Apple having an 'identity crisis', claims analyst

Apple having an 'identity crisis', claims analyst

Summary: Apple is finding itself having to defend the iPhone and iPad market share against stiff competition from the likes of Samsung and Google. But this is uncharted territory for Apple, and as yet it's unclear whether playing defense is in the company's DNA.


The growth that Apple has seen over the past decade has been nothing short of miraculous. Starting with the iPod, the company has gone from strength to strength, disrupting market after market. But now, the Cupertino, California, giant is finding itself in unfamiliar territory: Having to defend market share.

(Image: Apple)

UBS analyst Steve Milunovich sent a note out to clients titled "Identity Crisis: Can Apple Play Defense?" in which he examined how things have changed at Apple.

"Apple historically has played the role of underdog, beginning with its niche Mac status after losing out to Windows," explained Milunovich. "The iPhone and iPad are the first times Apple has had a leadership position drawing significant and competent competition."

Apple dodged such competition as far as the iPod was concerned, a class of product that remained dominant until sales were cannibalized by the rip-roaring success of the iPhone. However, given how incredibly profitable post-PC devices such as the iPhone and iPad are to Apple, Tim Cook's hardly in a position to be able to sit back and allow the likes of Samsung and Google to run rings around him.

But can Apple play the defensive game? Milunovich's not too sure.

See also: 'iWatch' could 'be a $6 billion opportunity for Apple', says analyst

"It doesn't appear to be in Apple's DNA to cover market spaces just to get revenue," continued Milunovich. "Yet now that the company is so large due to iPhone success, investors are clamoring for product expansion with larger as well as lower-priced phones with Android gaining favor."

Problem is, investors and pundits are clamoring for Apple to either come out with products in cut-throat markets, such as TVs, cheap products, in particular a cheaper iPhone, or copycat products, such as an iPhone with a larger screen.

Milunovich concluded by pointing out that the engineers and designers at Apple may have to put their thinking caps on and start getting creative. But Milunovich cautioned against expecting too much, too soon from Apple.

"The only way out might be innovation in new categories, which will require investor patience. Most companies would rush out a 5- to 6-inch phone; Apple probably won't."

Topics: Apple, iOS, iPhone, iPad, Smartphones, Tablets

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  • Many companies do.

    The reality is, nobody can be innovative 24/7.

    Nobody can borrow others' designs 24/7.

    Nobody can even patent to prevent competition from forming 24/7.

    You cannot wake up one morning and go "*ding*, I am going to be creative!" Real life does not work like that, otherwise all Americans between 1776 and 1990 would have - every single one - be the example of which modern Americans are not, because modern Americans are all said to be "indolent", "incapable", "lazy", "stupid", "uneducated", "this", " that", "the other thing", etc... and all as spin to get around the true issues - of which there is an irony since some people can't seem to figure out the larger issues... the macroeconomics, if you will...(which are compounded by the very technology used to render various things, including the need to do even rudimentary math, obsolete or moot or pointless...)
    • The pace of innovation is not the point.

      Why should Apple start listening to idiot pundits? Their strategy works. The race to the bottom, "me too" strategy is a recipe for failure. Before Steve Jobs returned to the company, the pundits said, "make Mac clones and turn your business into Microsoft" and that almost destroyed them. If anything says Apple is doomed, it's the iPad Mini and the rumored iWatch.

      For me the first sign of trouble at Apple was when Tim Cook let the iPad 3 out the door when it was thicker and heavier than iPad 2. It was a "good enough" design concession that was based on nothing that put Apple where it is today.
      • Correction: their strategy work*ed*

        I agree Apple should listen to all the pundits, but that might be all they can do at this point. Their problem is that their strategy, which has unarguably worked spectacularly until now, has begun to fail.

        Without the charisma and magician-like showmanship of Steve Jobs, they're no longer able to convince everyone of a reality that simply doesn't exist - that they're this amazing company of unmatched creative and innovative genius. It has become clear that they're a one-trick-company.

        They took the original iPod (which itself was a very latecomer to the MP3 music player market) and:

        -Made them in different shapes, colors and sizes.
        -Made one that combined a cell phone (the iPhone)
        -Made the cell phone version without the cell phone (the iPod Touch)
        -Made a bigger version (the iPad)
        -Made a not quite so bigger version (the iPad Mini)
        -Made the cell phone version with a bigger screen
        -Are presumably making a micro version (iWatch)

        When you look back over the past decade, they've basically made one product, added a feature here, removed a feature there, and repackaged it over and over again in different sizes, shapes and colors. There's been plenty of success to be sure, but little to no true innovation.

        And now, the whole iDevice concept seems to be running it's course. An Apple Television has been rumored for years, yet hasn't come to fruition and, even if it does, will surly be little more than a super-sized iPad. The latest speculation if an iWatch is presumably little more than a shrunk down iPhone.

        Apple's problem is simple - they've built their company around this image of creativity and innovation, and now don't seem to be able to live up to their own hype.
      • The next hill for Apple.

        Sometimes its like nobody knows what really happened with Apples rise to the top or how it happened or what it amounted to.

        Firstly, iPod, came in at a great point in the rise of mp3’s provided massive amounts of storage and an intuitive design in a nice looking package and blew the competition away. They took the product of an mp3 player seriously and it paid off in massive sales.

        But the standard mp3 player market died off to a large degree, but that didn’t hurt Apple because Apple was already thinking hard about things and they had already created the iPod touch and it was pretty obvious to them that a reworked iPod touch could be turned into an amazing touch screen smartphone. This is perhaps the only truly innovative really brilliant idea Apple had. But brilliant it was. The reason for the downturn in mp3 players was the advent of smartphones that could play mp3’s and Apple was on top of it and the touch screen phone idea was ground breaking in itself. It made the idea of a smartphone truly into a computer phone. They took the smartphone market by storm and in the process a huge part of the cannibalization of the mp3 player market went to Apple themselves because they had the newest brightest mp3 playing smartphone.

        Simply brilliant. Multi more millions of units sold.

        Then came the iPad. The iPad created its own market. Like it or not massive amounts of sales of the iPad were made not because everyone already had a tablet and was looking for a new better one, they bought the ipad because Apple made it, Apple pushed it as the new greatest thing and said it was like magic. People bought so many of them it literally created a new market where there really wasn’t one before. Nothing was particularly brilliant in itself, an iPad being not a whole lot more than a gigantic iPhone, but the marketing was brilliant now everyone thinks they need one. It was also perfect timing because people had practically stopped buying desktop computers and laptop sales had slowed because nobodys PC’s were breaking down and wearing out like they used to. Unfortunately whatever planned obsolescence Microsoft and the OEM’s once had in the PC market started to vanish in and around the time of Vista appearing so millions of people had cash to blow on a new toy by time the iPad came into existence.

        But unlike the cannibalized mp3 player market, the smartphone market was thriving and touch screen competition started prying its way into the smartphone market, and the same competition was rapidly putting their minds to the tablet market so competition was starting to move in there as well.

        The issue being, as well as Apple has done, it came out of the creation of the iPod touch which was transformed into the iPhone then the iPad. Others have caught on to the importance of touch screen. The competition has arrived and its only going to get worse for Apple.

        Apple may have had a good run here, an enormously fantastic run to be sure, but it was nothing more than one cleverly executed run off of one very clever product, the iPod touch. Then ad a phone, then make it bigger. One product one idea. Lots of competition.

        In this kind of scenario you cant stay at the lofty heights Apple raced to for very long.

        Unless Apple comes out with some truly new second invention of the innovative thinking of the iPod touch they are stuck and will slowly but surely slide for some significant degree to a point of stabilization. And it should still be a good place to be.
        But one thing for sure, they cant stay anything close to the lofty heights they were at forever on just one invention unless they had a way to create a monopoly.

        And that they do not have.
  • Apple beyond its heydays

    Definitely. iPhone and iPad were the ultimate success story. Unprecedented but also unrepeatable. No company on this planet is able to invent a breathtaking and mind-boggling super successful device year after year.
    Apple had the run of its lifetime and will ultimately shrink and become a "normal" company. It's only a matter of time when Apple will have to lower prices due to excessive competition. Up to now Apple fanatics belong to the most price insensitive customers of electronic goods ever. But inevitably this group will shrink.
    • Windows and Office are the ultimate success story

      iphone and ipad have been around for 3 years and 5 years and are already beginning to lose ground to the competition.

      Windows and Office were able to maintain 90%+ marketshare for decades while the competition tried, and failed, to put out anything better.

      Kudos to Microsoft for being the one with the ultimate success story, unprecedented, and also unrepeatable.

      apple? They just copied what everyone else was doing. Touchscreen phones existed before the iphone. MP3 players existed before the ipod. Tablets existed before the ipad. apple is a marketing company and perhaps has seen unprecedented success for a marketing company.
      • Have to agree with that statement.

        Microsoft may now be losing ground on both front, but Windows and Office did maintain their holds for a few decades. Things may be changing now but that still doesn't negate Microsoft's accomplishment.
      • Apple is the ultimate success story

        ((( "Kudos to Microsoft for being the one with the ultimate success story, unprecedented, and also unrepeatable." )))

        Microsoft? They just copied what everyone else was doing. Word processors existed before Microsoft Word. Spreadsheets existed before Excel. Presentation software existed before Powerpoint. And Windows was always just the poor-man's copy of the Macintosh. Microsoft is a marketing company, and perhaps has seen unprecedented success for a marketing company.
        • In all fairness, don't you points also apply to Apple?

          Smart phones, mp3 players and tablet computers all existed before Apple came out with their respective products.

          Why Todbottom had to drag microsoft into this is beyond me. It adds nothing to the discussion and even if Apple closed doors tomorrow it has been a massive success.
        • Apple, Windows and Office were successful for the same reason

          They all took an existing idea (MP3 player, OS, word processor, etc.) and refined the hell out of it.

          Apple was helped by the fact that they had Steve Jobs who decided what Apple were going to make and then used his incredible skill in salesmanship to create a market for it.

          With Jobs gone, all Apple can do is try to follow the market. Something which, historically, they've been proven to be incredibly bad at. It's not hard to see Apple long term drifting back towards the company barely keeping its head above water like in the days before the iPod.
        • Poor man's copy of Macintosh

          Is Macintosh a poor man's copy of the PARC GUI?(

          Everybody copies everybody. Get used to it - nobody really innovates.

          Microsoft is a marketing company? Pot, Kettle, anybody?


          Microsoft moved forward because they allowed competition in the hardware. Simple. You could run their operating system on something you built yourself, or expensive IBM hardware. Everybody got to join in.

          Apple means Apple. Apple guts of hardware, Apple operating system. Can't afford our box? Can't have it. Unlike grabbing that cheap Matrox Millenium video card at a swap meet so you can enhance your gaming on your Clone IBM PC.

          With the rise of iPod etc. we have Apple iTunes, Apple app store. "Lock it in Eddie". Everything locked to Apple.

          THAT'S why Microsoft has done so well in my opinion.

          HOWEVER, I will admit with Windows 8, if they're going to eventually force us out of the Win32/64 era, where we could do what we want, to the Modern UI/Windows Store era, we will lose that freedom. At that stage I'm not sure Microsoft will do so well to be honest.
          • Just a point of information:

            The Xerox GUI had little in common with the Mac GUI.

            Case in point: Xerox had no menu bar (that's an Apple innovation), and used a right mouse click (you know, the one Apple didn't have) to bring up a pop up menu.
          • To correct the Apple FUD

            Menu / Status Bars existed in non-GUI (character based) applications, way before.

            Thus the Menu Bar that's supposedly an Apple innovation, really isn't and never was original.

            There is nothing new under the sun, but there are lots of old things we don't know.
            ~ Ambrose Bierce
      • failure

        ((( "Windows and Office are the ultimate success story... iphone and ipad have been around for 3 years and 5 years and are already beginning to lose ground to the competition." )))

        I think what you mean is "Windows WAS the ultimate success story." Today, Apple generates more money from the iPhone alone than everything Microsoft sells combined, including Windows, Office, and the Xbox. And the newest Windows, version 8, is an obvious failure (see this insightful ZDnet article for five reasons why: ).
        • Question your data

          "I think what you mean is "Windows WAS the ultimate success story." Today, Apple generates more money from the iPhone alone than everything Microsoft sells combined, including Windows, Office, and the Xbox."

          Microsoft has entire profit stream ecosystem that scales well beyond selling hardware or consumer devices/software. It covers not only consumers but more importantly enterprise. Apple may have business folks carrying iOS devices, but they still rely on the entire suite of office products for productivity and IT has to use 3rd party systems to manage these devices which adds additional cost as well. Nevermind Office 365 which is dominating cloud services as well. Apple may have the sexy side, but short of continuing to keep that fickle consumer appeal, they are at risk as they don't have a very big foothold in more stable revenue markets like the enterprise. You can call MS many things, but they are viciously effective at standardizing and pushing mass adoption of their platforms at a comparatively low up front adoption cost. Love it or hate it, that has made them a huge success. They often show up late to the party which infuriates folks that believe groundbreaking innovation is the holy grail of the technology industry, but in the end they are generally always able to be very competitive and profitable.
      • The Shade

        Well, okay, but, Samsung and Apple are both increasing sales. Smaller slice, much larger pie. Samsung seems to be getting a bigger slice of the the bigger pie. It seems to be coming more at the expense of other phone makers.

        Apple hasn't been a success story? Forgive my rhetorical, Apple was a success story. Then Microsoft is a success story, not the ultimate success story. I agree the 90s are unrepeatable and Windows and Office remain a healthy business, with only the questions about mobile and cloud to be dark spots on a distant horizon. Apple is not the ultimate success story: there will be others.

        But since you seem to building a parallel to the positives said above for Apple, I gather you think that EnticingHavoc is right, meaning it's trouble for Apple, and, by extension, for Microsoft? Dear me. That seems out of character. Or, that EnticingHavoc is wrong, and we may expect Apple and Microsoft to continue to do well?

        Of course, calling a company a "marketing" company, unless it says "Marketing" on their shingle, is a "Well, duh." They do not build it and they will come. Microsoft did a heck of a marketing job in the 90s, because marketing is figuring out a product that people want and then telling them it's ready to improve their lives.

        My take: Mr. Milunovich forgets the wise words of that superb market analyst of the 1960s, Mr. Vince Lombardi, to wit, "The best defense is a great offense."
      • How do you type

        when you have so much brain damage?
      • Hardly a success story

        I would hardly call Microsoft with its Windows-8 and Office as being a success story. Maybe for the short recent term. But. for the long term... not so sure. Viable alternatives are coming on the scene.
    • The iPad alone is more successful financially than all of Google.

      And the iPhone is even bigger. The iPod, now waning, was also amazingly success. Even the Apple II and Mac have been super-stars with Apple always playing the defensive.

      "No company on this planet is able to invent a breathtaking and mind-boggling super successful device year after year. "

      Apple has had far more than most and there is no data presented here to indicate it won't continue to do so.
      • iPad and iPhone have been monumental successes

        yet at the same time Apple has gone from clear and undisputed market leader to that of following the competition.

        Apple may be growing year to year, but the rest of the market is growing at a much faster rate.

        So to put both points together and not just look at one side like you often do.

        iDevices sold like crazy = AAPL stock went over $700 a share as their future looked bright.
        iDevices have been losing marketshare at an alarming rate, the last round of iDevices where exceptionally boring, competing products are innovating and advancing much faster that iOS devices = AAPL stock drops below $450 a share as investors do not think Apple has what will be needed to maintain their marketshare, margins, status or both.

        Everytime Tim Cook makes an appearance or speaks to the media the stock drops in value. Look it up.