Apple Strives to Maintain Its Edge

Can Tim Cook Lead Apple to Its Next Big Thing?

by Faruk Imamovic
Apple Strives to Maintain Its Edge
© Getty Images/Justin Sullivan

In 1997, Steve Jobs made a dramatic return to Apple, a company he had co-founded but left over a decade earlier. At that time, Apple was in dire straits, on the brink of bankruptcy, and struggling to stay relevant in the competitive personal computer market.

Jobs swiftly redirected the company's focus, shedding unprofitable projects and concentrating on innovative product development. His vision and strategic decisions set Apple on a path to recovery and unprecedented success. The strategy paid off.

In 1998, Jobs unveiled the iMac, a product whose vibrant, colorful design quickly became iconic. This success was followed by the revolutionary iPod in 2001, which upended the personal media player market and popularized iTunes.

Then, in 2007, the iPhone was launched, propelling Apple into the stratosphere and setting the stage for a host of side businesses, including the highly profitable App Store. By the time of Jobs' death in 2011, Apple had become the most valuable tech company in the world.

The Cook Era: Profits Over Innovation

Tim Cook, Jobs’ successor, is a numbers guy. Under his tenure, Apple’s share price has soared, and investors have been pleased with increased share buybacks and regular quarterly dividends.

However, Cook’s tenure has not been marked by the same kind of earth-shattering product launches that defined the Jobs era. Other than the Apple Watch, which was already in development before Jobs' death, Apple has not introduced any new product categories with the same level of impact.

Instead, Cook has focused on maximizing the profitability of existing products. For a while, this strategy worked. The iPhone, which accounts for more than half of Apple’s revenue, saw steady sales growth. However, in 2017, iPhone sales hit a wall.

The market was saturated, and customers were not upgrading their phones as frequently. In response, Apple stopped reporting unit sales, choosing instead to focus on revenue growth through higher prices and premium tiers. This worked for a time, but by 2022, sales began to slow again, and other Apple products also saw declining sales.

The company reported four consecutive quarters of declining revenue in 2023, followed by a brief rebound in the first fiscal quarter of this year, only to see revenue decline again in the second quarter. The outlook remains bleak, with poor iPhone sales expected to persist, especially as sales in China decline.

The Looming Threats

While Apple has seen some growth in services such as Apple TV+, News+, and iCloud storage, these successes are deeply intertwined with the success of its hardware. Moreover, Apple's tightly controlled ecosystem is coming under increased scrutiny from regulators.

The US Justice Department’s antitrust case against Apple argues that the company’s walled garden makes it difficult for users to switch to Android devices, due to the loss of App Store purchases and proprietary features like iMessage.

The case aims to lower these barriers, making it easier for users to switch between operating systems. In Europe, lawmakers are targeting Apple’s monopoly over the App Store, pushing for regulations that would allow third-party apps and stores to be loaded onto Apple devices.

If successful, this could significantly reduce the revenue Apple derives from App Store purchases, which can be as high as 30% of each transaction. Both the US and EU cases threaten to make cheaper phones more attractive to consumers, further eroding iPhone sales.

Apple plans to fight these regulations vigorously, trying to shape their implementation to minimize their impact.

The Evolution of Apple: Steve Jobs Vision and Tim Cooks Strategy© Getty Images/Justin Sullivan

Stumbles in New Ventures

Apple's recent attempts to innovate have not been particularly successful.

The Vision Pro headset, a bulky and expensive piece of hardware, has not captured the market's imagination. Intended as a leap into virtual reality, it has been plagued by technical challenges and internal divisions, with reports suggesting it is being left unused and production being scaled back.

The Apple Car project, another ambitious endeavor, also failed to materialize. Despite investing $10 billion into developing autonomous driving technology, the project was ultimately canceled earlier this year when it became clear that the technology was not ready for fully autonomous driving.

This underscores the challenges Apple faces in venturing into new industries. Despite these challenges, Apple remains a highly valuable company, occasionally reclaiming the title of the most valuable publicly traded company in the world.

However, its future is uncertain. Cook has been focusing on expanding production in countries like India and Indonesia to shore up the supply chain. Yet, these markets are not likely to become major consumers of the iPhone, as most people in these regions opt for more affordable Android phones.

Apple is now turning its attention to generative AI, moving employees from the car project to work on artificial intelligence initiatives. The company plans to integrate AI into its products, such as the iPhone, iPad, and Mac.

However, this pivot to AI is seen by some as chasing trends rather than leading them. While AI may generate short-term investor interest, it is unlikely to be the kind of revolutionary product that transforms the market.

The Road Ahead for Apple

With the Vision Pro and Apple Car both failing to deliver the expected breakthroughs, Apple's turn to AI appears to be a bid to keep interest alive while it searches for its next big thing.

Over the past decade, Apple has seen significant success under Cook, who has maximized the profitability of existing products and returned value to shareholders. However, the company has not introduced a new product of the same market-shattering scale as the iPhone.

As Apple faces increasing competition and regulatory challenges, it remains to be seen whether Cook can steer the company toward another era of groundbreaking innovation.