Bull Vs. Bear - Apple's Industry Dominance Won't Last Forever

By Ryan C. Fuhrmann | August 30, 2012 AAA

Question: Will Apple TV and the iPad Mini propel AAPL to $1,000 per share?

Bear's Response
As the fall approaches, fanatics for anything and everything Apple (Nasdaq:AAPL) can hardly contain their excitement over the reported releases of the next generation of Apple products. A number of sources peg late September as the period in which the company will unveil the newest version of its popular iPhone franchise via the iPhone 5. Others are suggesting that Apple will take it even further and release iTV, which is thought to revolutionize the way that consumers watch television.

At this point, Apple enthusiasts will happily snap up any related products that restrict use to Apple's tightly controlled ecosystem of hardware, software and outside app development community. There is even talk that a "mini" version of the iPad tablet is in the works. All of that is fine and dandy but that doesn't mean Apple's stock price will reach $1,000 anytime soon.

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There is little denying Apple's success in inventing or simply improving tech gadgets that consumers had little idea that they ever needed. To date, few rivals have been able to supplant Apple's incredible success in the music, mobile phone and tablet arenas. The only competitor to come close in the smartphone market is Korean conglomerate Samsung, though it was recently embarrassed in a court ruling that said it had to pay Apple $1 billion in damages for infringing on Apple's patents. However, there is huge potential downside in its business model.

SEE: Apple Vs. Samsung: Q&A With Scott Freeze

The key concern with continued rosy predictions is the rapidness in which the technology industry evolves and shifts. The best examples of how an industry highflyer turns into a has-been stems from Apple's main rivals. Foremost, Nokia (NYSE:NOK) controlled close to half of the global cell phone market just a few years ago. Its share has fallen precipitously and has dipped below 20% so far in 2012. Its share of the smartphone market, which is seen as the only cell phone market that still matters, is now in the single digits.

SEE: 3 Ways To Indirectly Invest In Apple

Motorola controlled more than 20% of the market back in 2006 but was recently snapped up by Google (Nasdaq:GOOG), primarily because of its fall from industry grace. Research in Motion's (Nasda:RIMM) Blackberry devices are fighting for survival and could be snapped up by Microsoft (Nasdaq:MSFT), or another player similar to it or Google that would like to maintain major influence on the software side of the market. Dell (Nasdaq:DELL) and Hewlett-Packard (NYSE:HPQ) are fighting against a potential major consumer shift away from computers to more convenient tablets and smartphones.

Apple fans will try to suggest that the concerns of its major rivals are due in good part to Apple's stunning success. This is definitely an argument, but also speaks to how quickly competition can turn the industry on its head in just a couple of years. Additionally, the former Motorola dominance was supplanted by Nokia, which was only recently taken over by Apple. In the case of Apple, I have a feeling everyone is getting ahead of themselves.

SEE: How To Trade The Smartphone Craze

The Bottom Line
Already, there are plenty of tablet and smartphone offerings that basically perform the same tasks as Apple devices for a couple hundred dollars less. These products could cut Apple's profit margins drastically, and could also start to favor Nokia and other rivals with large international distribution networks. It may take time, but there is a high likelihood that Apple's industry dominance will not last forever.

At the time of writing, Ryan C. Fuhrmann was long shares of Microsoft and HP but did not own shares in any other company mentioned in this article.

Don't forget to read the Bull Side of this debate and weigh in with your opinion below.

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