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Somewhere, someone appears to have put a curse on Apple (Nasdaq: AAPL). No sooner had its share prices passed the $260 mark on Aug. 9 than a slew of bad news sent them skidding again. Tuesday was kinder to AAPL -- it climbed US$4.33 to $251.97, still short of that recent high.
Gartner's (NYSE: IT) figures showed that Android outstripped Apple in worldwide smartphone sales; a global supply manager for Apple was charged with accepting kickbacks from suppliers; Apple's iAds service has hit some bumps; and Amazon's (Nasdaq: AMZN) reported to be thinking of making mobile devices that might challenge Apple's position as the premier distributor of mobile content.
On the plus side, Apple has hired a near field communications expert in what's widely believed to be a bid to make the iPhone 5 a mobile wallet. Also, archrival Google (Nasdaq: GOOG) has been hit by Oracle (Nasdaq: ORCL) with a suit over Java that may impact Android.
Apple's Smartphone Squabbles
Gartner's figures for the second quarter show that 10.6 million Android smartphones were sold worldwide, giving that operating system 17.2 percent of the market. In the second quarter of 2009, only about 756,000 Android smartphones were sold worldwide, taking a mere 1.8 percent of the market.
In the second quarter of 2010, just over 8.7 million iOS smartphones were sold worldwide, giving iOS 14.2 percent of the market. In the second quarter of 2009, more than 5.3 million of the smartphones were sold, giving iOS 13 percent of the market.
You don't need a calculator to see that the growth in demand for Android smartphones has been nothing short of phenomenal. That poses a mighty big threat to Apple.
Meanwhile, Apple's supply lines for the iPhone 4 and the iPad have been plagued with problems.
It's not clear whether these have anything to do with the kickbacks allegedly accepted by Apple global supply manager Paul Devine from Asian suppliers in exchange for sharing confidential information with them to help them negotiate with Cupertino. Devine, who's been charged in a San Jose, Calif., court, has pled not guilty. He is also reportedly facing a civil suit from Apple over the issue.
However, some reports suggest that Devine's arrest is only the tip of the iceberg.
Meanwhile, reports have begun to emerge that Apple's iAd premium mobile ad service is stumbling. Only two of the 17 launch partners Cupertino named for iAd -- Unilever PLC and Nissan -- had launched their campaigns in July, according to The Wall Street Journal. Three of the others -- Citigroup (NYSE: C), Walt Disney (NYSE: DIS) and J.C. Penney -- have since launched their iAd campaigns. The delays are reportedly due to Apple's insistence on controlling the creative aspects of putting together advertisements, which has lengthened the amount of time taken to put together mobile ads. Further, Apple's reported to be taking longer to build the ads than expected. Chanel S.A. one of Apple's iAd launch partners, appears to have dropped plans to run iAds for now, the Journal reported. When Apple announced the iAd service in April, it claimed to have signed up $60 million worth of ads for the second half of 2010. How much will the slowdown in iAd campaigns cost Apple? Not too much, if anything, apparently. "This seemingly slow rollout is what I expected," Neil Strother, a practice director at ABI Research, told MacNewsWorld. "It takes time to get brands involved; the process is slower with Apple's control over creative, and the upcoming fall holiday season is the real time to assess the first time. I would say it will take until after December to get a more complete view of the iAd system."
Some of the other factors contributing to the perceived rocky start are timing, budgets and caution on the part of advertisers. "The platform was launched in mid-summer, and perhaps there was not enough time for some advertisers to gear up right away for something like this," Strothers explained. "Further, this new format was made available after major brand budgets had been set and did not fit the current schedule," Strothers said. "Also, some may have chosen to see how this works before stepping in, willing to let others be the test cases."
Overall, though, don't worry about these minor glitches reducing Apple's ability to compete with Google, Facebook, Yahoo (Nasdaq: YHOO) and Microsoft (Nasdaq: MSFT) in the mobile ad market. "At this point, Apple has so much momentum that these problems won't have a perceptible impact," Laura DiDio, principal at ITIC, told MacNewsWorld. "If Apple continues to try to control all aspects of everything, however, you might see a slowdown in the intermediate or long term," she added. "Apple's goal with iAd is to make it work on mobile devices like the iPhone and portable devices like the iPad," ABI's Strother pointed out. "These are still seen as different from online ad platforms. So in mobile, the advertising ecosystem is still under development, and there's room for Apple to try its hand and overcome hurdles."
Separately, Apple on Monday hired Benjamin Vigier, a near-field communications (NFC) expert. NFC is a short-range communications standard that, when embedded into a smartphone, lets the owner use the device as a mobile wallet. Users just wave their NFC-equipped smartphones near terminals to pay for purchases. The mobile wallet concept currently has the most traction in Japan. Perhaps Apple hired Vigier because it's planning to make the iPhone a mobile wallet. "This could be the case," Mark Beccue, a senior analyst at ABI Research, told MacNewsWorld. Apple published four patents related to NFC and mobile commerce in April, two of which are important in relation to mobile money, according to a study by Beccue. Apple's mobile wallet might let consumers store a variety of cashless payment instruments make contactless purchases or send or receive payments between persons using the payment instrument of choice, Beccue said. This move ties in with the joint announcement by AT&T (NYSE: T), Verizon and T-Mobile USA earlier this month that they're setting up a contactless payment consortium that will take on MasterCard (NYSE: MA) and Visa (NYSE: V). However, the contactless payment concept may not translate well into the real world. It will require buy-in from the payments industry, and merchants will have to invest in point of purchase devices, Beccue pointed out. There are other obstacles. "Using a mobile to make a purchase at a physical location is slow," Beccue said. "And, in Japan, mobile payments aren't doing as well as everyone thinks -- they've plateaued at a fairly low level."
It's not nice to gloat over others' misfortunes ... unless you're an investor. Money knows no morality. So the lawsuit that Oracle launched against Google over the Java technology being used in Android last week might be good news for AAPL carriers. Oracle has asked the court to stay production of Android devices and the use of Android because it claims Google owes it royalties on the Java technology in Android. Google had apparently not obtained permission from Sun, which developed Java, to use the technology. Oracle now owns Sun, and its lawsuit against Google could be motivated by one of two things. First, it might want to monetize Java -- Oracle, never a friend of open systems, never did like the idea that Java is free and open software. Or it could be that Oracle wants to cash in on Android's popularity. Heck, perhaps it's a combination of both. If the lawsuit slows down or even halts the development of devices running Android, look for the iPhone and iPad to take off. If it has no discernible effect -- remember, Google has deep, deep pockets and isn't likely to back down because it's betting on mobile as its future -- demand for the iPhone and iPad will still be strong. Either way, investors are in a good position, so Apple stocks still look valuable.
iWoes in the iAd Field
Other iFactors Impacting iAd
The iMoney Wagon Rolls On
iPay as You iGo
Oracle Preps Android Java for Slow Roast
