When the Apple Worldwide Developer Conference opens next week, the company will have something to prove. As of Friday, June 3, company's stock slipped below $100 per share, down from $130 per share a year ago, following a reduced projection from Goldman Sachs.
Smartphones sales, a major source of Apple revenue, are expected to slow down. Gartner in March predicted global smartphone shipment growth will be 7% in 2016, down from 9.7% in 2015. The firm also anticipates that global shipments of devices overall (PCs, smartphones, and tablets) will remain flat (at a 0.6% increase) while end-user spending in constant US dollars will decline 1.6%.
IDC sees smartphone shipments growing only 3.1% in 2016.
In April, Apple posted its first quarterly revenue decline since 2003. There's a sense that the Apple Watch has not lived up to expectations, despite selling an estimated 12 million units during its first year and capturing 61% of global smartwatch sales in 2015, according to IDC.
The situation for Apple is far from the disaster some reports have depicted. Apple remains hugely profitable and popular. Other companies should be so lucky as to have its troubles.
Yet Apple cannot afford to rest on its laurels. Despite healthy revenue, its product line is stale and its ability to innovate doesn't appear to be keeping pace with its rivals. Consider what Google and Levi's are doing with Project Jacquard, or any of Google's (Alphabet's) many moonshots.
The MacBook Pro needs an update, which it appears it will get, though perhaps not until later this year. The same goes for the MacBook; the MacBook Air; the Mac Pro, last refreshed in December 2013; and the AirPort Extreme router, last refreshed in June 2013.
Computers however aren't where Apple makes its money these days. The iPhone needs a new coat of paint too. Last September, Apple CEO Tim Cook insisted there was a significant difference between last year's model, the iPhone 6S, and its 2014 ancestor, the iPhone 6. "While they may look familiar, we have changed everything about these new iPhones," he said. At least this year's iPhone is expected to get a new number to match its new form rather than an appended "S."
With luck, Apple's next iPhone will include some of the innovations that have surfaced in Android phones like waterproofing, wireless charging, and expandable storage. But the iPhone 7 is expected to include at least one design improvement that favors form at the expense of functionality. Apple is expected to remove the 3.5mm audio headphone jack, thereby requiring headphones to connect via the Lightning port or Bluetooth. Apple controls the Lightning specification so headphone makers will probably have to pay Apple for a license, a cost that will ultimately be passed on to consumers.
Removing the uncontrolled audio jack also deprives developers of a port that's outside of Apple's control. While that may make sense financially, it's yet one more strike against the notion of permissionless innovation.
Apple's insistence on control has some benefits, as can be seen from Google's effort to make its Android partners distribute updates in a more timely manner. But its oversight can become capricious. It limits Apple's platforms at a time when working with third-parties has become critical. What Apple needs more than refreshed hardware is a more accommodating attitude toward customers, developers, and partners. Apple needs to loosen up and open up.
Apple should get out of the censorship business and approve apps based on technical merits and legal compliance rather than rejecting apps like Drone Strike Alert because it finds the content objectionable (a euphemism for politically challenging). The company's recent decision to reconsider its rejection of Lilya shows it pays attention to controversy. It would do better to avoid aesthetic judgements entirely, even if that meant seeing games about oppressed factory workers in the App Store. Google Play strikes a more reasonable balance with its rules.
Also, Apple should license third-party app stores or go so far as to trust its users enough to allow them to sideload iOS apps. Some competition might just be the incentive Apple needs to improve App Store search, a source of developer frustration. (If Apple could bring itself to separate its iOS App Store from the unwieldy iTunes, there would be celebrations around the globe.)
Apple's insistence on control appears to be hindering HomeKit adoption. The company requires that device makers buy and use a proprietary chip. Apple is not be alone in trying to extract revenue from partners, with Intel and Alphabet's Nest (headed by former Apple executive Tony Fadell) also imposing fees on IoT device makers. But looking at the progress made by Samsung's SmartThings and at Google's decision to open-source Thread, its IoT networking protocol, it's difficult to see how Apple's business-as-usual approach makes it a more appealing partner.
Apple should continue in this direction. Its handling of Swift, which should reach version 3.0 this year, shows Apple can be open when it has to be. But it needs to do more. Its secrecy has hurt its AI research. Apple is expected to introduce an API for Siri, but that hardly seems enough given pace at which Facebook, Google, and Microsoft have been offering open source machine learning libraries to the world and developing AI assistants.
Developer Marco Arment recently observed that if the bet being made on AI services by Google and its peers proves correct, Apple appears to be ill-positioned to participate. Apple is certainly aware of what its peers are doing, but its institutional habits work against it. The process of developing hardware in secret for years and then releasing it in a carefully stage-managed event has its place. It would work for an Apple Car. But now that each phone looks at lot like the last, and few devices bring any surprises, software and services are the stars of the show.
Yet, Apple's software and services don't have a great reputation. Apple's efforts to improve its long maligned cloud services have been bogged down by infighting. The release of iOS 9 and OS X 10.11 came with a focus on quality rather than new features. That's an initiative that clearly needs to continue to quell complaints about the company's software and services. It's happening on an infrastructure level at least: Apple knows it should not be running its services in Amazon, Google, or Microsoft data centers as it does. So it's developing its own cloud infrastructure.
But beyond addressing deficiencies in its software and services, Apple needs to engage more directly and more openly with its customers, developers, and partners. It needs less secrecy and more communication. The company has already come a long way, with beta programs for its software and occasional previews of its hardware. It can go further still by relaxing its developer rules and communicating more frequently about its projects and challenges. Were Apple to open up, it would have less to prove, because the proof of its efforts and intentions would be more evident.
(Cover image: mathiaswilson/iStockphoto)Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful ... View Full Bio