Loading...
Symbols:
Authors:

WSJ Report: What Apple Will Be Creating in 5 Years

by: Trader Mark May 23, 2008 | about stocks: AAPL    
Trader Mark

Trader Mark

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

A very interesting take in the Wall Street Journal regarding what Apple (AAPL) could potentially be doing in 5 years. I won't rehash my old posts but most of my bullishness on this name, aside from the potential market share wins of Mac vs PCs revolve around Apple as the center of the digital Nov 24: Apple (AAPL) the Cultural Icon] Much of the ideas in this article, are similar to my longer term vision - i.e. Apple will be running your home revolution.

My timeline on this name is quite far down the line, hence I don't get too stressed regarding the quarter-to-quarter numbers, although we have to be aware of the lemmings knee jerk reactions to Apple's ALWAYS conservative guidance. Technology, to me, as a sector is very overrated - there is very little true secular growth. Hence, despite the expensive valuation - I am willing to pay up for the few real growth stories - with that said, I have Apple down at the lower end of its typical allocation due to this very nice run the past few months - would like to add back more exposure at lower price points.

And yes, the US consumer is stressed, and no Apple won't be immune. But this is becoming an international story - with nearly 50% of sales now overseas. And even stressed Americans still will cut things less important to them than such valued treasures as video games and Apple products.  Let's see what Forrester Research is predicting 5 years out.
  • Forrester Research is the latest to look into the crystal ball in a new report that imagines the Apple products of 2013. But rather than predict Apple jet packs or other outlandish new directions, the research firm uses the company's recent history as a guide to forecasting.
  • Forrester's conclusion: While much of Apple's great successes have been mobile products such as the iPod and the iPhone, the company will seek to colonize rooms throughout the home.
  • Among the new products Forrester predicts Apple will create are wall-mountable digital picture frames with small high-definition screens and speakers that wirelessly play media, including photos, videos and music, stored on a computer elsewhere in the home. Such products already exist, but Apple could put its own twist on them -- for example, by adding its design panache and a touch-sensitive screen that lets viewers flip from image to image with a finger swipe, a la the iPhone.
  • For the bedroom, Forrester envisions an Apple "clock radio" that pipes in music and other media across a home network.
  • Possible, too, is an "AppleSound" universal remote control, also with a touch-sensitive screen, that lets users browse their music collections and change the songs playing through their stereo as they stroll around the house.
  • Forrester also thinks Apple could extend into the home the technical assistance currently offered by "Genius Bar" personnel in Apple retail stores. Apple in-home installation services will become especially important as its array of products for the home grows. (ohh we love services over hardware, nice margins - right IBM?))
  • The iPod remains the top MP3 player, with more than 70% of the market, and Apple is now the top retailer of music in the nation, ahead of Wal-Mart Stores. Less than a year after entering the cellphone business with the iPhone, Apple became the second-largest provider of smart phones in the U.S.
  • That said, the company had an underwhelming foray into the living room with a television set-top device called Apple TV that plays music, photos and movies downloaded from the Internet and PCs on a home network. In an interview earlier this year after dropping the price on the product by $70 to $229, Mr. Jobs said he was disappointed in its sales. (and when Mr Jobs gets angry, Mr Jobs makes sure the next iteration will be better - Mr Jobs does not like to lose)
  • Despite the hiccups, veteran observers of Apple say Mr. Jobs's intent is clear. "I see everything Steve is doing as positioning himself to take over completely the living room," says John Seely Brown
  • Steve Wozniak, the co-founder of Apple with Mr. Jobs, says it would make "a lot of sense" for Apple to do a television set that can also access media stored on the Internet and local PCs. "I only started thinking that way recently," Mr. Wozniak says. "Apple is obviously in the world of delivering display devices already."

One beauty about Apple is they find a way to make elegantly designed product that is dummy proof.... if you have tried to install your Sony DVD to your Panasonic HDTV to your JVC surround sound stereo to your ... well you know all those fun cables involved. This is where Apple will simplify life - and people love having a simple life - and they will pay for it. 

So, as we do every 90 days, we'll hear the lemmings cry about this or that line item in the earnings report and how its a clear signal the story is over... occasionally the stock will drop 25-35% allowing us to buy at bargain prices, which in turn we will sell back to the lemmings when they are "comfortable" that Apple is back on track - usually when the stock has rebounded 30%+.

And so we'll repeat in 2009, 2010, 2011, 2012, etc. At some point growth will have to slow just due to sheer size but there are so many markets for Apple still to conquer not to mention the prime market they deal in.......meanwhile Microsoft (MSFT) is chasing relics like Yahoo (YHOO) (hello AOL/Time Warner) - instead of fully focusing on morphing Xbox into something that could compete with what Apple is dreaming up for 2010 and beyond.

Disclosure: Long Apple in fund; no personal position

Related Articles

This article has 12 comments:

  •  
    May 23 05:09 AM
    Yesterday will tell us tomorrow.
    www.youtube.com/watch?...
    Reply
  •  
    May 23 06:11 AM
    APPLE IS A STARTUP!
    Reply
  •  
    May 23 06:43 AM
    Five years is an eternity in tech. Forrester doesn't have enough imagination to see where we'll be. If they did, they'd be another Apple.
    I disagree the focus will be on the home. Apple's big hits aren't from products hidden away behind your four walls, it's from products your peers see you have (and they want).
    Reply
  •  
    May 23 07:32 AM
    Trader Mark, you come off like a smug jerk. So, when you sell because it is a little overvalued after a long run, it is being shrewd, because lemmings might dump, but someone else who sells to book profits after a nice run is a...lemming. And if someone buys back when it gets cheaper again, just like you will, they are lemmings too.
    Reply
  •  
    May 23 07:52 AM
    please consider the auto industry as a strong possibility to further expand aapl's interest---they have just started to put their toe in the water--the WIZZZARD is at work shhhhhh
    Reply
  •  
    May 23 08:46 AM
    Is that all Forrester's could come up with ??? pretty sad no vision
    I am sure 100%, none of what they wrote about is in Jobs mind .
    Reply
  •  
    May 23 08:59 AM
    True dat, Newton Rules. I have to go hit the i-snooze on my i-clock radio.
    Reply
  •  
    May 23 09:27 AM
    The only prediction I found plausible is the Apple TV/multimedia console. All other products won't be material to Apples earnings. Over the next 5 years Apple's success will not be in new products but old products expanding within their respective markets. You, perhaps mistakenly, give the impression that you're investing in Apple as a growth story because of these new products. I beg to differ with that conclusion. Apple is a growth story because of its legacy products--the Mac, iphone, ipod and software/services. All of these product lines will grow at double dig over the next 2 to 3 years and some over the next 5 years. The Mac is growing over 35% annually, taking market share with no known viable competition. The iphone is in its infacy with less than 0.5% of the cell phone market. The ipod is morphing into a multimedia game playing machine and software and services will expand at the same rate as these new hardware products as Apple capitalize on new apps for all of them.

    Finally, there are 2 additional lagecy categories inwhich Apple will have double digit revenue growth namely content distribution and mobile microprocessors. Content on itunes is expanding into, TV, new motion picture releases, and soon gaming and posibly print media etc. With over 100 million processor needed for its mobile lineup, Mobile microprocessors will become an instant $2Billion market for Apple. Assuming a cost savings of 25% per processor, Apple will be looking at adding at least $500 Million to material cost savings annually.

    Apple is the new Sony. Given their war chest of $20B and approaching cash flow growth rates of $10B annually, Apple will become more and more vertically oriented to minimize material cost and system complexity.

    New markets are great but investment in Apple today should be based on its current market potential and track record not these small trinkets of CE products that are so consumer fickled. I see Apple is a congloramate in direct competition with (MS, HP, RIMM/Nokia, ToysRus, BestBuy and Block Buster). Add to that mix the Apple ipod which is the MP3 market and you have the making of the largest tech company by market cap in the world. I suspect Apple to surpass MS in market capitalization in 3 years.

    Where will Apples expansion come from:
    1. SW - Apple will become 25% of the desk top market as its Mac line expands. It will add more applications on top of the current purchase of Mac version of MS office from MS. SW Applications will expand into mobile as well.
    2. iphone - Apple will capture at least 5% of this market in the next 2 years. Thats an annual $10 Billion in sales with GM above 50%.
    3. Mac - Growing at 35% plus.
    4. ipod - rejuvinated by gaming applications suspect growth rate of 10 to 15% annually.
    Reply
  •  
    May 23 10:49 AM
    Rd4sndk, you are correct. Look at Trader Mark's blog. "Fund My Mutual Fund." He wants folks to pony up $7 million to him. Ha. With his snarky "lemmings" comments and falling for the Forrester bait. Hilarious.
    Reply
  •  
    May 23 11:38 AM
    Bullets 4 and 5 (clock radio, remote) already exist - the iPhone/iPod-touch.
    Reply
  •  
    May 23 02:45 PM
    I've been using a Mac as a clock radio for years -- driven by a simple AppleScript kicked off via a repeating iCal event. It corrects for DST automagically, and is trivial to adjust/suppress/reset. You could do the same thing with an iPhone or iPod Touch, plugged into a docking station w/ speakers (I think -- it would have to wake from sleep in response to the iCal event, not sure it the iPhone/iTouch supports script events yet).
    Reply
  •  
    May 24 12:21 AM
    I am relatively new to Apple land. I bot a G4 powerbook some years back and recently upgraded to the Macbook Pro with all the bells and whistles.
    I love it and my iPod touch, all my kids have iPods of one kind or another. We love them! My dream for Apple is to invent an iPhone like computer smaller than the Air, with maybe a 9 inch screen so we can see it better and have the ability to connect wherever we are. Maybe there is already something like this out there, but a mini laptop that fits in your hand and is also a phone. Of course thats just my humble thought and I don't know much..
    Reply
More Comments on AAPL ยป
More by Trader Mark

Investment Resources
Money Management 

Research 

Seeking Alpha provides these ads as a service to its leading contributors
Articles on related themes
iPods and Other Portable Music and Video Players 

Cell Phones 

Digital Cameras & Printing 

Digital Home