1.5 Billion Reasons to Buy Apple

It's been a year since Apple (Nasdaq: AAPL  ) launched its revolutionary App Store for iPhone and iPod touch owners. Some of the milestones announced by the high-tech sultan of style are very impressive. 

There have been 1.5 billion App Store downloads, for example, and some 65,000 applications are now available. And with 100,000 programmers in the iPhone Developer Program, the party's just getting started.

This doesn't mean Apple is rolling in the dough from its creations, though: Visitors still gravitate toward the free apps, and Apple has plenty of them. And as of last night, the five top paid applications are all charging just $0.99 a download, with most of that amount going to the developers.

Then again, just as Apple's iPod gravy rests in the original sale of the device -- and not the subsequent iTunes downloads, where the proceeds go mostly to the record labels -- the App Store's success is a great way to move more iPhones.

The App Store also offers a sweet way to keep its fan base loyal. Research In Motion (Nasdaq: RIMM  ) , Nokia (NYSE: NOK  ) , and Palm (Nasdaq: PALM  ) have some sleek smartphones on the market, but once someone begins downloading apps -- and even paying for a few -- they're caught in Apple's sticky web.

We'll find out soon enough whether that last point holds up. The first wave of iPhone buyers are now finishing their two-year contract commitments with AT&T (NYSE: T  ) . However, now that new iPhones will set them back a fraction of the original and their devices are brimming with pages of app downloads, why stray?

So congratulations, Apple, though not necessarily on the milestones. They're nice and round, but they're not needle movers. The real victory here is Apple's grasp on its growing army of iPhone owners. 

Apple is a Motley Fool Stock Advisor pick. Nokia is a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is starting to see more Apple products creep into his home lately, but he owns no shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 15, 2009, at 2:27 PM, kkrimmer wrote:

    I laugh at the complaints, and even a PC World column about tearing down Apple for not opening up the iTunes store to all vendors. It's an argument that doesn't make sense. Your Palm Pre or Windows CE would have to be able to run the apps on it's OS. Will Palm or Microsoft open their apps to run on anyones product?

    The complaint about being stuck with AT&T is also a joke. You can buy a Palm Pre but you're stuck with Sprint... how is that different?

    Anyway I just find these complaints entertaining while my Apple stock doubled since I bought it, and Michael Dell's stock has not.

  • Report this Comment On July 15, 2009, at 2:39 PM, plange01 wrote:

    with so many smart phones as good or better than the iphone there is no longer any reason to buy apple only to take profits if you own it,,,

  • Report this Comment On July 15, 2009, at 2:47 PM, JeffHy wrote:

    to kkrimmer -

    YES to being stuck with AT&T. I recently moved to the iPhone 3GS from the Sprint Treo 755P.

    The iPhone device is infinitely better than the Treo, BUT AT&T is simply awful!! The Sprint customer service is better. The Sprint coverage is better (I never had a dropped call with Sprint, I DO with AT&T.)

    If Sprint had the iPhone, I'd be back in a minute!!

  • Report this Comment On July 15, 2009, at 5:31 PM, UserCentric wrote:

    Apple has shown repeatedly that it has an incredible ability to develop compelling products, with a paradigm-breaking business model, that succeed in the marketplace. This is the definition of business innovation.

    Who cares if AT&T service sucks, or that there are iPhone copycats on the market. Apple is a great company with great products and is a great investment. Follow the leader.

  • Report this Comment On July 15, 2009, at 9:09 PM, marv08 wrote:

    The article does make a valid point. At least any competitor would have to be vastly cheaper to stand a chance. And in reality, they can't. Apple uses almost identical parts for all iPhones and iPod Touches plus they have the most favorable solid storage pricing due to the iPod business. Any competitor would have to burn millions over many years to really make a dent here.

    Still, I do not really think the decisions of the early original iPhone "2G" adaptors will be telling... these people stood in a queue for a week and paid 600 bucks for a phone that comes with a mandatory 24 months contract starting at 70 bucks. They would not buy anything else than Apple, even if the iPhone came with a dial plate. The decisions of the millions of 3G buyers with expiring contracts next year will be much more interesting.

  • Report this Comment On July 15, 2009, at 11:22 PM, dfnbach wrote:

    I had Sprint cell service for 10 years, until I switched to ATT. I stayed with Sprint because I didn't know how good the service could be with other companies. Sprint tried to make up for the long wait times for customer service by giving free minutes-- a pay off. Twice, I waited 40 minutes for a customer service rep. This year, I switched to ATT cell, and the service is by far, exceptional. There is no comparison with Sprint. I have only good things to say about ATT service and products-- the I phone included. How anyone could prefer Sprint over ATT is beyond me. I wish ATT all the success. Apple iphone is a great product that selected ATT and ATT has risen to the occassion.

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