Here's What Apple, Inc. Could Do With Home Automation

Home automation could be Apple's next big market -- and a long-term play on the Internet of Things.

May 27, 2014 at 7:30PM

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According to reports, Apple may announce a home automation platform at its developer conference next week. Source: Apple.

There's no shortage of rumors or anticipation leading up to Apple's (NASDAQ:AAPL) Worldwide Developers Conference next week. But aside from the hardware speculations of a possible iPhone 6 debut (which would be historically a bit premature) or an iWatch launch, the Financial Times is reporting that one of the company's biggest pieces of news may be the debut of a home automation system.

What Apple's (possibly) doing
The FT article mentioned that Apple is developing a software platform that would link home automation hardware, created by other manufacturers, to its iPhone and other devices. As an example of how the technology would work, the system would communicate with the iPhone saying the user just entered the door and would automatically turn on the lights. 

Third-party devices that would use Apple's home automation software would have to pass security and quality standards before being able to officially connect to Apple's smart home platform, similar to how some devices receive the "Made for iPhone" label after passing specific Apple standards.

Why it's doing it
There are several reasons why Apple might want to jump into the connected home market. It's no surprise that investors and consumers have impatiently waited for new breakthrough technologies from the company. While Apple certainly doesn't cater to anyone's timeline but its own, entering a completely new segment would breathe new life into its products while boosting its innovative persona as well.

Aside from that, the upside to home automation -- part of the so-called Internet of Things -- is massive. Research from Gartner shows that by 2020 the number of Internet of Things devices could hit 26 billion, and IDC says global revenue from the Internet of Things could reach $8.9 trillion in the same year.

Those numbers aren't lost on Apple's competitors. Samsung (NASDAQOTH:SSNLF) and Google have already thrown their hats into the home automation segment. Samsung's Smart Home system connects the company's smartphones to televisions, washing machines, and refrigerators, and Google purchased the smart smoke alarm and thermostat company Nest for $3.2 billion at the beginning of this year.

With Gartner's projections and competitors in the space, it's not far-fetched to believe Apple would want to enter a part of the Internet of Things as well. But does the company have any real advantages over Google and Samsung?

It certainly does.

Apple's edge
Apple has very strong developer relations and a vast operating system ecosystem. It currently holds 41.6% of smartphone subscribers in the U.S., putting it far ahead of Samsung, with 26.7%. That's one of the reasons many developers build apps for the iPhone before Android and why an Apple smart home automation system could spur companies to dive further into the iMaker's platform.

With such a new market as IoT and connected devices, the hurdles for getting the general public to get on board could be huge. Which means that the technology would need to be simple to set up and easy to use. Apple prides itself on creating devices and software that are exactly that, and you can bet it would take that same stance on software for connected homes. This means that companies building products to Apple's software standard would help ensure the success of home automation -- and their companies -- partially because Apple would require a simple-to-use system.

Lastly, Apple has already jumped into location-specific communication through iBeacon, which could be used as an integral part for a home automation system. Apple uses Bluetooth Low Energy, or BLE, tech in iBeacon to send messages to users' iPhones and iPads in Apple Stores. When users turn on iBeacon, they can receive product information, sent directly to their iPhone in real time, as they walk past devices in the store. Apple could use the same iBeacon tech to connect other smart home devices to its new software and allow them to easily communicate with each other.

Foolish final thoughts
If Apple does dive head first into home automation next week, I think it could be the innovation boost investors have been looking for and an entirely new revenue stream for years to come. 

Right now, there's no telling exactly how much tech companies will benefit from home automation and the Internet of Things, but clearly there's a lot of potential for Apple and its competitors. If this latest report proves true, Apple could have an entirely new platform to sell apps through, collect certified device royalties from, or even build devices for. And all that could spur years of new revenue growth.

Apple's getting ready for the Internet of Things. Are you?
With Apple preparing to enter the Internet of Things market and Samsung and Google already firmly planted in it, investors would be wise to give IoT more than just a passing glance. But new technology can be overwhelming to sort through, and picking the right stock even harder. That's why The Motley Fool's put together a special report on the Internet of Things and chosen one stock that has massive potential in the space. To gain access to this free report now, just click here.

 

Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google (A and C shares). It recommends Gartner. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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