When Did Apple Lose Its Magic Touch?

When did Apple (NASDAQ: AAPL  ) become so out of touch? When did it realize that it's bequeathing the mainstream market to Google's Android? Has it even realized that yet? 

Yesterday's iPhone event was supposed to be Apple's moment to shine. It was one of CEO Tim Cook's perhaps final chances to prove that the consumer tech giant can recapture the glory it had when Steve Jobs was around.

Instead, we got more of the same.

  • The iPhone 5s has some new features, but it has the same form factor as last year's iPhone 5. That wouldn't be a bad thing if Apple hadn't surrendered market share, going from 17% of the global market to just 13% over the past year.
  • The iPhone 5c was supposed to be the entry-level device that would finally open doors for the company with the prepaid wireless carriers here, and the countless carriers abroad, which don't offer hundreds in subsidies in exchange for long-term contracts. No. It's unlocked price of $549 without a contract isn't going to make a difference in a world where entry-level Android smartphones are available for a sliver of that. 
  • After seeing Samsung -- the company that overtook Apple in smartphone sales -- introduce a smartwatch last week, there was always the hope that the Cupertino taste maker would finally make a big splash in wearable computing. No. It didn't happen.

There are plenty of snazzy features in the iPhone 5s. The camera is dramatically improved, and that's a big thing for many buyers trying to consolidate gadgetry. However, boasting about the more powerful 64-bit processor seems as if it's missing the mark. I've heard people complain about slow PCs, but never slow smartphones. It's a nice feature, but it's not a very marketable one if it's not aiming at an addressable problem. 

Then we get to the fingerprint identification. Blackberry (NASDAQ: BBRY  ) had to be biting its cracked nails when Apple announced its features to make the iPhone 5s more secure, but when you're gunning for BlackBerry's fading market, you're essentially fighting for scraps. Yes, Apple did make its devices more compelling for the enterprise market yesterday, but that's right now. Just wait until the 5s is out in the wild, and folks begin having problems accessing their phones if the ID technology proves to be less than perfect, or the sensors wear out in time. Today's selling point can be tomorrow's selling point -- if you know what I mean.

Clearly, there's a reason why Apple shares began to slide during the final two hours of the trading day yesterday, just as Apple was failing to live up to the hype.

The 5s didn't raise the bar high enough. It didn't come in the larger form factor -- or at least the option for the larger form factor -- that has drawn the masses to larger Android devices. 

However, the real reason why Apple is clearly out of touch is that the 5c is not the entry-level device that we thought it would be. It's not cheap enough. Apple went ahead and put a plastic shell around last year's iPhone 5, and it decided to settle for turning a fat profit on a small number of sales instead of shocking the world in a good way. 

"Your margin is my opportunity," is one of my favorite quotes from Amazon.com's Jeff Bezos. 

Amazon's ability to sell things at ridiculous price points -- settling for market share instead of near-term profitability -- has helped make it a force, with the Kindle line of products, in categories where larger tech names have faltered. 

Well, here we are again. Apple is choosing to maintain its margins at a time when Google's open-source platform, and Amazon, are willing to do whatever it takes to get bigger in mobile computing. 

Apple's margins are it's undoing. The media invites promised that Tuesday's even would brighten the day of the attendees. That may have been a hint on the colorful array of devices that we're getting, but it turns out that Apple wasn't very bright at all.

Apple's opportunity is your margin -- of error
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Read/Post Comments (12) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On September 11, 2013, at 1:10 PM, jdmeck wrote:

    It didn't. They are still the best at what they do. Just because the idiot investors don't get it means nothing. They will continue to bring in more money than they need and dividends will be raised.

  • Report this Comment On September 11, 2013, at 1:11 PM, Linkerone wrote:

    When it's visionary Steve Jobs died! Tim Cook is a manager not an innovator. Jobs would have never approved of the new look! Appearance and new exciting technology was everything to Jobs. If you can't excite the public, you loose the appeal! Still a good solid product, just nothing more!

  • Report this Comment On September 11, 2013, at 1:13 PM, sa1212 wrote:

    You've never heard about people complaining about slow smartphone?! Yes they do. Android community often calls it "lag".

  • Report this Comment On September 11, 2013, at 1:14 PM, JesusQuintanaJr wrote:

    I don't think it is Apple that is out of touch.

  • Report this Comment On September 11, 2013, at 1:24 PM, Mega wrote:

    The larger form factor cuts both ways. For some bizarre reason, Android manufacturers have basically given up on producing high end phones at reasonable sizes, driving customers into the arms of Apple.

  • Report this Comment On September 11, 2013, at 1:38 PM, tkell31 wrote:

    Apple's growth is over because the high end market is saturated, time for the slow painful contraction. Cook just sounds pathetic talking about the pipeline like he has for two years. Wait for the pop on pre-order news and sell, but realize if pre-orders are weak at all $400 will be here in a blink.

  • Report this Comment On September 11, 2013, at 2:13 PM, GaryDMN wrote:

    Just watch, they haven't lost anything. They are being outspent by Android vendors on PR and advertising by over 4 to 1. Apple continues to build their carrier base and loyal customer base, while maintaining the highest profit margins in the industry. I expect earnings per share to jump up, based on the millions of shares they are buying back alone.

  • Report this Comment On September 11, 2013, at 4:56 PM, NeuroProf wrote:

    I still feel the magic...and I didn't even know that I needed fingerprint security, but now I can't wait to get it on my new 5S. I will upgrade early for that. I hate how many times I mistype my password. I hate passwords! Now I won't have to deal with passwords to buy stuff on my iphone! Everyone will want that before too long...

    So maybe there is a little bit of magic left - its just hard to keep the supply chain quiet anymore.

    And if the new music service is as good as Pandora...or if Apple buys Pandora that would be all the better. There have always been so many Apple naysayers...until the next EPS comes out. This week, we have another great buying opportunity for a great company.

  • Report this Comment On September 11, 2013, at 7:43 PM, Morgana wrote:

    In order to decide whether or not to keep my AAPL stock, I decided to read Steve Jobs' biography. Please, if you think Jobs is the be all and end all of innovation at AAPL, read his biography. You will see that, yes, he was a visionary, and so were all the people with whom he worked. The market and these "analysts" are creating expectations for Cook and Aapl that they did NOT EVEN HAVE when Jobs was at the helm.

  • Report this Comment On September 12, 2013, at 9:18 PM, adamwins76 wrote:

    If Apple gets any cheaper Warren Buffet is going to start backing up the truck. Apple's share price is screaming undervalued. The talking heads on TV are incredibly short-sighted and frankly WRONG.

  • Report this Comment On September 15, 2013, at 7:02 AM, H3D wrote:

    "The iPhone 5c was supposed to be the entry-level device that would ...."

    I think you mean that you supposed that that war the purpose of the device was to....

    So now are we to assume that you supposed wrongly, but seek to place the blame elsewhere do as to not look stupid?

  • Report this Comment On January 03, 2014, at 8:57 AM, nonbelieber wrote:

    The magic has gone, even Apple doesn't believe anymore!

    After delivering 3 broken machines (straight out of the box) with exactly the same manufacturing problems, I mean what are the chances of that happening ;-), they WILL not replace it with a new (fourth) machine because i imagine they don't believe they can deliver a proper functioning machine!!!

    They won't even make an exception and check the machine before they will deliver.

    Maybe they are right to refund us after the 3rd time. I just think they don't care enough to check their supply chain and not only lost the magic, but even their hope :-(

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