14 January 2019
Fail to prepare, prepare to fail: Lessons from Apple's bittersweet 2018

By Jennifer Lambton, Junior Resourcer

The last 12 months have been a whirlwind at Apple – from becoming the first company to gain trillion-dollar status to seeing hundreds of billions of dollars wiped off their market value. Where do they go from here?

Apple iPhone

At the beginning of August, Tim Cook will have had a mighty big grin on his face. Apple shares hit the heady heights of $207.05, making it the first company in the world to hit a market cap of $1,000,000,000,000 – yes, that’s one trillion dollars. It continued rising, peaking two months later at value of $1.12 trillion, or $232.07 per share. 

The new year was not such a happy time for Apple, however. The first week of January saw a monumental $446 billion wiped off its market cap, an amount greater than the gross domestic product of New Zealand, Qatar and Croatia combined. Despite being the first to reach a $1 trillion valuation, the demise subsequently saw them overtaken by Amazon and Alphabet.

Although they seem to have weathered the storm remarkably well, with stocks now recovering, there is little light presenting itself at the end of the tunnel just yet.

What happened?

For several years now, Apple has benefited from unrivalled sales in the mobile phone sector. While its competition arguably has been more innovative, Apple has continued to be the market leader; iOS users outnumber their Android counterparts in the UK, US and Canada and usage in those countries has continued to increase. It seems, however, that things have changed. While the mobile phone market has been crucial to Apple’s success up until this point, it’s now where they are suffering most.

It’s been more than a decade since Steve Jobs first unveiled Apple’s first mobile phone, and while they’re positioned as innovators in that space there are quite literally 101 things that Android achieved first. Even though their market cap grew immediately following the release, Apple’s most recent batch of iPhones has been touted by many as the reason for the company’s demise.

The iPhone XS cost the same as its predecessor, but had the same screen resolution, form factor and cameras. It was heavier and its battery life was shorter. The improvements came modestly in the form of offering larger storage capacity and a new six-core processor – Apple’s focus for the launch. But the gains were marginal, and consumers realised that a little too late – although sales initially outperformed that of the iPhone 8, the company have since resumed production of their previous flagship phone because of disappointing pick up since.

Where next?

Apple seem to have held their hands up and admitted that their dominance of the smartphone market is ailing – in November they announced they would no longer be reporting sales figures after growth slumped to zero per cent. Time, then, for Tim Cook and co. to steer their ship onto smoother seas.

Things are much rosier elsewhere within the business. In quarter four of 2018, Apple’s services division – currently featuring Music, TV and the App Store among others – reached the $10 billion milestone, marking growth of nearly 600 per cent in the past eight years. That progression is set to accelerate as Apple divert their focus to services. But are they not just repeating history in a different sector? Apple Music was made to challenge Spotify and has since garnered over 50 million users – still significantly fewer than Spotify’s 83 million. Their movie streaming service is rumoured to be just around the corner, aiming to poach users from Netflix, but will they be able to challenge the existing brand with a sufficiently innovative new product?

The strength of Apple’s brand is almost unrivalled; they have the ability to enter almost any sector and bring a legion of fans along with them. That brand, however, is built on their ability to innovate, to improve on their own and their competitors’ products and services. Can they break the mould and regain their position as genuine pioneers, or are they stuck in a vicious circle of feeding off competitors? Time will tell, but Apple’s road ahead is anything but clear.