The past year has been a very, very good one for Apple – and particularly its iDevices – iPhone, iPad, iPod line of products. Apple has now passed Microsoft in stock value and is approaching the highest valued company in the World, ExxonMobil. And next years prospects are even better:
Trefis Model of Apple Stock Value
In effect one can see the huge value that the iDevices are to Apple – the Mac line-up of desktops and notebooks makes just over 18% of the value of the stock while the iPhone is more than 50%. The $dollar writing is on the wall – Apple is making the transition from MacOS to iOS4 devices. The signs of the transition are everywhere:
1)Two years ago the company changed its name from Apple Computer to Apple Inc;
2)For the past three years, Apple has had an opportunity to take over a much bigger share of the PC Desktop and laptop markets with its Mac and MacBook line of products offering a superior experience to Microsoft’s Vista and virus plagued PCs. True, Apple cannot come close by an order of magnitude to the number of apps/programs written for the PC but virtual technology allowed a bypass. But Apple has priced its Mac hardware at 2 and often 3 times the price of the equivalent PC. And they are equivalent because the computers often use the same parts/components: CPU, disk drive, RAM, graphics processors, and other basic components. Why keep the price of Macs so high when PC market share is low hanging fruit – easy for the taking? Perhaps because Steve Jobs is laying most of his marbles on the next generation of client devices – or should I say iDevices. So, by pricing high Steve gives his iDevices much wider profit margin room – and iPhones and iPads sell for 2-3 times the price of Netbooks and EEE-PCs at $250-350. But Steve Jobs has seen what Steve Ballmer and Bill Gates failed to see for 10 years – most consumers want light, highly-portable, mobile-connected, long-battery life devices which draw a small set of apps from a huge stable/store of Apps. And they want a drag/drop/touch and swipe easy to use and remember how to operate interface. Users definitely do not want huge huge programs 3 level deep menuing systems or dozens of hieroglyphic icon driven system with huge learning curves.
3)This in turn allows Steve to lead the parade on the next dominant client platforms – his iDevices. In every case from iPod as media container through iPhone as the pioneering smartphone to iPad as the dominant tablet, Apple has a first start lead of nearly a year or more and an App lead of more than 50%. In effect, Steve is betting that Apple can replace Microsoft as the client platform of choice among consumers – and with iPad among organizational/business users as well.
4)For the sake of launching a new platform to replace Microsoft-dominated PCs, Steve has been willing to sacrifice his Mac line-up and in many ways beyond pricing. For example, 3 years after the iPhone and its multi-touch interface brilliance, Mac users can only use multi-touch through a “Magic Pad”, no direct on-screen multi-touch operations[conceding that advantage to a growing number of Windows full-screen, multi-touch laptops and PCs]. In addition, Apple did not repair/improve the performance of its Mac’s with respect to graphics speed of processing . For example, Windows 7 running on Apple Mac hardware is anywhere from 10-40% faster than the MacOS powered units. Another small but telling instance of the change-over to iOS4, is that the Worldwide Developers Conference in August 2010 was devoted to iOS4 with NO MacOS developers sessions. In short, MacOS is consistently being short changed at Cupertino.
5)Historically, Steve has abandoned his older technologies. Apple II and III for Lisa and Macs. Motorola Macs for Power PC Macs. Power PC Macs for Intel Macs, etc. And now the Apple Servers are being cut out yet again. So Steve, if not his customers, is always willing to move onto something more innovative and leave his old technology behind. Its called Creative Destruction.
Implications for 2011 and Apple’s Future
Expect the iDevices to see major improvements and a fast track of added features and peripherals. Steve now knows that the iPad was missing some key hardware and software features. Apple has already corrected several of those shortcomings with the release of much improved iOS4.2 – particularly multi-tasking, wireless synching and links to Mac OS. So expect a very big iPad hardware and software refresh in late January. You aint seen nothing yet.
But that leaves the problem of the Macs. Macs are hopelessly behind Windows in terms of number of apps/programs – likely 1/10th the number of PC programs. That is the only reason people put up with the Windows nonesense [think Vista, IE Feature Freeze, and horrendous monthly security patches] that emanates from Redmond. So how do you flip that apps advantage to Apple’s favor. You make iOS4, which has a tremendous app lead in all the iDevices, the “new and primary” Apple OS. Suddenly, the WWDC devoted to iOS4 with no Mac coverage makes sense. Ditto no multi-touch screens for Macs. But what do you do for all those loyal graphic designers, web developers, and gen-x-ers [like Jimmy Fallon who uses a big Apple machine on his Late Night Show]?
Well Steve Jobs, planted in the heart of Silicon Valley, knows Moore’s Law is alive and well – and the industry will continue to double computing power[everything – CPU, RAM, disk space, and inter-machine bandwidth] every 2 years or so. This will allow his iOS4 machines to have the compute power necessary to do the advanced graphics and design that is currently done on Macs in about the 2014-2016 time frame. And it will then have multi-touch and gestures, floating components, and new design software from Apple to beat the bejesus out of anything in Windows. And Macs will have the ability to do iOS4 speak and transfers with the ease of a Lion. So a path to iOS4 from Macs will be provided.
But really, MacOS and what to do with it may be the $64,000 question for Apple in the next few years. Is there a big enough market and Steve’s interest for what can be done with the Mac. Would Steve allow Macs to be spun out? Is the CPU intensive graphics designers markets of sufficient interest and new innovation? Or will the inevitably increasing computing power [Moore’s Law is alive and well both for CPU and disk space] create a Mac-replacing iPad or other special iDevice. Only the Shadow knows what lurks in the Jobsian mind.