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November 19, 2015 | Barry Matties, I-Connect007Estimated reading time: 10 minutes
Custer: Yeah, but they're not as big in dollars as things like the media tablets or the smartphones. I agree that Fitbits and smartwatches and such are definitely growth drivers. But are they the growth driver with the magnitude to offset the decline in some of the other areas that are slowing down? That's why I'm being conservative about '16. You can think of all these coming things, but if you start to quantify them, they're not as big as some of the things that are slowing down.
Matties: The other thing that I've noticed is the life cycle of electronics products have changed. You mentioned the tablet life is now about four years.
Custer: And that's kind of disappointing to tablet vendors. They'd like it to be every year or two.
Matties: I'm using an iPad 2 and I'm looking at the iPad 4 and that’s two or three generations of difference, but I still don't see the need to change.
Custer: If you just use your present iPad to get email, read the news, etc., you don’t need a new one.
Matties: It’s hard to justify spending another $1,000 on an iPad, or whatever it is.
Custer: And that's what's hurting them. At the same time there are knock-offs coming. It was interesting, if you look at Apple's financials, we think of them as Apple Computer, but about 65% of their sales are the iPhone. And they're getting really good prices for it.
Matties: Unbelievable prices!
Custer: If you read Apple's financial reports, they disclose both units and dollars. So you can calculate the selling price of an iPhone, and I think it's around $600. Most of their competitors are at half that. So here they've got 60% of their sales in a premium priced product, which kind of indicates that they're vulnerable, because the Chinese are running hard to get knock-offs. And so far, Apple has been able to keep a glow on the iPhone to warrant really premium prices. But if they can't justify premium pricing when it's 60–65% of their sales, it's going to be tough. They need another product—the iCar or the iSomething. I don't think the iWatch is taking off as fast as they had hoped. So I'm watching Apple in the next year to see what their next generation of products is going to be.
Matties: When I look at Apple, certainly after Steve Jobs passed, it just starts to feel like a “me too” company. They wanted to go larger, and now they have the bigger phone. Then in 2014 they dropped one model to $99 and made the older version of the iPhone the free option.
Custer: Yeah, I think if they go the cheap phone road, they're strangling themselves because that's where all the rest of their competition is. They successfully carved out a nice niche at really premium prices. That's driven their sales.
Matties: So when you do your analysis, do you look at specific companies like that?Page 3 of 4
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