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Has the iCar Arrived?

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As the penetration of smartphones into our lives continues to increase, it is easy to wonder when Apple's (Nasdaq: AAPL  ) signature "i" will precede nearly every product we buy. Even with Google's (Nasdaq: GOOG  ) Android claiming the top spot for most-used platform within the smartphone realm, Apple has a special knack for remaining the iconic symbol of every device it makes. In keeping with this tradition, the recent announcement by General Motors (NYSE: GM  ) that certain models will incorporate an integrated "Siri button" leads one to contemplate whether the first iCar has finally arrived. The announcement raises as many questions as it answers, but gives GM investors something to pay attention to as the first units roll into showrooms.

The vehicles
According to GM's Nov. 27 press release, the Siri interface will be available on both the Chevrolet Spark and the Sonic. Each model will offer the Chevy MyLink infotainment system that will allow drivers with an iPhone to connect their iOS 6 device directly to the system. Taking Siri functionality one step further, the system will include an "Eyes Free" mode that is designed to increase driver safety and minimize distractions. Specifically:

In the Spark and Sonic RS, owners can use Siri in Eyes Free mode to:

  • Make voice-activated, hands-free calls to Contacts on their iPhone
  • Play songs in the iTunes library, and even switch music sources automatically from AM/FM/XM radio to iPod mode
  • Listen to, and compose and send an iMessage or text message to a phone number or anyone in saved Contacts
  • Access Calendar and add appointments
  • Minimize distraction even more by keeping the screen of the iPhone from lighting up, even when Siri answers simple questions such as game scores or the dates of national holidays
  • While in Eyes Free mode, Siri will not provide answers to complex questions that require displaying a web page.

The interface is designed to address many of the most common causes of distracted driving.

While the introduction of this type of functionality is clearly an advance for Siri, many of the features described above are available in varying formats in other systems. For example, the Ford (NYSE: F  ) Sync system has been offering voice commanded operation for some time and has been a positive point of differentiation on which GM is finally playing catch-up. Both automakers pride themselves on being able to offer advanced technology that, in many cases, surpasses features available on many luxury cars.

A double-edged sword
The inclusion of Apple integration has the potential to be a major boon for GM as it continues to look for ways to differentiate itself from competitors. It remains early in the process, but you should expect to see a series of joint advertising spring up as the new vehicles' release dates come closer.

Of particular interest will be how closely Apple decides to align itself with the development. If it well received it will reflect positively on both companies; if, however, this release is met with a less-than-warm reception, reminiscent of the recent Apple Maps rollout, the news could represent another misstep that Cupertino would prefer to avoid.

The other side of this news, of course, is that by aligning itself with Apple, GM runs the risk of immediately alienating users of Google's Android. While you may believe that the Apple mystique is worth the risk, the sheer volume of Android users raises the question of whether the decision is prudent. Options for Android users within the Chevy MyLink system, specifically on those models, remains unclear, but may prove important.

Furthermore, since Google is not known for its propensity to sit idly on the sidelines, it may choose to align itself with one or more other automakers. While it has typically taken a broader view of its distribution options, preferring to be available across platforms -- think of automakers standing in for wireless carriers in this example -- should the company take a more exclusive approach, this could be a major headwind for GM. The fact that Ford's Sync is powered by Microsoft (Nasdaq: MSFT  ) makes it an unlikely partner for Google, but certainly should give Microsoft a sense of places to focus its development efforts with both its Windows phones and, perhaps, the Microsoft Surface tablet.

Trading the news
Generally, while it is too early to take a decisive position based on this news, investors in all of the above companies are well advised to take note that the market is heading in this direction. As future developments are released, the inclusion of smartphone integration into new car models is likely to be a major driver of sales in both industries. In the interim, the prudent approach is to remain vigilant and monitor new alliances as they are formed.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

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  • Report this Comment On December 06, 2012, at 12:33 AM, dwilh51183 wrote:

    Today, shares of Apple Inc. (AAPL) gapped down nearly 5%, even while the Dow surged over 100 points. The fuss stems from speculation that the iPad could lose ground to the growing number of Android-based tablets on the market.

    According to IDC, Apple’s market share is expected to decline from 56.3% to 53.8% in 2012, while Android tablets are expected to capture 42.7% of the market (up from 39.8%). By 2016, iPad market share is forecast to drop below 50%.

    But what many sellers are forgetting is that even if Apple gets a slightly smaller slice of the tablet pie, the pie itself is growing by leaps and bounds. Analysts are calling for 122.3 million shipments in 2012 and 172.4 million in 2013—that represents a 41% jump! So even with this extra competition Apple stands to profit handsomely from the tablet boom.

    And whenever we talk about Apple’s growth prospects, we can’t forget the iPhone. This quarter, analysts expect that 224.5 million smartphones will sell around the globe—nearly a 40% increase over last year. This is, of course, very good news for Apple, and here’s why:

    [*] Apple now commands 48.1% of the U.S. smartphone market thanks to the iPhone 5, overtaking the Android’s 46.7% share.

    [*] The iPhone 5 also pushed Apple ahead of LG among U.S. phone makers—it is now second to only Samsung.

    [*] The iPhone 5 drives 13% of all iPhone web traffic—an accomplishment considering that the smart phone has only been out for two months.

    [*] Apple plans to launch the iPhone 5 in 50 countries by the end of the month, including Brazil and Russia. Currently, the iPhone 5 is sold in 47 countries.

    So now that the company’s supply problems have been resolved, analysts expect 46 million iPhones to sell this quarter—a huge jump from the 26.9 million iPhones sold last quarter. Fueled by iPhone 5 sales, total sales are expected to jump 17.8% this quarter. And that number should only increase in the coming months.

    To sum up, Apple Inc. is still a great buy, and I expect that it won’t be long before those who sold off today rethink their decision.

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