It’s Apple Versus the Market, and Apple May Lose

Shares of Apple (NASDAQ:AAPL) have come down over 25 percent since breaking $700 per share in September. The stock’s fall over the past two months is quickly becoming as monumental as its rise early in 2012, and every investor is trying to identify the catalyst. 

That catalyst may be that Apple’s staggering success is predicated on unsustainable expectations of innovation. The company dropped a bomb on the mobile landscape with the iPhone and defined what smartphone innovation looked like. Apple has even successfully taken competitors to court to prove it. There is an obvious and unique elegance to Apple products that has played a critical role in making the company one of the leaders in its field.

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The iPad pretty much defined the tablet industry. Before its introduction there was no certainty that the device could be efficiently produced or that consumers would adopt it. A few years later the industry is booming and the iPad is still, by most measures, the best in its class. In the traditional computer market, the company’s MacBook Pro is a winner for discerning customers. Already attractive, Apple’s operating system looks downright seductive in the face of Windows 8.

But it’s clear that the company’s momentum is unsustainable. The difference between the first smartphones and the market was far greater than the difference between the current iPhones and the market. Apple’s power was to offer customers something that no one else could even come close to offering. And as the technological landscape evolves, the company’s ability to do that is waning.