“Hedge fund superstar David Einhorn has been all over the place lately with an important message. It’s the same refrain he recited to the Ira Sohn Conference attendees last month. Einhorn, apparently, is among the chosen few who actually understand Apple,” Rocco Pendola writes for TheStreet.
AAPL’s ability to consistently offer innovative features . . . encourages users to upgrade every couple of years. This provides a recurring revenue stream . . . Rather than view AAPL as a hardware company, we see it as a software company that monetizes its value through the repeated sales of high margin hardware. – David Einhorn
“I’ll be the first to admit it’s a prime ingredient in Apple’s success; however, at day’s end, it doesn’t generate much direct revenue for Apple. Hardware sales take care of that,” Pendola writes. “I’m not missing some higher level point here. Einhorn’s argument boils down to this: Software-based features (though the innovations often come from hardware enhancements) drive repeat sales of high-margin hardware. That’s fine, but, from a long-term standpoint, it’s a flawed perspective.”
“There’s no question that Apple’s entire ecosystem, including iOS, serves as a value add. But, for all intents and purposes, it’s only the diehards who buy Apple products because of iOS’s apparent superiority. The general public buys iPods, iPhones, iPads and Macs because they’re cool, they work really well and they’re beautifully designed. The brilliantly unique hardware hooks people, not the software,” Pendola writes. “Until this changes, Apple will dominate. The iOS, AppStore, iTunes and iCloud ecosystem will not save Tim Cook’s butt if he cannot roll out products the public adopts as quickly as it has iPad and its relatively humble predecessors.”
Read more in the full article here.
MacDailyNews Take: Wrong, Rocco.
The hardware and the software/services are symbiotic. Without one, the other suffers greatly.
A Mac running Windows is just beautiful hardware offering an inferior experience. An iPhone or iPad stuck running Android would be the same: Inferior. A junky, heavy, plastic Dell laptop trying to run a hackintoshed Mac OS X still looks like cheap crap while it falls apart. The user experience suffers greatly when Apple hardware is cleaved from Apple software/services and vice versa.
Apple controls the whole widget for a reason. Apple’s not a hardware or a software company. They are both. It’s the total experience that Apple offers — hardware and software, both designed to complement each other — that is without peer.
People who are really serious about software should make their own hardware. – Alan Kay