Apple Inc. (NASDAQ:AAPL)’s business has certainly morphed a lot through the years and once again the company finds itself in a difficult place. Its business relies largely on a rapidly shrinking market: high end smartphones. So whether or not the company has something new coming soon or not, the focus in its next earnings reports will largely be on iPhone volumes, which have made up a large chunk of the company’s business in recent years.

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Apple Could Slash iPhone Forecast

One analyst predicted earlier this week that Apple Inc. (NASDAQ:AAPL) would slash its iPhone forecast for the second half of the year, which very well could send its stock into a nosedive. And Apple Inc. (NASDAQ:AAPL) isn’t the only high end smartphone maker that’s struggling this year. Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and HTC Corp (TPE:2498) are also struggling in the high end market.

So it probably won’t be a bit surprise if Apple does cut its iPhone forecast, but this will just make the company’s need to come out with some new product every so much more important. If the company doesn’t release the iPhone 6 or whatever the next iPhone model is by September or October, investors will likely see that as yet another negative for a company that’s been struggling to stay in the positive in terms of sentiment.

Apple Should Diversify Or Revolutionize

One of the biggest problems Apple Inc. (NASDAQ:AAPL) and HTC Corp (TPE:2498) have especially faced in the smartphone market is the fact that neither of them really address the mid or low end market. HTC does to a smaller degree, but its earnings were heavily focused on the HTC One, a high end handset. Apple Inc. (NASDAQ:AAPL) partially addresses the lower end through its earlier iPhone models, but that strategy just isn’t working any longer. It needs to diversify or else revolutionize the industry with yet another fancy new gadget.

Worries About Cannibalization

If Apple Inc. (NASDAQ:AAPL) were to take the diversification path, how could it start to fill in the gaps in its product lines? There’s been plenty of talk about a phablet-sized iPhone and / or an iPhone Mini, but Apple runs the risk of cannibalizing its other products. A phablet may begin to encroach on the iPad because, depending on what size it ends up being, it could get close to the size of the iPad Mini. We already know the iPad Mini cannibalized the 10-inch iPad to some degree.

And then there’s the low cost iPhone or iPhone Mini, which probably will cannibalize the iPhone. However, what’s important to realize is that cannibalization may become less of a concern because Apple Inc. (NASDAQ:AAPL) does need to diversify. While it’s true that someone who was already going to buy an Apple Inc. (NASDAQ:AAPL) product may opt for the less expensive one, it’s also true that by diversifying, the company will likely pick up a wider variety of customers. In short, Apple will begin offering products that could interest someone who wasn’t interested before because it will cover more areas of the market. So diversification could be a solid option.

Revolutionizing Apple

And what if Apple really could change the game with a new product? This is something almost everyone wants to see, but if the product is really going to be revolutionary, it might have to be something no one outside of Apple has dreamed of yet.

But whether the company chooses the path of diversification or revolutionizing, one thing is apparent. There must be a transition somewhere, or else the company is doomed. It will come and go just as other companies have come and gone after their products were no longer relevant.

Apple Inc. (NASDAQ:AAPL) reinvented itself once, transitioning from the computer to the iPhone and iPad. Can it do so again? And if so, what will that transition look like? It will probably take a lot longer to shake out than what most investors are comfortable with.

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