The Nightmare Scenario: How Everything Could Go Wrong For Apple

tim cook

Photo: AP

Apple is on top of the world right now, but nothing lasts forever.The company must find ways to innovate old products, fight off tough competitors, and keep up employee morale high—all without the leadership of visionary cofounder Steve Jobs.

It’s easy to overlook these threats given Apple’s tremendous success to date. But if Jobs’s handpicked successor, CEO Tim Cook, is not careful, Apple could end up facing one of these nightmare scenarios in the future.

The new Apple TV could end up being a complete flop.

Given the success Apple has had entering the smartphone and tablet markets in recent years, it's easy to assume that the company will do well should it launch a television in the near future. But one analyst suggests the odds are not in its favour.

'Television has been the death of pretty much every tech company that has tried to do it,' said Rob Enderle, principal analyst at The Enderle Group. 'People are expecting this thing to be huge, but it could very well not be.'

If Apple's TV set does flop, Enderle says it could 'take the wheels off the cart' for the company. The reason, Enderle says, is simple: Apple is a company that lives from hit to hit. Every successful product brings a halo effect to others--think of the way the iPod and iPhone boosted Mac sales.

The television could be Apple's new power product that boosts sales and brings more customers into the Apple ecosystem. But if it flops, the company will have to scramble to find another way to juice its product lineup while simultaneously dealing with critics who see the failure as proof that Apple's era of dominance is over--not to mention customers who have lost confidence in the Apple brand.

Apple never finds another Steve Jobs.

Apple can coast pretty comfortably for the next few years just on the products in its pipeline that were greenlit by Steve Jobs. But the key to the company's success is its ability to spot the next big market it can dominate. Without a visionary like Jobs at the helm, who will steer the company to that next big opportunity?

'Tim Cook is a good manager ... but the fire in the belly that led to where they are was Steve,' said Roger Kay, an analyst with Endpoint Technologies Associates. 'The machine Steve Jobs set up is set to work for at least another half decade, but it's in the out years that it gets unclear.'

Samsung could dethrone Apple as the tech industry's trendsetter.

If there's one company right now with the potential to take Apple down, it's Samsung. The two companies are already locked in a battle to control the smartphone market and Samsung continues to step up its tablet offerings to compete head-on against the iPad. As Enderle points out, Samsung is also doing well in markets Apple might have its eye on, like televisions.

'Samsung has the breadth to take on Apple on all fronts,' Enderle said, which is all the more problematic because Samsung happens to be a major supplier of parts to Apple--everything it needs to build devices, from chips to screens. 'So now a major partner for Apple who knows the most about how Apple markets and designs is the major competitor.'

It's not likely Samsung will put Apple out of business anytime soon, but that's not the concern. Instead, Enderle says a justifiable fear is that Apple gets knocked out of the top spot and is forced to chase after Samsung's products, rather than the other way around. This, according to Enderle, could knock Apple 'off its pedestal' as the trendsetter for the consumer technology industry.

iOS ceases to be the platform that developers want to make apps for first.

One of Apple's biggest assets is that iOS is widely viewed as the best platform on which to develop apps--both because it's less fragmented than Android and because Apple's mobile products have such a strong share of the market. That's why the iPhone and iPad tend to get great apps like Instagram and Path months or even years before competitors do, which serves as a further incentive to buy these products. If Samsung or another company managed to take away enough of Apple's market share (or if Apple feels pressure to start introducing different screen sizes to keep pace with competitors, which would complicate matters for developers), the company might lose first dibs on new apps.

The company experiences a serious brain drain as top talent gets fed up and goes elsewhere.

Apple doesn't just have to worry about staying popular among consumers, it also needs to continue to attract and hold on to top talent if it wants to stay competitive.

'Losing their key people is always a threat when they are fat, dumb, and happy,' Kay says. 'I think the culture will change slowly and there will be some people at different points who decide they have had enough.'

Just in the time since Steve Jobs stepped down from his day-to-day duties as CEO last year, Apple has lost several high-profile executives. However, the company hasn't experienced a mass exodus. But if it does in the coming years, Kay says this would definitely qualify as a nightmare. The same is true, he says, if the company's reputation in the tech industry weakens to the point where it has trouble recruiting new blood.

Apple's profits take a major hit from declining carrier subsidies.

One of the biggest concerns investors have about Apple these days is that carriers may cut their subsidies for the iPhone. If this happens, it could have a dramatic impact on the company's profits from the device.

'The worst case for Apple is that their average selling price for the iPhone drops from the $600 range to something more sustainable like $400,' said Wayne Lam, a senior analyst with IHS. 'If you drop that gross margin, it would really have an impact on their revenue.'

One thing is clear, according to Lam: 'The current rate of $600 is somewhat unsustainable.'

Apple loses a key court case and ends up blocked from certain markets.

Apple is engaged in countless legal disputes with competitors like HTC and Samsung. While the company has enjoyed some significant victories in the process, there is always the risk that it will lose a key case down the road.

'When you're talking about litigation, it's certainly a crapshoot. You expect to win, but you may not,' Enderle said. The worst case scenario as he sees it is that Apple ends up losing an IP or patent dispute with a company like Samsung and ends up locked out of the market in a country like China or the U.S. It's already had trouble with iPad sales in China.

Apple never figures out how to do social.

Every time Apple tries to build a social product, it seems to fail. Heard of Ping? How about Game centre? Exactly.

Now, Apple doesn't necessarily need to build a great social network to succeed as a company, but as social becomes a bigger and bigger part of our everyday lives, Apple's inability to do social properly could make its products look dated to consumers.

'It almost says philosophically that they are not leading in this idea that is important to people,' Kay said. 'It looks like they are somehow living in the past.'

This could come back to bite Apple if their competitors come out with similar products that happen to have a much better social integration.

For right now though, there's plenty that Apple can be happy about..

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