A lot of people are still on the bandwagon, but asuredly the music will stop, and the shares will start to reverse, thats when i'll jump in and short the stock.

    Until then, i'll wait patiently.. the release of iPhone 5 showed that the magic is lost, no innovation but living on past glory.

    When everyone catches onto this, and a new handset has cooler features, it will be the beginning of AAPL's decline

  • Report this Comment On September 18, 2012, at 6:50 AM, Sant1ag0 wrote:

    @ nessrapp

    "When everyone catches onto this, and a new handset has cooler features, it will be the beginning of AAPL's decline"

    The time has come, its called the new and revolutionary Nokia Lumia 920! This phone will start the turn around for Nokia in the smartphone market. Its more advanced in every technological category than the iPhone 5. Just the display alone is innovative compared to whats out there now. The Puremotion HD+ display is a 1280x720 (332 PPI) with the fastest and brightest screen in the world and can be used with gloves on or even navigated with fingernails (ladies). I saw a demo someone was using a car key to work the display and it didn't miss a beat. The Lumia 920 is the only and first smartphone to ever use OIS (optical image stabilization) in its camera along with Pureview technology Nokia can claim best camera in any smartphone to date. I give credit where its due and Nokia is doing all the right things.

  • Report this Comment On September 18, 2012, at 7:41 AM, SonofCaan wrote:

    @Sant1ag0,

    Busy, busy, busy. Keep spreading the good news. No one besides Nokia engineers have actually used the Lumia 920, so all you have is a sales pitch.

    Nokia baked too much into the Lumia 920 because it now represents the heaviest smartphone on the market. At 185g, it anchors the bookend of the weight spectrum. Even the Smasung Note 2 is lighter and it has a monster screen.

    iPhone 5 is 112g, or 60% of Lumia's weight.

    Comparing other specs, iPhone 5 may not win on paper in a geek-off, but the relative difference of specs is not going to impact most consumers' decision matrix.

    You'll never convert an iPhone user to Nokia with "but ours has PureView, OIS and is ,7MP larger resolution." iPhone 4S users love their iSight cameras and besides, if absolute quality was everything then why are so many users content on using reduced quality through apps like Instagram?

    Nokia is toast. Brown bread. Dead.

  • Report this Comment On September 18, 2012, at 12:21 PM, Fruitfan wrote:

    Rimm trolls are just sad investors hoping their junk stock will someday rebound. Sorry but Rimm is dead and never coming back. In the world of consumer electronics once you lose the "cool" factor it is almost impossible to get it back. Rimm people will point to Apple and say they were dead in the 90's and now are the biggest company ever but even with one foot in the tech grave Apple was still "cool" just not compatible in the windows world.

    Rimm is like AOL, Betamax, 8-Tracks, Walkmans and so on...dead money

    Happy to say long AAPL from 73, 134, 209, 276 & 347 .....go apple go ..

    Thanks to Steve Jobs I will be able to retire at 50 in 4 yrs

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