On Wednesday, Apple CEO Tim Cook will walk onstage at the Flint Center for the Performing Arts at De Anza College in Cupertino, California, and make the most important speech of his life.
It will feel as if Apple rules the world during the 90 minutes or so that Cook’s presentation lasts. But in fact, the world Apple lives in is moving faster than it ever has before. Apple now has rivals that are more nimble than its old enemy, Microsoft.
Even simple questions about the speech will hang in the air, unanswered. For instance, do consumers really want a smartwatch in addition to the phone in their pockets?
So while Tuesday’s speech is important, it is not clear whether history will regard it as Cook’s moment of triumph or a mere cul de sac, like the Apple Newton or MobileMe.
Cook has chosen an almost religious location to speak: The late Apple founder Steve Jobs launched the original Mac there, 30 years ago.
The smartwatch — or “iWatch” as everyone is calling it — will be the first truly new product of the post-Jobs era. It will probably be the first new product that Jobs never touched. Alongside it will be the iPhone 6, a powerful new iteration of the iPhone, in two large-screen sizes (4.7 inches and 5.5 inches). There will also be a new operating system for the iPhone and iPad (iOS 8) as well as a new operating system for the Mac (OS X Yosemite).
And while the event will be massive for Apple — and iPhone 6 will doubtlessly be a huge seller — Cook will make his speech in a world that is already very different from the one he inherited when he became CEO in 2011.
To a surprising extent, Apple is playing catch-up:
- Large-screen phones have been de rigeur on Android systems for two years now.
- Android established a market record of 85% global share in Q2 2014, according to Business Insider Intelligence.
- Samsung already launched six smartwatches in the time it took Apple to get its first one out the door.
- Xiaomi, a Chinese phone maker that copies Apple, has taken more than 5% of global market share in just months, with phones that are hundreds of dollars cheaper than Apple’s.
- Apple’s market share, meanwhile, has slipped to just 11.9% of all phones sold, globally.
- Chinese vendors now sell one third of all phones sold.
- And then there is the recent iCloud fiasco.
Much of this is irrelevant to Apple, of course. Tim Cook is not interested in serving those stretches of the market that require zero or negative margins, or those that generate users who have low value to advertisers and app developers.
Cook can be confident that Apple remains the strongest brand in the rich, Western countries where its phones are bestsellers.
And Apple’s strategy has been historically successful: Let other companies launch wacky, underpowered new gadgets and then wade in later with the best-possible version in the category.
Fools bet against Apple, in other words.
Cook will also draw some confidence from the collapsing sales and market share of its current strongest smartphone rival, Samsung. Samsung is seeing its market get stolen from underneath it, as cheap Asian Android makers tempt people away from its expensive flagship Android phones.
The challenge that Cook’s iPhone 6 must meet is whether it, too, can withstand competition from companies making phones that have largely the same functionality as Androids. (One example: iPhone 6 will get a split-screen function allowing apps to display several streams at once. That feature has been available on Samsung’s phones for months.)
The subtext of Cook’s speech, therefore, is this: “Sure, you could buy a decent smartphone for less than $US400. But we have a very good smartphone for $US700 or more. We’re betting that this will not change, that there will always be customers who want to pay hundreds of dollars more for a product that, elsewhere in the market, is regarded as a commodity.”
The received wisdom is that Apple products and the iOS system are essentially their own category; they don’t really compete with Android. Android makers compete against themselves, on price. That logic has held true for years.
Cook will be hoping it continues.
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