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An ailing iconic tech giant: Does Apple have an innovation problem?

by Craig Timberg

The Washington Post

Analysts blamed flat profits for the steep slide in Apple’s stock price last week. But what’s ailing the iconic tech company is not a profitability problem. It’s an innovation problem. And, perhaps, an expectations problem.

Nearly three years have passed since Apple last revolutionized the world of consumer electronics with the release of the iPad. Since then, competition has grown increasingly fierce within the markets that this and previous Apple innovations helped create. And, of course, the company’s animating spirit, Steve Jobs, died in October 2011.

Under his successor, chief executive Tim Cook, the company has done many things right. The iPhone 5 is a wonder. So are the latest iPads, iPods and Macs. Apple is spreading its market footprint with a smaller iPad and, if recent news reports are to be believed, a cheaper iPhone.

This progress helps explain the stock surge that made Apple the nation’s most highly valued company, with a peak market capitalization of more than $600 billion in September, prompting one Financial Times reporter to calculate that the company was worth more than the value of all of the publicly listed companies in Portugal, Ireland, Green and Spain combined.

Perhaps some slide was inevitable, but losing $250 billion in value in a matter of months suggests a problem. Part of that problem is uncertainty about whether Apple has another blockbuster innovation brewing up in its secretive headquarters in Cupertino, California.

Such expectations arguably would be unfair for most companies, but Apple built its loyal following on the ability to not merely move into markets but also create them. The Apple II and the Mac were historic innovations within the tech industry during the first Jobs reign at Apple, just as the iPod, iPhone and iPad were during the second.

So what’s next? And is there a “next” without Jobs there to marry world-changing ambition with fanatical meticulousness about the user experience?

The best guess for a potential next act is that Apple finally cracks the code with a television product that everybody suddenly wants in the living room. But that space is already crowded. Plus, a breakthrough that weakens the hold of cable companies on our eyeballs and wallets would be quite a trick — one might even say Jobsian.

If Apple merely continues to turn out better and better products for which consumers are willing to pay premium prices, it’s hardly a bad fate. Microsoft has been milking its Windows, Office and Xbox cash cows for years, and probably can for years more — especially if the company succeeds in reinventing its offerings for the touch-screen products that appear likely to dominate our near-term future in consumer electronics.

But an Apple without startling new innovations wouldn’t be the Apple we’ve known for so long. It wouldn’t be Steve Jobs’ Apple. And that, investors may decide, may make it something less than the nation’s most valuable company.

  • Richard Werkhoven

    Apple was probably overvalued at the high point.

    Apple is probably undervalued now by the knee-jerk reaction from the market.

    Apple’s mistakes recently are not a lack of innovation. Innovation is actually not what made Apple great.

    Even in the bad times when Jobs was not there Apple was innovating but the innovations were not quite designed right.

    The ability to get things right rather than just do new things for the sake of newness is what made Apple successful.

    Jobs was good at rejecting things and at badgering people to get things right. Apple is now adjusting to the lack of that strong personality in the quality control and human design role.

    Apple is at it’s lowest point in terms of getting software right. I don’t think that will last though.

    For instance Apple Maps (the supposed disaster) is now a good product with some data errors to be resolved and some catching up on data collection. It now navigates better than my stand alone Tom Tom unit. It also has some issues with localisation of the search result. None of this is any different to Google Maps in earlier times.

    Why is anyone suprised that there was a market saturation issue with the iPhone?

    Why is anyone suprised that a competing product was going to take some market share?

    Apple’s role was never intended to be 100% market share, that was Gates’ dream for Microsoft though.

    Apple is about quality and humans. I don’t care if they have 1% or 100% of the market as long as they give me the best available – which they usually (yes not always) do.