Apple Inc. (NASDAQ:AAPL) reported a truly disappointing earnings report earlier this week, and the company’s shareholders have been weighing the future of the company against the rewards offered for owning its stock. It seems that even more numbers are turning against the Cupertino company today, as it became clear that the firm’s sales were lagging a preeminent Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) by an increasing margin.
According to a report on the state of the smart phone world, which was released by Juniper Research, the gap between the two companies is widening, and there seems to be little that Apple Inc. (NASDAQ:AAPL) can do. In the first three months of 2013, Apple Inc. (NASDAQ:AAPL) sold around 37 million phones, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) sold closer to 70 million.
Last year was a banner year for hedge funds in general, as the industry attracted $31 billion worth of net inflows, according to data from HFM. That total included a challenging fourth quarter, in which investors pulled more than $23 billion from hedge funds. HFM reported $12 billion in inflows for the first quarter following Read More
Defenders of Apple Inc. (NASDAQ:AAPL) have long been able to point to the firm’s ability to make money and keep margins thick in order to justify the idea that the company is still more successful than Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930). But that ability is failing, and like Gresham’s law states, “Bad money drives out good.”
An increase in competition and companies offering smartphones with features not a million miles away from those offered by Apple Inc. (NASDAQ:AAPL) means that the company’s phones are increasingly being passed over in favor of those offered by competitors. The increased demand for smart phone components coming from the huge increase in production is driving component prices, and availability, up.
All of these factors, most of them a result of the initial success of Apple Inc. (NASDAQ:AAPL) in the smart phone market, have conspired to drag the company back to the horde of firms in the market. This was inevitable in a free market, and it will get worse before it gets better.
Smart phone prices are falling, and smart phone demand is increasing. The quality of phones on different platforms is not as variable as it once was, meaning that there is less impetus for buyers to look for the Apple Inc. (NASDAQ:AAPL) logo as a sign of quality. As the market opens up, and manufacturers like Nokia Corporation (NYSE:NOK) take more of a share, Apple Inc. (NASDAQ:AAPL) will lose most of its precedence.
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) is beating Apple Inc. (NASDAQ:AAPL) because it has chosen to target the whole market, rather than just a small segment. Apple Inc. (NASDAQ:AAPL) is beginning to look like a specialty phone maker.