Apple (NASDAQ: AAPL ) CEO Tim Cook was on Capitol Hill this week, answering questions about how his company has managed to -- legally -- avoid paying taxes on billions of dollars of profits worldwide. It seems like the company has been making headlines for all the wrong reasons lately, a big shift from the media darling Apple used to be.
The tax debate is important for Apple, especially when you consider that the company has about $100 billion in overseas cash. But the core challenge for investors isn't the tax debate, it's that Apple hasn't introduced new products and is allowing the competition to catch up.
It's been more than 200 days since Apple's last major product announcement. Since then, Apple's stock has dropped like a rock, which generated a lot of headlines, and now the media focus is on Apple tax strategies instead of its products. If investors are going to buy back into the Apple story, the company is going to have to turn this trend around and return the focus to products.
Falling behind in the TV market
This week, Microsoft (NASDAQ: MSFT ) introduced the Xbox One, a gaming console that has the ability to become the entertainment hub of the living room. Microsoft took many of the capabilities Apple offers with AirPlay and through SmartGlass expanded them to allow Windows Phone, Android, and even iOS devices to control the Xbox One. It's basically everything the Apple TV could be.
My concern is that Apple's long-rumored iTV will be so late to the market that Apple will miss out on a huge opportunity to define the living room and streaming markets before someone else does.
Losing the lead in smartphones
Since Apple introduced the iPhone 5, Google and Samsung have had over six months to develop the next level of competition in the smartphone market. The Galaxy S4 was recently named Consumer Reports' top-rated smartphone, more validation for competitors to the iPhone.
It's being reported that Samsung executives expect 10 million Galaxy S4s to be sold in the first month of availability, by far Samsung's best smartphone launch. Samsung may even come within shouting distance of the 27.4 million iPhone 5s Apple sold in the first quarter of availability.
Tablet pressure from all sides
The tablet space is probably most concerning for Apple right now. Market share in the first quarter dropped to 39.6% from 58.1% a year ago, according to IDC. Samsung's share increased from 11.3% to 17.9% and Microsoft went from off the map to 1.8%.
Apple's lack of new products has given smartphone makers, tablet makers, and even tablet-PC crossover devices time to develop without an Apple response. To change the narrative from disappointing earnings, competitors' new products, and now the tax debate, Apple needs to bring out some new products. Whether it's an iTV, an iWatch, or something else, the company needs to refresh its line for the sake of consumers and investors, who are afraid Apple is falling behind.
Apple can still come out on top
The good news for Apple investors is that the company is very quick at launching new products. The Xbox One stole the show this week, but an improved Apple TV or new iTV could still launch before the new console hits stores this fall. It's too late to be ahead of the curve, but Apple could still wow investors with new products this summer.
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.