Is Apple DOOMED?

The guys at Cupertino have received a good deal of bad news lately. Some pundits have even declared that Apple’s Golden Age has ended, and the inevitable spiral back down to fringe player status has begun.

It began with the much-publicized Antennagate issue. The outer band of metal on the iPhone 4 served as more than decoration; the segmented border acted as an antenna for various radio functions. When grasped in a certain way the cell reception would dramatically decrease; I was able to reproduce the effect on my own 4 but never had an actual impact on my usage because of it. Famously Steve Jobs declared that users were merely “holding it wrong”, rather than own up to the engineering flaw.

Fast forward to the release of iPhone 5, iPad Mini, and iOS 6, and the controversy that came with them. The iPhone 5 has been a joy to have; thinner, lighter, yet with a larger screen. Yet some just weren’t impressed; pundits complained it wasn’t different enough, that the interface was dated, some even going so far as to complain that it was too light. The iPad Mini failed to wow some pundits due to its suboptimal specs, and reports of smaller lines than any other iOS product launch seemed to support the lukewarm reception.

The there are the real issues of iOS 6. Some complained of the removal of the YouTube app (even though YouTube is usable via Safari and several third party apps). There were sporadic complaints about wifi, Exchange settings, and the elephant in the room: Apple’s new Maps.

As Apple and Google spiraled from Frenemy to just plain adversaries, Apple has attempted to remove all traces of their competitor from their mobile platform. Chief among these has been Google’s Maps; once a crowning jewel of the handset. Rumors stated that Apple rushed to replace Google’s Maps with their own, even though they still had a year left in their contract with the search giant. Sadly, on release Apple’s Maps wasn’t ready for prime time, with numerous reports of incorrect rendering, bad directions, and warped satellite imagery. Landmarks were omitted or misplaced.

Now Apple is dealing with bad press closer to home. The recent shakeup of administrators and rumors of discord that led to the retirement (and then unretirement) of key executives showed cracks in what had been thought to be a solid, almost hive-mind group of visionaries that had assumed control of the organization after the death of Steve Jobs. Statements of infighting and contrasting visions would lead the reader to wonder why the fired executives were ever brought on in the first place.

All of these issues have led up to a precipitous drop in Apple’s stock price. At one point it was thought that the price per share might top $1000, as of 11/2 the price had plummeted to $576.80. What is a tech enthusiast to think? Are the few voices declaring the end of Apple’s reign accurate?

While I lack access to the inner circles of Apple, I can advise those that like me spend too much time perusing tech news to relax. None of the iOS devices have had a controversy-free release, and the eye of punditry has been focused ever tighter on Apple’s offerings with each successive product. Hyperanalysis comes with market leadership; almost no one noticed when the once highly anticipated Notion Ink Adam tablet failed to be released on time, and then fail to meet its prerelease hype, yet the iPhone 5 got a good deal of e-ink for not being ‘different enough’.

I’ll agree that Apple’s Maps was rushed to market, but in defense of the maligned app I haven’t had a single issue with it since the release of iOS 6 (and Google Maps led me far astray more than once). Some pundits have pointed out that Google has a several year head start on Apple when it comes to map data, and I would agree with the notion that Apple will have it on at least equal footing in a very short timespan. In the meantime, there are multiple options (including using  Google maps via Safari) for iOS 6 users that don’t feel like waiting.

The iPad Mini is a product of adaption of existing product lines. It sports some of the same internals as the iPad 2, as well as its screen resolution (albeit on a smaller screen, making the pixel per inch count significantly higher) for a reason- it made the device not only more affordable to produce, it allowed a seamless introduction into Apple’s existing product ecosystem. The Mini can use all existing apps with no conversion, and while its screen isn’t Retina Display quality it is better than its closest iPad relative. Apple had to walk a fine line to create a legitimate product between the iPad and iPod Touch- too powerful and you steal sales from your other products, too weak and no one will be interested. Much like Porche intentionally created their Boxster as slightly underpowered as not to infringe on the more expensive 911 and Cayman, Apple crafted the iPad Mini with exact specs- it offers value via a smaller and lighter form factor, more screen than an iPod Touch but less power and resolution than the full iPad. I would have loved for Apple to have followed Amazon and Google’s business plan of selling their devices at cost, but Apple has never done so. The $329 price marks it as a superior good; if you are shopping with price as your sole determining factor Apple seems comfortable with you choosing an Android-powered device rather than undercutting the $299 iPod Touch.

As for their executive team, who can say what inspired the creation of the group that was just dissolved. I had noted that the quickly reversed changes to Apple’s retail outlets went against what I and many others valued in Apple. The skeumorphic design of some of Apple’s software lineup has been curiously deviant from their overall design (just look at the stitched leather design of Calendar compared to the design of the device). I’d wager that the shift of control of iOS 6 to Jony Ive will result in some subtle changes to the interface of iOS 6. Apple has strongly stressed user experience as the primary benchmark of their product line for almost the life of the company, and I would expect the reshuffling of responsibilities to reflect this.

Lastly, stock prices are notoriously fluid. Wall Street and investors crave just two things: profit and stability. While Apple is still obscenely profitable (and holds more cash reserves than many nations) the shakeup of executives was unexpected and untimely. This was bound to have an impact on investor behavior. Couple this uncertainty with the introduction of a powerful competitor with Microsoft’s release of Windows 8 and their first internally-produced hardware the Surface, along with the rapid improvement of Android-powered tablets like the Nexus and Kindle Fire and you have a recipe for sure-fire turbulence.

Ultimately, nothing has really changed. Apple’s meteoric sales of iOS devices cannot last forever; one would assume that they are spending a good portion of their vast reserves on R&D to develop the next wave of cutting-edge devices. Apple is still incredibly profitable, and the outlook of their entire product line (save the iPod Classic and Mac Pro) is rosy- sales of just about every category of device has met predictions, and the Mac’s market share has risen along with the unexpected adoption of the iPad by businesses.

No pundit, least of all this modest blogger, can predict the long term outcome of a major international organization, but I can venture that the short term outlook of Apple is very good. While competition in the new market of portable devices is about to become much more intense, Apple still has a very advantageous position. Reports of their pending demise are more than a little premature.

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More rumors of an iPad Mini

For some time now pundits and various rumor sites have been murmuring about a secret smaller iPad Apple has been developing to compete in the budding smaller, less expensive tablet market. Dubbed the ‘iPad Mini‘, the only thing that the rumors agree on is that the tablet would come with a 7 inch screen (as opposed to the existing iPad’s 9.7 inch screen) similar in size to Amazon’s Kindle or the new Google Nexus 7. The smaller device would likely still sport a version of Apple’s Retina display, but be somewhat less powerful than its larger sibling allowing Apple to meet the $199 price that many of the devices in this category have.

The latest rumors come to us from Bloomberg via MacRumors. Bloomberg argues that competitors haven’t been able to compete head to head with Apple, but they have found some traction selling devices that are smaller and easier to carry. The Kindle Fire and Nook Color were the first big names sporting this form, and the Fire had respectable sales figures during its first year in production (although those numbers have tailed off significantly as of late). Google’s Nexus aims at this new subcategory, with a matching seven inch screen that could more easily be held in one hand or stowed in a purse or large pocket.

Apple, thanks to strong strategic positioning and manufacturing has been able to sell the iPad at the same price point for each generation, yet still generate a profit of close to two hundred dollars for even the lowest priced model. They compound this profit by the sales from their ancillary services: the App Store, iTunes music and video, iBooks, and direct sales of accessories. Google is selling their new Nexus 7 at or possibly below cost as a loss leader, hoping to generate profit by channeling users to their core business of advertising and new multimedia retail site Google Play. It’s not unreasonable to expect that Apple could leverage their current manufacturing might to crank out a smaller, less expensive iPad that could still generate a profit via sales of the device that would still offer the same secondary sales that the current iPad does. This would also provide a competitive advantage over Microsoft’s soon-to-be-released Surface lineup. Apple would have devices with a more complete ecosystem, more mature app store, more accessories, and with the addition of a Mini tablet less expensive models as well (although the iPad is likely to be less expensive than the x86 model of Surface running a full version of Windows 8; they have been stated to be priced to compete with ultra books that range from $800-$1600). The iPad Mini would steal all market buzz from the newly-released Google Nexus, as well. Google needs to have a sizable market presence for the Nexus 7 to be financially worthwhile, but a similarly priced and formed iPad would likely garner more attention and sales.

There are some valid reasons that Apple would decide not to bring a seven inch tablet to market. Such a device would likely cannibalize sales from existing iPads more than competing tablets. The smaller tablet would run the risk of fragmentizing iTunes apps, as they could require different resolutions and icons between the those of the iPhone/iPod Touch and existing iPad. Steve Jobs went on record more than once panning the seven inch form for tablets, pointing out that there isn’t enough differentiation between them and smartphones. While devices with a seven inch screen have been spotted in the wild, Apple routinely field tests devices that never make it to market.

I fall on the side of approving of the smaller form factor. While I wouldn’t likely buy one, I do like the size of the seven inch tablets I’ve tested; they fit one hand comfortably but offer enough extra screen and case size (think larger battery) to offer consumers some unique value. The Bloomberg report suggests that the Mini iPad would sport the same screen resolution as the Retina iPad (1024×768 pixels) eliminating the fear of fragmentation, and could take the place of the iPad 2 as Apple’s less expensive tablet. I have little doubt that Apple could sell the smaller iPad for $199, the question is can they do so without sacrificing performance or features while generating enough profit to make the move worthwhile?

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