Is Apple (NASDAQ:AAPL) positioned to follow in the footsteps of BlackBerry (NYSE:BB)? One well-known mobile market pundit thinks so, arguing that Cupertino is missing the next game-changing market revolution.
Does that even make sense? Let's have a look.
First, a history lesson
Once upon a time, BlackBerry was on top of the world. Its customers were fondly addicted to the "Crackberry" experience of sending secure text messages through a high-quality, thumb-style keyboard. The company's market cap peaked above $80 billion in the summer of 2008. Supporting the largest market cap on the Canadian stock market, shares of the company then known as Research In Motion traded for more than $140 apiece.
Today, BlackBerry's golden age is a rapidly fading memory. Investors are now looking at a $3.6 billion market cat and stock prices below $7 per share. That's a 95% plunge, erasing some $135 billion of market value in the process.
Apple played a large part in BlackBerry's swift decline. The iPhone transformed the very concept of smartphones, leaving BlackBerry to defend an increasingly irrelevant market niche. Voice calls and text messages no longer seemed so important in a new age where "There's an app for that" in every situation. Apple is now one of the most valuable companies on the global market, despite a 27% decline over the last 52 weeks.
Of course, Apple's recent stock slump comes from weaker iPhone sales. In the recently reported first quarter, Apple saw its flagship phone's revenues dropping year over year for the first time ever. Investors and experts are wondering whether this is a temporary bit of rough terrain in Apple's fantastic operating history -- or an early sign of larger and more dangerous issues.
And that's where Marco Arment comes in.
Marco Arment is a well-known Apple analyst, app developer, and entrepreneur. He was the lead developer on microblogging platform Tumblr, and has a long history in the mobile development world. His views on Apple certainly deserve a second look.
In a Saturday blog post, Arment argued that Apple might be headed down the same unfortunate path as BlackBerry of old. The mobile industry is turning toward artificial intelligence tools, which might change the consumer's expectations of smartphones and tablets once again. And Apple is not leading the charge this time.
A bevy of tech heavyweights "are placing large bets on advanced AI, ubiquitous assistants, and voice interfaces, hoping that these will become the next thing that our devices are for," Arment wrote. "If they're right -- and that's a big "if" -- I'm worried for Apple."
In the self-described Apple analyst's view, Cupertino is very good at what it does today. But serving up high-quality app experiences on handheld screens may not be enough for much longer, as the artificial intelligence wave sweeps in. Here, the Google division of Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) looks like a leader, having spent more than a decade on exactly the type of data collection and analysis that is required in the next stage.
Yes, Apple is trying its hand at the AI game as well, and personal assistant Siri is the most obvious evidence of this. Siri excels at performing simple tasks, but often falls short on more complicated questions. The deeper language analysis and knowledge sharing tools you'll use tomorrow are not among Apple's strong suits.
"Apple can do rudimentary versions of all of those, but their competitors -- again, especially Google -- are far ahead of them, and the gap is only widening," Arment says. According to the analyst, Apple is acting as if nothing will change and today's mobile success stories will go on forever. "Apple's apparent inaction shows that they're content with their services' quality, management, performance, advancement, and talent acquisition and retention," he wrote. "And they may be right -- they may be fine."
But if not, there won't be any quick fixes for a deep-seated problem and Apple would indeed join BlackBerry among the long-term footnotes of mobile history. Google, on the other hand, is playing the AI makeover like Wayne Gretzky played hockey, always placed "where they think the puck is going."
Is Arment right about Apple?
Apple does have a few advantages that BlackBerry never had.
For one, Apple has amassed a cash hoard of more than $200 billion. That's enough to take the company through a very long period of terrible weather.
And the velocity of Apple's business leaves BlackBerry far behind. At its absolute peak, BlackBerry shipped 13.8 million devices in fiscal year 2008 and generated total revenue of $6.0 billion. Against those numbers, Apple is putting up 231 million iPhones sold in 2015 and an annual revenue stream of $234 billion.
Nothing good lasts forever, and Apple's business is not safe from harm. But it will take a drastic market turn to take the company's much larger fan base away in the same way that BlackBerry's addicts did.
So maybe the scale of Arment's suggested Apple decline is a bit overdone. But the dangers he outlined are very real, and they can cause significant damage to your Apple holdings -- quicker than you might think.
In my view, Apple is working much too hard to defend its current business model. From iPods to iPads, the company is built on minor variations of a single theme -- apps on a handheld screen. Meanwhile, archrival Google has built Android into TV screens, cars, eyeglasses, and laptops. Each new device gets a custom-designed user experience, suited to that particular use case.
Above all else, Android device builders swarm in to explore every possible angle of attack in each new market. Apple's failure to build a partner ecosystem is a big mistake, and will make the company more exposed to failure in the next mobile market makeover.
In short, I agree with Arment in principle. Apple is in fact setting itself up for a replay of the BlackBerry catastrophe but on a larger scale. I don't think it's too late to set a new course, and CEO Tim Cook is probably working on that behind the scenes. It's hard to tell, due to Apple's infamous lack of transparency, but that's what I assume.
Meanwhile, Alphabet is taking a very different path forward and remains a healthy growth play for the very long term. If you want a low-risk mobile stock for the extremely long haul, Alphabet fits that bill. Apple doesn't.
Anders Bylund owns A shares of Alphabet. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Try any of our Foolish newsletter services free for 30 days.