Is Apple’s gadget dominance ending?

Apple - Dominant player

It seems that there have been so many ups and downs at Apple since the departure of Steve Jobs.  The latest of which hit hard today—a 12% drop in the stock price to a 4-month low.  Some proclaim that Apple has lost its edge since Jobs departure.  I, however, appreciate Tim Cook’s management style—at least as an outsider looking in.  And, I think it will be quite some time before Apple loses it’s dominates in the MP3 player, tablet or smartphone market.

Nearly 70% market share in the declining MP3 player market

Now, most would agree that the MP3 player is now a rather mature market.  At this point, the late majority have made at least their first MP3 player purchase.  With nearly 70% market share, Apple dominates this market and will continue to do so (albeit, a shrinking market).

More than 50% market share in the tablet market

By comparison, early adopters are taking the tablet market by storm.  And, many are going for the cheaper, smaller version of the tablet.  This explains why Apple allowed the iPad mini to cannibalize iPad sales.  iPad unit sales were up 48% in Q1 2013 but revenue was only up 22%.  A good guesstimate is that iPads are outselling iPad mini’s by 2:1.  (You can play with the math a bit to see if you come up with something similar.  I assumed the average iPad sale was $450, average iPad mini at $329.)  But even with this cannibalization, Apple continues to dominate the tablet market with over 50% market share.

More than 50% market share in the smartphone market

What about the smartphone market?  iPhones make up 56% of Apple’s revenue and they maintain more than 50% of the smartphone market.  Android devices (and, specifically, Samsung devices) are making a dent.  However, according to the IDC’s forecast of smartphones through 2016, Apple is expected to grow at 18.8%, while the overall smartphone market grows at 18.3%.  This suggests that Apple will maintain its dominance in this category.

Challenges ahead in the sale of songs and videos

Where Apple is probably most threatened is with iTunes.  Amazon recently opened an MP3 store for iPhones and iPods.  Amazon is a data beast.  They will continue to learn quickly from the transactions of the iOS users and there are many, many more songs on Amazon at 99 cents v. 1.29 on iTunes.  Amazon means to squeeze margins and this will put significant pressure on iTunes margins and/or sales.

That said, iTunes is 7% of Apple’s Q4 2013 revenue.  iPhones, iPads and iPods make up 80%.  Apple isn’t likely to lose their lead as #1 in any of these categories in the near future.