Time for Apple to make the angels sing

Its shares fell despite reporting revenues of $57bn. The pressure is on for the technology giant to find its next big thing

New York

When consumers switched on the first Apple Mac computer 30 years ago, it is said that for many of them “angels started to sing”.

At crisis points in the development of the company, that same ability to innovate, to bring an “insanely great” product to market, came to the rescue.

The MacBook, the iPod, the iPad, the iPhone – they all blew consumers away.

Well, if ever Apple needed to make the angels sing again, this is the time.

The company's stock has taken a hammering in the last two days despite announcing record sales of iPhones and iPads late on Monday. Record sales they may have been, but Apple is losing overall market share in global smartphone sales at an alarming rate.

Much of the pressure to make the angels sing again is likely to fall on the shoulders of Newcastle Polytechnic's most-famous design graduate, Sir Jonathan Ive, Apple's British-born design chief.

With Steve Jobs no longer around, markets are looking to Sir Jonathan to come up with the goods.

Apple's stock fell another 8 per cent in early trading on Tuesday to around $508 (£306), down from more than $700 in September 2012. One analyst, Bert Dohmen, predicted the stock may fall as low as $320.

With the corporate raider Carl Icahn building a stake in the company and agitating for increased stock buybacks, Apple may have to act faster than it would like.

When a company announces record sales of 51 million iPhones, 26 million iPads, record revenue of $57.6bn and maintains a gross margin of around 38 per cent, and its stock falls as much as Apple's has in the past day or two, something is very wrong. And it is that in the same breath as announcing record quarterly revenue, Apple also forecast that revenue in the current quarter would be between $42bn and $44bn, below many analysts' estimates of $46.1bn. Cue the sell-off in the shares.

Investors and analysts had hoped that Apple's contract with China Mobile, the world's biggest wireless carrier, would have led to more optimistic forecasts. They were disappointed.

“I think all investors were looking for brighter expectations for these new products and not such a sharp fall off,” said Morningstar analyst Brian Colello.

What really concerns many analysts is that Apple is securing a smaller and smaller percentage of the global smartphone market as serious competitors and cheaper producers alike take their share of customers.

Research firm Strategy Analytics says Samsung had almost 30 per cent of the world's smartphone market in the fourth quarter, way in front of Apple's 17.6 per cent. Apple's share of that market was roughly 22 per cent about a year earlier.

Apple faces the classic dilemma confronted by many companies: produce cheaper products, sell more of them, but at reduced profit – or keep its products high end at higher prices and higher margins but risk taking a smaller market share.

Apple's chief executive,Tim Cook, said on Monday night that the company's objective has always been to make the best, not the most.

So it's settled then? Well, for now at least.

“They either stay on the high end and make very good gross margins but maybe growth is a little less than expected… or the other way around – they drive growth but it's not very profitable,” Mr Colello said.

He stressed that Apple still has armies of loyal customers, but that “it's just trying to gauge how much further growth there is beyond that in places like China and other emerging markets and right now it just looks like it's a little less than anticipated.

“It just seems they are going to sell fewer units than what we expected of their main products.”

The timing of all this is troublesome for Apple. The company is currently sitting on $159bn of shareholders' cash and it is under pressure from Mr Icahn and others to increase its share buy-back programme.

Mr Icahn is a very resourceful operator and he is unlikely to go away soon.

Apple has faced down other crises in its storied history –and what saved it was always innovation. If Mr Cook is true to his word and Apple refuses to sell 'em cheap and pile 'em high, then innovation has to be the answer. Apple needs its next “insanely great” product or service.

There is talk of new product categories this year in “wearables” and TVs and perhaps “in-car systems” – but no firm details.

Apple just needs to bring us the next great thing we did not know we needed. No pressure then, Sir Jonathan. Just make the angels sing.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Guru Careers: Financial Director / FD / Senior Finance Manager

Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...

Recruitment Genius: Junior / Apprentice Sales Executives - OTE £50,000

£11000 - £50000 per annum: Recruitment Genius: This financial company offer ma...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen