Wednesday, January 27, 2010

Why I still like AAPL

I first recommended AAPL on this blog just over a year ago, when the stock was around $80-85. I've owned the stock since 2002 and have no plans to sell.

Apple unveiled its new iPad this morning, and I'm seeing some mixed reviews. I'll have to hold it in my own hands to say whether it's really "magical" as Steve Jobs claims. Some were disappointed that it doesn't have a camera, or multitasking. No hand-held videoconferencing ... but maybe that comes with the next version.

But the iPad does offer a lot more than anything else in the netbook or tablet category, and it leverages all of the software that drives the iPhone and iPod Touch, plus the market-dominating iTunes, the iTunes store, and the App Store. The killer feature, I think, is that you get all kinds of great stuff that we know works well with an entry-level price of only $499. Not many will be able to resist this. It does far more than a Kindle for only a little more $$. It's a new portable gaming platform that already has thousands of games ready to go on day one (iPhone games will run today on the iPad in reduced size, but it should be relatively easy for developers to tweak their apps to take full advantage of the bigger screen). You can use it to generate presentations that make Powerpoint slides look pedestrian, and you can plug it into any projector. It weighs only 1.5 lbs., so many people will undoubtedly want to travel with it. Read books, watch HD movies, play great games, surf the web, do email, etc. Once again Apple has blown away its competitors and created a new product with sex appeal.

The second chart above compares Apple's market cap to Microsoft's. It's the David vs. Goliath story of our time. Apple is still worth about $75 billion less than Microsoft, but Microsoft has almost 90% of the worldwide market for personal computers. That's a testament to how Apple has opened up new markets and innovated like no other company in recent memory. And Apple can still grow its share of the personal computer market by leaps and bounds, as it has been doing for the past 5-6 years. If you haven't tried a Mac computer, you don't know what you're missing.


jj said...

Switched to a Mac about a year ago, wish I had done so sooner, the Mac has been maintenance free which is reason enough for me to leave the PC behind.

Benjamin Cole said...

I always liked Apples. But beyond reluctant acceptance of a cell phone, I don't think I will ever carry around a Kindle, or iPad or whatever those things are.
I think AAPL does point up one reality: Success in the marketplace is both technology and style driven.

Your products have to work, and be user-friendly and look good too.
AAPL get this. There has to be a sense of motion, and being the first and best.

GM knew this before the 1970s.
Microsoft reminds me a bit of IBM and GM. Long term fade.

狂猪 said...

I owned and used macs, ipods, iphone and PCs. I have to say the ipad is a huge disappointment.

Here are some feed backs.

In the last 10 years, apple has released a series of great products. Each carried apple to the next higher level. Unfortunately ipad is clearly not such a product. Right now, apple has no new product that will take it to the next level.

I've been waiting to buy a ebook readers because a number of these are coming on the market this year. After seeing the ipad, I won't buy it.

I also think the iphone market is worrisome. The various android based phones are starting to give iphone a run for it's money. I suspect apple is repeating what happened with the PC market during the 80s. Apple beat everyone to the market during the early 80s with the proprietary apple computer. However with the introduction of IBM PC and Microsoft MS DOS, the market was flooded with PC clones. The android platform is open and is attracting a flood of android phones to the market. Some of the new android phones are really nice.

Right now, the iphone momentum is still with apple. However, the long term trend is not. My guess is apple have another year or so to come up with something really great to pass the growth baton to. Ipad isn't it.

Scott Grannis said...

One problem with the Android phone is the same problem that is afflicting the PC market: every piece of hardware is different, and compatibility is not always reliable. Each Android phone is built to different specifications. So there will never be the eco-system that now surrounds the iPhone. Nor will there be a single brand name that people can count on. Also, it will be tough for Google to keep all the software upgraded and cutting edge, since a different version is needed for each phone. Developers also have to deal with this. I don't see Microsoft's licensing model working these days.

狂猪 said...

You are right that compatibility is an important issue. It is also an open question rather Google would get it right.

On the other hand, Microsoft proved that to dominate the market, the issue of compatibility just need to be done well enough. Android is an operation system similar to Windows or OSX. From a technical perspective, it is definitely do able for Google to achieve the same level of compatibility as Microsoft on PC clones. Today, compatibility is not a purchase consider for most PC buyers. Yet, the PC hardware diversity is more so now than ever before.

Also the current software trend of running the main application logic on servers side in conjunction with a very light weight client app on the device (or no client app by using the phone web browser) means many apps will have no compatibility issue on hardware.

With regards to the eco-system around Android, user adoption of android phones will depend on many factors such as marketing, product design, and etc. Software developer will go where the money is; even if they have to jump some hoops. For smart phones, there may be a dozen core applications that the phone must have good offerings for (e.g. email, im, map, music, certain popular community apps etc.). Most of the other apps on a smart phone are of casual nature and can be substitute. The fact is no one does heavy computing on their phone (unlike a PC). Why would software compatibility be high on a user's purchase consideration?

At any rate, today's market dynamic is very different from the 80s. I have no idea if Google can replay Microsoft's 80's OS strategy. One thing is clear. In the coming years, multiple large companies are in essences aggregating their creativity, engineering and marketing resources to dethrone iphone.

Scott Grannis said...

And likewise, many large companies and brilliant people have for the past 8 years been trying their hardest to dethrone the iPod, but none have even come close to succeeding.