It's Not Just You, Apple

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It's easy to kick Apple (NASDAQ: AAPL  ) when it's down, but everybody else may be suffering a similar fate.

There's no denying that Apple has lost a few steps. Sales are slowing, and when the consumer tech giant reports quarterly results later this month, it may be the bellwether's first year-over-year decline in ages. The walk down to the bottom line is even more cruel. Margins have been contracting as customers flock to cheaper iPad Mini, iPhone 4, and iPhone 4S devices that don't carry the same kind of markups that Apple packs for its newer gadgetry.

However, it seems as if fears that Apple's iPhone is falling out of favor to rival platforms may be premature. They're all smarting these days. Let's go over some of the grim reports that have come out in recent days from the leading handset makers.

Q2 revenue and profit that missed analysts' expectations, following weeks of speculation of slower-than-expected sales of the company's flagship Galaxy S4 smartphone.

  • Shares of Android leader Samsung slipped in South Korea on Friday after preliminary quarterly results fell short of expectations. Samsung's new estimates are 3% below analyst estimates for revenue and 5% below the market's profit target.
  • HTC doesn't get a lot of attention, but it, too, is coming up short. The Taiwanese smartphone maker posted quarterly revenue on Friday that fell 1% shy of analyst forecasts.
  • A week earlier, BlackBerry (NASDAQ: BBRY  ) shares were crushed after posting a surprising loss. The real stinker in the report was that BlackBerry cleared just 2.7 million Z10 and Q10 smartphones. These were supposed to be the handsets running BlackBerry's updated mobile operating system that was supposed to herald the pioneer's return to relevance. It didn't.
  • Nokia (NYSE: NOK  ) has moved higher on buyout speculation and a shrewd acquisition, but its smartphone business remains a hot mess. Analysts see Nokia posting another deficit for the quarter that ended last week on a double-digit percentage dip in revenue.

Suddenly Apple doesn't look so ugly.

Microsoft (NASDAQ: MSFT  ) has poured billions into Nokia to get it to back its Windows Phone platform, yet Nokia's losing money and sales are sliding? Google's (NASDAQ: GOOGL  ) Android is the market leader, but in the span of a few hours between Thursday night and Friday morning we saw two of the biggest Android backers -- Samsung and HTC -- fall short of growth expectations.

The only constant in all this has been disappointment. Investors have been scrambling to find the platform that has been cashing in on Apple's slide, and it's easy to see why. The stock has shed 41% of its value since peaking the morning that the iPhone 5 hit the market late last year. However, as Samsung's Galaxy S4 has bumped into resistance as the top anti-iPhone choice, it doesn't seem as if anyone is truly cashing in here.

Forget the market-share slices, even though they naturally matter. The market itself appears to have badly overestimated the size of the pie itself.

The vast majority of the planet doesn't own a smartphone, but the vast majority of the planet also can't afford a smartphone and the costly data plan that's necessary to stay connected. There's a cry for cheaper hardware -- and even the mighty Apple has complied by keeping older models around at lower price points -- but that apparently isn't enough to make it a sound value proposition for the masses.

This will be problematic for all players. Microsoft and BlackBerry feel as if they still have a shot here, since there are so many people who have never owned a smartphone. Unfortunately for them, that isn't about to change.

This will also come as rude awakening for Mozilla, which earlier this week thought it was making a splash by announcing partners for its regional launches of smartphones running a Firefox operating system. Mozilla is hoping to turn the apps-driven world on its ear with its Web-centric operating system, but will that be enough? There's apparently resistance here in the adoption cycle, and that's something that will require the handset makers and carriers to get even cheaper.

This isn't good news for Apple. It's bad news. However, the news is bad for all of the companies riding the smartphone revolution and the investors who believe that we're still in the revolution's infancy.

Everybody's smart, but everybody's smarting.

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Read/Post Comments (15) | Recommend This Article (17)

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 July 06, 2013, at 8:35 PM, SanPasqual wrote:

    Well, in my case I ordered a MacBook Pro only to cancel the order when Apple announced super claims using the Haswell chip. So, Apple killed my purchase by announcing a future technical upgrade. One has to wonder if the same thing happens hundreds of thousands of times a day with tech gadgets ... more super features just around the corner so why buy into yesterday's news.

  • Report this Comment On July 06, 2013, at 9:46 PM, jferristx wrote:

    It's not the device. It's the data plan. I don't care who makes the device, there are pro's and con's to each. But a data plan is too costly. At some point, device makers and network providers are going to do battle. It's going to be ugly because one cannot exist without the other. Who's going to be Harry Potter, who is going to be Voldemort?

  • Report this Comment On July 06, 2013, at 10:20 PM, Vanamali wrote:

    No matter how much they talk it up, surfing the internet, reading a book, or magazine, watching a video is simply too difficult with a phone - the screen can only get so big & the biggest can't compete with a 10 inch tablet. I use my smart phone mostly for phone calls & playing sudoku, looking up the weather etc but not much else. I see the popularity of tablets increasing & the phones declining

  • Report this Comment On July 06, 2013, at 10:32 PM, buullit wrote:

    It has NOTHING.. I repeat NOTHING to do with hardware. The issues, 100% is the data plans. Wake the heck up.

  • Report this Comment On July 06, 2013, at 11:15 PM, RaulR2 wrote:

    The author jumps into very simplistic conclusions about a "saturation" of the smartphone market without any hard facts. BB is in trouble long time ago, HTC and others are long hardly swimming trying to arrive the other side of the river and regarding Samsung, it is well known that its latest flagship S4 was a big failure offer and analysts did not timely adjusted their quarter estimates for this Co.

    According to Horace Dediu, a highly respectable analyst at Asymco, the growth rate of smartphones in the US is now 58.4% up from 20% only three years ago. (see Platform Churn/2013/05/05)

    This is what you call a market saturation? and "bad news for Apple" in particular?

    I suggest you to look for better reasons to build more serious "bad stories" for Apple than this one..

  • Report this Comment On July 06, 2013, at 11:30 PM, HelpIsHere wrote:

    Apple just can't innovate any more, so boring.

  • Report this Comment On July 06, 2013, at 11:45 PM, robmxa wrote:

    Nokia the innovator, back to #1!

  • Report this Comment On July 07, 2013, at 12:53 AM, crampedsultana wrote:

    For me, I happen to simply dislike talking on the phone, and I won't use one unless I have to. It was easier and cheaper to just get a prepaid burner phone for the few calls I do make and invest in the Nexus 7 for everything else I wanted. It was less expensive than Apple's offerings and fit my needs better. I don't like the small screens on phones.

  • Report this Comment On July 07, 2013, at 1:58 AM, GuitarJim wrote:

    The author of the article seems to understand the problem, though it's pretty clear many of the people commenting on it don't.

    It is NOT the data plans that are causing the smart phone market to stagnate. If it weren't for the cost of those data plans you wouldn't be getting a phone whose cost is largely subsidized by the carrier. If the carriers drop the price of those data plans then you're going to have to pony up the dough and pay substantially more for that phone. Don't want to be tied to a contract? Fine. You pay full price for the phone.

    The problem with the market, as the author rightfully notes, is that the POTENTIAL market has become saturated. That POTENTIAL market consists primarily of middle class people in first world countries who either have expired contracts, or they are willing to pay off their remaining contract in order to upgrade to a newer phone. People who WANT a smart phone, and can AFFORD a smart phone, and don't already HAVE a smart phone are becoming increasingly rare.

    For a large percentage of the world's population, the full cost of a new smart phone represents about half a years pay. Data plan? Give me a break! People in third world countries get the two year old model phone from their relatives abroad, pop a local SIM chip into it, and use it for voice and SMS. They don't have contracts. They add minutes to their SIM chips by buying scratch off cards from a local market. The only time they get to use it for internet is when they're in a coffee shop or internet cafe or some other place with WiFi. Very few use 3G or 4G (which isn't very good with GSM anyway). They don't care what an iPhone can do. They just want to be seen holding one.

  • Report this Comment On July 07, 2013, at 5:03 AM, fauxscot wrote:

    Apple has been in this market longer than anyone else.

    Apple has been selling a smartphone series to people since it invented this market.

    Apple users overhelmingly replace their hardware with new Apple hardware.

    Apple iPhone 1,2,3,4,4S batteries wear out after a few years. The phones themselves accumulate wear and damage. They will be replaced by more Apple units.

    Meanwhile, the extended ecosystem of Apple has gotten nothing bur more diverse and better. Apple produces a lot of stuff that enhances the smartphone experience, and in case you haven't noticed, the entire f*kging world has changed in the last 5 years, to a large part because of the changes Apple brought and are still bringing.

    It isn't done by a long shot. But the winner is perched on top of a big hill. In Cupertino.

  • Report this Comment On July 07, 2013, at 7:59 AM, pcparadigm wrote:

    @fauxcot: My Apple experiment is over. I won't be replacing my Apple hardware with Apple. I've already got an unactivated Lumia 620 and will probably be moving to a Lumia EOS with a 41MP camera. When I'm in a hotspot (which is most of the time), I always reach for my Lumia 620. My 4S is just not as enjoyable to use. I think Guitar Jim is spot on. Apple will not be able to compete internationally. Their hardware is just too expensive.

  • Report this Comment On July 07, 2013, at 8:52 AM, will1946 wrote:

    How many handsets can you make? And for how many people? The majority of the world cannot afford them, and who would they call?

    There is far too much competition in this area.

  • Report this Comment On July 07, 2013, at 9:29 AM, Jeanva wrote:

    This is like comparing apples with watermelons. Apple shares dropped by a whooping 41%. How can you say other markets are badly falling if they shed only 3-1%.

  • Report this Comment On July 08, 2013, at 8:45 AM, eldernorm wrote:

    Sorry but while well written, this article only touches on the new headlines and really ignores the data. Lots of pontificating but little info.

    Everybody is bad, the stock price says so, yet today we know that for many companies, the stock price has nothing to do with the company value, its just the manipulated price so large investors can make money.

    PS, to the first poster, yes people tend to want the latest and with Apple, usually you get a better deal for the same money. I suspect that os x Mavericks will make an even better deal.

  • Report this Comment On July 08, 2013, at 5:46 PM, applefan1 wrote:

    What a bunch of misleading BS.

    FACT. With Android, each flavor (version and modified OEM version) is not even close to the number of users compared to iOS 6. Only 36 Million (4% of the Android community) is actually USING a flavor of 4.2.2, which their latest version. Most Android users are STUCK with Gingerbread, Ice Cream Sandwich and earlier versions of Jelly Bean.

    Android population just has a LOT more cheap ass POS users where Apple has more users using one particular model iPhone. The 4S and 5 are the two most popular single model phones used with the S3 as a distant 3rd.

    Apple has demonstrated that they get their users on the latest OS faster and with almost total adoption, even on an older product. Android can't do that. They SUCK at security issues, and version support which is going to eventually kill off the Android line for REAL professionals. Most corporations, and large entities will choose the iPhone over Android in a heartbeat as many of them are switching from BB to iPhone. Apple is a consistent leader. Once a year they release a major feature update and a small handfull of maintenance updates and the users update their phones faster as to not be exposed to the smattering of Malware that is infesting on Android,

    Android is definitely the market leader in smartphones in terms of malware. If you want to ensure that you probably won't get updates, get an Android. If you want higher quality apps and more of them with a very consistent update process and more attention to security issues, go iPhone.

    Apple is going through their yearly slow period which is predictable. They released the iPhone 5 10 months ago, (how quickly we forget) so sales have slowly dropped off since the feeding frenzy last Christmas, but Apple sold more iPhone 5's in the first 100 days than any other single model phone to my knowledge and the top selling model was the 4S, which has probably sold around 100 million units since it was introduced the year prior.

    Samsung sells most of the flagship product until Apple makes their flagship announcement and then sales drop like a rock for Samsung while people are lining up for the newly released iPhone. I think Apple is in great shape as they are working on stuff no other platform will have ever or for a very long time that will probably attract more government, military, corporate business, which is where the stable user base is. They don't switch platforms as quickly as consumers. Consumers tend to flock to what's getting the most advertising and media attention, warranted or not.

    I think this latest security problem with Android is going to piss off a LOT of users.

    When ever a platform still sells outdated products with an OS that's several revs ago, that indicates that they don't sell products that have a long lifespan with OS updates. Samsung probably won't update their current Gingerbread phones since they probably aren't even powerful enough (CPU and/or RAM) to even run the latest OS. Shows me that Samsung is probably selling those ULTRA cheap phones to dump outdated chips, buy market share out of desperation and to keep their semiconductor plants open. If Samsung kept the products that actually shipped with the latest OS, they'd only have one phone to sell. Samsung just doesn't know how to support their own Android platform. So much for trying to be a market leader with any integrity.

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