We are in the dark period between hardware releases for Apple, so rumors abound as to what’s to be released in the near future. The speculation has been fanned by Apple’s recent financial reports- although Apple is awash in cash and has generated an astounding $13.07 billion in revenue in just the first quarter of the fiscal year, the sales figures didn’t match what financial pundits had predicted based on Apple’s meteoric rise in sales and revenue over the past few years. Consequently Apple’s stock price took a tumble (that was soon reversed) thanks to the pessimism. What’s a consumer to think? Has Apple really run out of mojo? Is this just a return to reality for a company that’s feasted off of meteoric sales fueled by practically creating two new product categories?
There are multiple factors in play concerning, and most are not readily evident. While the iPhone still reigns supreme in the US, it isn’t the industry leader around the world- Android has the lion’s portion of market share thanks to its breadth of pricing, handsets, and the slow release of the iPhone around the world. Apple has had some significant success in China, the world’s largest market for handsets, but they currently rank 6th in market share.
The iPhone won’t likely retain its market dominance in the US forever as competitors flood the market; Android has evolved at a blistering pace, and Microsoft is pushing their new mobile version of Windows 8 just as new names like Ubuntu and Firefox have been linked to mobile devices. What some don’t realize is that Apple has never been focused on market share- they place far more value on margin. Organizations like Amazon and Google sell their devices with almost no profit (and sometimes at a loss) to steer customers to their real profit centers- advertising and data mining for Google, the various Amazon stores for that entity. While Apple does generate a tidy profit from their media and app stores, they have never embraced the strategy of employing a loss leader (something that generates no or negative profit that brings more customers to the things that do).
The breadth of Android devices has been recognized as one if the reasons the platform has such a commanding portion of the handset market; devices range from iPhone equivalents like the Samsung Galaxy line to bargain models from makers like Huawei. While Apple does keep older models of iPhone in production to offer a broader range of prices, they have never sold a handset that was designed to appeal to bargain hunters (or a device that deviated from the established form factor). Some (including former Apple CEO John Sculley) have called for Apple to deviate from their business model to compete in the inexpensive handset demographic, even going so far as to insist that a cheaper version of the iPhone must be pending (with no actual evidence to support the claim). Others report on a rumored handset dubbed the iPhone Math that sports a 4.8 inch screen similar to some of Samsung’s phone/tablet (“phablet”?) hybrids.
Not only is such action not likely to happen, it would border on foolishness for Apple to do so. They have managed to generate more profit than all of their competitors combined by not focusing on market share and ceding certain segments of the market. While the sales figures from this past fiscal year weren’t explosive, they were still greater than the GDP of many countries- and this was in a quarter that was one week shorter than usual. Apple has only developed products to that offer significant value in each category, not devices solely to compete for money in that category. The Mac Mini is more than a cheaper version of the iMac; it has a different form factor and possible uses. The iPad Mini is less expensive than the full sized iPad, but the primary focus hasn’t been the price, it has been the utility offered by the smaller size of the device. The same can be said for the Shuffle, Apple’s cheapest iPod; it has a significantly different form (diminutive and lacking a screen) but is tailored for specific uses, not just to generate sales in those that can’t afford an iPod Nano or Touch. Creating an underpowered or under spec-ed device just to compete in a market segment they have never pursued for little more than market share is nonsense unless there were some way they could keep the profit margins they count on, and to date none of their competitors have been able to do so with far more time and emphasis on that demographic.
As for the super sized iPhone Math, the waters are less clear but still doubtful. I have no doubt there is a larger sized iPhone in product research (just perusing the research models revealed during the Apple v Samsung trials recently shows how broad the scope can be) but Apple tends to control every aspect of their consumer product line. The screen resolution of a larger device would pose problems for apps; it would either have to sport a non-retina display (unlikely considering the flack generated over the lack of retina in the iPad Mini) or would have to have a custom resolution- very unlikely given Apple’s insistence on uniformity in App Store apps. Another facet is Apple’s own in-house research; they have reported more than once that the screen of the iPhone and iPod Touch was specifically designed to allow one handed operation. The iPhone 5 allegedly is the largest factor that can still adhere to this purpose according to their engineers, any larger and Apple would have to ignore their own stated strategy. Then there’s the question of product identity; a massive iPhone becomes a potential competitor to the iPad Mini (which has allegedly already cannibalized sales from its full sized sibling).
While I’m far too low on the technosphere’s food chain to have precise insight on Apple’s product development, I’d still wager a week’s pay that a majority of the hand wringing and speculation on what they will (or should) do is just so much noise. The next big thing won’t be a big iPhone, it will likely be an entirely new category of device.