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7 Companies That Pose a Threat to Apple

Investopedia logoInvestopedia 28-07-2015 Andrew Beattie
Samsung, Dell, Google and many others are chewing away at markets that Apple helped define.© shutterstock Samsung, Dell, Google and many others are chewing away at markets that Apple helped define.

Apple Inc. (AAPL) is the largest technology company by market cap, so it is a stretch to say that Apple is struggling. There are, however, a few companies that are challenging Apple in some of its strategically important businesses.

The PC Crowd    

Apple is still a hardware company on the whole, but it would be a gross exaggeration to call it a personal computer company. The revenue share of the Mac side of Apple has been shrinking in comparison to other business segments. This is partly due to the massive growth in iPhone sales making all other revenue sources look small, undercutting the significance of the Mac business. In a theme we will see repeated, the importance of the Mac to Apple is in the premium. Apple isn’t the top computer manufacturer by volume, but it owns the high-end market in personal computers.

However, the gap is shrinking. Dell,Hewlett-Packard Co. (HPQ), Lenovo Group Ltd. (LNVGY), Acer and Asus have released a number of products that challenge the Mac lines in terms of design, performance and, most importantly, price. The Apple premium in the computer segment is bound to erode as consumers look at alternatives like ultrabooks that are priced over a hundred dollars lower. The pricing on the MacBook with a sub $1000 option seems to suggest that this may already be happening. (Check out: Primer On Investing In The Tech Industry.)     

The Smartphone Race

Unlike the Mac segment, which is a nice, stable revenue generator, the smartphone segment is critical for the success of Apple. The iPhone is the major driver of revenue for Apple as well as the most effective gateway into the Apple ecosystem of services. Here again, the gap in design, function and user experience is narrowing between Apple and its rivals. Chief among the rivals is Samsung, with the “if you can dream it, we’ll make it” approach to phone design resulting in a wide range of offerings. The Samsung Galaxy series is iterating at a pace Apple can’t or won’t match, so the iPhone may end up playing catchup in the near future.

The Integrated Ecosystem

Apple has begun putting more energy into sealing up customers in the Apple experience, replacing the aging iPhoto, taking on streaming music and tying it all together through iCloud storage. The latest addition, Apple Music, shows that Apple is looking to take on Spotify and other streaming services by leveraging all the iDevices it controls. We’ll see how Apple Music fares as the free trials start to cycle out, but right now it is the established parts of the Apple ecosystem that are facing a stiff challenge – and it all comes down to Google Inc. (GOOG). (For more, see: Apple and the Battle for Streaming Music.)

Google is the creator of Android, the smartphone OS that has passed iOS, as well as Google Photos, Google Drive, Google Music and Google Play. Each of these offerings has the potential to chip away at Apple’s integrated ecosystem. Google Play now has more apps and is starting to clean up the wild west approach in allowing developers to throw anything into the store. Google Photos and Drive offer full alternatives to the main functions of an iCloud account beyond the device specific backup. In short, there is now an integrated ecosystem to rival Apple, and it can be used across different brands of devices. That is a level of flexibility that Apple cannot match because it is too different of a business model. (For more, check out: The Story Behind Google’s Success.)

The Bottom Line

Apple’s long run of success is reflected in its massive market cap, but a company can’t survive by resting on its laurels. Samsung, Dell, Google and many others are chewing away at markets that Apple helped define. Apple Music is one sign that Apple intends to go on the offensive. That said, Apple needs a strong showing in its hardware and services to show investors that the Apple premium still exists.

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