Will Apple lose its bite?

Economic slowdown has not spared even Apple Inc. Within the last 12 months, the iconic firm has missed Wall Street expectations twice. Analysts have been quick to pounce on this, claiming that Apple is not the fortress it once was. The slowing economies in Europe?most notably Italy and Greece?did not help Apple?s cause. But that?s not the only problem. Apple has grown in size and that is beginning to slow it down. It?s no longer the nimble Apple that one admired even a couple of years ago.

Apple has become synonymous with the iPhone. The iPad has fallen to the background, though it accounts for more than half the tablet sales globally. Still the iPad is not strong enough to power Apple past the high expectations. For that to happen iPhone will have to deliver big time, every time, and that is a worry. The iPhone now contributes almost half of Apple?s revenues and hence is the backbone of its fortunes. For CEO Tim Cook trouble has arrived in double quick time.

Last quarter iPhone sales fell 26% sequentially. That did not prevent Apple from posting a 23% rise in revenue to touch $35 billion compared to the corresponding quarter last year. Still the firm missed the Street?s average forecast by $2 billion. Sales fell 22% in Asia Pacific compared to the previous quarter. Asia Pacific is a traditional stronghold for most technology companies and Apple was no different. Its lowered sales in this region should be a massive cause for concern. It is now clear that Apple is no longer insulated from global economic turbulence and that?s a bitter medicine to taste. The last quarter provided ample evidence of that. Sales dropped 3% and 6% in the Americas and Europe respectively. JP Morgan, Raymond James and others have slashed the target price on the company?s stock, which is known for its conservative forecasts. It?s a rare jolt for Apple.

Product life cycles have come to haunt the firm. Its traditional rivals have long suffered from this syndrome, but the disease has caught up with Apple too. The wait for the new iPhone had a massive role to play in Apple missing its quarterly expectations last fall. Consumers have begun to work out when the next version would be released. Their calculations, right or not, often play mischief with sales forecasts. With Apple this has become a new reality. However closely guarded the launch maybe, consumers have begun to guess the timing of the release. They then wait around for the new iPhone launch and delay their purchase decision. The product life cycle has become a little bit more predictable, and Apple will have to soon find ways to break this trend.

Players like Samsung Electronics have played a part. Its fast moving Galaxy S III is a worthy challenger. Samsung which now sells the largest number of smartphones in the world annually, is a huge threat and so are some of the other handset manufacturers using Google?s Android. A lot will ride on iPhone?s next version, which is expected to be a totally redesigned one with a larger screen. The world is expecting the world of it, and that?s a scary thought.

Unfortunately for Tim Cook, comparisons with Steve Jobs have taken an acute turn. The talk in tech circles is that Cook is not in the same class as Jobs. Well, that was a foregone conclusion in any case. It is unfair if anyone expects Cook to be in the same bracket. Jobs was the ultimate showman who could raise people?s expectations on a product and then proceed to meet them without breaking a sweat. He had attitude. Cook is more like your typical CEO, who unsurprisingly is not very keen on India just like his mentor. He said the ?multi-layered distribution network? in India will work against Apple?s interest. He sees higher potential elsewhere. ?We have a business there (India) and the business is growing but the multi-layered distribution there really adds to the cost of getting products to market,? the CEO said last week.

Clearly Cook needs more time. But he can?t expect too much of it. His biggest challenge will be to manage expectations, and at Apple that?s a tall order. Cook knows it and he has to show that he can handle the pressure.