Have We Reached Peak Apple Inc?

Ok, I call this the iPhone challenge. Take an iPhone 6s. Then take a leading rival phone, say a Samsung Galaxy S6. Cover the logos. Then ask people to compare the two phones.

Have you tried the iPhone challenge?

Let’s start with screen size. The 6s is 4.7 inches. This is well beaten by the S6, which is 5.1 inches. Then resolution. The 6s is 750 x 1334 pixels. This is knocked into a cocked hat by the S6, which is 1440 x 2560 pixels – four times the detail.

How about storage? Well the base Apple (NASDAQ: AAPL) model has 16 Gb of storage, and 2 Gb of RAM, compared with 32 Gb of storage and 3 Gb of RAM for the Samsung. How about the camera? Well Apple’s 12 MP is well beaten by Samsung’s 16 MP primary camera.

The price then seals the deal. On Amazon currently the iPhone 6s sells for £539. The Galaxy S6 sells for £369.99. And what’s more, I think Android OS has far better features than Apple’s iOS. How about design? Well, in my eyes, both phones look good in their sleek metal cases.

In short, the Samsung thrashes the Apple on specification yet is far, far cheaper. On paper, there’s just no contest. Yet the iPhone outsells the Galaxy by a long way, and Apple is, by some distance, the most profitable company in the world.

Apple is pulling off the Indian rope trick

Basically, Apple has been pulling off an Indian rope trick for the best part of a decade, selling tens of millions of iPhones not because they’re the best, but because they’re the coolest.

Yet until recently, the momentum, booming sales in China, and the cult of personality around Steve Jobs, drove sales ever higher. However, in the latest set of results, we noticed something unusual. For the first time in years, Apple’s iPhone sales are slowing and even starting to fall, and the share price is tumbling. People from San Francisco to Shanghai are twigging that other phones are better, and the Apple logo is finally gleaming a little less brightly.

I think we’ve reached peak Apple, and that’s a worrying sign. Some would argue that Apple now looks cheap, trading as it is on just 10 times earnings. Yet profits on hardware are fragile. Apple only has to go out of fashion, and profitability will crash. 

Apple insiders will realise that this is the Cupertino company’s golden age, and I suspect it will be decades before any other firm in the world is as profitable again. Apple shareholders should enjoy it while it lasts.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.


*This article originally included commentary on ARM Holdings in the same breath as Apple, including the statement "Most rival phones have chips from other companies." This incorrect fact has since been removed, along with all references to ARM within the article, and both the author and TMF apologises for any confusion.