Ok, I call this the iPhone challenge. Take an iPhone 6s. Then take a leading rival phone, say a Samsung Galaxy S6. Cover the logos. Then ask people to compare the two phones.
Have you tried the iPhone challenge?
Lets start with screen size. The 6s is 4.7 inches. This is well beaten by the S6, which is 5.1 inches. Then resolution. The 6s is 750 x 1334 pixels. This is knocked into a cocked hat by the S6, which is 1440 x 2560 pixels four times the detail.
How about storage? Well the base Apple (NASDAQ: AAPL)model has 16 Gb of storage, and 2 Gb of RAM, compared with 32 Gb of storage and 3 Gb of RAM for the Samsung. How about the camera? Well Apples 12 MP is well beaten by Samsungs 16 MP primary camera.
The price then seals the deal. On Amazon currently the iPhone 6ssells for 539. The Galaxy S6 sells for 369.99. And whats more, I think Android OShas far better featuresthan Apples iOS. How about design? Well, in my eyes,both phones look good in their sleek metal cases.
In short, the Samsung thrashes the Apple on specification yet is far, far cheaper. On paper, theres just no contest. Yet the iPhone outsells the Galaxy by a long way, and Apple is, by some distance,the most profitable company in the world.
Apple is pulling off the Indian rope trick
Basically, Apple has been pulling off an Indian rope trick for the best part of a decade, selling tens of millions ofiPhones not because theyre the best, but because theyre the coolest.
Yet until recently, the momentum, booming sales in China, and the cult of personality around Steve Jobs, drove sales ever higher. However, in the latest set of results, we noticed something unusual. For the first time inyears, Apples iPhone sales are slowing and even startingto fall, and the share price is tumbling. People from San Francisco to Shanghai are twigging that other phones are better, and the Apple logo is finally gleaming a little less brightly.
I think weve reached peak Apple, and thats a worrying sign for shareholders of both Apple, and ARM (LSE: ARM). ARM Holdings is, of course, the Cambridge-based designer of Apples processors.Most rival phones have chips fromother companies. So if Apple loses, ARM loses too.
Some would argue that Apple now looks cheap, trading as it is on just 10times earnings. Yet profits on hardware are fragile. Apple only has to go out of fashion, and profitability will crash. ARMwill fall too, and an expected2015 P/E ratio of 32.41,with a dividend yield of just 0.95%, leaves little margin for error. There will bescant justification for the high rating if growth tails off, and a downward rerating would be painful.
Apple insiders will realise that this is the Cupertino companys golden age, and I suspect it will be decades before any other firm in the world is as profitable again. Apple and ARM shareholders should enjoy it while it lasts.
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Prabhat owns shares in none of the companies mentioned in this article.