Later that same day, perhaps not coincidentally, mega investor
Carl Icahn (aka the most notorious corporate raider of the '80s),
conveyed his opinion just as succinctly. "We currently have a large
position in APPLE," he tweeted. "We believe
the company to be extremely undervalued. Spoke to Tim Cook today.
More to come."
With that, he goosed AAPL stock nearly 5%, adding $17 billion in
market cap to the company by the end of the trading day.
Which billionaire should you side with? That depends on how you
feel about Apple's ability to continue to innovate -- i.e., is an
Apple "smartwatch" really imminent? -- and where you think its
existing products will fit in a rapidly morphing marketplace.
On the one hand, as my
colleague John McDermott reported last month, Apple set a
record for its June quarter, selling 31.2 million iPhones, vs. 26
million in the same quarter last year. Investors welcomed that
news, but it's worth noting that Apple's revenue-per-phone has been
dropping -- to $581 per unit in the June quarter vs. $608 in the
same quarter last year. (Consumers in the U.S., of course,
typically pay only a fraction of those prices because carriers pay
the balance of the real cost of iPhones as a contract-signing
inducement.)
Now consider that last week research firm
Gartner announced that smartphones outsold feature phones
worldwide for the first time during the April-to-June quarter.
In other words, we've reached a tipping point and now smartphones
are becoming almost commoditized. And along the way, Apple's
position as the maker of the definitive smartphone eroded.
Per Gartner, Apple's global smartphone market share dropped to
14.2% from 18.8% in the same quarter last year. (Samsung currently
leads with 31.7% market share.)
But Apple seems poised to introduce a more competitive set of
iPhones -- including, possibly, a more affordable "emerging market"
model -- so let's move on to Apple's other marquee product, the
iPad.
There the news is really grim: iPad sales dropped to 14.6
million units during the June quarter, vs. 17 million during the
same quarter last year. (Mac sales -- oh, right, Apple still makes
desktop and laptop computers -- were also down, from 4 million to
3.8 million.)
Various industry observers have put forward explanations (e.g.,
channel inventory, the lack of a new big-screen iPad model), but
what I find alarming is the fact that last November's introduction
of the more affordable, more portable iPad Mini didn't mitigate the
iPad's overall sales decline.
I've got friends and colleagues who continue to adore their
iPads and who would find the idea that iPad sales are sinking --
that the iPad has possibly already peaked -- to be mystifying.
Then again, my friends and colleagues and I mostly live in
certain sorts of bubbles -- media bubbles, socioeconomic bubbles
(middle-class and up), etc. -- and we tend to have lifestyles in
which owning an expensive, dedicated media-consumption device makes
sense.
But look around at the real world -- the rest of the real world,
I mean -- and you'll understand why high-margin-loving Apple is
increasingly finding it hard to compete in a category it basically
created. Because $499 and up for the iPad, or $329 and up for the
iPad Mini, is just too damn expensive. Meanwhile, Apple's
competitors are getting really good, really fast, at creating
cheaper, better iPad alternatives.
But, heck, in certain -- arguably most -- socioeconomic circles,
paying even $239 for Google's just-released, excellent Nexus 7
($100 less than the iPad Mini it competes with) is still probably
too much for a dedicated media-consumption device. Especially when
you consider how many millions of people are more than comfortable
enough already, thank you very much, consuming media on the
increasingly awesome, ultra-portable, pocketable, multipurpose
devices they carry with them absolutely everywhere: their
smartphones.
And with the rise of big-screen smartphones, well, remind me
again why I need an iPad Mini or, erm, an iPad Maxi ... or any kind
of tablet, for that matter?
Earlier this month, Bloomberg
News reported that "Global tablet shipments slowed in the
second quarter from the previous three months" -- unit sales
declined 9.7% to 45.1 million -- "as consumers delayed purchases of
Apple's iPad to wait for a new model expected later this year,
according to researcher IDC." OK, sure, that's one explanation.
Another explanation, a scary one, is that maybe the tablet
market is way niche-ier than we in the tech, media and marketing
worlds thought it would be. And the iPad is becoming the high-end
niche within a niche that big-screen smartphones are
cannibalizing.
How small could that niche-within-a-niche get? Stay tuned.
Simon Dumenco is the "Media Guy" columnist for Advertising
Age. You can follow him on Twitter @simondumenco.
