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Apple has always been about innovation and creation, but for the first time, Jon Markman of Markman Capital Insight, feels Apple's competitors may have taken the lead.
SPEAKER 1: Hello. My guest today is Jon Markman. Hi Jon, nice to see you again.
JON: Hi Nancy, great to be back.
SPEAKER 1: Yeah, well listen. I was reading one of your articles about Apple recently and obviously Carl Icahn just came out and tweeted several times about his new stake in Apple, but you didn’t seem to be such a fan of that. Can you elaborate on that?
JON: Well Icahn is trying to get Apple to go up. He’s got a very large stake for him. I think it’s a $1,000,000,000 stake and he wants them to improve their standing by issuing debt to buy back stock. You know that’s okay. I mean that’s shareholder friendly but it’s kind of a gimmick and I think that it distracts from what Apple should be doing, which is innovating and creating new products.
SPEAKER 1: What do you think? Are they actually innovating? There are rumors around that maybe a new iPhone is coming out. Maybe something a little more expensive and maybe something not so expensive.
JON: Well you know Apple really created the Smart Phone category with its iPhone. There were already good phones out like the Trio at that time from Palm, but they innovated and created that iPhone. They really created the musical device category with the iPod before that. They innovated and created the Tablet market, which is huge with the iPad, and then they spun off a smaller version of the iPad, the iPad Mini, all of which were great innovations and drove Apple Stock higher. Because they were scarce products they also had fantastic margins. In the past few years, Apple seems to have taken a vacation from innovation. The last two phones have been a disaster, both the hardware and on the software side. You can’t really take two years off in this market. In the meantime, their competitors have not stood still; particularly the Android operating system has gotten better and better. It’s taking more and more market share away from Apple. When you lose market share you also lose the opportunity to drive margins higher. Apple’s really finding itself in a very difficult spot right now. They need to catch up to the Android devices and then it needs to surpass them. It’s very hard to do that when you’re losing market share, so I think it’s got a really hard road ahead of it. I think people will be disappointed with it, the next iPhone. There won’t be anything that’s new enough to capture their interest. The next thing that people have on their minds for Apple is something called Apple TV. Nobody knows what this is. It’s like a snipe hunt.
SPEAKER 1: You never found a snipe?
JON: No one’s ever found a snipe and I don’t think anyone’s ever really going to find an Apple TV. The reason that Apple TV is so difficult, whatever it might be, is that they’re trying to find a new way of trying to help people have a new experience in watching television, but in the five years that we’ve been talking about Apple TV, TV has changed dramatically already without Apple. You know it’s already a lot easier to unbundle your cable by watching various shows online through Netflix. HBO and Showtime have also been great innovators, and so although Apple can come out with a new device, those incoming cable companies and the carriers are going to make it very difficult for them to capture any margin in doing so. I think people will be disappointed with that product.
SPEAKER 1: Do you think that they could possibly go the way of BlackBerry or RIM?
JON: You know nobody thought BlackBerry could go the way of BlackBerry. Nobody thought Palm could go the way of Palm. So could Apple implode? Of course it could. I don’t expect it but it certainly could.
SPEAKER 1: Thanks for joining me Jon.
JON: Thank you.
SPEAKER 1: Thanks for being with us on the Moneyshow.com Video Network.
Tickers Mentioned: AAPL