What Tech Company is Healthier Than Apple?

When it comes to understanding the stock market, I acknowledge I am no expert. I am not a financial analyst and my research is not directed at those making stock bets. Yet if I was to put myself in the shoes of a financial analyst or someone looking to make long term bets on tech companies, I would have to wonder what company is a better long term bet than Apple? In my opinion there isn’t one.

I do industry analysis and not financial analysis, however, my work often results in very company specific analysis. I do quite a bit of scenario planning as it helps guide our trend and strategy reports. I can say with quite a bit of confidence that as I survey all the current players in the technology industry, Apple is the one I worry the least about. In fact my only concern for Apple is that they are having trouble keeping up with demand. Their earnings call revealed that Apple was supply constrained in almost every product category. Apple could not make enough products fast enough.

What other company has this problem? Apple has this problem in the tens of millions of devices per quarter range and in the foreseeable future hundreds of millions of devices per quarter. The level of scale for the precision engineering of Apple hardware is unprecedented in consumer electronics. I can’t think of a single more elegantly designed piece of hardware that was mass manufactured to the degree of the iPhone.

I remain confident, as I look at the strengths, weaknesses, executive management, competitive landscape, and the core strategies of all the companies in the technology landscape, that Apple is among the few I am certain will still be relevant and in the game 10 years from now and for much longer.

Others Going Vertical

A question I look at as I analyze specific companies is who is building a strategy to be a long term company. Many tech companies develop strategies and create corporate vision in the 3-5 year range. Many also don’t even go that far as they are only planning 1-2 years out. There are a rare few companies who strategize a bit longer and Apple is one of them.

Yet if you look at some of the core strategies of those who I think are thinking longer term, you will note that they are headed down a vertically oriented path—just as Apple is. Microsoft will inevitably get into more hardware business, Lenovo has their own smartphone OS in China, Samsung will invest in its own middleware solution and Google owns a smartphone and tablet hardware company.

Companies today are faced with the reality that a hardware only business model is not sustainable. That business model always results in a ruthless race to the bottom. Companies who can add unique value at the software and services level can protect their hardware efforts. In mature markets the vertical model is the most sustainable and defendable model there is. So it is easy to see why others are on the verge of going fully vertical the same way Apple has been for decades. Which brings up an interesting point and it gets to the question of my columns title.

Almost every major company who is thinking long term is headed in a vertical direction. This is a model that Apple has used since the beginning. To put it another way, Apple has decades of experience executing the very model that many companies are hanging their future on. This does not mean that others will be successful implementing a vertical model, only that they believe it is the way forward.

There is a massive land grab and Apple does not need to own as much land (market share) as others in order to have an incredibly large and profitable business. If Apple simply acquired and maintained 10% of the global smartphone market (when it is saturated) they would ship five times as many iPhones as they currently do. I believe Apple will get and maintain a larger piece of the global pie for smartphones and tablets but I use that number to make a point.

I recognize that investors have a distorted and mostly short term view of the world. So I can’t fault them for being short sighted. But I would encourage them to dig deep down and ask themselves what tech company is more heathy than Apple and better positioned for success in the long run? If Apple isn’t still on the forefront of innovation then who is?

At the launch of the first iPhone, Steve Jobs said this:

“Every once in a while a revolutionary product comes along that changes everything”

Stop expecting Apple to make every once in a while happen every year.

Published by

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

58 thoughts on “What Tech Company is Healthier Than Apple?”

  1. Ben Bajarin, thank you for your truly intelligent commentary about Apple. Yes, their only problem, aside from the idiocy on Wall Street, is that they can’t build their products fast enough to keep up with the massive demand. Other companies would kill to have Apple’s problem.

  2. The market is irrational in the short-run. We can only pray that it is rational in the long-run, otherwise, it’s never rational at all.

    When analyzing a company, we need to leave market moves out of the equation. Apple has many strengths and many weaknesses. But many misguided pundits are mistaking Apple’s strengths for weaknesses.

    in my article yesterday, I went through Apple’s earnings statement. Mac down 16% due to supply constraints, iPad up 60% with the iPad Mini supply constrained, iPhone up 39% with the iPhone 5 and the iPhone 4 supply constrained, 75 million new iOS devices sold in a quarter, revenue up 27%, profit up 8%, cash up $16 billion for a total of $137 billion.

    Apple may have many issues, but the bogey-man of low demand is certainly not one of them. Just think about the above numbers for a minute. Apple sold out their entire inventory of Macs, iPad Minis, iPhone 5(s) and iPhone 4(s). How is that low demand?

    Low demand is NOT one of Apple’s issues. Neither is high price. Anyone who takes Economics 101 knows that price is, by definition, not too high if demand exceeds supply.

    If you eliminate the “demand is too low”/”prices are too high” arguments, most of today’s criticism of Apple fall away. Let’s criticize Apple for its weaknesses and stop criticizing Apple for its inherent strengths.

    1. The best analysis. Especially: “Low demand is NOT one of Apple’s issues. Neither is high price. Anyone who takes Economics 101 knows that price is, by definition, not too high if demand exceeds supply” and “Let’s criticize Apple for its weaknesses and stop criticizing Apple for its inherent strengths.”

      1. Very good comment. I think the fact that iPhone ASP has not declined is the biggest indicator and argument against a low end strategy at this point. Apple is still selling to the right customer base at what appears to be the right price. As the evidence shows, even for that group they can’t make enough to meet demand.

  3. The reality is that Apple’s profitability and viability are unrelated to stock price. As we’ve seen, Apple reports record-breaking revenues and profits, even beating the average of “analysts” predictions, and the stock price drops radically.

    Investors (especially short-term investors) need to realize that investing in stocks is like going into a casino… unless you are an insider. You can bet on the roulette wheel and lose a bundle of money, but the casino that bets against you will always make money on your losses.

    If you still think that you can trust the financial sector with your investments after 2008… well, I’ve got a bridge I’d like to sell to you. 😉

    1. Yes this is true. Apple does need to cash generated from public stocks either, but it is unfortunate for many individual investors who may believe Apple is a solid growth stock for the long haul as a part of retirement or something.

      I do find it interesting though that at this point the public stock from Apple’s standpoint is really more of a value creation vehicle for others rather than themselves as a company. Employees care though.

      1. Exactly! With a reserve that has now grown to over $137 Billion (more than the budget of most countries in the world), Apple can make all the additional investments that it wants, without ever relying on stock price, as other companies do.

        One thing that I think Apple should do with a small part of that reserve, is to start buying up its own stock. At the current absurdly low price for AAPL, Apple can make a killing on investing in itself.

        1. So this writer, whoever he or she is, argues that Apple’s share price will fall to $50 in three years without ever mentioning that each share is currently backed by nearly $150 in cash. How could that happen? Surely before that happened, someone would have to take Michael Dell’s advice: Shut the company down and return the money to the shareholders. I miss the days when you had to convince an editor somewhere that something was worth printing before it could appear in public.

  4. Fair enough regarding AAPL’s long-term planning, but this analysis ignores another long-term trend — the cyclical nature of the computer industry. If you’d written this column in 1983, you could have said many of the same things about DEC, the dominant company of the day (it doesn’t exist any more). If you’d written this in 1998, Microsoft would have been the biggest thing around (and with the notable exception of the Xbox they’re been moribund in the game-changer dept. since then). Today Apple is the “it” company but that doesn’t guarantee anything about the future, especially in this business.

    1. The thing that is different this time around is that computing has finally gone mainstream, consumer-facing. Even with Windows PCs it was not truly consumer-facing. I think it’s obvious why this matters so I won’t bother getting into it.

      1. Sorry… anyone who says ‘its different this time’ needs to have a reality check… its not different at all – the players are different and the lighting may be a bit different but the stage is still the same and the script is still intact….

        Ben’s piece is right on the money. The fact that Apple was supply constrained will be just killing them – Apple could probably have topped 50m iPhones and 25m iPads in the holiday quarter, if they had been able to sell them – not to mention the problems with the iMacs….

        Everything about Apple right now is about making that supply chain work (see its huge capex spend over the past few quarters) to delver more products but also at lower build cost per unit…

        That’s manufacturing 101…. nothing ‘different’ going on here.

        1. Hmm, if you don’t realize why the shift to consumer-facing devices matters, there’s not much point trying to convince you.

        2. Your words “The fact that Apple was supply constrained will be just killing them ”
          If you are talking about numbers it meant more to the analysts and fortune tellers but the profitability of the company is more important then any thing else by that i mean hard cold cash.

          1. Swing and a miss….. there is nothing worse for a supplier (of any product) than a stock out – that’s a unit that could of been sold but wasn’t because the supplier didn’t have any available…

            Which, and here is the kicker, means that they could have had more profit and more cash but didn’t – not because the customers didn’t want to buy but because they couldn’t supply – that’s what’s hurts.

    2. I take a different approach to what you point out here. I do not believe that the technology industry is cyclical but rather I believe product categories follow a path that appears to be cyclical. Mainframes, Minis, desktops, notebooks, tablets, etc all follow a similar path but all end up in the same place, roughly vertical.

      If we look at other industries that have been around longer than those in tech we see that the same truths apply and all industries follow a similar path as categories move from immaturity to maturity. It appears its cyclical but its not the industry it is simply categories that follow the same path to maturity.

      This is one of the most mis-understood things about the industry as people assume that history repeats itself but its path a new category follows that repeats not the industry itself.

      In mature markets, segmentation and differentiation are the only ways forward. You can not be different when you ship someone else’s software on your hardware. This is the sea of sameness I have been speaking so heavily against that is not successful in mature markets and never has been and never will be.

      I am confident in Apple’s ability to compete in the sea of sameness, I am not sure of many others.

    3. If the reasons laid out in the article don’t make a company investment-worthy, what does? In light of AMZN, it seems the answer is large revenue with miniscule earnings. If you are already at the bottom, the only way to go is up?

    4. what you say is true… and has happened to dozens of companies. But DEC was a much smaller company (~6 bill a year) in the mid 1980s with a tiny amount of cash and a relatively small number of customers and they did not have a large healthy eco system of 3rd parties and app makers surrounding them. This allowed Compac to buy them after they stumbled for about 5-8 years.

      Look how long Microsoft has been swirling down the toilet.. they havent been doing well for 10 years and keep doing dumb things that waste tons of money. But they are so big that it is taking a long time for them to implode.

      Even if this is the beginning of an epic slide for Apple, they are so big and so strong strong right now that it could take 10 years for them to burn through enough of their cash for someone to buy them. And that is assuming that they have absolutely nothing in the pipeline and their research labs that will cause another wave of disintermediation like what they did to cell phones and music and desktop publishing. The broadcast tv industry is just sitting there waiting to be blasted with apple magic… and if Apple can figure out a few things for the enterprise they could quadruple their income in that segment over night.

      It will be interesting to look back in a few years and see if this is just a bump or the start of a major slide. I am beting its a bump.

      1. To expand on your take on Apple’s fate, I believe Apple will NEVER die. They may not be the same Apple of today but they’ll never die. The tipping point was when iPhone sales took off after App Store release. Coincidently, that was also when pricing of Apple other products went “main stream”. (Remember how much Air cost before then?) This point was mostly lost on many analysts who insisted new iPad prices needed to be at least $800 to be viable. This also explains why iPad has no real competitor still. Apple’s premium products have gone main stream price wise.

        Doing a quick & dirty calculation of Apple’s numbers will show that even if Apple ceases all productions & sales effects, their $137B covering quarterly expenses of say $2B (Apple’s guidance for next quarter’s opex is about $3.9B), It will last at least 15 years (17.125 to be exact). And that’s not counting the interests to be earned on the hoard.

        So Apple is doomed just won’t happen any more, no matter how much some people want it to be true. Unless MS succeeded in sending one of theirs to take over Cook.

    5. The PC desktop computer market may be cyclical, but I am not so sure about the mobile market or the information market. Apple has gone a long way toward being different from the normal cyclical market. Apple has not based their business upon a market segment, but more on a philosophy of excellence, simplicity of use, creative design and maximizing customer satisfaction. Admittedly they are directed towards a more affluent and knowledgable area of their markets, and admittedly they believe in achieving the best margins in their markets. So far, they have not put all their eggs in any limited, declining products. Not iPods, iPhones, iPads, desktops, laptops, Music or book sales…not in any one market, but maintain a balanced mix of introduction and maturity. Perhaps they can continue, through dropping a product when it becomes advantageous and introducing a new product line when it is ready. More of an ‘evolution’ than a cycle.

    6. Since you mentioned DEC I would like to hear your view why it failed.

      It it has all the qualities of Apple described by Ben then there maybe something there if not then there is no basis for comparison or assumption which all the naysayers are doing.

      1. DEC’s leader Ken Olsen was too comfortable being the minicomputer king. He ignored the rise of PCs and also the rise of Unix and TCP/IP, believing that his mini hardware and proprietary VMS software and DECnet network stack were superior and therefore more likely to stay on top. He was wrong on both counts. Also, as noted above, DEC didn’t have anywhere near the cash stockpile that Apple does, causing a hard fast crash in the 1990s.

        None of this is to suggest Apple is resting on its laurels; far from it. While the pundits and analysts want lightning to strike a third or fourth time, Apple has pulled off some pretty amazing logistical feats under Tim Cook, such as simultaneous launches in many countries. Getting that done, let alone done right, is far more complex than the public might imagine.

        At the same time, there are also signs of rot at Apple. The fit and finish of iOS 6 is bad; the Podcasts.app is execrable; iTunes Match works some of the time; and I don’t need to pile on to what’s already been said about Apple Maps. Some key people have left (and I don’t just mean Scott Forstall). Eddy Cue is a director at Ferrari, which worries me; I’d prefer he spent 110 percent of his time fixing the multiple aspects of Apple’s Internet brokenness. Worse, the 18-to-30-year-old set now prefers the Galaxy S or Galaxy Note over the iPhone (I’ve seen this firsthand, all over the world.).

        I’m long on Apple. I really hope they fix their existing problems and keep pumping out hits. But I’m also a realist and an old guy. The computer industry, especially on the consumer side, has been kind to very very few companies over the long run.

        1. There is great irony in the history of VMS.

          Dave Cutler, the principal architect of VMS, and a good part of his team were hired away by Microsoft, where they built the Windows NT kernel based on VMS. So in a sense, VMS lives on in hundreds of millions of Windows machines.

          Meanwhile, Ken Thompson and Dennis Ritchie at Bell Labs created UNIX on a DEC PDP 7, presumably running VMS.

          So you can say that DEC hardware and software played a huge role in the birth of all of today’s computers.

      2. I can share my thoughts on that. The industry started vertical, but then moved horizontal due to the need to standardize or mature the market. DEC’s model, like many, started out fragmented but got beat by others who went horizontal. Once a category is mature it no longer needs to be standardized (for example, the iPad is most likely the OS that will standardize the tablet) making it the first product many own to understand what they want and why they want it. Once standardization happens and a segment is mature, it fragments because an all things to all people play only works for part of the market.

        Simply put DEC didn’t evolve with the maturity cycle of the category they were in. On this front by all accounts Apple should have died, almost did, because of this very same reason. The fact that it made it through, bought it time for its model to work at the point that the market segmented. Which is where we are today.

      3. I really dont know exactly why DEC failed… They fumbled the “micro computer” era.. and focused on building their DECnet world wide network at the time when tons of folks were installing Ultrix and other Unixes on their Vaxes in order to put the machines on the pre-web Internet. Not sure if that is the reason they failed tho… At the end they seemed to loose the will to live on as a independent company.

        1. DEC failed because Ken Olson, an otherwise brilliant man, failed to see the impact the personal computer would have on its core minicomputer business. The company also underestimated Intel and weakened its finances with a huge, failed investment in the Alpha processor.

          By the way, Ken Thompson and Dennis Ritchie developed UNIX on a DEC PDP 7 at Bell Labs.

          1. It was, but it focused on Data General, another ultimately failed minicomputer company, not DEC.

  5. “Five years ago, Microsoft had 96% share of connected operating systems. Today, smartphones are half of all connected devices, so Microsoft lost half the market because of not participating in smartphones. They went from 96% to half of that, because of not participating in smartphones.” – Roger McNamee, Elevation Partners.

    I would say losing half your market in five years is a significant loss.

  6. fundamentally, in the tech world, I believe that consumer technology companies fundamentally lack a model for sustained growth.
    consumers are just too fickle. Sure, not the “hot product” is the iPhone, and before that it was the razr, and before that it was the Treo, and so on.
    all it takes is one bad product to trash all your progress (for example the Nokia n97).
    fundamentally, if you want a stable, long term business, focus on enterprise first, consumers second

    1. The CE market is easy to understand, consumers arn’t fickle. If you produce good value products that meet peoples needs then you will find customers who will stay loyal till someone else does a better job.

      Palm and Motorola forgot that and were punished. The n97 sold well and importantly Nokia had other good value products. They had a messy stratagy but it was comming together until Elop took over, a man who is a one man Value-

      Armageddon machine.

  7. Thanks for a refreshingly insightful article.

    We now seem to be in a situation where there is a disconnect between Apple the company and AAPL the stock. By any sane standards, Apple is firing on all cylinders and performing strongly with excellent prospects for the future, but the stock is tumbling for no sensible reason.

    During the last 12 months, Apple has posted results that are not only record breaking for Apple, but are amongst the strongest of any US company ever. However by the reckoning of the analysts, two of those quarters were declared to be fails because Apple didn’t produce results quite as high as the analysts had guessed that they might have been. Note that this is portrayed as Apple failing rather than the analysts failing to guess right.

    As an individual, I would like there to be some alternative where I could invest in Apple the company without having to gamble on AAPL the casino game.

    I think that the underlying issue for Wall Street is that Apple doesn’t play the game that Wall Street wants them to. Apple is not swayed by market share, but instead addresses the highly profitable end of the market. Apple can make far more profit from a 5% market share than low margin operators might make on 50% share, but the markets seem obsessed with market share. Apple doesn’t borrow money, not only that, Apple has more available cash than some large nations do. Apple uses that cash strategically, buying up entire outputs of large manufacturing plants to guarantee supply well into the future, but also investing in new manufacturing plant and technology which will be used exclusively for Apple’s components. Remember when ultrabooks were being made to look like LacBook airs ? Those manufacturers discovered that they were unable to get companies to mill out the aluminium casings in quantity because Apple had already tied up pretty well the entire global capacity for such machining.

    Maybe Apple’s biggest sin in Wall Street’s eyes is the one that you discussed in the article. Apple takes an unusually long term view whereas the market adopts a very short term view. Apple builds solid foundations and then builds upon those foundations. Some might say that Apple’s fortunes turned around with the iPod, so look at what happened. They first of all offered the iTunes application for computers and got it established. Then they released the first iPods and once they took off, they introduced the iTune music store. Now each of those strands ( iTunes / iPod / music store ) wasn’t particularly revolutionary in itself, but the three strands combined made the iPod into a very solid product. We were always hearing about “iPod killers” that were about to be introduced, but while their hardware was usually pretty good, those devices didn’t have equivalent support – what we now call the ecosystem.

    Apple learned a great deal from the days of the iPod and the one lesson above all others was that they must deliver a broad ecosystem to support products. It’s not just hardware, it’s not just software and it’s not just services. They worked out many years ago that they need to offer a solution and the solution for each product involves a mix of hardware, software and services. But the most critically important aspect is that the hardware, software and services must be tightly integrated and easy to use and high quality.

    That degree of integration is embedded deeply within the DNA of Apple as a company. It’s how they have always worked and how they always will. Other companies which are now attempting to adopt that approach will face challenges in changing long-standing attitudes and rivalries within their company.

    1. Great comment, thanks so much for taking the time to write such a well worded commented. I remain convinced that focusing on customer value is a better strategy than focusing solely on maximizing share holder value.

      I am pleased that Apple management was adamant in their approach to be laser focused on making the best products possible and pushing the boundaries on ways to please and delight their customers.

  8. I can’t agree more with your conclusion. People who criticise Apple for not making innovative or revolutionary products anymore are only being jealous of Apple’s success. If making an innovative or revolutionary product was something so easy that can be done every year or so, why haven’t others done it?

  9. Ben, I have come to the conclusion that this latest market drop is more a sign of a weakness in the stock market than a sign of a weakness in Apple. The stock market is just a tool of wall street, a place that hides its “greed is good, screw over the little people” attitude behind a lot of analyst shills.

  10. Any publicly traded company is actually in two businesses. One is the actual product/s or service/s they sell. The other is their stock. To _investors_ the actual product and the company that makes them is what is important. To _traders_ the stock is what is important. All the financial analysts are focused on the stock.

    The problem with the stock is no company really has any ethical control over that except in how they run their business. The stock market is pretty much a wild west of hopeful possibilities, some rationally calculated and perceived, some not. Attempts to manipulate stock prices (not really anything to do with a company’s health) are usually short lived.

    Apple is wisely choosing to focus solely on what it has direct control over, their product and services. Anybody who plays short with stocks is cruisin for a bruisin. I learned a long time ago back when Apple was $25 a share, you can’t pay any attention to the day to day, week to week, or even month to month fluctuations of Apple’s stock price. As long as the company is well run, making money hand over fist, and continues to outsell pretty much everyone else in the business, let the speculators do what they will and ignore them in their process because nothing they are talking about really has anything to do with the company, only the stock and what they think may or may not happen in the future. Everyone wants to be the one who calls Apple’s _future_, even though that is impossible.

    Its all about placing future bets. I placed mine back when Jobs came back to the company. I could have been wrong. Luckily (and I really mean luckily, Jobs could have turned Apple into his NeXT and continued into obscurity) I was not.


    1. I think that any public company that regards its stock as a product it must sell to investors is in big, big trouble. Managing a company to boost the stock price int he short run leads to terrible business decisions. Unless your stock price falls to a level where it is an existential threat–say because of delisting–management does well to ignore market gyrations and stick to business.

      1. Right. I really liked how Cook and Oppenheimer handled the call. It showed me a company focused on their products and how the company is really doing. They kind of said’ “It’s like this. We are kicking ass. That’s either good enough for you guys or it isn’t. Oh, and we are past the age of sandbagging, so stop trying to out predict us.”


          1. Shareholder value bifurcated from the actual business of a company and their customers is exactly where most of these financial analysts are stuck. Another example of a system becoming more important than what it should be supporting.

            I have this discussion with arts groups all the time. They also get stuck in the thinking that says their primary business is getting butts in seats. So then everyone is all concerned about marketing and development. I try to get them to realize that their business is creating interesting work. If they focus there, the seats will fill. A bit over simplified, but it does help the arts orgs remember why they exist.

            In terms of the CEO, not to drift off topic, this is not just a corporation paradigm shift, this is also an educational shift. If all those MBAs graduating each year don’t know how to focus on the customer, then a lot of the (potential) talent pool is in need of re-educating.

            Seems there is a need for a more holistic metric, or probably more like a matrix, to tie CEO compensation. Or maybe the concept of a metric/matrix is the problem. And how many board of directors know enough about the company they govern to understand what kind of CEO they need?

            But back to Apple. Apple is fine, for now. Let the tree shaking filter all the weenies out who probably shouldn’t be Apple share holders to begin with.


  11. Interesting point about Apple being able to manufacture such numbers with such high precision. Imagine a Porsche 911 Turbo for $25,000. How many could they sell? How many could they make? Apple is unique.

  12. Great article. I have learned ón Think from my Apple investment. Just stay put they Will go up and Down in shareprice, but mostly up. I dó not nede the money invested in Apple Stock and I Can wait for Them to increase i Value again. The next quarter Will show a more true picture of Apple situation, because it Will be a quarter without delivery constraints ón iPhone iPad and iMac

  13. I think Apple is partly to blame, laziness of the “professional” analysts not-withstanding. With Apple’s history of analysts’ skepticism and then the low ball guidance, both practically guaranteeing a blow out report, the stock performance over the last few years was predicated on post-iMac earnings reports.

    Then the cognitive dissonance of analysts’ expectations not wanting to look like suckers, but still wanting that rush of being so completely wrong, anytime Apple can’t out-do the analysts is a bad day for the stock. Short term anyway. Cook, I think, did the right thing and said “Homey don’t play that any more”.

    After Samsung’s recent report and their statement lowering next quarter’s expectations, I wonder if they aren’t again trying to play Apple’s game.


    1. I also happen to think most of Wall Street and AAPL shareholders still don’t understand Apple’s product strategy. Based on some of the articles I’ve ben reading elsewhere (I know, I should know better) a lot of people still think Apple is strictly a hardware company and they base the notion of “competition” strictly on “feature to feature” or “specs to specs”. So since so many “competitors” have reached parity in one form or another in hardware, then surely Apple must be doomed.

      Apple has never been a strictly hardware centric company, although they make great hardware. They have always been about what the hardware can do, which is not always about speeds and feeds. It is strictly the touch point of their ecosystem.


  14. Apple doesn’t strategize look term. Their product choices are based on what the market has to offer that no one else has made it grow. Think of the iPod. The market had mp3 players as niche devices. Apple changed that. Smart phones were available and a few had touch screens before the iPhone. Microsoft pushed the pen/tablet idea in 2003 but failed to understand how to make it useful. What Apple has done that one other Tech firm has been as successful is how well their products are integrated with their hardware and software. This rather puzzles me that others can make their products work so well. It is important to remember that wall street types take a subway / bus to work.

  15. Ben, good post. But I think the real issue that AAPL faces is that it is trying to play both sides of the game. Right now they are both the volume leader and the value leader in their categories. They have done a brilliant job of building an ecosystem that hooks people into their vision and have continued to deliver excellent products to keep the masses in the game.

    But what comes next is the issue. The rise of the other ecosystems that are “good enough” to have people think of switching will then push Apple to make a decision of where they want to take things. Will competitive pressure on tablets, music players and phones drive Apple to be more like they were in the “PC” business (i.e. a small market share player with high value that people are willing to pay for) or will they take the path of holding onto their share by sacrificing margin? I’m not sure that both are sustainable and I’m betting that the financial types are looking at this and coming to the conclusion that the license to print money may not live on.

    1. “But I think the real issue that AAPL faces is that it is trying to play both sides of the game.”

      This is the problem all those analysts have, Apple is not playing any side except producing excellent products their customers love. That has always been their strategy. It has never (nor is it now) ever been about volume/market share. now if you want to say exciting their customers is a value play, I could buy that since they aren’t _just_ a hardware company, but all the value they add to their hardware with their software and content distribution.

      As I saw Tim Cook demonstrate one time, he put a turned-off iPhone on a table and asked the interviewer what he saw. It was just some glass and metal. What Apple adds is everything that happens when you turn the device on and use it, that is added value, that is all the stuff people are actually buying, not just the device. And so far no one has actually delivered anything that is even “close enough”.

      The only pressure Apple acknowledges and I think the only pressure they should is the internal pressure to keep making the best products that they and their customers love. Now, when other companies start thinking like that, _that_ is when Apple should worry. (Not that they should be lackadaisical otherwise. I hope you know what I mean)


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