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The Quiet Genius of Apple

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The iPad 2 came out this week, and like many other people I was glued to my computer, waiting to see what Apple (Nasdaq: AAPL  ) had to say. I came away with a ho-hum thought of the new iPad, but I saw some quite genius behind the applications that Apple is including in its new products.

Apple has slowly created a suite of products that reinforces itself and gets buyers sucked into coming back again and again for their technology needs. This week we saw the slow and steady proliferation of Apple's next product-integration technology: Airplay.

To understand why I think Airplay is so important and how it helps all of Apple's products, let's take a quick look back at how Apple has been building this empire.

Act 1: iPod
It started with a stylish musical device, the iPod, and its computer software, iTunes. Apple made an iconic device that brought millions of users into the iTunes Store. And it was the success of iTunes that allowed for the next big step in Apple's master plan.

Act 2: iPhone
When the iPhone was released, it blew the socks off any phone we'd previously known. Apple's innovative spirit showed through in redefining the phone as we know it, and others have been trying to copy it ever since. Google's (Nasdaq: GOOG  ) Android now has a greater market share than the iPhone, but it was Apple that took the first step in redefining the mobile phone.

The real genius of the iPhone was the App Store and the device's seamless integration with all things Apple. My iCal, Address Book, music, videos, notes, and even browser bookmarks transfer easily between my Mac and my iPhone. It isn't as if you couldn't do most of this with a PC, but the ease makes the transition to a Mac much more enticing. Others think so, too: Mac sales were up to 13.7 million units in fiscal 2010, from 7.1 million units in fiscal 2007, when the first iPhone was released and the App Store was just beginning to show its possibilities.

Act 3: iPad
The iPad has been a smash hit in its first year, and as we review the updated iPad 2, what I took from the device was a new way to connect other Apple devices with Airplay.

Airplay is really just the ability to stream music, photos, or videos among Macs, iPhones, iPads, and Apple TVs. In iOS 4.3, app developers will be able to use this technology in their applications, and a variety of other third-party devices, such as stereos and picture frames, are adding the technology.

This is important for Apple, as it slowly makes a move beyond our computers and mobile phones and into our living rooms. Cable companies are scrambling to make iPad-friendly apps for viewing and controlling TV shows, both live and on-demand. Comcast (Nasdaq: CMCSA  ) and Time Warner Cable (NYSE: TWC  ) are both leveraging iPad applications on their cable networks. And Netflix (Nasdaq: NFLX  ) , although not an early adopter of Airplay, can be seen on almost any Apple device.

A company that was once just computers is now the center of music and video at home. And the integration between the devices makes other Apple products all the more enticing. With MacBook and iPhone in tow, I am much more likely to buy an iPad than I am a Motorola Mobility (NYSE: MMI  ) Xoom, despite good reviews

The next act, one Fool's dream
What does Apple have up its sleeve next? On the outside of Apple, we don't really know. But I think you can deduce a few things from recent actions.

Apple has demonstrated that it wants the App Store to continue to grow in both scale and capability. It also has made slow steps into our living rooms, with Apple TV and iPad applications.

So I think it's logical that the home theater is next. I've long hoped that the Apple TV would be a truly revolutionary device, and the foundation is set for that to happen. In the past, I've called for TiVo-like capabilities, but now it looks as if gaming would make just as much sense. iPhones and iPads are already able to connect to the Apple TV to control it, so why not give developers the chance to use a full screen for games?

This would be a boon not only for Apple; it would also give much-wanted flexibility to game makers. Activision Blizzard (Nasdaq: ATVI  ) has complained that Microsoft's Xbox Live doesn't kick back any of its revenue to the developers making the games. An Apple TV game would open not only new gaming possibilities but also payment options. There could be tiered pricing and subscriptions, and the developer would control everything.

The quiet genius behind Apple's products is the way they integrate and reinforce each other. Once you start making the move to Apple products, it's a slippery slope, and there may not be a way back. This Fool has found that out the hard way.

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Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

Google and Microsoft are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers choice. Apple, Activision Blizzard, and Netflix are Motley Fool Stock Advisor selections. The Fool has written puts on Apple. Motley Fool Options has recommended a synthetic long position on Activision Blizzard and a diagonal call position on Microsoft. The Fool owns shares of Activision Blizzard, Apple, Google, and Microsoft. Motley Fool Alpha owns shares of Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (15)

Comments from our Foolish Readers

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 March 06, 2011, at 12:53 PM, XMFTom7 wrote:

    I wonder what percentage of the 15 million folks who bought an iPad ever really think about or care whether their device is a closed system vs. an open system.

  • Report this Comment On March 06, 2011, at 1:14 PM, tramvv wrote:

    Market leadership is not a right by birth for a company. Apple has earned it over the years. No doubt about that. All the concepts of Apple are not new, but it is the way they present things are new. Slap it if some one says Apple is the sole innovator. There were MP3 players even before iPod was in the market, Motorola Innovated the Cell phone, Nokia came up with the first Smart Phone. Palm Came with the first Tablet.

    But what is great about Apple is Capability to use a existing idea and make take the user experience to the maximum possible level.

    This attitutde is not patented to a company. Many companys follow the same philosphy, this make it a good probablity that you might see products superior to Apple in some areas.

    Xoom is one such product... One of the aspects of xoom, It is packed with much much more than a common user asks for. Making it slightly priced above iPad. It will take time for people realize this fact. And they will realize once the Android Tablet app numbers creep up.

    This will create a good environment for xoom to compete against iPad and HP tablet. Can Xoom really win Not necessarily. In essence it might not be a looser as well. The Fragmented android tablet sales from various vendors will still

    keep the iPad a Leader far in numbers.

    Bottom line could be

    But eventually Android will Win over iOS,

    But Xoom might not match iPad.

    Still Xoom has a high probability to be a leader in the Fragmetned Android market

  • Report this Comment On March 06, 2011, at 1:31 PM, IraLA wrote:

    What Apple has done is create an environment that works for its customers. Customers have problems they want solved. Apple solves them; period. The reference to "sucked" is gratuitously pejorative. Customers come back for the same reasons people with free will do anything: because they want to replicate a positive experience.

    The notion of a closed system is a bogus red herring. It is a proven work environment in which things work. Users want a tool that does its function. There are techies, some geeks, who want to be able to tinker. That's fine for them, and they are no unable to do so. But for the vast majority of us, it's like buying a cordless drill: I want it to turn on and off when I hit the switch, but I have no interest in tearing it down to replace the motor.

  • Report this Comment On March 06, 2011, at 1:49 PM, jwh7610fool wrote:

    Some people don't understand, I want a closed system. A system that's integrated, works smoothly, no crashing and doesn't require a tech education to work with. I want to turn it on and use it and not worry about making part A work with part B. It all works, all of the time and is state of the art.

    I'm not really sure what more I could ask for. The masses want Apple. The hard core techs can go with systems that are open and spend their days adjusting, fixing and manipulating to get them to work.

  • Report this Comment On March 06, 2011, at 2:21 PM, Superstef wrote:

    All those folks who think 'Android' solutions are better because they are 'open' are living a false dream. One day they'll wake up and realize it's all a nightmare. 'Open' does not always mean 'better'.

    There are already hundreds of thousands of Android devices out there in the mobile space that have been infected with malware that can steal ID's and heaven knows what else. This is because anyone can load an app onto the Android application store without any oversight. You just load it up and folks download it unwittingly.

    If Google wants to preserve any sort of respectability to its offering , it will be forced to adopt similar curation restrictions on its software that Apple has had in place since day 1 with iOS. When it does, how 'open' is 'open'?

    And even when it does, it doesn't even scratch the surface of the problem. There may well be HUNDREDS of different devices out there now running some sort of Android software independently of Google. Google has absolutely no idea where these devices are and can do nothing to protect them, because its position from the start has been 'here is some free software. Use it to do whatever you want. There's no support from us. You're on your own.'

    Google is pushing this free software out for one reason only: to generate a massive user base through which Google can pollute the mobile space with advertising. Google is an advertising company, generating 97% of its revenue from ads. That's why it gives the software away for free.

    Apple, by contrast, has its entire mobile product line dependent on the functional richness, performance and security of its iOS, and simply cannot afford to get it wrong. THIS is why it has taken security seriously from the start, part of which is the curation of its application eco system (which is what the 'open' nuts complain about most) and part of which is its outright refusal to allow anyone access to its OS: you use Apple's published hooks into the OS or your app doesn't get approved. Do anything nefarious and you don't get in.

    It's a free world. Choose whatever is best for you. The so-called 'open' model from Google or the curated model from Apple. I've made my decision, thankyou.

  • Report this Comment On March 06, 2011, at 2:31 PM, HiramWalker wrote:

    Have the Xoom pushers here even used a Xoom?

    See what someone who is a Android supporter has to say:

    @curlyhead46 You seem to be posting the same MMI pushing hype all over the Apple blogs. You should actually try the product before you invest in a stock that will surely tank with this product.

  • Report this Comment On March 06, 2011, at 4:10 PM, deasystems wrote:

    Apple does the system integration so you don't have to.

    Thank you, Apple. You saved me from being an amateur computer janitor and mechanic.

  • Report this Comment On March 06, 2011, at 10:20 PM, Henry3Dogg wrote:

    The vast majority of android phones are locked bat the user cannot replace the OS. How is that open?

  • Report this Comment On March 06, 2011, at 11:28 PM, FiveForksFool wrote:


    Change "quite" to "quiet" in paragraph 1. Sync w/ title.

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