O dear: Winfrey factor can’t hide whiff of desperation about Apple
In the absence of a novel product and as global smartphone sales droop, when it comes to innovation Tim Cook seems to be tossing in the towel
As Oprah Winfrey bounded on to the stage of the Steve Jobs Theatre in Cupertino, Apple’s late founder may have turned in his grave.
With all the Hollywood razzmatazz that a company with $245bn of cash in the bank can muster, Apple fired off a blizzard of new announcements on Monday, from the launch of new television streaming, gaming and magazine subscription services, to a credit card partnership with Goldman Sachs. But amid the fanfare, the hordes of journalists and a parade of celebrities wafted in for the occasion (from Jennifer Aniston to Steven Spielberg), Tim Cook couldn’t quite conceal the air of quiet desperation about the scene.
What was Apple actually pushing? Certainly not a Jobs-style “magical” new device or piece of technology, dreamed up in secrecy by its brilliant team of designers and unveiled with trademark panache – the traditional formula devised for these events. Nope, this was a victory of style over substance.
All of these services are widely available in one form or another from countless existing providers. Instead, in the absence of a novel product and as global smartphone sales begin to droop, when it comes to innovation Cook seems to be tossing in the towel.
Apple is seeking to prop up revenues by using its continued market heft – with an installed base of 900 million iPhones and 1.4 billion devices – to offer a mish-mash of bundled services. Under the circumstances that may be understandable, but has it really come to this? How did the mighty Apple, pioneering creator of cutting-edge consumer tech, inventor of the iPad, the iPhone and the Apple Mac, find itself reduced to a middle-of-the-road, middle-aged brand flogging credit cards, bland TV shows and subscriptions to Men’s Health and InStyle magazines?
To be fair, it’s not difficult to sympathise with the invidious position in which Cook finds himself. After more than a decade of relentless growth, the global smartphone market, which Jobs created and that fuelled Apple’s spectacular rise to become the world’s first trillion-dollar company in August 2018 – after a 50,000% rise in its share price since it first listed in 1980 – has turned. It is now shrinking, with global smartphone sales expected to fall to 1.8 billion units in 2019, a drop of 3% from 2018, according to figures from CCS Insight.
Apple’s smartphone market share has also fallen from 23% in late 2011 to 18% at the end of 2018 as it has struggled against Chinese rivals including Huawei and Xiaomi. They produce similar products at lower prices, especially popular in key growth markets such as China and India.
Apple has made strategic missteps too. Far from staying at the leading edge, Apple seems to have missed the boat in one of the few remaining hot areas of the smartphone market: 5G, a technology that will offer download speeds up to 100 times faster than existing devices when it is rolled out. About 220 million 5G phones will be sold in 2020, rising to 930 million in 2023 to account for almost half of all cellphone sales, according to CCS. Yet, while key competitors Samsung, Oppo, Xiaomi and Huawei have all unveiled plans for new 5G phones in recent weeks, Apple is not expected to follow suit until late 2020. That hands rivals an 18-month head start, a virtual aeon in the fast-moving and hyper-competitive global handset market.
So what happens next?
Make no mistake. Apple remains a fearsome company with some brilliant people. With a more than $890bn market cap, it remains the world’s second-biggest company with colossal firepower to pull off transformative deals. Sales of wearables such as the Apple Watch and AirPods headphones are still performing well, rising by more than 50% in the final three months of 2018. Its services division, which includes sales of apps and music, increased revenues to $10.8bn in the same period, up more than 25% on a year ago. But iPhones still contribute the bulk of revenue – nearly 62% of the total.
There is no obvious killer product on the horizon that could conceivably replace this. Can Cook’s new strategy of focusing on services work? Perhaps, but it’s hard to see quite why it should. If Apple is no longer about making bold bets on cutting-edge design and empowering, intuitive technology, then what exactly is it?
And if it can’t sustain its position as a technology leader, then it is surely destined to fail as a provider of content, financial services and video games. Naturally, it might take a while for the rot to set in. Cook might yet surprise us with some new piece of genius dreamed up by its cleverest developers, but there is little sign of it yet. Certainly, as Apple, the company founded by Steve Jobs and Steve Wozniack in a California garage in 1976, fights to regain its mojo, Oprah Winfrey seems like an unlikely saviour.
– © Telegraph Media Group Limited (2019)