Yesterday, that possibility got a little more real, as Apple reported a disappointing quarter largely because of a perceived shortfall of iPhone sales and a second fiscal quarter forecast lower than analysts had predicted. The company's shares fell today more than 12%, to $450.50.
Now, that could be and likely is temporary, since iPhone sales were actually constrained by supply issues and Apple no doubt has some smartphone feature tricks up its sleeve for the coming year. But in a new report, Whyman says he expects smartphone sales to cross 50% of all handset shipments in the second or third quarter of this year--a clear sign of maturity and eventual slowdown.
Whyman reckons that unit growth will slow from 45% last year to 30% by the end of this year, and revenue growth could be even lower as price points fall. He even quotes former Apple CEO Steve Jobs from late 201o: "Eventually, as most of those [feature] phones do convert to smartphones, it will turn into a zero-sum game or at least a lot closer to that."
We're not quite there yet, but Whyman's point is that that moment is now in sight. Generally, says Whyman, value in the market is likely to migrate from hardware to apps and cloud services. That could benefit Google much more than Apple, since the search giant doesn't make much if any money on hardware and doesn't necessarily need a lot of new devices on the market as long as people keep searching and clicking ads on their existing phones.
Whyman's report says smartphone makers--Apple in particular--have several choices for how to deal with this:
* Go down-market, selling cheaper phones to developing markets. That means lower margins, though, making this a big challenge for Apple.
* Expand first-party apps and Internet services. Apple has many of the pieces in place to do this, such as a leading software development platform, leading App Store, and iCloud. But Google may be relatively strong in software (including apps) and services vs. hardware when it comes to competing with Apple.
* Expand into the enterprise, moving smartphones into corporate use. This may be Microsoft's best opportunity, though the iPhone has made significant inroads into the enterprise.
* Emphasize tablets more than smartphones. And Apple is certainly doing well with iPads. Problem is, they have lower margins than smartphones, whose full cost is hidden (in markets such as the U.S., at least) by carrier subsidies.
* Jump into the TV business. This is the year that many analysts think Apple will do just that, whether it's through a slick TV set or a more capable Apple TV settop box. Whyman thinks the former, with a 56-inch screen, Siri voice control, and gesture and facial recognition. Still, that seems like a tall order in one package.
* Expand into content such as movies, TV and other video. Problem is, Apple has apparently been unable to get ready access to content via less restrictive licensing, and that failure has been seen as the main reason for delays in Apple's move into the television business. So this is far from a sure money-maker. Not to mention, Apple no longer has Steve Jobs, who sat on Disney's board thanks to its Pixar acquisition, to woo Hollywood.
* Extend into gaming consoles. It's a big and profitable market. But given the entrenched competition, Whyman doesn't view this as the most attractive option.
Still, Whyman's savvy enough to recognize that "none of them are 'magic solutions.'" As a result, he says mildly, there will be "a period of adjustment" as Apple and others try or extend various combinations of these options. In other words, we still come back to the distinct possibility that Apple's incredible multi-year run could hit a slow patch.
All this doesn't mean the end of smartphone innovation, of course. China's a huge potential market, one that some analysts have been predicting Apple would address with cheaper iPhones--though CEO Tim Cook seemed to nix the idea on yesterday's earnings call.
For his part, Google CEO Larry Page reeled off at his earnings call several features he anticipates coming from its Motorola Mobility unit--longer battery life, wireless charging, and better durability. No doubt Apple has other innovations in store as well, any of which could recharge interest in smartphones--or even define a new category.
But it's tough to deny the numbers. And the numbers say that, leaving aside upgrades, half the potential market for smartphones is already taken in developed markets. All the more, it will be up to Apple to invent, or at least perfect and popularize, entirely new forms of computing and communications if it's to continue its reign as the undisputed leader of the technology industry.
