Why Apple's Fall releases are make or break for Cupertino

Reading between the lines of a series of overnight reports, Apple [AAPL] is beginning to lose momentum as months of product release drought dim public perception of the brand.

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Fall or fold?

Sure, we all know Cupertino to be hard at work on a flurry of new products and services set for launch beginning this Fall, but months of relative inactivity are cutting the cord between the company and consumers -- and we're going to see evidence of this during Apple's Q3 earnings release on July 23.

Analysts have been issuing relatively downbeat assessments for the company's Q3 financial performance. These are broadly in line with Apple's own expectations for the current quarter: revenue between $33.5 and $35.5 billion, down on Q2 growth and flat on a year-on-year basis.

This likely reflects the absence of any hot new Apple products during the last few months. The only systems we've seen the company offer up are Mac/PC-related: improved MacBook Air, new AirPorts and a late 2012 iMac refresh.

That's not enough. PC sales are in decline, meaning these new products have failed to hold the line. Apple's competition hasn't slept: Samsung et al. is beginning to gain ground -- recent StatCounter data claims Samsung devices outpaced iPhones and iPod touches in worldwide Web browsing in June -- though not by much:

Samsung's devices accounted for 25.5 percent of page views to 25.1 percent for Apple and 22 percent for Nokia in June. Those global figures don't translate to the US, where Apple took 54.8 percent of the mobile browsing market to Samsung's 18.3 percent.

All the same this is an important metric. Apple has been able to consistently claim its devices are far more widely used than those running the Android OS when it comes to Web browsing. "I sometimes wonder what people actually do with those other devices," said CEO, Tim Cook at one time.

Samsung's move to exceed iOS Web browsing share may only be by a sliver but still constitutes a blow to Apple's morale.

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PC decline

There's equally depressing Apple figures from Gartner and IDC -- while they're open to challenge, they show that Apple's PC sales are slowing, though they also show the PC industry is in deep decline -- down 10.9 percent.

“We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets,” said Mikako Kitagawa, principal analyst at Gartner. “In emerging markets, inexpensive tablets have become the first computing device for many people, who at best are deferring the purchase of a PC. This is also accounting for the collapse of the mini notebook market.”

Excepting iPad sales, Apple's US PC sales figures fell 4.3 percent.

The questionable thing about Gartner's figures is their complete bias: what else do you call the analyst firm's decision to include sales of Windows 8 tablets as PCs, but not to include iPad sales?

Acting in complete ignorance of the trend to use iPads across the Fortune 500, Gartner characterizes iPads as "media tablets." Frankly I think that's disingenuous, dishonest and unrealistic. It drives me to question the validity of Gartner's data. Do these figures reflect the real world, or simply mirror Gartner's own prejudice? I think the latter.

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The Post-PC impact

Eager for fresh insight, I danced over to IDC's own market data. These figures reveal an even steeper decline in PC sales -- down 11.4 percent. Like Gartner, these figures don't include iPads but neither do they count Windows tablets. They basically confirm the same trend -- PC sales, including Mac sales, are in decline.

"When we were an agrarian nation, all cars were trucks, because that’s what you needed on the farm. But as vehicles started to be used in the urban centers, cars got more popular. Innovations like automatic transmission and power steering and things that you didn’t care about in a truck as much started to become paramount in cars," said Apple's Steve Jobs in 2010.

"PCs are going to be like trucks. They’re still going to be around, they’re still going to have a lot of value, but they’re going to be used by one out of X people."

This is precisely what is happening, according to Gartner:

“We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets,” said Mikako Kitagawa, principal analyst at Gartner. “In emerging markets, inexpensive tablets have become the first computing device for many people, who at best are deferring the purchase of a PC. This is also accounting for the collapse of the mini notebook market.”

These observations also underline a lack of integrity inherent within Gartner's decision to ignore the already widely used in the enterprise iPad while counting the relatively unadopted Windows 8 tablets within its figures. I fail to see any objectivity in that decision.

Combining all this data, for Apple the big picture is:

  • Apple's mobile devices can no longer claim to be the most widely used for accessing the Web.
  • Mac sales are in decline.
  • The decision to slow new product introductions this year is impacting company performance.

This leads me to presume Apple's Fall will be a make or break point for the company. Any new product launches will rightly be seen as essential to the company's future success. These new devices must ignite the market, or Apple's fall will truly begin.

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