Apple's race to 2014: Six big unknowns
As Apple rounds out the summer and heads into the calendar fourth quarter with what is supposed to be a slate of new products, the unanswered questions are beginning to pile up. At stake is CEO Tim Cook's ultimate grade as Apple's leader and the company's history for breakthrough product categories.
Perhaps Apple dazzles the tech world with new products and something we don't expect. It's just as likely that Apple is wrestling with gravity and scale like many large tech vendors.
Among the key questions:
Will iOS 7 be Apple's Windows 8? Apple's iOS was getting tired looking and needed a refresh. Be careful what you ask for. Apple's mobile operating system was tired, but also just worked well. With the launch of iOS 7, Apple will offer a facelift that the installed base may not love. Keep in mind that Apple's mobile installed base is huge now so it's likely to face the same issues as Microsoft. Move a menu and catch hell. Tweak a map and get the same. Perhaps iOS 7 won't get in the way of customers. If Apple pulls off a perfect refresh though it may be a minor miracle even if many changes are just cosmetic.
Can Apple weather smartphone fatigue and commoditization? All smartphones are starting to look alike. Folks aren't running to break contracts to get the latest and greatest devices. Apple is selling a lot of iPhones, but margins are going to fall in emerging markets as the company goes for market share. A low cost iPhone due in the fall won't help pricing much either. It's tough to be the top dog and it's unclear whether the iPhone will simply become tired with price as a key differentiator. Apple is in a better position than the Android hardware army, but investors used to the company defying gravity may not care.
To drive home the smartphone commoditization theme, Jefferies analyst Peter Misek noted that the iPhone 5 was on the front page of a circular from Real, a low-end supermarket in Germany. Discounted pork and the iPhone shared top billing. Here's the image via Misek.
Will the iPad refresh offset the cheap Android tablet movement? In Apple's most recent quarter, iPad revenue fell 27 percent from a year ago. Average selling prices for the iPad and units were below Deutsche Bank estimates. In addition, the iPad mini is cannibalizing its larger sibling. The larger question regarding the iPad is this: Is there anyone left in developed markets like the U.S. who doesn't have one? Also: Tech spec showdown: the new Nexus 7 vs. iPad mini | Apple looking to supersize the iPad with 13-inch model?
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What's the next category? A month doesn't go by where we don't hear some rumor of the iWatch or an iTV. To date, CEO Tim Cook and the gang have little to talk about. As a result, 2013 so far has been a largely Apple news free affair. Cook's legacy may largely ride on whether Apple can deliver another groundbreaking category. Apple reinvented music with the iPod, phones with the iPhone and ushered in the post-PC era with the iPad. Do companies really go 4-for-4 with great products?
Will Apple tame China? Apple's China revenue in its most recent quarter fell 14 percent from a year ago. Apple has had PR problems in China and faces brutal price competition. Meanwhile, the China market---not to mention the government---may just decide Apple makes enough money in that country. Apple has a lot of growth and turbulence ahead in China.
How can Apple leverage its installed base to garner subscription revenue? Apple could turn its wealth of customer data into an e-wallet. Better cloud execution and services could garner subscriptions. There are a lot of incremental things on the cloud front for Apple to tackle. Apple could also charge for these services too since a transaction is just one button away.
Related: Apple Q3 earnings: beats on profit, revenue; sales mixed