Apple Might Want To Take Notice Of This Massive Opportunity

Will Apple ever enter a new market with an iPhone-like product, and if so, what should it be?

Aug 23, 2014 at 7:00PM

Apple's (NASDAQ:AAPL) expected iPhone 6 launch will most certainly be the biggest device launch of 2014, as the company releases the fourth major refresh to its iPhone family. While the iPhone's hardware, software, and size are all likely to change, consumers and investors still want more from the company.

Since Steve Jobs's passing, many have questioned Apple's ability to innovate and create great products in new markets. Unfortunately, the company has been slow to respond in key industries like wearables, and in one particular space where it is missing a golden opportunity.

The power of Apple
In Apple's last quarter it sold 35.2 million and 13.3 million iPhones and iPads, respectively. Importantly, these enormous numbers came ahead of expected product launches, a period where many thought consumers would wait a few months longer for the newest devices. However, Apple's success demonstrates the power of its brand, where it can release updated versions of existing products and create many billions in annual profit.

Still, in technology, what's in favor with consumers can change quickly. And although Apple has a strong ecosystem filled with consumers and businesses that are interconnected on various devices, we must still wonder when Apple will unleash its next big product.

Planning ahead with new products and services
For all the good things we can say about Apple's hardware, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is just as dominant on the Web and Microsoft (NASDAQ:MSFT) in software. Yet, neither Google nor Microsoft have grown comfortable in their successful time-tested niche markets, both looking ahead to the next 10 years with new products.

Specifically, Google has taken the broadband Internet market by storm with Fiber, a multi-billion dollar project that increases Internet speeds by up to 100 fold versus the average broadband provider. For Microsoft, it has embraced the cloud, specifically cloud infrastructure and application platforms to become a viable competitor against the juggernaut Amazon.com. As a result, Microsoft and Google have their own insurance policy beyond their flagship industries to create growth in the decade ahead.

Apple should take notice
For Apple, it's already late to the wearables market, and even with the Beats acquisition, music isn't really a game-changer for a company with $180 billion in revenue. However, there is one market where it could thrive with its premium pricing and services strategy, a market that is growing especially fast, smart TVs.

Apple has been long-rumored as a company that could enter the TV space, but nothing official yet. Of course, the company has Apple TV, which connects users to movies and shows via iTunes along with photos, music, and Internet content. In total, Apple has sold 20 million of these devices, including seven million over the last year, creating more than $1 billion in revenue from media content in the 12-months prior to April of this year.

Therefore, Apple has the foundation for an entrance into the smart TV space, but desperately needs the corresponding hardware, with now being the time to strike.

According to BI Intelligence, 75 million smart TVs shipped globally in 2013, and 101 million are expected this year. Then, in 2015 smart TVs shipments are expected to surpass traditional TV shipments with 124 million, followed by 148 million and 172 million in the following two years, respectively. Therefore, from 2013-2017, smart TVs are a business that's growing at an annualized rate of 23% -- which is actually faster than the rate of e-commerce growth in the U.S -- and will eventually own nearly 75% of the total TV market.

As a result, with the smartphone and tablet markets both reaching maturity in the U.S. it seems logical that Apple would take such data in stride, and make an aggressive push into the smart TV space as its next big-time market.

Falling prices should not be a concern
Now, one reason that investors reject the idea of Apple creating a smart TV is because the price of TVs in general have collapsed in the last decade. Back in 2005, the average 32-inch LCD TV cost $1,566 , then $729 in 2007, and in 2012 fell to just $435. Today, most 32 inch TVs can be purchased for under $350, and while smart TVs command a slight premium, its prices have also seen rather aggressive declines in the last several years.

With that said, consumers and investors tend to forget that when cell phones were first introduced, they were expensive luxuries that only the wealthy could afford, and gradually saw price declines over time. In fact, Whiteboard Advisors estimates that the average price of a cell phone in 1984 was $4,000 after being adjusted for inflation. Still, Apple has managed to become the most valuable company in the world despite these lower prices, and has been able to demand higher prices due to the luxury of its product.

Foolish Thoughts
In other words, price decline worries are irrelevant as it applies to Apple not entering the smart TV space, and investors should realize that Apple is missing a golden opportunity by not acting on an industry that's expected to ship 124 million units next year. With all of Apple's devices being connected, there's no doubt that a smart TV would be a big hit with consumers, and could be meaningful for the company's fundamental performance.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

 

Brian Nichols owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Microsoft. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers