Business Watch: Apple might just be a victim of its own hype


Dominic White reckons the pressure is on Apple to produce more outstanding devices due to increasingly high expectations of the company

It’s been an historic two weeks for Apple.

The loss of its talismanic founder Steve Jobs has left investors pondering whether it can continue its dominance of the smartphone market without his creative genius.

That fear was underlined last week when the company stunned Wall Street by missing sales and profit forecasts and revealing it had sold far fewer iPhones than analysts had expected.

Apple said it sold 17.07 million iPhones in the three months to September 24, which was well shy of the 20 million predicted.

Shares in Apple tumbled seven percent on Tuesday, knocking some £17 billion off the company’s market value.

It was not a great first-quarterly earnings announcement for chief executive Tim Cook, who took over from the ill Jobs in August.

But Apple is to some degree a victim of its own hype.

There is no doubt that the build-up surrounding the new iPhone, released after the quarter, caused many consumers to hold off buying until the new iteration of the device arrived. Apple execs themselves gave that explanation for the disappointing sales figures.

Ironically, early sales of the new iPhone 4S, released this month, have gone far better than many expected. Apple shifted four million iPhone 4S handsets in its first three days, defying the less-than-sparkling reviews.

Many fund managers are predicting that the bad news will be short-lived.

Indeed, Apple went on to forecast that revenues and earnings in the Christmas quarter will be better than Wall Street had expected.

The problem that Apple faces is that expectations are so high that it must keep coming out with the next blockbuster product for the share price to maintain its stratospheric trajectory.

BlackBerry trauma
One company that knows all too well the problem of meeting high expectations is RIM. The BlackBerry maker has had a shocker in recent weeks.

It has already been struggling due to losing market share to Apple and the likes of Samsung. Now RIM has had a series of embarrassing network glitches that have tarnished its reputation in the eyes of some of its users.

Its response this week was to say it will give BlackBerry users more than £60 of free applications to say sorry for the outage that shut down its email service for three days in many countries around the world, after a switch failed at RIM’s data centre – in Slough of all places.

To add to RIM’s woes, the back-up system then failed, with as many as 40 million people – half of RIM’s BlackBerry user base – affected.

Until the end of the year, customers can download a clutch of premium applications on the BlackBerry App World Store, from games like Sims 3, and Texas Hold’em Poker, to music-finding service Shazam Encore. They will also get a month’s extension to their technical service contract.

Mike Lazaridis, RIM’s co-chief executive and founder made a big play of the announcement, which perhaps shows just how much the company is on the defensive right now.

“We have apologised to our customers and we will work tirelessly to restore their confidence. We are taking immediate and aggressive steps to help prevent something like this from happening again,” he said in a statement.