Taking a biteout of AppleNorm Johnston 26/04/13BackgroundApple has recently been under intense pressure as competitors, particularly Google and Samsung,continue to gain market share by introducing new and highly competitive products. As a resultApple’s share price has dropped and its stock market value has tumbled by 40%. Has the post-Job’sApple finally lost its shine?DetailsGiven that the early adoption phase for smartphone, tablets, and phablets is now over in manymarkets, it should come as no surprise that Google’s Android OS is gaining share as HTC, LG,Motorola and others battle over the mass market audience, which has never been Apple’s naturalcustomer base.Apple’s business has been built on a disruptive smaller volume, larger value approach compared toGoogle’s larger volume, lower margin formula. Apple’s strategy is threefold: 1) create brilliant andconnected products in a largely closed ecosystem; 2) appeal to early adopters and latent followerswith enough cash to pay for expensive devices; 3) squeeze incremental revenue through services,applications, and to a lesser extent advertising. To put things in perspective, consider that Applemakes a $368 profit for each iPhone while Google makes roughly $10 per phone. Furthermore,Apple makes 30% from sales of iTunes applications compared to Google’s measly 5%. Sustainingsuch margins was always going to be difficult; Apple’s most recent Q2 2013 results indicate thateven with decent sales of iPhone and iPads, the company suffered a YoY quarterly drop in net profitto $9.5bn compared with $11.6bn last year.ImplicationsApple’s CEO Tim Cook hinted this week that Apple has some big plans for Q3 and a solid line-up for2014. Apple’s relative silence during its recent stock price plummet may in fact indicate a quietconfidence in its future product releases. Of course it doesn’t hurt to have a massive cash reserveof $137bn to weather the storm. The key question is what are those Q3 and 2014 plans?Speculation is rife that Apple, while still iterating and improving on its existing product portfolio,has moved on to the next big thing and is quietly preparing to disrupt yet another industry. Punditshave long speculated that Apple is due to launch its own TV set, a highly cluttered and competitivemarket with tough margins and all kinds of broadcasting and content legal challenges. However,the TV set remains the one screen in a multi-screen ecosystem where Apple doesn’t fully play (note:the current Apple TV product has an Apple EPG and streaming ability to your existing TV). Don’t betagainst Apple redefining the TV experience.A second area of speculation is an iWatch wristband; the long-mooted Dick Tracey phone watch mayactually be functioning somewhere in an Apple lab. An Apple watch would capitalize on the recentwearable tech craze (Jawbone, Nike Fuelband, Google Glass) and could port iTunes content, Siri,Facetime, and of course your phone to your wrist. It’s the type of disruptive, jaw-dropping productSteve Jobs would have loved.On the other hand, Apple may be preparing to simply improve its iOS experience, and unleash new,graphene-powered, memory-boosted iPhones and iPads. With Samsung’s new Galaxy S4 givingApple a run for its money, an upgrade beyond recent releases may be necessary to defend its share.SummaryApple has excelled in disrupting and defining industries with its technology. CEO Tim Cook hashinted something is on the way; Steve Jobs may have planned a few more surprises for us. Staytuned.