Is the Internet of Things Really the Next Apple Product Category?

Apple (NASDAQ: AAPL  ) hasn't moved into a new product category since the iPad was released in 2010, and the masses have been clamoring for another big thing to come out of Cupertino. An opportunity arises at the upcoming Worldwide Developers Conference. Will an announcement be made?

Over the last few years, the rumor mill has indicated that a smart watch, a mobile payments platform, and an expanded Apple TV are imminent. In addition, a larger-screen iPhone is supposedly under development.

But something else had flown below the radar that makes sense to be unveiled at a developers conference. How will investors of Apple and competitors such as Google, (NASDAQ: GOOGL  ) (NASDAQ: GOOG  )  be affected? 

Smart home
The Financial Times reported that Apple will formally announce in San Francisco next week that it will develop a software platform that can be used to control gadgets in a home or office from a Mac, iPhone, or iPad, rivaling what Google entity Nest is doing. 

The news isn't really that new. Apple had filed a patent in this area, and several articles have been written on the subject.

Nest has already developed connected gadgets that can be controlled by a smart device, but the company had to suspend production of smoke/CO detectors and recall nearly 440,000 of them while it corrected a potential safety hazard. Apple will have to perform better if it intends to get into the market. Nest will have have to ensure no other issues arise in the future so others, like Apple, don't swoop in and take over the market. 

Smart MO
Apple would have to collaborate with others on a larger scale or make acquisitions in the space if it expects to make any headway in the Internet of Things, a potential multi-trillion-dollar industry, going forward. It has developed systems to interconnect its own devices. For example, users can pair Apple TV with iPhone and iPad via Wi-Fi. Now it might have to work with third-party sensor manufacturers, including Nest, and contribute to industry groups to develop standards. This is all new for Apple. Its modus operandi has been to work in secret and then announce a new product or service at the end. 

Google, which got into the business by acquiring Nest for $3.2 billion , has no problem throwing things out there and letting the chips fall where they may, all while taking in lots of cash from its superior web search platform. Whether or not Nest will make an impact in the Internet of Things remains to be seen, but a big part of the Nest deal probably involves the technical prowess that Google now has access to. Something like that can't be measured with any degree of accuracy. 

Smart upgrade
In the shorter term, Apple investors would most likely profit more from an iPhone upgrade. Enhancements such as a larger display that would rival phones from Samsung would pay off.

The iPhone, which Apple has sold more than 400 million of since 2007,  would probably continue its epic run with a 4.7-inch or 5.5-inch display. The extra space under the screen would also allow Apple to increase the battery capacity, another big selling feature these days. 

Google was smart and got out of the handset business by disposing of the former Motorola Mobility unit it had acquired just a few years earlier. Investors were happy about this turn of events, as the operation was reportedly losing money and Google got to keep the Motorola patents, estimated to be worth about $5.5 billion. 

Foolish conclusion
Apple could make an announcement next week at its Worldwide Developers Conference in San Francisco and say that it would like to get into the Internet of Things in a bigger way. If it does, investors should pay attention to exactly what will be coming out of Cupertino. A blockbuster release could really move the needle for investors. However, it is more likely that a lower-key software platform will be in the offing. Shareholders might be more interested in what the company has to say about the next iPhone.

Google will continue to plod along, buying up companies like Nest in order to selectively profit from smart, interconnected homes and offices, while still raking in tons of cash from its search business.

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