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When exceptional growth is not an exception

Apple’s last quarter’s sales growth was an impressive 83%. It was not as high as the 92% earnings rise because there was a higher mix of iPhones this quarter than in the past. The iPhone is the most profitable product in Apple’s portfolio so it impacts the gross margin significantly.

The iPhone is, in fact, a huge part of Apple’s business. In units it reached 5% global share and 14% US share. I’ll go over the overall industry data as soon as all the major reports are in, but already it has been estimated that Apple is the largest phone vendor by profit and sales.

In the following chart, you can see just how important the iPhone has become. Together with the iPad and iPod touch, iOS-powered devices make up about 65% of sales. That’s almost three times the value of OS X based products which make up 23% of sales. That also leaves just 12% of sales not directly affected by these two juggernaut platforms (though music and peripherals are clearly indirectly affected by Apple’s own platform products.)

The following chart shows the same information as shares of total net sales.

I’ve read that some of the uncertainty around Apple’s future prospects is driven by the perceived vulnerability of these new blockbuster iOS products. At first glance this growth looks quite unprecedented and hence risky. 65% of sales from iOS did not exist four years ago. If you look at the sector it’s hard to find any company that has doubled its sales in a few years from completely new product lines. Especially a mature company over 40 years in the business.

Well, there is one.

If you look again at the second chart above, you’ll note that the proportion of sales held by iOS devices has mostly replaced the sales share that used to be held by iPod, itself a product that did not exist four years prior to the time of these charts.

Apple consistently doubled its sales on the basis of the iPod. It’s now consistently doubling on the basis of iOS.

Exceptional claims require exceptional evidence. But that’s exactly what the investment thesis for Apple should be: Exceptional growth is no exception.

Steve Jobs himself said it well once: “I wasn’t alive then, but from everything I’ve heard, Babe Ruth only had one home run. He just kept hitting it over and over again.”

Even this exceptionalism is not unique. It happens not just at Apple, but at another of Jobs’ creations: Pixar.

Perhaps this magic formula for exceptionalism is itself a fluke but what if it’s not. What if blockbusters are really something that can be built with repeatable consistency. What would that be worth?

  • http://www.igoe-ip.com Patrick

    "What if blockbusters are really something that can be built with repeatable consistency. What would that be worth?"

    Apparently, right now it's only worth ~13x earnings (ex-cash), which is utterly baffling.

    Apple has only 5% of the unit share of phones. Growth to 10% seems entirely plausible to me as country/carrier penetration increases, yet the market acts like the growth is surely nearly over. I just don't get it.

    – Patrick

    • mortjac

      I neither get it. Apple are growing 115% and the smartphone market 20%. I've asked my programmer, and he told me Apple will have a 10% market share in aproximally 16 months.

      • newtonrj

        It hit me during a walk outside (finally sunny here), the market is not intereseted in rewarding an industry that is not growing, even if a single player is out-sizing the market. Rather, they are waiting to punish the non-flexible. -RJ

      • Peter Hanes

        This suggestion "the market is not intereseted in rewarding an industry that is not growing, even if a single player is out-sizing the market. Rather, they are waiting to punish the non-flexible" by newtonrj is the most interesting I have seen about the apparent undervaluing of Apple shares.

        What evidence is there to support it or to contradict it?

    • KGB

      Apparently, no one gets it….. I would suggest that buying AAPL now might be prescient ! :)

    • chandra

      I think the answer is simple, if truly frustrating for buy-to-hold investors.
      The market does not understand AAPL. And that is worrying to Mr. Market.
      AAPL makes the market dazed and confused.
      AAPL is overturning every fondly-held belief in how large-cap companies should behave and perform.
      This kind of 'genie out of the bottle' magical performance is beyond their experience and understanding and that really bothers them. It's a psychological thing – like some sort of disruptive cognitive dissonance leading to disbelief.
      Their common mantra where Apple is concerned is 'I can…NOT believe this is happening!
      The market does not like what it cannot understand. When the (historically) well understood players that the market relies on as its benchmarks of stability and investability (like MSFT and DELL etc) fail to compete with AAPL, they find that perverse and perplexing. Dazed and Confused. And Flummoxed.
      What is the answer?
      Eventually I think that a company that rises and rises because its business franchise is so well-founded and solidly based; with the added bonus that its market shares are (mostly) small (max headroom!), will overcome much of this distrust. And I believe that AAPL can continue on its dizzying trend for at least another 5 years, perhaps 10. I'm discounting the chance of AAPL itself being disrupted, of course.
      As in the dot com bubble years, there were headlines recounting the mass envy of those who had stood disbelieving and unsure on the sidelines as the market rose and rose. In that case, they were wise to defer, as we know. Many out there sitting on the sidelines on AAPL, will be feeling the same. Eventually though they will learn to reassess the company based on a simple percentages game basis. And AAPL's percentages in terms of future potential are fine indeed.
      The hesitaters will soon realise that Apple's run is no fluke and that its underpinnings for future growth are very solid indeed. Sooner or later people will do their proper unemotional due diligence on AAPL's raw numbrs and they will realise what most of us here already seem to know. The typical market performance benchmarks are being shattered by AAPL. New more 'paced' measures of performance and sustainability are needed. With AAPL the past is not a reliable pointer to the future except that for the next 10 years it is likely to enjoy continued stellar growth.
      If, like me, you hold shares in AAPL and find it's share price dynamics to be frustrating in the context of its true worth, just be patient. Ultimately, there is a limit to how long the market and potential new investors can keep dissuading themselves from joining us. They will do their research on the numbers, viewed in the context of where Apple is with its products in their respective markets – and then see the light. They will be driven by self-interest rather than belief at first, of course, but that's all it takes to dip their toes into AAPL waters.
      I believe that nowadays it isn't Steve Jobs who is the master of the Reality Distortion Field.
      It is Apple. It is distorting the market's sense of what is possible, quarter by quarter of inexorable growth in almost all its metrics. This exceptional difference about Apple is what should be blindingly obvious to any objective observer. This is no ordinary company so don't attempt to assess it as if it was. Double-duh!
      What is more, I can think of no (non-force majeure) reason why this wonderfullly unreal trend cannot continue for another 20 to 40 quarters.
      It is genuinely within the growth potential of Apple to become a trillion dollar company, perhaps more – and sooner than we might bring ourselves to believe. If you doubt what I propose in saying this, then consider what a modest set of profit growth parameters are needed from today forwards, to achieve this undistorted reality within 5 years.
      Apple is a superbly well-managed company and its business franchise is unmatched.
      Just be patient.
      And as far as the graphs above are concerned, even though the Mac seems to be a lacklustre and diminishing percentage contributor to growth, viewed on its own, it isn't. When the tipping point comes, it will continue growing very nicely indeed, thank you for asking! It may even break into a modest sprint.
      And it has all the headroom it could want in terms of market share to grow into.

      • Hamranhansenhansen

        Mac OS Lion may be good for Mac growth, because it offers something more iOS-like than Windows-like. Of course it is Windows that is Mac-like, but now Mac OS can differentiate itself from its clones in a way new users can understand. If I was rocking an iPad and Windows XP right now (like a lot of people) I'd be pretty tempted by a MacBook Air running Lion.

      • Nangka

        This is EXACTLY what I've been thinking about the deep discounts, and Apple's potentials in at least the next 5 years.

        It seems this "fear" of Wall Street was triggered at the end of 2008, when the global financial meltdown occurred, as we can see from Horace's other post on Apple's P/E ratios moved from 35-40 band to the current.

        But still why then?

        Apple's market cap didn't just suddenly went big then. In fact, it dived along with market. We should still see 35-40 P/E ratios prices after the market recovery.

        Some thing spooked Wall Street right around then that they haven't been able to recover from still.

  • Luis Masanti

    You made a goog question:
    What if blockbusters are really something that can be built with repeatable consistency?

    But the real one is How can we build blockbusters with repeatable consistency?

    Steve Jobs already did it, with the Apple I, the Apple II, the Macintosh, the iPod, the iPhone, the iPad, Pixar,,,
    How he did that?

    Focus on the user, attention to details, no to promise; deliver!… etc., etc.

    As with gourmet meals (or any meal) the right answer is in the correct quantities of each element.

  • Travis

    Not related but Horace, I had a question.

    Aapl has in it's 10Q that is has long term contracts all the way out to 2022. Is that an aapl thing or an industry thing to go out that far? Thanks

    • HTG

      There are lots of industries that have 10 year contracts in place – shipbuilding is one (esp building submarines!), and maintenance contracts are often that long for transport infrastructure, but it would certainly seem to be unusual for a technology company…

  • mortjac

    "Exceptional claims require exceptional evidence. But that’s exactly what the investment thesis for Apple should be: Exceptional growth is no exception."
    Sooner or later investor will see it. Or other will see it and invest.Well, that's what I expect.

  • davel

    It is amazing how the music player is vanishing to nothing and that the pc has legs.

    These graphs are very instructive.

    Thank you.

    • JamesW

      The iPod hasn't shrunk too much in absolute terms. It looks that way in the second chart because its overall contribution to revenue has decreased due to iPhone/iPad growth. In absolute terms, it's still doing fine (first chart).

    • Hamranhansenhansen

      I look at it the other way around. The iPad and iPhone and iPod touch are all iPods. iPod PC, iPod phone, iPod touch. I think the PC is going back to being a workstation. The reason the Mac is still growing is it was always a workstation, and because you use it to make iOS apps, music, movies. The $500 PC is going to fade away because what people really wanted was an iPad in the first place.

    • chandra

      The iPod isn't disappearing. The physical iPod is being subsumed into other devices … as an app. That might look like the loss of an important revenue stream at first glance, but it really isn't. The devices that have absorbed iPod functionality are selling very well indeed and they benefit from the added value of having an iPod inside. I am sure that the disappearing physical iPod revenue is growing very fast as part of the higher pricing of the devices in which it now resides. Minus the iPod app, the iPhone, iPad and iPod Touch would have to sell for at least $50 less imo. IT appears as added value and contributes to higher device pricing in that way. Its sales volumes and revenue stream are greater today, not less.

  • davel

    You make a good point about Pixar.

    Of his 4 businesses, he ran Apple into the ground and Next was a technically successful company that stalled. Pixar eventually hit it out of the park and he came back to Apple to replicate his success at Pixar.

    Coincidence? I think not. It was a long journey and Steve figured out what works. Even his misteps mobile/social and the livingroom are minor blemishes in the context of the whole company.

    • Les S

      "You'll come to see that a man learns nothing from winning. The act of losing, however, can elicit great wisdom. Not least of which is, uh… how much more enjoyable it is to win. It's inevitable to lose now and again. The trick is not to make a habit of it. "

      -Uncle Henry Skinner from the movie A Goo Year

      • Les S

        The movie title is A Good Year (sorry about mangling it above) and it was directed by Ridley Scott who directed the 1984 Apple commercial.

      • Les S

        And the movie happens to be about an investment broker.

    • Ted_T

      "Of his 4 businesses, he ran Apple into the ground"
      Sorry but I fail to see how he ran Apple into the ground — when he left/was fired in 1985, Apple was a very successful company with a huge hit in the Macintosh (still going strong in 2011 — where is the IBM PC now?), left it by Steve Jobs. Then Sculley, Spindler and Amelio ran Apple into the ground. Jobs' only contribution to the mess was having hired Sculley in the first place, and not succeeding in getting him fired in 1985, when he already realized Sculley was a big mistake.

      I don't doubt that Jobs improved as a CEO with experience, but the hits were there from the word "go" in 1977.

  • Rob Scott

    The iPhone is growing at 8X its competitor growth and is expected to move 30 million iPhones in Q1 2012. Apple is the fastest growing OEM with massive room to grow both in PCs and phones. Maybe there is nothing exceptional about the growth. Apple has no choice but to grow, you would think Wall Street analysts would know that.
    Apple will replace LG next year and Sumsang a year after. And the iPad will continue to lead until at least end of 2012.
    And then there is Apple TV, which Apple refuses to sell to some of us.

    Amazing!

  • Les S

    Could the ingredients for this kind of blockbuster model have something to do with understanding that the sum is more then just the sum of it's parts: http://wiki.answers.com/Q/Who_originated_the_phra
    And leverage: http://www.businessdictionary.com/definition/leve

    • Les S

      Grrr! I meant the whole is greater than the sum of it's parts!

  • woods

    On "repeatable consistency":
    The other Steve (Martin) said something similar. That to be great, you need to be consistently good, time after time.
    http://www.smithsonianmag.com/arts-culture/funny-

  • stefn

    Both Apple and Jobs benefited hugely from failure. I remember the eighties when Apple was enthralled with its own fame and fortune. It forgot what it was about and went bust. When Jobs returned, Apple was in a humbled state and ready for change. And Jobs was ready to pursue "permanent evolution," toward "the computer for the rest of us." Apple beats Wall Street because it doesn't care about Wall Street any more than it cares about its local electric company.

  • Hamourabi

    Thanks for those telling exhibits. It looks quite sure that Apple's earnings will double in the next 18 month whereas boldest analysts thinks that doubling needs 36 months.
    For instance : http://blogs.forbes.com/joshlipton/2011/04/29/app

    • asymco

      Ever since I started looking at the iPhone business I considered the potential of the overall smartphone market. If you believe that market is going to boom and you assume that Apple's share of that market will grow it's inevitable that you get very rapid growth in volumes for many years. Yet every year, the assumption from the consensus seems to be that either (a) the growth in smartphones will stop or (b) Apple's share will plummet. I can't buy either assumption. It follows that the iPhone (and hence Apple) doubles in size predictably.

      • Iosweeky

        Apparently 54% of US handset sales are now smartphones, and the same survey gave apple 29% smartphone marketshare, or 15% of total US handset sales.

        I assume nearly all smartphones in the US are sold on postpaid contracts, and postpaid currently makes up 80% of US subscribers, so I foresee apple, with their current product lineup, easily growing to at least 25% total US handset market share if all postpaid subscribers move to smartphones. Of course this could grow larger if apple introduces a cheaper prepay iPhone model, but with only 20% of US subscribers on prepay the growth opportunity from a prepaid model would likely come in other international territories where prepay phones are more dominant (china is 90% + according to Tim cook).

        Still a prepaid iPhone would likely increase apples US Market share to north of 30%, as it added prepaid purchasers and also add postpaid purchasers if the prepaid model was more appealing in some way to a certain segment of postpaid that whatever reason would not purchase the current iPhone (perhaps an iPhone Air would attract those after a slimmer device)

      • Hamranhansenhansen

        There are prepaid iPhones. Or at least there were when the original came out, because a friend of mine had one.

        Apple is only on 2 of the US carriers. They're the 2 biggest, but I think that only gives them something like 60% addressable market. At some point, they would have to address that.

      • Iosweeky

        The current price for an unsubsidised iPhone is rediculously overpriced – it doesn't come anywhere near affordability for most consumers who wishnto buy a prepay handset.

  • chandra2

    Horace, a claim can be made that the market was overpaying for Apple during 2006 when iPod was the main growth driver ( 35 to 45 timesP/E then ). It always does at lower market caps as it does now for Amazon. If there was no iPhone or iPad, the P/E would have shrunk dramatically when there was any sign of slowing iPod growth. Compared to that kind of pain, I would rather take the current state of affairs where the market is underpaying for the growth. It makes Apple stock easier to hold ( sleep better at night ).

    • mortjac

      Interesting explanation. I can buy that!

  • davel

    I agree. The demise of the music player is the result of most phones having an integrated music functionality.

    It is just somewhat surprising that a product category that not too long ago was a huge product for Apple is fading into nothingness like the Cheshire cat.

  • http://twitter.com/tcrooks3843 @tcrooks3843

    Wondering if you are going to comment on the outlook for Apple's Mac business which is fast outgrowing the PC sector where growth forecasts are being regularly reduced? Is this likely to give Macs added momentum in terms of Market Share as a result? Wouldn't that have some impact on your revenue/earnings forecast?

  • John

    So how does one say that in Latin?

    • KGB

      Eximium habetur exceptio incrementum

      (sorry if this repeats…my posts seem to sometimes disappear after posting!)

  • http://lowendmac.com/ Dan Knight

    I have to say that I hate stacked area charts, as they can hide more information than they reveal.

    Your top chart reveal that OS X is growing, iOS is really growing, and the iPod sector seems to have become consistent – but it's hard to know what percentage of those are iPod touch, which is the third iOS device. Whatever, Apple has two growing product lines and a third line that's a dependable source of income.

    I do wish you'd consider using simple line charts instead of stacked area charts. You did this with Apple's 258% growth to good effect!

    • Hamranhansenhansen

      I like it in this case, because everything that isn't a Mac is a kind of iPod, and you can see them sitting on the Mac like the foundation it is.

  • Xian

    Horace,

    Just thought I'd let you know that the blog below is ripping off your stuff. Verbatim. Straight cut and paste job, ZERO credit to you.
    http://www.keezer.nl/applewatch/2011/04/29.php#a3

    • CndnRschr

      There is an attribution to asymco although it should be more dominant. That blog seems to be an aggregator.

      • Xian

        Sorry, I don't see it. I see that when they stole his graphs they didn't remove the ©asymco.com mark on one chart, but no credit on the text or the other chart for that matter.

        I'm sorry and embarrassed if they credited him on his text and I'm just blind.

      • CndnRschr

        Yes, that's the only attribution I saw. Legally, it is sufficient. Ethically, not so much.

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  • Hap

    Metaphoria: Someone used the image of a spring being wound to describe what's going on with the Apple stock price. It seems to me that it may also be like a dragster sitting at the starting line: The driver better be well strapped in when the light turns green. And then there's the sepia-toned standby: "Who wants to be left standing at the station once the train has gone?"

    If Einstein imagined riding on a light beam and came up with his world-changing theories, what might we learn from conjuring a fresh set of metaphors?

  • chandra2

    The NASDAQ 100 re-balancing silliness is over today. With that selling pressure lifted, Apple stock price should start going up.

    • HTG

      Huzzah!

  • KGB

    asymco nails The AFB AAPL Price Target Index (http://www.postsateventide.com/2011/02/afb-aapl-price-target-index-february.html )

    asymco's target forcast for May 1, 2011 was 350. AAPL closed friday April 29 at 350.13

    ….another form of 'exceptionalism' :)

    • asymco

      Thanks for reminding me about this. I had forgotten about this long ago.

      • CndnRschr

        What's more remarkable is that Horace was the most accurate of the lot – despite everyone else being more optimistic in their targets. Hear, hear! Data needs analysis.

      • Nangka

        It's interesting that the forecast was made ~ 3 months ago, and since you've been harping about market inefficiency in discounting Apple share price for quite some time now, does this mean you had no confidence in Wall Street coming to their senses in this period?

        If you had forecasted the price based on (predicted) Apple's numbers, you would've been off by quite some margin.

        Now if you had factored the market inefficiency in it, THAT would've been something really exceptional! :)

      • asymco

        I don't make a habit of predicting what the market does. This was an exception where the editor of the forum asked me for my forecast so that he could put together an unaffiliated analyst "consensus" in contrast to what the professionals quote.

        So my method was to take the earnings forecast and multiply it by some P/E multiple. I just chose a lower multiple because it sensed the market was discounting the stock and would continue to do so. It was simple extrapolation of then-current behavior. Behavior which did not change.

        It could be considered factoring in "inefficiency" but I would just call it factoring in "sentiment".

  • KGB

    this link is better
    http://www.postsateventide.com/

  • Hamranhansenhansen

    Blockbusters can be built repeatedly. It is no mystery. The key is don't ship any non-Blockbusters. You have to have a lot of ideas and iterate and iterate until you have a great product, whether that takes 6 months or 6 years. You have to prototype immediately so you can see what you have and see its flaws, then iterate and iterate, constantly improving the prototype. It's like a painter who sketches with newsprint and conté every day, then takes only the best sketch and does variations and drawings until he has something epic and only then does he go to the easel and do a paint and canvas version. And then, if the painting doesn't sing, he shelves it or iterates again. He only ships the Blockbusters, the ones that make him weep. Then people will say every painting is so deep, so full of ideas, so complete in its vision, how does he do it again and again? Always high quality, always making you weep! Well, you didn't see all the failures. They died on the sketchbook or on shelved canvases. But they were failed experiments, they contributed to the successes by answering questions, developing the artist's technique.

    Both Apple and Pixar don't even start production until they have a Blockbuster prototype. They have to be that way, because their production costs are so high. Millions of iPads, or millions of frames of computer graphics are much more expensive to throw out than hundreds more prototypes. That's just not acknowledged by most makers. They say, we have to ship by March or we miss our opportunity, and they do one sketch, one production, and ship. Maybe it is good, maybe not.

    It's not divine inspiration that makes a good product, it's just hard work and high standards.

    • kgbrainlover

      Exactly

    • Addicted44

      Interesting. Even pixar works the same way. Prototyping, followed by reactions followed by iterative improvements until they think they've got the best product possible.

    • Nangka

      Right on!

      Maybe you should also write about how NOT to respond to blockbusters – panic release of copycat half-baked products, like what M$, RIM, and Moto are/have been doing.. Ha!

      I'll be interested to see what HP have up their sleeves..

      • asymco

        If you have to respond to Apple, you've already lost.

      • nns

        Microsoft once had to respond to Apple.

      • Camden1

        In general, I agree. But specifically, Samsung is doing quite nicely, thank you. But they have a strategic advantage in also being Apple’s most valued supplier. They have wisely (?) used that leverage.

    • chandra

      You're almost poetic, sir!

    • mortjac

      "You have to have a lot of ideas and iterate and iterate until you have a great product, whether that takes 6 months or 6 years." – is a good recipe. I admire your likening with the painter. It's really good! You've actually made Horace post a bit more utile for me!

    • http://rauset.no/ Øyvind

      This is just so true. I'm amazed at finding such an up-to-the-point correct description of the creative process in a tech blog commentary. Being a painter and graphic artist myself, I know this from hard experience. Kudos to you Hamran for finding the words to describe it!

    • PGiese

      About as well-put a statement on the Apple (and Pixar) ethos as I have been able to find – may I quote you sir?

  • Hamranhansenhansen

    It is completely non-controversial to say Apple was run into the ground by Scully and the CEO's who followed him, until Amelio cried Uncle and bought NeXT and brought Steve back and essentially unforked the Mac, because NeXT started as a pro Mac that Steve Jobs wanted to build at Apple. Not only did they run Apple into the ground, but they did so by firing Jobs and taking Apple in the opposite direction from what he wanted.

    There was always "Apple is doomed" talk. Even today there is "Apple is doomed" talk and their stock is undervalued. Apple continued to make money on Apple II through 1989, and in 1986, the Mac found it's legs in desktop publishing. Apple didn't get into trouble until the 90's, when Steve was long gone.

    When Steve Jobs returned to Apple, NeXT was considered to be his big failure, and look how that turned out once combined with Apple. It was basically a shadow Apple, an Apple management-in-exile. Plus, the Web was created on NeXT, with Xcode! We should all fail like that!

    • chandra

      Nevertheless, Jobs was a recklessly disruptive loose cannon in those days. That is not untypical behaviour in a young visionary. The wilderness years in exile gave him ample opportunity to temper his bursts of impatient, intolerant brilliance, with a little, much-needed, business acumen. The resulting Steve Jobs Mk.II is the unstoppable 'make-it-so' genius he is today.
      It hasn't hurt Apple that he is the most customer-centric CEO on the planet. People notice.

  • http://twitter.com/mariomui @mariomui

    Doesn't the market tend to reward company actions that cement growth, profitability and marketshare? Earnings, product launches and mergers/acquisitions are all designed to chase marketshare and corner the market. The market favors monopolistic companies.

    Apple has never allowed marked are to dictate company decisions. Back in the iPod classic heyday they could have easily bought creative or archos for 5 percent more marketshare. Instead they bet on a never before seen touch central os and proceeded to cannibalize their own market. They consistently mess around with the form factors of their best selling devices. The market hates risk. Apple Doesn't see it as risk.

    An ideal apple in the markets eyes would corner google out by making decisions that take away googles perceived advantages. Licensing the os, adobe flash, carrier compromise, integrating more google like services. Go on a hiring spree just so you can develop enough skews to corner every market need from prince to pauper.

    But apple makes their decisions on technological idealism with borders on feasibility and efficiency. Apple and the market have diametrically opposing philosophies. The market will always punish apple because apple never listens to them. Apple may be the only company that does this. Is it because of steve jobs or because of the tech savvy nature of the apple board members?

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  • mortjac

    Associated Press: "[Competitors] are looking like rowboats bobbing in the wake of Apple Inc.'s supertanker."
    Clearly also analyst are slowly getting the picture!

  • Kristian

    'Skynet' became fully operatinal when Apple connected Steve Jobs with Next OS and an iPhone in to the Internet :P

  • Walt French

    Post #1 by @Patrick, lays it out succinctly.

    Today, Apple ALREADY makes more money than ALL OTHER competitors in music players (by far). In tablets (and their mini iPodTouch version), probably more than the entire industry, given others' losses. Ditto for laptops and quite possibly for PCs in general. Well documented (versus my hand-waving sketches) in smartphones. Dominant positions in music sales, video and TV rental.

    So Apple has two ways to continue its explosive growth: (1) it can continue to utterly re-invent old categories like PCs or laptops, not driving competitors' share to zero but re-making the category so that it is the ONLY serious competitor, or (2) finding new industries to conquer, again going from 0% share to ~100% share in one swell foop.

    IBM was already 50 years old when it introduced System 360, becoming indispensable to big business for two decades. But it was not able to exploit its considerable strengths in the newer minis and micros, today settling for being a huge, VERY profitable, but low growth firm. Some day, having utterly transformed maybe a dozen industries (TV? music? phones?), Apple may lose that magic — magic that looks like starting a whole industry from a clean sheet of paper, but of course, with all the foundation defined by IP owned by Apple, and structured so as to not get bogged down in sharepoint complexities and their ilk.

    When will that day come? That seems to be the $64K question. But as much as I am enthralled by Apple's business model (I claim its business IS disruptive technology, period), I believe that day WILL come.

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