5 Things Apple Doesn't Want You to Know

NEW YORK (TheStreet) -- Apple (AAPL) has built up a laundry list of incredibly flattering media headlines over the years, as it transformed under Steve Jobs and now-CEO Tim Cook into the world's largest company by market cap, and perhaps the most powerful firm in the world.

Despite all the acclaim surrounding the iPod, iPhone and the iPad, there are a few things Apple has done since it was founded in 1976, which it wishes the public would just forget.

There have been concerns over the company's labor practices in China, product flops, and fears that the company isn't the overwhelming growth engine it once was. To some extent, these have all weighed on consumer and investor sentiment.

Apple generally has taken a 'my way or the highway' approach, especially as it relates to its App Store policies, excluding  certain apps for a variety of reasons. The Cupertino, Calif.-based firm is also noted for its draconian partnership agreements. Despite all of this, much of the company's dirty laundry has already been aired in public, thanks to the high profile nature of Apple.

Yet, there's still plenty more that remain largely un-scrutinized. Here's five things that Apple doesn't want the public talking about:

5. Apple TV and the iWatch may not be runaway hits.


SICA Wealth Management Founder and CIO Jeffrey Sica doesn't see much corporate enthusiasm for the Apple TV and the upcoming iWatch. That signals to him that the company might not see the products as having the growth potential many would expect. The products are still developed and supported by Apple only because the consumer tech giant wants to keep an arsenal of products available to its core consumer base.

"Apple is not showing any building excitement for the Apple TV and an Apple iWatch, which makes me believe that these products don't have the potential people expect," Sica said.

Apple TV generated more than $1 billion in revenue for Apple in 2013, but that pales in comparison to what the other iDevices are doing, so it's fair to say that the future of the product may not be a runaway hit. However, Cook has been adamant that Apple is interested in doing more with television, though those plans aren't exactly clear.

Morgan Stanley analyst Katy Huberty has put some public projections on what the iWatch could do for Apple in terms of revenue, and while it's likely to be bigger than the iPhone or the iPad in its first year, that's coming off a much, much larger fan base.

"Our working assumption is that iWatch will largely be adopted as an accessory device and therefore sold into the existing customer base like the iPad rather than to new customers like the iPod or iPhone," Huberty wrote in a Feb. research note about Apple. "Assuming an ASP of $299 and Apple customer base penetration rate similar to the iPad, we see up to $17.5B of revenue in the first 12 months compared to $12B for the iPad and $2.5B for the iPhone."

See Also: Tim Cook: TV Is 'an Area of Intense Interest'

4. Samsung is a bigger threat than Apple wants to admit.


 

The battle between Apple and Samsung, the largest competitor to Apple for hardware, has been going on for years. The companies have been locked in patent lawsuits over software, though some have speculated that Apple's gripes should actually be with Google (GOOG), and less with Samsung.

"The Apple lawsuits against Samsung brought a lot of attention to Samsung products," Sica said in an interview. "If Apple is suing Samsung for copying their technology, then why would I, the consumer, spend $500 on the Apple product instead of the $100 on a Samsung phone?"

Apple's legal actions against Samsung have backfired by drawing attention to the fact that a virtually identical product to the iPhone can be bought for less money. Unless they are a die-hard Apple fan, consumers are considering this when browsing for smartphones.

On earnings calls, CEO Cook has made reference to Samsung as being Apple's biggest competitor on the hardware side. "And of course, today, our tough competitor from a hardware point of view would be Samsung and married to Google on the operating system side," Cook said in April 2013, when discussing Apple's fiscal second-quarter results.

See Also: How the iPhone Air Gives Apple a Boost


3. Apple technology isn't all that original.

While the public generally thinks of Apple as having invented markets, be it smartphones, MP3 players, or tablets, that's not true. Apple enters markets where there are already competitors, struggling to figure out what the end consumer wants, and gives that to them.

"Everyone thinks Apple invents all their own tech, but in reality they 'borrow' quite a bit of it from others," said J.Gold Associates founder and principal analyst Jack Gold.

For example, voice command has been done for years by others, particularly IBM (IBM) and Nuance. However, with Apple's purchase of Siri in 2010, it brought the personal voice assistant to the forefront. Now, Google (GOOGL) has its own offering, as does Microsoft (MSFT) with its Cortan. Apple bought Siri. The company made Siri better, but voice command and search is not a new concept.

Furthermore, the iPhone was not the first smartphone, the BlackBerry was. However, it was the first to offer touchscreen in a way that was easy for users to use, and combined the Internet with a music player. Apple is now credited as having revolutionized the category.

The now defunct Handspring was the pioneer of smartphone touch interface technology using Palm OS, the first instance of a phone that had touch with email, calendar and other personal information manager capabilities.

See Also: How Apple's iWatch Can Help Wearables

2. Apple Isn't Perfect.

"Many think Apple doesn't ever fail with their products," said Gold. "There are lots of examples, some relatively recently, of Apple having limited success in building products."

Before Jobs returned to the company, Apple was in disarray, and was seemingly trying to produce every piece of consumer electronics out there, including cameras. In the early 1990s, Apple launched QuickTake, a digital camera.

The digital camera market was still very early, and the QuickTake had no zoom, focus, the range was tiny and the storage was next to nothing, allowing users to store just 8 pictures. It was a disaster.
 
Other failures include the Apple III, after the incredibly successful Apple II, Apple Pippin (Apple's disastrous entry into the video game market), Mac OS9 (funny how Apple has been on OS X seemingly forever, right?), as well as Apple's first (and maybe not last?) foray into the television market, the Macintosh TV.

Also See: 10 Best Apple Products Ever

1. Apple is aging.

The big issue for Apple since Jobs passed away is its pipeline. Some have said Jobs left a pipeline of products, others have said that he did not. With that, it's not clear that Apple can maintain its innovation going forward.

"This is the 'innovation curve' effect," Gold noted. "You have a harder time innovating the older your product gets, without blowing it up and starting over."

The iWatch could be one example of Apple moving into new areas, but wearable technology isn't taking off like everyone had initially thought, so it's still a question mark at this point. The same goes for mobile payments, something Cook has talked about publicly.

"The mobile payments area in general is one that we've been intrigued with, and that was one of the thoughts behind Touch ID," Cook said on Apple's 2014 fiscal first-quarter earnings call. "But we're not limiting ourselves just to that. So I don't have anything specific to announce today, but you can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it's a big opportunity on the platform."

As technology companies experience hit products, they face something known as Innovator's Dilemma, which means, "Where do we go from here?" Apple is currently experiencing that right now, at least in public perception. Cook has said in the past that Apple has no problem working on stuff, the issue is determining which products to work on.

With the iWatch scheduled for the second half of this year, Apple will be facing scrutiny like never before on a new product, something it needs to be a hit from day one.

Also See: Here's How Much the iWatch Will Cost

-- Written by Chris Ciaccia with Andrea Tse in New York

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