Could Apple Inc (NASDAQ:AAPL)’s Sales Suffer From iCloud Hacks?

Recently, Apple Inc has come under attack, and its carefully built ecosystem could suffer. The maker of the iPhone is investigating claims that an individual or group of hackers had gotten into its iCloud service.

It seemed like the targets the hackers were after were celebrities. The hackers published a series of nude celebrity photos as well as videos, including several from popular actress Jennifer Lawrence and swimsuit model Kate Upton. These photos were stolen from their personal private accounts.

This latest security breach in Apple’s operations could have serious implications for Apple’s ecosystem.

Apple gathers together all its devices and services with iCloud, a convenient and secure cloud system that syncs all your content – from music and photos to documents and apps – between an Apple user’s devices. This ecosystem is one of the many reasons why the company’s iPhones are often dubbed the gateway to its other gadgets. However, it seems that Apple’s iCloud is not as secure and hacker-proof as the company and its users expects, and this could severely impact the company’s sales figures.

Investment Thesis

The issue that arises with Apple is that its business model is dependent on its ecosystem, and that puts iCloud at the center. If this system is perceived in anyway to be vulnerable, the ecosystem loses its value and drags the business value down along with it.

Many of Apple’s products already do not have several features that its competitors’ products have. Without the strength and security of its ecosystem and with a growing number of rivals now offering the same type of interconnectivity, the company may see a loss in its market share.

Apple Tries To Catch Up

On September 9^th, the iPhone maker with hold a media briefing, which is also the same time that the company is expecting to release long awaited products like the iPhone 6. The iPhone 6 is said to feature a larger display screen than the previous models. Another highly anticipated product that Apple is planning to launch is the iWatch, as well as another iPad with a larger display screen. These developments seem to be ground breaking, but it is really just a case of Apple tries to catch up to the rest of the players in the market.

Many of Apple’s rivals already sell similar products. There are multiple companies that offer tablets and phones with larger display screens and smart technology that is wearable. For example, Samsung (OTC:SSNLF) has many smartphones that are larger in size, such as its Galaxy phone series, as well as a line of smart watches. Samsung realizes that Apple is trailing behind Samsung’s technology, and has aired several commercials that poke fun at Apple’s inability to keep up.

Additionally, Microsoft Corp (NASDAQ:MSFT) had just recently debuted the Surface Pro 3, an oversized tablet that comes with a detachable keyboard. Rather than marketing the product as a device that competed with the iPad, the company aired a campaign of advertisements that liken the Surface Pro 3 to the MacBook Air.

The commercials may get a laugh or two out of the audience, but they are true. Apple used to be at the forefront of technology, but the company has recently fallen behind the pace. The evidence of this decline is clear when it comes to gadgets and devices, but it is even more obvious in the iCloud.

Apple’s iCloud

The service that Apple’s iCloud provides is capable of a lot. It allows users to sync and stream music, photos, and videos. It also features a function for saving certain files, including those from Apple’s iWork. However, it lacks certain features that are widely available on the cloud sharing system of other devices.

Google (NASDAQ:GOOG) (GOOGL) Drive and Dropbox are other online storage and sharing services that enable users to store and sync files, but it doesn’t include many file types. In order to back up documents and other types of files in iCloud, they have to be in one of Apple’s specific program file formats.

Apple’s iCloud also enables usage of FaceTime, Apple’s video chat service. However, that service is only enabled for Apple users. On the other hand, Skype and Google Hangout are available for anyone, regardless of the operating system you are running.

Apple’s iTunes gives users the ability to sync purchased music and movies. But this service is not alone – Amazon offers the same service, and doesn’t charge users to store the media that they purchased. Additionally, there are a great number of people who would rather use Pandora (NYSE:P) or Spotify to listen to music, and Netflix (NASDAQ:NFLX) to watch television shows and movies.

In addition to the popular services mentioned, there are also hundreds of other companies that offer the same or similar services and functions. So why choose Apple?

Different Perspectives

Apple’s highlighted features are that its interfaces are easy to use, the company provides excellent customer service, and there is a significant degree of convenience in having everything sync and update from a single log in account. But Apple’s greatest forte so far has been its security.

Intelligent Defense conducted a survey earlier this year, and the data found that only 33 percent of participants did not agree with the statement, “Macs do not get computer viruses.” On the other hand, 67 percent agreed with the same statement, or could not decide whether the statement was true or false. In this case, confusion and ignorance have little difference when looking at from a security perspective.

The idea of security has generated huge gains for Apple, especially in the corporate space. According to Forrester Research, Apple won about 8 percent of global business and government spending on tablets and computers in 2012, which was a 1 percent increase from 2009. By 2015, Forrester Research predicts that the figure will grow to 11 percent. Additionally, more than 90 percent of all the business apps were used on Apple’s iOS mobile operating system in the third quarter.

If the perception of its customers and the public changes, the tech company could see some of those gains slip away.

Conclusion

Apple’s devices are popular, sleek, and easy to use. There is a certain status symbol associated with those who own the latest iPhone or are using an iPad. However, it doesn’t mean that the company and its products will always have that status to rely on. More and more, other alternatives to Apple’s systems are entering the market. If Apple’s ecosystem is believed to be vulnerable, and general public realize that Apple’s products are, in fact, lacking in innovation, there could be a quick turn away from Apple’s devices.