Does Cloud Computing Hurt Apple?
Apr 11th 2012 7:08PM
Updated Apr 11th 2012 7:12PM
If the central thesis of the cloud-computing movement is that hardware is largely irrelevant -- made obsolete by browsers that can run applications anywhere, on any device -- and if Dell's (NAS: DELL) recent purchase of Wyse Technology proves that the movement has momentum, then why are Apple (NAS: AAPL) investors hoarding shares like a pirate who's found a long-lost buried treasure? The Mac maker is subject to the same forces conspiring to commoditize computer hardware, right?
I'm inclined to say "no," but I'll admit it's a troubling question. Feature for feature, there isn't much difference between machines manufactured by Dell, Hewlett-Packard, Acer, and Apple. All use Intel chips. All use some form of hard drive. All use copious amount of RAM to retrieve information quickly. All use modern Wi-Fi radios to access the Internet.
Yet history shows that the more commoditized the market, the more that small service and design enhancements make a huge impact. Think about Rackspace Hosting (NYS: RAX) in the Web-hosting market. Hundreds of companies give customers tools to run a website or Web business, but only Rackspace pledges that you'll get a human every time you call with a problem. To the customer whose website crashes at 11 p.m., getting through to a friendly voice on the first call is a big deal.
Amazon.com (NAS: AMZN) unit Zappos has a similar story. Agents are encouraged to spend as much time as customers need to fix a problem or make a sale. As a result, Zappos sells more than $1 billion worth of merchandise annually. Why? There's a noticeable difference between buying from Zappos and buying from the local Al Bundy.
Small distinctions are where Apple shines. Take rounded corners. Do they matter much? No, it's an aesthetic change. But when you feel a MacBook's beveled edges topping a rounded corner, you know you're using a Mac. Same with the software: The Mac OS is designed to provide as close to an all-in-one experience as possible. Who cares if you don't buy additional software? The Mac has what you need, or at least enough to explain two consecutive years of better than 20% growth in unit sales.
So even if the truth is that the rush to cloud computing should be costly for commodity computer manufacturers, users see Macs as materially different. They see them as well-crafted, integrated systems that come with high-touch support by way of an international retail network. Everything the late Steve Jobs intended, in other words.
Think I'm right? Wrong? Either way, Apple isn't the only company profiting from the cloud-computing revolution. For more ideas, I suggest this Motley Fool video special report: "The Two Words Bill Gates Doesn't Want You to Hear." The research is free, but only for a limited time, so watch it now.
At the time this article was published Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Rackspace Hosting at the time of publication. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool owns shares of Intel and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Rackspace Hosting, Apple, and Intel, writing covered calls on Dell, and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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