Apple’s ultimate power within

“Whether Apple’s share-price plunge is justified comes down to one question: Is the iPhone maker a hardware or a software company? Right now, it is more the latter. And that is why the 22% drop in the shares since their September peak creates an opportunity for investors,” Rolfe Winkler writes for The Wall Street Journal. “The collective market capitalization of these five companies [Sony, Dell, HP, Nokia, RIM] is just $75 billion today, according to FactSet. Apple’s is seven times larger.”

“And that is largely due to the secret sauce inside the iPhone, which isn’t really a handset so much as a computer with software that makes calls—and plays music, offers games, gives directions, takes photos, provides Web access and more,” Winkler writes. “Inside the iPhone is a mobile ‘walled garden’ for which developers tailor their apps… The next leg of growth for the iPhone may be a more affordable device for lower-value subscribers. Apple decided to offer cheaper versions of its first mobile blockbuster, the iPod. And it has launched an iPad Mini. Such moves make sense when you consider that the ultimate power of Apple’s business model is luring more users into its walled garden.”

“The handset business used to be hit-driven, with the sexiest device gobbling up the market only to disappear after a more popular handset appeared. The genius of the iPhone was to break this trend. Its proprietary software and revolutionary design has encouraged users to stick with newer versions of the device,” Winkler writes. “As long as Apple can keep its software leading edge—and avoid more mistakes like the maps fiasco that frustrated users—its recurring business should keep generating big returns for shareholders.”

Much more in the full article – recommended – here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

12 Comments

    1. God, I wish people would stop reading public media.

      Opinions are like assholes, everyone has one. Except in the case of “financial/business” journalists, they have two, one on each end.

  1. Maps Fiasco?

    How about Zune, ME, Vista, etc. Those were fiascos.

    iOS maps was just an incomplete and very slight set of errors that are easily fixed and particularly so when users give feedback. I think Apple even recognized the minor errors prior to release.

    1. If the maps are so bad why are the phones selling so well? Because the maps aren’t bad – Funny nobody would think they were bad if these hit pieces weren’t written.

    1. Opinions are abound by anyone and anybody who calls themselves an analyst or Joe I Know, but in the end Apple Inc. is in the same boat as all other for profit gadget makers in that their strength will always be influenced by consumer consumption and when their distribution numbers dry up due to whatever reason (economy, stalled new innovations, increased anti Apple sentiment, etc…) then the lay of the land will start to look like what historically happens to companies the likes of Sony, MSFT, HP, Dell etc…

      Apple is very relevant today as was Sony 10 years ago but Apple was not very relevant 10 years ago etc… Apple is 37 years old and are currently on a nice run as is Google, Audi and others. Getting to the top is always more exciting than trying to stay on top as once on top your are spending as much time fending off the wolves then you are trying to grow the business.

      Everything in life cycles…. and I mean everything and this Apple Inc. up cycle is in it’s 5th year so the jury is out on how much longer they have until folks simply stick with their existing Apple gadgets and ignore new offerings which seem to come out quite rapidly these days.

      Oh and for the love of God can they stop parading market cap as that is just a fabrication. That number as we are seeing moves like the weather. 🙂 Shareholders can quickly increase or reduce market cap of any company. Apple Inc.’s primary concern is its shareholders and that is no different than any other publicly held company. Mr. Cook is as busy humouring shareholders as he is trying to portrait an Apple Inc. image of caring for you provided you are buying Apple’s steeply priced gadgets.

  2. iJah420,

    Take it easy, man! This author reinforces the way most of us on this site feel about AAPL. Sure, it’s obvious to us that the ongoing success of AAPL isn’t just some specific isolated piece of hardware, but the hardware +software + ecosystem, etc. To many, however (and I really mean to many NON-APPLE device users), they merely (and incorrectly) view AAPL as a hardware company only. Many of these users don’t get the big picture as most of us (who have been using AAPL products for years) do. My interpretation of this article was that one’s attitude toward AAPL as a company should be viewed more in line with “the big AAPL picture” and not just based on isolated parts of the machine.

    1. Points taken. All I am saying is that cycles go north to south in very little time. I too enjoy my Apple products as I do my PS3, and other quality branded products many of which have brand names that not so long ago ruled the roost. 🙂

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