In my book, Google Inc (NASDAQ:GOOG) is the Robin Hood of the tech industry. It stole all the spoils of the rich, which is of course Apple Inc. (NASDAQ:AAPL), and redistributed these said spoils to the entire industry, save for Nokia Corporation (ADR) (NYSE:NOK), Research In Motion Ltd (NASDAQ:BBRY) BlackBerry, and few other fringe players. Oh, did I mention that Nokia and Research In Motion Ltd (NASDAQ:BBRY) BlackBerry are also fringe players as of this writing?
Where am I headed? It’s simple. Google Inc (NASDAQ:GOOG) created an ecosystem that not only rivaled Apple Inc. (NASDAQ:AAPL)’s iOS, but that also rallied support from key handset makers; handset makers that have since gnawed into Apple Inc. (NASDAQ:AAPL)’s market share and sent demand for its iconic iPhone several notches down. Now, Google Inc (NASDAQ:GOOG) is at it again. Remember pro-Apple Topeka analyst Brian White with his preposterous $1000 plus price target on Apple? White issued the price target not once, but twice; most recently in January.
Now, take Brian White’s positive outlook on Apple Inc. (NASDAQ:AAPL), remove the half bitten fruit and add Google Inc (NASDAQ:GOOG) to the picture. Google is in the process of stealing Apple’s $1000-plus share price dream. As of this writing, its share price has, for the first time, crossed the $900 mark and the prospect of it crossing the $1000 mark is brightening by the day.
Where did Apple Inc. (NASDAQ:AAPL) go wrong?
There are no premium products in technology and if so, not for long
The premium product approach doesn’t work in technology. History has shown us that over and over again. Do you remember cathode ray tube color TVs back in the 50’s? Even with a protruding back that was reminiscent of the jawbone of a Zinjanthropus, these colored TVs were exclusively reserved for top income earners in the U.S. Now, however, if you see someone with a CRT TV, I’d recommend you call the police and report a missing artifact; our museums can’t bleed any further.
Apple took the premium product approach and, for some time, raked in unbelievable returns. However, with Google Inc (NASDAQ:GOOG) catering to the masses, the iPhone quickly started losing out to Android handset makers. Not to mention that some unregistered tech buffs in China had manufactured iPhone replicas in epic proportions. This literally divided the market and sent more consumers Google’s way.
Now, smartphones have become a necessity and Google, due its approach of catering to the masses, has the ultimate edge. Technology is a necessity and not a luxury. The snob appeal that Apple has perfected for consumers in emerging markets is now working against it.
A personal account on how Apple is losing out.
So one day, I take a walk on the streets of Nairobi, Kenya; the capital of Kenya and a key investment destination in East and Central Africa. I meet some youth donning a cap and listening to music from his Samsung Galaxy. Out of curiosity, I ask, “You are using Samsung, what do you think of Apple?” He replies, “Sorry dude, the Apple season is over. Right now it’s the season for oranges.” Stunned as you are, a good number of people in the emerging markets know of iPhones but don’t even know of a company called Apple. On the other hand, a good number of consumers in the emerging markets use Google interchangeably with the internet. And Samsung has become the synonym for smartphone.
Even struggling Finnish handset maker, Nokia Corporation (ADR) (NYSE:NOK), has a huge footprint in emerging markets. Not because of its feature phones, but because of its battery life. Most consumers (save for those who can comfortably afford $600 for a smartphone) are driven by simple, yet critically important, needs when purchasing smartphones; needs such as battery life, functionality, and price greatly affect buying decisions.
This explains why Nokia still has a presence in emerging markets relative to the developed markets. Now, however, its feature phone segment is thinning and consumers are giving in to other options. Once the undisputed handset maker, Gartner argues that it has slipped to the tenth position in the global smartphone market and eighth in the overall global handset market. Most of its loss is attributable to the astronomical gain made by Samsung and other Android devices. Also, Android smartphones are offering better functionality at reasonable prices.
Bottom line
Considering the fanatic following that Apple has, I am certain this article will be met with heavy bashing. Nevertheless, I think it’s time to look at things from an investor’s standpoint and put feelings aside. Who is better off? The investor who invested in Google one year ago, or the one who invested in Apple one year ago?
Key hedge funds have foreseen the tsunami of hurt coming for Apple shareholders and have, in fact, pulled out. David Tepper’s Appaloosa management, which manages close to $18 billion, reduced its stake in Apple by 41%, with Tepper adding that he was no longer enamored with Apple. On the other hand, Julian Robertson’s Tiger Management went to the extent of relinquishing its position in Apple. It now owns no shares in Apple compared with 42,125 shares at the end of the prior quarter.
Thus, the bottom line for me is — sell Apple, buy Google.
The article Is Google About to Accomplish What Apple Couldn’t? originally appeared on Fool.com and is written by Lennox Yieke.
Lennox is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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