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As I Predicted 13 Months Ago, Apple’s Days of Easy Profits Have Ended.

Written by Gary North on January 23, 2013

In early December, 2011, I wrote an article on why I thought Apple would lose the smart phone war to Android. Read it here: http://www.garynorth.com/public/8798.cfm

Apple’s momentum is now slowing. It suffered a profit decline in the fourth quarter. That has not happened in a decade.

It is a great company. It sells music. It sells hype. Hype sells. But Apple’s hype depended heavily on Steve Jobs.

In the battle for market share in smart phones, Apple’s days of wine and roses are over. Now Apple will have to compete.

Its share price is down 30% since September. No surprise there . . . not to me, anyway.

Here is reality: free is good. Expensive is not good. Android’s operating system is free. There is open entry. There are lots of genius Asians who want a piece of the action in the market for smart phones. They cannot be stopped.

Proprietary software cannot remain highly profitable in a world economy with open entry and open source code. It can be profitable in niche markets, but these markets will decline as a percentage of total market share.

Competition will be fierce. Profit margins will shrink.

The free market always relies on price competition to penetrate new markets. The largest market in history is Asia’s.

Asia will not adopt Apple. Apple’s products are for rich Westerners. The future of mass production and mass consumption does not lie with rich Westerners.

Samsung is nibbling away at Apple’s profits. Meanwhile, the Coolpad is nibbling at everyone’s profits in China. This is great for consumers, but bad for investors in Apple.

All this seemed obvious to me in late 2011. It will become more obvious to investors as time goes by.

Continue Reading on www.bloomberg.com

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3 thoughts on “As I Predicted 13 Months Ago, Apple’s Days of Easy Profits Have Ended.

  1. While I agree with you Gary you and others are behind the Power Curve. Apple has only had single digit share of the computer market. While it had its "killer" app decades ago (graphic arts) it had its butt slammed two decades ago when Intel came out with the dual processor and Microsoft wrote apps for it. But because of good marketing and dumb college students and professors Apple was able to maintain the illusion of greatness in Academia.

    Well no more. Apple is dead. And it will rot to the core as every Apple does that falls from the tree. Apple needs to stop being a socially sensitive touchy fuzzy company and become a very serious business or they will be left in the dust by the double digit companies that sell to the masses and not to academia or Hollywood.

    After all did not Apple finally give up on its proprietary processor from Motorola and go to Intel? Oh wonder of wonders. Can Apple learn again before it goes into the dust bin of history?

    If history is any indicator sell you Apple computer and stocks. Buy a "normal" computer. After all most apps are in fact written for them.

    Apple RIP.

    Sorry college students and Academia….once again business is business and you loose.

  2. I switched to iPod in 2006 because the reliability from MP3 players made by Rio and Sandisk was abysmal.

    I've been using an iPhone since 2008. Mostly because before the iPhone, it was like pulling teeth to get smartphone makers to explain exactly what their products could and couldn't do, and it was even more difficult getting carriers to tell you how much it was going to cost. I didn't get my first real hands-on experience with a smartphone (Blackberry) until 2009. Like a virgin bride, I'm glad I waited for the iPhone.

    Last year I saved up and bought my first Mac. There are some interesting and unique ways of doing things with a Mac vs a PC but overall (coming from a guy who started out using DOS and UNIX), it's no easier to use or any more reliable than a SIMILARLY-PRICED PC. However, I will say this for Apple: they have a reputation for quality not entirely due to hype, nor is it because their $1500 MacBook is more reliable than a $1500 Dell. It's because their $1500 MacBook is more reliable than that bloatware-laden $497 Acer, Dell or HP that most people will pick up from Walmart and get their first computing experience with. One year later, my Mac's 7-hour-rated battery still lasts 7 hours. One year after buying my $350 Acer, it's 2-hour-rated battery barely held 15 minutes of charge. On my Mac it's rare to have to spend the first 15 minutes after startup waiting for OS updates to install – still a problem with Windows 7.

    There was a time I thought Android would eat Apple for lunch but I'm not so sure anymore. As far as pricing goes, higher-end Android devices cost just as much as iPhones and iPads (sometimes more). And if you're looking to save a few bucks, you can now opt for last year's iPhone/iPad. As for customization, carriers like Verizon are increasingly locking down Android devices despite Google designing them to be open. I don't know who will win in the end but of one thing I'm certain: Android would still be a flea on Apple's behind if Apple hadn't shot itself in the foot by giving AT&T exclusivity on the iPhone that first 5-years.

  3. retired teacher says:

    Excellent comment, Paul A.
    You speak from knowledge and experience.
    Thanks for your viewpoint.