Fall of Apple

By: Ronen Sartena

 

Right now, the world’s richest and most successful company is standing on the edge of a cliff.  Apple Inc., which currently dominates the technology industry, is in a state of long-term fragility.

For the past decade the Apple business model has led it to become the most powerful and successful company in the world. Apple has designed itself to be a solo operation. Unlike Microsoft and IBM, who licenses its technologies with other companies, Apple’s technology is closed source. Apple software, interface, programming, app store, etc. are specifically designed, and only capable to be operated on Apple products.

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In the 80’s, when Apple’s products did not dominate the market, Steve Jobs took immense heat for making Apple closed source. At a time when Microsoft was making billions of dollars licensing its technologies to other companies, it seemed foolish for Apple to limit revenue streams by not licensing. Jobs was viewed as a control maniac. The original Apple Macintosh had no screws or software inputs for the purpose of not being able to open. Jobs was obstinate in his vision of keeping Apple’s technology solely in Apple’s products, and paid the price when the Macintosh lost market share, and Apple ran the brink of bankruptcy.

Fast forward to the 2000’s and Steve Jobs decision to be closed source paid off in the hundreds of billions of dollars. By having exceptionally designed technologies coupled with superior interfaces and operational functions, Apple has basically eliminated its competitors in the current consumer technology markets. Even if another company were to develop incremental improvements to specific features of a phone or computer, it is all but impossible to compete with Apple on all of its functions. In a sense, Apple has positioned itself to be: Apple V.S. the entire tech. industry. And in the current markets, Apple has won.

Now, fast forward into the future. What can we expect for the Goliath of the tech. industry? The demise of Apple will not come through competitors beating them out of existing markets. It is hard to contemplate how much more beautiful and easy to use a personal computer or cell phone can be. The demise of Apple will come through the creation of new ones.

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We live in immensely exciting times. Unmanned cars. Interactive glasses with constant feedback of any information you demand. 3D printers that can create edible synthetic meat. Commercial space flight. Talking robots capable of carrying through on low-end human tasks. Online television with the use of 3D modelling. There is more possibility in technology today than ever before. One breakthrough in science, and you have exponential increases in innovation and new markets. Technology is like a powder keg; one spark, and you may get an explosion.

In the short term, Apple may be the most robust company in the world. With over $145 billion dollars in cash on hand, they have enough money to bail out Greece three times over. They have enough money to produce a thousand blockbuster movies. With a stock price of $500, a market capitalization of $450 Billion dollars, Apple is relatively cheap with a 12% free cash yield and a P.E. Ratio of 12x. Even if their margins were to decrease by 20%, Apple would still have positive cash flow and enough money to raise dividends.

However, in the long term, Apple run the serious risk of becoming obsolete. Unless Apple is creating the new markets to dominate, they will virtually get none of the market share, even if its technologies are applicable to certain functions and applications.

Tim Cook, Apple’s current CEO, must relocate his concern away from squeezing every last profit out of existing products, and instead regain Apple’s position as the tech industry’s leader in innovation and market creation. The alternative to not innovating is literally being left in the dark. Right now, the world’s richest and most successful company is standing on the edge of a cliff. One breakthrough by a competitor and Apple will be fighting to survive. 

Now, fast forward into the future. What can we expect for the Goliath of the tech. industry? The demise of Apple will not come through competitors beating them out of existing markets. It is hard to contemplate how much more beautiful and easy to use a personal computer or cell phone can be. The demise of Apple will come through the creation of new ones.

Fall of Apple2-1.png

We live in immensely exciting times. Unmanned cars. Interactive glasses with constant feedback of any information you demand. 3D printers that can create edible synthetic meat. Commercial space flight. Talking robots capable of carrying through on low-end human tasks. Online television with the use of 3D modelling. There is more possibility in technology today than ever before. One breakthrough in science, and you have exponential increases in innovation and new markets. Technology is like a powder keg; one spark, and you may get an explosion.

In the short term, Apple may be the most robust company in the world. With over $145 billion dollars in cash on hand, they have enough money to bail out Greece three times over. They have enough money to produce a thousand blockbuster movies. With a stock price of $500, a market capitalization of $450 Billion dollars, Apple is relatively cheap with a 12% free cash yield and a P.E. Ratio of 12x. Even if their margins were to decrease by 20%, Apple would still have positive cash flow and enough money to raise dividends.

However, in the long term, Apple run the serious risk of becoming obsolete. Unless Apple is creating the new markets to dominate, they will virtually get none of the market share, even if its technologies are applicable to certain functions and applications.

Tim Cook, Apple’s current CEO, must relocate his concern away from squeezing every last profit out of existing products, and instead regain Apple’s position as the tech industry’s leader in innovation and market creation. The alternative to not innovating is literally being left in the dark. Right now, the world’s richest and most successful company is standing on the edge of a cliff. One breakthrough by a competitor and Apple will be fighting to survive. 

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