Apple unused to being attacked, must adjust to new role on defense, analyst says

Posted:
in AAPL Investors edited January 2014
Apple has bested most all of its competitors and is widely acknowledged to make some of the highest quality products in the world, but now a new report says the tech giant will have to adjust to its new role as an industry heavyweight, a change from its traditional underdog status.

iPhone
With the iPhone, Apple is in the unfamiliar position of having to fend off competitors.


In a report titled "Identity Crisis: Can Apple Play Defense?" UBS analyst Steven Milunovich reiterates his previous 12-month rating for AAPL, calling the stock a Buy and targeting $600 as a price. The report cautions investors to remain patient with the stock, though, as the trend for AAPL is still likely to show more downside before it moves back upward.

The report notes, though, that Apple is in somewhat unfamiliar territory as a company. Once Microsoft's Windows achieved dominance in the OS wars, the Mac was relegated to a niche position, with a core of loyal users but diminishing share as the PC market grew ever larger. With the iPod, Apple finally achieved a leadership position, and the company never faced any serious competition in the media player segment.

Now though, Milunovich writes, the iPhone and iPad "are the first times Apple has had a leadership position drawing significant and competent competition." That competition comes in the form of an array of Android handset manufacturers, specifically chief Apple rival Samsung. Apple maintains significant leads in terms of profitability, product quality, and overall product ecosystem, but its competitors are looking to close the gap.

Apple, says Milunovich, is caught between its traditional focus on product quality with high revenues and investor demands for both lower-priced and larger-screened phones to compete Android devices. Milunovich is doubtful that Apple will rush out a five to six-inch phone in order to address those demands, saying that most companies would probably do so but that Apple likely won't.

"It doesn't appear to be in Apple's DNA to cover market spaces just to get revenue," the report concludes.

The report points toward innovation in new product areas as a potential way for Apple to deal with increasing competition. Others have previously pointed to rumored devices such as the Apple iWatch as a way of growing revenues even as the premium smartphone segment approaches saturation.
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Comments

  • Reply 1 of 48
    "A good offense is the best defense."

    ...Which is something Apple EXCELS at.
  • Reply 2 of 48
    allenbfallenbf Posts: 993member
    Doomed. Samsung is out-innovating Apple now. Apple is losing market share. Tim Cook should be fired.

    Did I leave out anything?
  • Reply 3 of 48
    I'm really not interested in a big a$$ watch on my arm even if it is thin. Apple TV is a good idea but it doesn't give me any more than I can get streaming things with my Mac Book.

    My four and five year old computers still do everything I need them to do. Home computing technology is so good that it doesn't require updates as often as in years past. Today's iPod Touch is more powerful than my 2002 Gateway desktop computer.

    If Apple can create something in a new category that would benefit me I'll take a look at it.

    When iPads come with card readers and a cool file system then I'll be interested in buying one. The multiple tiers of SSD storage models just isn't appealing to me. It is a good marketing tool for jacking up the profits and I understand that. So be it.
  • Reply 4 of 48

    Quote:

    Originally Posted by AppleInsider View Post





    Now though, Milunovich writes, the iPhone and iPad "are the first times Apple has had a leadership position drawing significant and competent competition." 



     


     


    He's exaggerating.  Apple had a leadership position ten years ago in MP3 players and it was competing with plenty of heavyweights.  Apple's management is more experienced than Milunovich gives them credit for.

  • Reply 5 of 48
    dasanman69dasanman69 Posts: 12,969member
    He's exaggerating.  Apple had a leadership position ten years ago in MP3 players and it was competing with plenty of heavyweights.  Apple's management is more experienced than Milunovich gives them credit for.

    The iPod didn't come under attack as much as the iPhone/iPad.
  • Reply 6 of 48
    baytedbayted Posts: 13member


    Mac is used to being attacked. Apple has to deal with this for a long time.


     


    iPod has been successful in defending, but that market is not very big to attract big players, like Google, Samsung.

  • Reply 7 of 48
    He's exaggerating.  Apple had a leadership position ten years ago in MP3 players and it was competing with plenty of heavyweights.  Apple's management is more experienced than Milunovich gives them credit for.

    Twenty years ago, Apple II dominated personal computers before IBM PC came, and for old timers, "legitimized" these newfangled microprocessor based computers. MS-DOS rose to dominance on the back of the IBM PC. Apple never recovered that market share. A series o flops such as the Apple /// and Lisa showed Apple could not compete with IBM, and soon afterwards, it's clones.
  • Reply 8 of 48
    jungmarkjungmark Posts: 6,592member
    Twenty years ago, Apple II dominated personal computers before IBM PC came, and for old timers, "legitimized" these newfangled microprocessor based computers. MS-DOS rose to dominance on the back of the IBM PC. Apple never recovered that market share. A series o flops such as the Apple /// and Lisa showed Apple could not compete with IBM, and soon afterwards, it's clones.

    You mean 30 years ago. It was due to Apple having a sugar salesman in charge in the 80s and morons in charge in the dark period.
  • Reply 9 of 48
    bullheadbullhead Posts: 493member


    another clueless analyst writing completely stupid statements. We all know Apple never had any competitors before. And we all know Apple makes no money from phones, tablets, and computers.

  • Reply 10 of 48
    sflocalsflocal Posts: 4,342member

    Quote:

    Originally Posted by AppleInsider View Post



    Apple, says Milunovich, is caught between its traditional focus on product quality with high revenues and investor demands for both lower-priced and larger-screened phones to compete Android devices. Milunovich is doubtful that Apple will rush out a five to six-inch phone in order to address those demands, saying that most companies would probably do so but that Apple likely won't.



    "It doesn't appear to be in Apple's DNA to cover market spaces just to get revenue," the report concludes.




    Apple needs to tell those whining investors that if all they care about is bottom-feeding and scraping the barrel to get every last dollar, sell their AAPL stock and go away.  Fed up with these people thinking that in order to compete, they have to join the herd of money-losing ventures.



    Apple may not be #1 in quantity, but they are getting all the profits.  Yet it's not enough for some.

  • Reply 11 of 48
    dasanman69 wrote: »
    The iPod didn't come under attack as much as the iPhone/iPad.

    I would say that this is just incorrect. Not that the iPod isn't the dominant player in the field, but that it didn't have competition. In reality, there were a lot of competitors out there. The sad fact though, is not one could compete with the iPod (thus the term so many times used of "iPod-killer").
  • Reply 12 of 48
    sflocal wrote: »
    Apple may not be #1 in quantity, but they are getting all the profits.  Yet it's not enough for some.

    I love this. The way I explained it to my son was this. Profit shows the health and wealth of a company. Market Share is just for people who like to measure certain anatomical properties.
  • Reply 13 of 48
    It's also misleading to characterize Apple iPhone as having lost market share. The iPhone started with zero-percent marketshare in 2007 against entrenched smartphone competitors like Nokia and RIM and Palm and Microsoft Windows Mobile licensees. While Apple has steadily won share away from this existing smartphone market, it has also gone after the larger market of feature phone users who are buying their first smartphone.

    The same applies to the iPad. Some regulars on these forums buy the fiction that Apple had 100% of the tablet market in 2010, but you have to define the "tablet market" as modern iPad clones so as to exclude all the Windows-based tablets that came before it.
  • Reply 14 of 48
    paxmanpaxman Posts: 4,589member

    Quote:

    Originally Posted by bullhead View Post


    another clueless analyst writing completely stupid statements. We all know Apple never had any competitors before. And we all know Apple makes no money from phones, tablets, and computers.



    Disagree. Though this is not particularly insightful it at least makes sense. 

  • Reply 15 of 48

    Quote:

    Originally Posted by AppleInsider View Post



    "It doesn't appear to be in Apple's DNA to cover market spaces just to get revenue," the report concludes.


     


    Isn't this a good thing?

  • Reply 16 of 48
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by AppleInsider View Post

    …six-inch phone…


     


    Sweet mother of frick, this phrase has now been said in actual seriousness. What moron wants a SIX INCH PHONE?!






    "It doesn't appear to be in Apple's DNA to cover market spaces just to get revenue," the report concludes.



     


    Huh. An intelligent analyst. Never saw that coming.

  • Reply 17 of 48
    Uhm, iPad mini? Keeping previous two iPhones in production so carriers can offer them at $99 w/contract and 0$ w/contract (at least in the U.S.)?
  • Reply 18 of 48
    macgizmomacgizmo Posts: 81member

    Quote:

    Originally Posted by allenbf View Post



    Doomed. Samsung is out-innovating Apple now. Apple is losing market share. Tim Cook should be fired.



    Did I leave out anything?


    No, I think you about covered it. Unless you wanted to add the obligatory "MAC suxorz!" as a closing statement.

  • Reply 19 of 48
    quinneyquinney Posts: 2,521member
    sflocal wrote: »
    Apple needs to tell those whining investors that if all they care about is bottom-feeding and scraping the barrel to get every last dollar, sell their AAPL stock and go away.

    That seems to be what has happened the last few weeks.
  • Reply 20 of 48
    tokyojimutokyojimu Posts: 384member
    My sister told me yesterday that she's giving up her iPhone for a Note2. She wants the big screen. This seems to be a trend among my friends. Apple cannot ignore this demand for long.
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