Home Listed Tech Steve Jobs where are you? Apple loses its shine

Steve Jobs where are you? Apple loses its shine

First Microsoft, now Apple has posted disappointing results, although not as bad as some had expected. The giants of the industry are falling off the pace. What would Steve Jobs think?

Apple’s third quarter financial results, released at the company’s Silicon Valley headquarters today, reveal a company still coming to terms with the changed world that it, in many ways, created. The results were a little better than Wall Street expected, but still way below the Apple of just a couple of years ago.

Apple had revenues of $35.3 billion in the quarter, making a profit of $6.9 billion (all figures in USD). They are figures most other companies would die for, but they need to be compared with Apple’s recent results. In the same quarter last year Apple achieved similar revenues, but made a much higher profit of $8.8 billion, Apple's massive profit margins are eroding.

One very worrying sign, which few commentators seem to have picked up on, is the decline in Apple's revenues outside the US. Last quarter, 66% of total sales were from Apple's international operations. This quarter, that figure declined to 57%. That is an enormous drop in one quarter, and indicates that Apple is struggling outside of its homeland. The rest of the world is switching off, which does not bode well.

The real story is reflected in Apple's share price, which shows what investors think of the company. No room for sentiment there. In September 2012 a single Apple share sold for over $700, valuing the company at over $650 billion. Now they are trading in the low $400s, meaning nearly $250 billion has been last from the company’s value in less than a year. They did rise on the news of the recent results, but as a reaction to Apple beating very gloomy analysts’ forecasts.

The shares have been declining for a while. The reasons are not hard to find. Lots of research companies publish shipment figures for PCs, tablets and phones. The most credible is Gartner, but they are all saying much the same thing.

Gartner says Apple’s share of the worldwide mobile phone market declined from 22.5% in the first quarter of 2012 to 18.2% for the first quarter this year. Samsung’s rose by nearly as much, from 27.6% to 30.8%. As well as Korea’s Samsung and LG, the Chinese vendors are coming up fast. The iPhone is responsible for around half Apple's reveues, and well over half its profits.

A similar thing has been happening with tablets. As with the iPhone, Apple defined that market when it released the iPad, but now the others have caught up and it is way off the pace, especially when it comes to price-performance.

This decline has been going on for years, since Apple had 100% of the market when it released the first iPhone in 2008. It will decline even further, and everyone knows it.

The new breed of Android devices have made Apple just another player. Its sales are still growing – it sold over 100 million iPhones last year – but the rate of growth is declining as fast as its market share. It sold 31 million last quarter, up from the same quarter last year but way down from 37.4 million in the previous quarter.

And its mind share. That’s important. Apple is not seen as the really cool company any more. Steve Jobs is dead, and to paraphrase Lloyd Benson’s famous comment to Dan Quayle: “I knew Steve Jobs, Tim, and you’re no Steve Jobs.”

The parallels with Microsoft, which announced equally disappointing financial results last week, are many. Both companies redefined the industry - Microsoft in the 1980s with MS-DOS and in the 1990s with Office and Windows, and Apple in the 2000s with the iPod and iPhone and in the 2010s with the iPad..

Both companies had at their peak a market capitalisation exceeding God’s (Apple at one stage nearing a trillion dollars). Both companies had charismatic and visionary founders who were replaced by functionaries.

In both cases, the companies became arrogant through their own success. The ancient Greeks called it hubris – such a blind faith in one’s past glories that you cannot believe it will ever end.

Well it has.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.