Changing the World
There is no question that Apple Inc. (NASDAQ:AAPL) products have changed the face of the world over the last decade or so. After falling into obscurity, the company brought back its co-founder and a string of new devices came out. The iPod, iPhone, and iPad changed the way people interacted with music, telecommunications devices, and computers.
While Apple may not have been the first to market in any of the categories in which it is now a leader, it was the first to make the products that customers wanted. All others just followed its lead. After three home runs, however, hitting a fourth is a tall order.
More Competition
Part of the problem is that increased competition is pushing the envelope to the point where Apple isn’t as much of a leader anymore. For example, Samsung teamed up with Google Inc (NASDAQ:GOOG) to make its wildly popular Galaxy line of products. Although the devices look a great deal like Apple’s products, Samsung has been doing a lot more than Apple Inc. (NASDAQ:AAPL).
For example, when Research In Motion Ltd (NASDAQ:BBRY) launched its new smart phone, it had a nifty feature for separating work from pleasure. It also contained the same high-level of security for which Research In Motion Ltd (NASDAQ:BBRY) is so highly regarded. Samsung quickly came out with similar offerings. Apple, not so much.
Moreover, as Nokia Corporation (ADR) (NYSE:NOK) has been working to launch a new high-end smart phone in developed markets, Samsung took advantage of an exposed flank. Indeed, Samsung has started to challenge Nokia Corporation (ADR) (NYSE:NOK) in its emerging markets stronghold with cheaper phones. Apple Inc. (NASDAQ:AAPL), not so much.
New Products or New Markets
Apple has major challenges ahead. If it wants to keep growing it has to either bring out great new technology or find new markets. New markets will become increasingly important as competition heats up in developed markets. New technology, of course, is the harder of the two options.
With regard to new markets, Apple has been slowly pushing into China. That’s not good news for Nokia over the long term. However, it has been a difficult road for Apple Inc. (NASDAQ:AAPL). Not only has China called the company out for treating its citizens “differently” than it does others, but Apple hasn’t been able to secure a relationship with the country’s leading cell phone provider.
According to Bloomberg, that’s a theme that is running through much of the world. For example, Horace Dediu, an analyst who runs Asymco.com, explained to Bloomberg that Samsung has relationships with nearly all of the 800 cell phone companies in the world, while Apple is stuck at around 240. That’s a big difference and means that Apple’s iPhones and iPads simply aren’t an option for billions of potential customers.
Change is Hard
Part of the problem is Apple’s penchant for keeping everything close to the vest. It doesn’t like to open up its technology. Google Inc (NASDAQ:GOOG) and Samsung don’t seem to mind doing that at all. Interestingly, BlackBerry follows a similar model to Apple Inc. (NASDAQ:AAPL), which could be a major impediment to that company’s turnaround effort. Most investors should stay on the sidelines at BlackBerry to see if the company gets some traction with its new phone.
Although on much more solid footing than BlackBerry, if Apple doesn’t start to open up a little it will likely find the going rough. That’s particularly true in countries with strict governments, like China and Russia. This is an important topic for investors to watch. That said, with a near 3% dividend yield and plans to buy back a huge number of shares, the stock should have notable support at recent levels. Getting paid to wait for Apple to figure out how to find new customers may not be such a bad thing.
While Samsung and Google Inc (NASDAQ:GOOG) both seem like they are poised to take over the world, each company is priced for perfection. That makes them most appropriate for momentum investors. More conservative investors might want to take some profits. Nokia Corporation (ADR) (NYSE:NOK), meanwhile, is in turnaround mode, like Research In Motion Ltd (NASDAQ:BBRY). It’s best avoided until investors see some consistent improvement in the business.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.
