How Apple Chooses Where to Go Next

Investors have nearly insatiable needs for growth. As Apple (NASDAQ: AAPL  ) has delivered on this front over the past decade, shareholders are now worried about where the Mac maker heads next, as the growth rates they're accustomed to can't be expected to persist going forward.

Shortly after Steve Jobs returned to the company, he surveyed various markets that Apple could tap. He landed on one with universal appeal: music. Everyone likes music, so Apple launched the iPod. Likewise, everyone uses phones so the iPhone made sense next.

Tapping mainstream markets is relatively obvious, which is why investors rightly expect Apple to get into the TV market in the near future. Beyond the mainstream, though, there are still numerous opportunities in smaller and relatively niche segments. The opportunities may be smaller individually, but when considering the number of sectors Apple can explore and the fact that these gains are entirely incremental, they'll quickly add up.

The personal interests of execs will determine where Apple goes next.

Get fit
Rumors of an iWatch have surfaced recently alongside burgeoning interest in smart watches and wearable devices. At the same time, wearable fitness activity trackers have also begun to gain popularity. Nike's (NYSE: NKE  ) FuelBand and Jawbone's Up are among the most popular of these new devices.

Tim Cook is a known fitness enthusiast, and reportedly wakes up at 4:30 a.m. every morning to hit the gym before heading to Apple HQ. Cook is also on Nike's board, and is frequently seen sporting his own FuelBand at public events. Apple also sells the FuelBand and Up in its retail stores. That's why Apple will probably integrate fitness capabilities into the iWatch. If so, the iWatch could be a threat to the FuelBand, which could create a conflict of interest for Cook.

In an extreme case, Cook may need to recuse himself from board meetings or potentially step down from Nike's board, much like how Google (NASDAQ: GOOGL  ) ex-CEO and current Chairman Eric Schmidt had to do when he was on Apple's board. However, FuelBand sales are negligible relative to Nike's consolidated revenue ($6.2 billion last quarter), so it's less of a concern than having Schmidt listen in on iPhone and iPad talks.

Car talk
Online services exec Eddy Cue and marketing chief Phil Schiller are both known as car buffs, and Cue recently joined Ferrari's board of directors. Apple director Mickey Drexler once confirmed that Jobs had always dreamed of making an iCar to take on the automakers. Of course, Apple will never enter the car market directly, but what the company can do is to integrate its technology deeper into vehicles to broaden the appeal of its devices.

To that end, Apple has been collaborating with automakers to integrate Siri's Eyes Free functionality, starting with General Motors and Honda, among others. Volkswagen just unveiled an iBeetle, which was specifically designed to integrate with iPhones. iOS 7 is expected to make a big push into car integration with Siri and Maps.

Direct auto integration would be highly complementary for Apple's mobile gadgets.

What's next?
These are just two examples of how Apple management will likely pursue personal interests in expanding Apple's horizons. Schiller is also a "rabid hockey fan," so the Mac maker could even be preparing to disrupt the lucrative hockey puck industry. Incumbent puck manufacturers won't know what hit them when the anodized aluminum unibody iPuck strikes.

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 reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (4) | Recommend This Article (8)

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 May 02, 2013, at 8:43 PM, Jjkiam wrote:

    Yes finally an article that acknowledges the ecosystem opportunities Apple can expand it's revenue base into. But aside from these great possibilities, what about Apple's possibilities in mobile payments and other ecosystem growth areas such as gaming ? Let alone competing with Netflix for content delivery. Then add the potential for Apple to succeed with Maps and move it's user base away from Google and really start to generate significant ad revenue! Suddenly the idea of Apple as a " gadget" hardware company competing only in a very commoditized space seems short sighted. Yes Apple will continue to make compelling gadgets but that will increasingly become a decreasing part of it's revenue generation

  • Report this Comment On May 03, 2013, at 9:37 AM, FoolishLonghorn wrote:

    @Jikiam

    Not sure that I buy your thoughts that Apple has ample opportunities for growth in the delivery of content and ads.

    Apple takes in a ton of revenue from Itunes, but then pays out most of it to providers of content.

    In order to profit from content, Apple will have to displace tough competitors.

    Can Apple take money away from Google or Netflix? Perhaps, but it will be quite the dog fight.

  • Report this Comment On May 03, 2013, at 10:56 AM, pk22901 wrote:

    "Can Apple take money away from Google or Netflix? Perhaps, but it will be quite the dog fight."

    Agree on the dog fight, but Apple will fight or cooperate with these firms on its own terms.

    Re Google: It will continue with iAds, Siri Search and Agent, iMaps w/ inside-bldg maps, privacy enhancement, seamless ecosystem integration, peerless customer support, marketing, and retail, and expanding into new areas of innovation (iWatch, iPayments, iTV, iTunes content expansion). I believe Google has proved itself a sharply competitive, untrustworthy, and aggressive entity; perhaps the Google war will last till the 20s.

    NetFlix may be bought or continue to be a cooperating partner. An

    D there's some possibility that Apple licenses mounds of content from US and foreign media powerhouses.

  • Report this Comment On May 03, 2013, at 11:01 AM, pk22901 wrote:

    Typo...

    And there's some possibility that Apple licenses mounds of content from US and foreign media content owners to compete directly with Netflix.

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