Communities Dominate Brands

It Opens Like a Book - How 'Good' Would a Fold-Open Screen Be Like? Anticipating Samsung Innovation

At first thought, a 'fold open' screen for a mobile phone does seem 'obviously better'. Every one of us has been in that situation at some point, with some picture, video, website, game or other content, when we felt "I wish the screen was bigger". And I've been on this blog telling that 'Screen Size Trumps Everything'. We've seen the reversal from the trend of mobile phone handset devices getting ever smaller (from 1980s to 2007) and the opposite, via first the original iPhone, and then subsequent ever-larger screens which have brought us the massive phablet screen sizes that barely fit into any pocket or hand. By the two most important measures of the three measures of physical size (Height x Width x Thickness = Volume) and I mean height and width (not thickness) the modern largest phablet phones are larger than most commercial mobile phones of the mid 1990s.... Only by the thickness aspect, are we currently ahead of the phones from two decades  ago. yeah, thats 'progress' for you. 

So when someone says 'how about a folding screen on a mobile phone' - folding like a magazine, to give us a larger screen - that does sound like a brilliant idea. That oh yes, please, lets not try to make our current oversized phones even larger, what if we had a smaller phone, and just offered it with a folding screen in some way, that gets us the larger screen size, but in a far-smaller handset overall (while then, very likely, somewhat thicker, bulkier, to allow for two layers of the screen element, when folded into our pockets).

Well, we're probably gonna see it soon. Samsung has been teasing developments into that direction and now it does start to look, like we may see the first flagship phone by any major brand, that has a folding screen that folds in half when in the pocket, and opens up to twice-size when opened up for any screen work. It may be somewhat like an old Motorola flip-phone (flipping upwards) but its more likely to be like a 'palmtop' such as a Nokia Communicator, opening sideways. Like a book. It may end up having an extra screen, smaller, to use when it is 'closed' like later editions various flip phones and folding phones like Communicators. So you don't have to open the folding screen to use it. 

COMMUNITIES DOMINATE ORIGAMI

And that has me thinking (oh-oh...). Will it really be any good? I don't mean mechanically (will it be durable, will the seam between the two sides of the fold, be visible..). I mean for the CONSUMER. What good would a folding screen really be?

And first off, you might say, duh, Tomi. It is TWICE the size of the screen! As long as the phone doesn't cost twice as much, of 'course' it will be better. It will be twice as good. Didn't you say that screen size trumps everything? 

Yes, I did say that. But we have a nagging warning from the recent past: the hapless Blackberry Priv and its square screen. No matter how you turned it, horizontal or vertical, you could not get more to see in a movie, video, photograph. Unless that picture was taken with some ancient square-film camera, you only lost and never gained with the square screen. So aspect ratio plays a big role in our display. So old style TV images were 4.3 aspect ratio but most modern flat screen TVs are in 16:9 aspect ratio (Wider). And movies often are in 'widescreen' which can be as wide as 2.2 to 1 aspect ratio. And recently we've started to see wide-screen smartphones in the rough mid-point between those, using an 18:9 aspect ratio.

BABY YOU'RE SO SQUARE

So what does this do to our viewing pleasure? Lets stay with the most standard screen size today, 16:9. And lets flip our screen. Here the blue screen is any regular smartphone in portrait mode, and the yellow part is the same screen turned sideways to horizontal orientation for landscape images, videos & movies:





Now, lets try a twin-screen out of the same phone. So it is standing up, portrait, identical size to the above, and is a 16:9 aspect ratio screen. Then we open it up 'like a book' (or magazine) and we get two screens, side-by-side. But what happens when we view something on it? What? A standard video clip on YouTube or the picture we just received about our nephew? If we now use the double-screen to view any content that is formated for 16:9 aspect ratio video, and we view it on the double-screen, we get this yellow image. I have superimposed on the same image, what would be the SAME screen, in single-screen size, but flipped sideways to landscape mode....


 



Note the gain is truly modest. The light green image sideways is not twice as big as the blue screen sideways. It is only 26% larger in area, and only 13% wider. It is yes, visibly bigger, but only just. Barely so. Is this worth a ton of money? I kind of doubt it. The concept might not be worth the extra money and it could be a huge waste of effort. Because most people who could afford a premium Samsung folding-screen smartphone, would also own other phones and definitely have friends with similar phone screen sizes (unfolding phones) and the comparison would be too easy to make. How much more are you gaining from this? Not really that much, considering the folding screen IS twice as big (costs at theoretically twice as much in pixels, but probably even more, due to the folding tech, and while the whole phone won't need to be twice as expensive, this would definitely mean a more expensive phone...).

LIFE'S GOOD

That is with a 'normal screen' phone, at the 16:9 aspect ratio. What happens if we do the new wider 18:9 aspect ratio? Now there is literally no gain (in terms of width of image, vs flipping the same phone screen side-ways). Then the image looks like this:






Yeah maybe LG was playing some offense in its defense against Samsung, when they introduced the 18x9 aspect ratio screen size haha... Ok. How DO we gain from the folding screen? Would you believe it, the best gains come if we go down to old-fashioned screen formats, like 4x3 of old TV. Here we DO get a benefit, especially if we are viewing 16:9 type of content (which was already poorly fitting to the orig 4:3 screen). If Samsung went 'back' to this type of screen format, then the GAINS would be big from doubling the screen... 




(Note that I now added a new color, red, to illustrate the 16:9 format image on the single-pane 4:3 screen, turned sideways for landscape viewing.) But the OTHER issues with phones would then come into play - in other words, we'd get wide phones that don't fit in our pockets (as modern phones have screens that go very near to the edge of the phone. What could we then do? If you want DRAMATIC increase in a folding screen, then you'd really need to go to 3-way folder with 16:9 aspect ratio. THIS is what would be an impressive folding screen:




But that would then bring us tons of new problems such as... the second fold. Its not like folding paper (yet, haha Communities Dominate Origami)

I don't want to sound like a wet blanket, and I DO DO DO so hope for innovations and new form factors for our phones... but the folding screen? Gosh, it does seem like awefully lot of trouble for a truly modest gain. It might turn out not quite the miracle breakthrough that we had hoped..

iPhone X: Now the pain

Well that was a nothingburger. Apple's event is over. The new flagship iPhone X has what? Wireless charging and face recognition. Oh, and don't forget the animated emoticons. For this the price is jacked up by more than 200 dollars to $999 without contract for the cheapest Model X. Seriously? The screen is SLIGHTLY larger in a slightly smaller body. Then the rest is utter cosmetics and trivial tweaks. But the flagship iPhone price is suddenly jacked up by a quarter? This may bring nice revenues from most loyal iSheep but some who were already concerned about the price evolution of the iPhone line, and had started to ponder a possible rival phone, they may well now feel that this is just going too far.

I did expect SOME magic to suggest this, the largest leap in iPhone's price in its history (as percent compared to previous flagship) but no. Nothing there. So while yes, the loyalists will stand in line for the X, this flagship will not grow Apple's iFlock. In fact, this will scare away some who were lukewarm nearly iBelievers and this is a great opportunity for many rivals to snatch SOME high-value iCustomers to the Android fold. And this underwhelming iX comes at a time when Samsung's Galaxy Note 8 is doing record business for the Sammy; and various next-tier players from Huawei to Xiaomi to Vivo are reporting hot sales - and even a nearly-forgotten Nokia brand is doing a flagship for us. The iChains are strong but they are not unbreakable. Some will say they can't see the value in the iPhone X, not if they have to pay $999 or more.

At the same time the other two new iPhone models numbered 8, are also priced very highly and not priced to move the model line into any new market segments at all. The only stuff Apple has for those lesser mortals who would pay TWICE THE AVERAGE RATE of a smartphone - is old obsolete iJunk smartphones. All this spells to me - lackluster iPhone sales into the Christmas quarter ie calendar Quarter 4, and poor performance in China's New Year gift-giving period that follows in the January-March calendar Quarter 1. With Q4 lukewarm sales - after how this year has gone for the iPhone - we can expect roughly flat iPhone unit sales vs year 2016. We could see a fall in iPhone sales vs 2016. That would be the second year of falling iPhone unit sales. (Warning bells? Anyone? The overall smartphone INDUSTRY is still growing. Why is Apple not able to even match the growth level of the industry?)

Worse than that, is how it bodes for the start of next year. This is Apple's 'best shot' of the year, and it is truly underwhelming - combined with highway-robbery level price increases. Any sensible rival can make SMALLER price jumps, but put in some more exciting tech, and steal some of Apple's potential customers - in particular those who are not yet fully in the iSheep camp. Samsung's next Galaxy flagship has a HUGE opening now to move some goalposts (and there is the persisting rumor that we will get a folding-display to double screen size). If we get two years of falling iPhone sales, as is now quite possible - it then sets quite large hopes/expectations for the XS model for this time in 2018. And there IS a surging Huawei coming. It has held the third-ranked smartphone manufacturer title for four years in a row (annual unit sales) and certain to add this year, to make it 5 in a row. In that time Apple has fallen from 20% to 14% while Huawei has climbed from 5% to 10%. By the summer of 2018 we should see individual Quarters where Huawei inches just ahead of the iPhone - and then that will be a dramatic shock to many who have truly iBelieved in the iMagic and in imaginary iEconomics. Around year 2019 we may see full-year sales for Huawei on par with Apple and a true race for second place (Samsung is obviously safely the largest smartphone maker now and then).

Well.. the old adage holds true - to see what Apple will do next on its flagship, just look at an old Nokia flagship. Wireless charging? Nokia had in 2014... Now as to things like OLED displays haha, those have been staples on various rivals from Samsung to Nokia for YEARS. 

Will this new iPhone 8 and X model line sell well? Yes. Will Apple make massive sales revenues and humongous profits? Sure. But will these phones grow Apple's market share? Of course not. Apple has not just stopped growing market share (5 years ago) but it has now stopped even growing mere unit sales. And if you thought last year was an anomaly, and the 'anniversary iPhone' would somehow fix the 'temporary' drop in unit sales then no, that will not happen. These iPhones will continue the slow decline in annual unit sales of iPhones. And while most iFans will just cheer on, giddy in ridiculous-level profits - some sensible analysts will start to get a .. little bit .. alarmed that wait, haven't we seen this movie before?

Now about movies seen before. I gave you a prediction on this blog about a total flop for the Apple Watch. I said there is no market for smart watches and the iWatch, sorry the Apple Watch will not survive to 3 editions. On that, today I have been proven wrong. Apple did get its third edition Apple Watch out - so yeah, I am not infallible and I got that call wrong. As to smart watches? They are a disastrously bad market opportunity for anyone. If Tim Cook wasn't personally married to the apperance of the Apple Watch as his first 'post Steve Jobs' product, he'd have killed it already. But yeah. There is SOME sales. The sales numbers are so bad - that Apple refuses to give us the numbers and hides behind guesses made by analysts. We know from that, that the true Apple Watch numbers are EMBARRASSINGLY bad. But yeah, I predicted that Apple would pull the plug at this stage. They rather maintain the embarrassment for another cycle. Ok, I got that guess wrong. I still hold that there is no big market for smart watches and that if Apple honestly felt the Apple Watch was a success, they'd be yelling about those sales numbers and publishing them at every Quarter. Apple know the iWatch is a total flop. But ok, they did make a third edition. I did get that call wrong. I am sorry about that. Just don't be mistaken into thinking there is any sustainable mass market for any wrist-based media etc... Some iSheep will wear the iBracelets yes, but there is no mass market for smart watches. It will be a fad that will soon be gone.

Back to iPhones. Am truly disappointed in that Apple had nothing amazing for us, yet it did that outrageous price bump. Again their timing is off. Apple COULD have done this when they did the phablet screen bump. At THAT point, Apple left so much money on the table and had a missed opportunity (I told you then, calculated on this blog, that a market for $1,000 dollar price premium smartphones was viable). But this move now, with this lame an upgrade, is going to hurt Apple. Not that they would be in any danger for their total revenue growth or profits, but for unit sales - now it looks like a second year of unit sales numbers actually fall - or at best, are flat vs 2016. There is no 'recovery' powered by the anniverary iPhone.

Now finally. We do know how Apple intends to revise modern mathematics. The new iMath by Apple goes like this, based on iPhone model numbers: 0, 2, 3, 4, 5, 6 7, 8, X. No ones, no nines. And the 'cool way' to 'write' a 10 (which by octa-math is of course what we know as an 8 on our decimal system) is with X. I could go with that, but by that logic, shouldn't a 'zero' then be a slash? like / or would the zero be \? I am not sure...  

I am not saying Apple is doomed. I have NEVER said that on this blog. I AM saying, that this X model and the 8 iPhones will not resurrect the iPhone line into unit sales growth. And yes, obviously, I was correct back when I said that Apple's market share had peaked. That has never recovered either. More market share declines coming. But Apple the company will be fine, more revenue growth and more profits yes. Just don't think the iPhone or iOS is anything more than a niche market. Rich, large niche yes, but a niche market. The mass market and digital future of the next decade (indeed, this century) belongs to Android and Google.

Anticipating Apple Strategy Shift with iPhone, with Warning From History

There are a bunch of stories that signal the timing for an Apple shift in strategy. Some numbers from Apple tell that the 'next iPhone' has not materialized (iPad, Apple Watch) and the old businesses have more-or-less peaked (Mac, iPod) and now we are possibly on the verge of 'Peak iPhone'. If the iPhone business also stops growing in unit sales - I do not mean grow market share in iPhones, that stopped several years ago (and this blog was the first to point it out) but I mean, actual UNIT sales of iPhone will ALSO peak at some point in the future (or may have just now peaked). That too is inevitable, only a question of time. The iPhone is a premium phone brand, it will not be sold to everybody with a phone: it is too expensive for that. It means, literally, that there will have to be a limit to annual unit sales, that the iPhone can achieve. And we are now close to that final limit. I personally don't think they've yet hit the absolute peak iPhone but they well might have. And even if they still manage to grow this year vs last, then very soon, possibly next year already they will stop growing and indeed, we would have reached peak iPhone. But even if Apple is able to magically create five years more of tiny growth per year vs last, they will hit their peak in the coming years. That is inevitable. Peak iPhone is imminent.

Then Apple needs one of four things. It needs to either grow the iPhone into where the market has grown (lower cost iPhones, that could cannibalize iPhone sales, revenues and profits); or invent a 'new iPhone' type of product category (I advocated for the iCamera to be that). Or they have to adjust their strategy from pursuing unit sales to pursuing higher revenues from the same sales (raising prices - this usually means lowered sales, however). Or fourth - they could change their strategy from pursuing unit sales, to pursuing increased profits. Make more profits per device sold. Then even as their overall market has stopped growing, they could still bring more value to shareholders, by delivering better profits. Bearing in mind, that Apple is already the most profitable company that has ever existed in human history, this would be quite a thing haha, but that is the fourth option. These are not 'mutually exclusive' options, Apple could try more than one of those simultaenously, of course.

Now the immediate next step from Apple seems to be breaking the $1,000 price barrier for the iPhone (ie option 3, raising revenues without increasing unit sales). Note, this also is a strategy that was first offered on this blog (at least, first that included any scientific analysis ie offering the current handset price pyramid, and ilustrating that strategically, it was possible for a premium handset maker like Apple, to raise their prices. In other words, that I felt there was a market segment of consumers who would be willing to pay up to $1,000 for a new iPhone, when new iPhones back then cost about $600 a piece - excluding the handset subsidy of a 2 year contract of course. All prices that I talk about on this blog are the real price, not the fake subsidised price distortion that is still in use in some countries like the USA). So yes, sorry about that, you can blame this blog for at least partly contributing to the direction that we suddenly got a few years ago, when top-end phones started to be priced at ever higher levels... So in terms of this 'strategy' of suddenly 'alarmingly' high prices for iPhones, yes, this blog argued that strategy first (at least first, when supported by current market data of handset prices). If Apple do now release an iPhone 8 at the 999 dollar or above price, then yes, this blog has once again, predicted correctly the direction of Apple's iPhone strategy's near future. So what are you thinking next, oh Sage Tomi? Haha. Lets take a lesson from history. A painful one.

WHEN YOU ONLY HAVE A HAMMER

So, first the warning. If the only tool you have is a hammer, you tend to see every problem as a nail. My background was strongly influenced by my last full-time employment at Nokia HQ (I left 16 years go) Yes, I've been a consultant, analyst and author ever since, and worked with almost every player in the industry but in some ways, you can see throughout my writing, that Nokia plays a disproportionate part in all of my analysis. I tend to see lessons from Nokia in various developments we have in the industry. So just a word of warning to start off, I will yes, make a Nokia analogy here, and it may just be that I am foolish about now having that hammer and seeing any problem as 'Nokia happening again'. But don't worry, this is not about Stephen Elop the most incompetent lunatic CEO ever to run any company (and to destroy it). This is about the decade that came before Elop. This is a lesson for Apple of how Nokia approached a very similar situation in the same industry.

So you like Apple today? Biggest mobile company by revenues and profits. The most valuable company in its industry (actually, most valuable company of any time in any industry). Recently made a management change, its iconic CEO is now gone. The market share growth has stopped, stalled and turned into decline, but the company easily makes the biggest profits of any rival in its industry. Now consider Nokia only twelve years ago. Nokia was the world's largest mobile company by revenues and profits. It had the largest market share of all phones, but its market share had peaked. Its iconic CEO was scheduled to soon quit, and a successor was being groomed already. And Nokia announced that it will stop pursuing market share growth, it would shift to pursuing profit growth instead. And part of this shift, was to move from lower-cost 'featurephones' ie 'dumbphones' to the new highly-profitable 'smartphones'. Also Nokia wanted to sell its very low-profit networking unit (that part which today remains, as Nokia later was forced to sell its total handset business to Microsoft).

Initially Nokia's strategy worked well. For a few years. It continued to make incredible profits, and through two world recessions, Nokia was the only full-portfolio handset manufacturer that was profitable in its handset unit in ever quarter. Every other full-portfolio handset maker rival of Nokia at that time - from Motorola to SonyEricsson to LG to Siemens to Samsung - reported losses in their handset unit, at some point in those world recessions (I am ignoring what back then were tiny specialist smartphone makers like HTC, Blackberry and Apple). But not Nokia. Nokia was SAFELY the most profitable of its industry. And even as Apple would climb to take third ranking in smartphone sales (and fourth place overall in total handset sales), and Apple prodcued bigger total profits in handsets vs Nokia, even then compared to ALL of its MAJOR rivals (full portfolio handset makers, those who made mass market dumbphones as well as the new modest-scale premium smartphones) ie Motorola, SonyEricsson, Samsung, LG etc - Nokia towered over all those with its profits. Only Apple - which soon would become the most profitable company in ANY industry - only Apple made bigger profits in selling only smartphones. Even then, Nokia sold more than twice as many total smartphones as Apple sold iPhones. So yeah, Nokia in purely 'smartphones' when measured against Apple - had fallen to second place in profits - but vastly outsold Apple in total smartphone units. This is not 'failure' at Nokia. While yes, Apple was besting Nokia in profits.

But now consider how the strategy went, and how the investors took this strategy. Initially, the investors loved it. Yes, their favorite tech brand (before Apple, Nokia was THE tech brand in the mobile sector. The nearest thing to a 'guaranteed' investment. Time and again, the Nokia share was split, and Nokia value just kept climbing and climbing, until it became the most valuable company in mobile, as well as the most valuable company in Europe. And Nokia could do now wrong. It had a conservative management, that always gave the truth on whatever was happening, good or bad. And it always was cautious in reporting what was coming up. Then in its quarterly results, it would tend to match or slightly beat what was the expectation. And if you invested in Nokia in the late 1990s or early 2000s, you could not fail. Any mid-term or long term investment in Nokia, as long as you only eliminated the regular cyclical down-turns of the economy - then Nokia was the best investment of the major tech brands you COULD make, in mobile (until Apple).

So Nokia overtook Motorola to become the largest handset maker in 1998. Then Nokia went on to own a third of the handset market, and then it came close to 40%. And then Nokia CEO (Jorma Ollila) announced that Nokia would not pursue market share anymore, but would pursue profit instead. And what happened after that? For the rest of Ollila's career as CEO, and all through the next CEO Olli-Pekka Kallasvuo, Nokia continued to be profitable in its handset division - in EVERY SINGLE QUARTER. Where all of its major rivals stumbled. Nokia continued to produce the biggest profits vs any other 'global major' brand in handsets, ie a full portolio handset maker - and Nokia which still of course sold more dumbphones than smartphones - was making bigger profits than most PURE SMARTPHONE makers like HTC or Blackberry. Only Apple with its iPhone, grew to make more profits as a pure smartphone maker.

But now, as Nokia was focused on profits, "not market share" - what happened to market share? It started to decline. And then EVERY QUARTER the market share number was down. There could be a tiny blip, one quarter, where it might tick up a bit, but then it was again down. While total REVENUES grew, and Nokia reported the best profits of the (full portfolio) handset peers, the market share news was 'negative' every single time Nokia was in the news. And that - inspite of good profits EVERY TIME - and often Nokia RECORD profits time and again - the market PERCEPTION changed from Nokia being a winner, to Nokia being in trouble and a loser.

Before Jorma Ollila's announcement of focusing on profits, there was no end to Nokia's share price growth. After that announcement, shortly thereafter comes the Nokia price peak and then it never recovered. The share price started to tumble, and then it tumbled, and then it tumbled and then the new CEO was replaced with another new (idiot) CEO and the Nokia share price started to collapse and it collapsed further and further. After a decade of astonishing growth, came nearly a decade of ever worse decline.

Does this sound familiar? Is Apple now telling us, we won't worry about unit growth or market share (anymore) and we will rather raise our prices sky-high and pursue high profits instead? There is no 'next iPhone product' to save Apple. The new iToys like Apple Watch are in fact, failures. And now the only way forward is to make bigger profits.

PARALLELS ARE VERY CLOSE

Apple is the most profitable company in mobile, which previously built its size in an adjacent tech field (computers). Nokia was the most profitable company in mobile, which previously built its size on an adjacent field (telecoms networking hardware). Apple has seen its market share peak. Nokia saw its market share peak. Apple is seen as invincible and unbeatable. Nokia was seen as invincible and unbeatable. Apple seems to be now shifting its focus from caring about unit growth, to only focusing on profits (the news is that the first run iPhones made at Foxconn will be less than in previous years, only 5 million units - this suggests that Apple may try to squeeze maximum profits out of a shrinking market). Nokia openly announced it was shifting from a unit growth/market share strategy to profit strategy.

So first, it is quite possible that Apple is able to grow its unit sales for Christmas and raise its prices for the iPhone 8 and get gargantuan profits while doing so. It is also possible that Apple has some wonderful features or new tricks they've prepared in secret for us, on the iPhone 8, that it becomes a massive hit phone. So say it cures cancer, has teleportation and time travel. That kind of things. But if the iPhone 8 is 'just another iPhone' - it IS facing ever stronger competition. Samsung for once is not stumbling with explod-a-fones. Huawei IS gaining on Apple. An ever more dangerous field of powerful rivals from Vivo to Xiaomi is joining the usual gang of LGs and Lenovos. Even Nokia is making a noisy come-back. If the iPhone 8 is 'only a regular' update, and not something spectacular to celebrate the 10 year anniversary of the iPhone, then this Christmas season for the iPhone could be far more challenging than usual. And that is BEFORE we consider the raising of the price.

I said when I told you that iPhones could raise their prices, that the optimal time to make that jump was, when the iPhone would do its phablet models. Not now. Today, if Apple does not have something CLEARLY SUPERIOR in the next iPhone, then a big jump in the price would seem like price-gouging. Being greedy. Milking the iSheep. And Apple could face some backlash. I am not suggesting that Apple FANs would stop buying their next iToy, obviously. They are safely brainwashed into the iCult. I mean the undecided consumers, that will make the difference between an ok Christmas 2017 for Apple or a great Christmas.

So if the iPhone 8 is not 'revolutionary' and radical and supremely desirable, but it suddenly jumps the prices up massively - then all economists suggest that it should mean lower sales (increased price = lower sale; reduced price = increased sale. Basic Economics 101). Now if the rumors are true (Foxconn gets reduced early orders for iPhone 8 and iPhone 8 price jumped to about $1,000 and also the rumored specs of the iPhone are true (nothing exciting coming) - then we could see a 'disappointing' Christmas Quarter for the iPhone - followed by an EVEN MORE disappointing FIRST Quarter 2018 (January-March quarter, calendar quarter, I am not talking of Apple fiscal quarters). Because First Quarter (Jan-Mar) is driven by Chinese gift-giving season. If the Chinese feel that hey, the iPhone is a rip-off, and far better phones are available - including their beloved Nokia - then many who otherwise were buying iPhones in the recent past, will suddenly abandon the iPhone for Chinese New Year gifts, and the China sales in early 2018 will be ALSO DISAPPOINTING.

And suddenly, Apple would have TWO CONSECUTIVE bad quarters of press. The market share is in decline, the unit sales are in decline, the quarter AND ANNUAL sales of iPhones fell - against most analysts' early predictions - and this all would create an echo chamber that suddenly spells 'doom' to Apple. While it generates obscene profits (remember, Nokia generated record profits too). Now what if some other player (Google, Facebook, Amazon) suddenly reports exciting growing profits and becomes the 'new tech darling'? Apple COULD see the same kind of decade-long decay and decline like Nokia did, where soon the shareholders will demand Tim Cook be replaced (because he is no Steve Jobs) and they start to demand ever more 'new strategies' that eventually in Nokia's case led to the hiring of madman Stephen Elop and his suicidal Windows strategy for Nokia.

THIS IS THE CERTAIN PART

Some of this is warning from history. History doesn't repeat itself, but it rhymes. Apple could 'do a Nokia' and I don't mean the death-of-Nokia like Elop, I mean the 'loss of trust' Nokia that was the years of Olli-Pekka Kallasvuo. Even as Kallasvuo precided over every single year a profitable Nokia, only one QUARTER did he see a quarterly loss, and that was not in the handset unit, that was in the networking unit (after it had bought Motorola's loss-making networking unit, and this during the worst economic recession in our lifetimes). So Apple could shift into a period where every year, and most quarters, Apple reports declining iPhone Unit Sales (and market share) with no 'next iPhone' success in sight. And while Apple also reports concurrently astronomical profits, the investors become ever more gloomy and alarmed, that the iPhone is heading towards the dangerous 10% market share level. And then old Apple investors remember the Mac vs Windows wars, and how Apple was on the brink of bankruptcy in 1997 yes literally only 20 years ago. They say that which goes up, must come down. It is far more likely that an Apple share value peak is upon us (soon) than somehow Apple ignores all economic history and lives in an alternate economy and just keeps breaking all the rules. If Apple openly, or just by its actions, shifts its strategy from pursuing unit sales growth and holding market share, to a declining unit sales and plunging market share (in a market that is still growing, mind you!) then I think it is inevitable that at some points, Apple investors will revolt and say, I don't want you to go to selling one iPhone that costs 50 Billion dollars, per year, to one silly mega-billionaire. I want Apple to be viable in the future and must go back to growing market share.

And THAT will be the death-nail. Because being a profitable niche-player is incompatible with being a mass market leader. If the investors accept the Apple new strategy, then that is ok. But they will be hearing perennial bad news, every single quarter, how Apple is down to 13% market share. And then down to 12% market share, oh, and Huawei is now number 2 and Apple fallen to number 3. And then Apple is down to 11% market share, and someone else, like Vivo or Xiaomi or Gionnee is now chasing Apple for that number 3 slot, and then Apple is at 10% market share and so forth. That to me, sounds like the malaise that hit Nokia in the late 2000s decade. Remember, Apple will not be number 1 to begin with. SAMSUNG will easily be the biggest smartphone maker - and Sammy will also be profitable almost any quarter that it just doesn't deploy pocket explosives to its customers. Some investors will hark to the days when the iPhone was larger than Samsung's smartphone biz (has happened in 2 quarters in the past 6 years) and now they observe that Samsung is more than twice the size of Apple and even Huawei is 30% bigger.... Then Apple reports numbers where the iPhone market share is at 9%.... 

I don't think this is a strategy that is long-term sustainable. I think it will doom Tim Cook. Now, many MANY things can happen in the interim. Imagine a 'new iPhone' product like what initially the iPad looked like and what many hoped the Apple Watch would be. Maybe something like the iCamera. And its possible Apple shifts to a 'broad portfolio' premium smartphone strategy, especially as they eye India - releasing lower cost iPhone models to hold onto more market share. Even then, they are a premium brand. They cannot get back to 20% market share. Huawei has the reach, but a far broader portfolio - it is only a matter of time when Huawei passes Apple for second place. And when THAT happens, I think the alarm sets in. That 'oh my gosh, Apple is not invincible' and then - the hope and hype built into years of iHysteria would come out, and Apple could see years of unending value decline.

And on that note... what ELSE could Apple possibly do? They have by far the world's largest consumer segment ever to go for a niche premium-priced product. Steve Jobs promised 10 million annual sales of iPhones. That was laughed at by most insiders of the industry as utterly poppycock (not me, this blog calculated how they could achieve exactly that in their first year). But look at Apple's enormous success. They now do 20 TIMES that level of sales in a year. A level which was seen as ridiculous as a goal, set by Steve Jobs ten years ago. What else COULD Apple do now? They have nowhere else to go? They can't turn the premium iPhone into a discount brand to compete with say Samsung in scale. Their ONLY way is to now secure the maximum possible profits out of this level of customers. But if Apple iPhone sales have now peaked and they start to raise prices - that is it. There will be no more organic growth left for the iPhone and iOS. That is then acknowledged also at Apple, if not explicitly, then implicitly by their actions at least.

Now just to remember. There was a time when TomTom was unassailable in GPS. Or when GoPro was the huge success in camera tech. Or when the iPod was the music player that could not be defeated. Microsoft, gosh Windows, was supposed to be such a powerful digital powerhouse it would never be toppled, yet Android took the (pocket) computer market as easily from MIcrosoft, as taking candy from a baby. (Granted, Steve Ballmer is a big baby). But just because RECENTLY Apple seems to be doing nothing wrong.. that is EXACTLY the same feeling we had of Nokia 12 years ago. And just 20 years ago, Apple was on the brink of bankruptcy. If Apple can sustain a passionate fan-base of iSheep who buy every iToy and stand in line for the whole night to get their next iFix, all is good. If Apple starts to push silly iFailures at those consumers (Apple Watch? Seriously?) how long will that passion remain? It will certainly stop GROWING. and if Apple's only response then, is to resort to ever more expensive iToys to keep profits growing - that means at some point, most sensible people will abandon the iTax and go to normally-priced better-value sensible products. But if the GROWTH ends, then magic of Apple seems to have burst, and that will be blamed on Tim Cook (and probably also on the price-gouging strategy too, especially if there are other devices coming like Apple Watch that seem only to be made to milk profits from iSheep). 

I am not an investment advice blog .But for this blog article, I will be very 'liberal' in allowing discussions of profits and shareholder expectations into the comments (usually those topics are forbidden). Please readers, don't take advantage of this in today's evaluation talks. Limit your views to 'long term' investment views, not today's market status, ok?

Because of the lesson of Nokia, shifting from 'market share strategy' to 'profit maximising strategy' in this VERY same handset industry. And because of Apple apparently getting ready to try that same shift, I wanted to write this blog as a warning. I do think that would be short-termism and foolish and not sustainable. But I also think Apple will do that next. The signs strongly suggest it is what is coming from Apple in the coming months. What do you think? Lets talk in the comments.