Shares of Apple closed above $500 today — barely. The stock came under pressure amid reports that the company has had to cut its parts orders for the iPhone 5.
Specifically, Apple is ordering fewer screens for the smartphone assembly lines, apparently because demand for the gadgets is running considerably less than expected. According to some reports, the cutbacks amount to as much as half of Apple’s previous sales estimates.
Georgetown University marketing professor Ronald Goodstein says that’s the most dramatic indication yet that the iPhone is being seriously threatened by competition from Samsung and other Android-system smartphones. Says Goodstein: “I think this is a really bad sign for Apple.”
At the start of 2011, the iPhone’s global market share was 23 percent, according to the research firm IDC. This past holiday season, it was down to 14 percent. But at Endpoint Technology Associates analyst Roger Kay still sees that as respectable. “Apple has the most profitable segment,” he explains. “They actually get better margins than anybody.”
Kay is concerned, however, about reports that Apple is under pressure to sell a cheaper version of the iPhone. He says that harkens back to the early 1990s, when its computer business was in serious trouble.
“The problem was somewhat the same,” Kay recalls. “It was a higher-quality experience, and it cost more, and people really did make decisions based on money. So they looked at it and said, ‘Wow, I really love those Macs, but I just can’t afford them.’ And they’d go buy a PC, reluctantly.”
The company was nearly on death’s door — until the return of its wunderkind founder, who gradually set about turning things around. Then, on January 9, 2007, he captured the wireless phone market with a simple declaration: “Today, Apple is going to reinvent the phone.”
Now, Georgetown professor Goodstein says Apple is relying on reinventing products that, he says, are losing their cool. He warns that small incremental changes in new versions of the iPhone, iPod and iPad won’t lead to increased sales.
“I don’t think another version of anything for them is going to equal cool,” Goodstein says. “They’ve got to truly innovate again.” Only this time, he notes, there is no Steve Jobs to come to the rescue.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.