How Apple Chooses Where to Go Next
May 2nd 2013 8:00PM
Updated May 2nd 2013 8:20PM
Investors have nearly insatiable needs for growth. As Apple has delivered on this front over the past decade, shareholders are now worried about where the Mac maker heads next, as the growth rates they're accustomed to can't be expected to persist going forward.
Shortly after Steve Jobs returned to the company, he surveyed various markets that Apple could tap. He landed on one with universal appeal: music. Everyone likes music, so Apple launched the iPod. Likewise, everyone uses phones so the iPhone made sense next.
Tapping mainstream markets is relatively obvious, which is why investors rightly expect Apple to get into the TV market in the near future. Beyond the mainstream, though, there are still numerous opportunities in smaller and relatively niche segments. The opportunities may be smaller individually, but when considering the number of sectors Apple can explore and the fact that these gains are entirely incremental, they'll quickly add up.
The personal interests of execs will determine where Apple goes next.
Rumors of an iWatch have surfaced recently alongside burgeoning interest in smart watches and wearable devices. At the same time, wearable fitness activity trackers have also begun to gain popularity. Nike's FuelBand and Jawbone's Up are among the most popular of these new devices.
Tim Cook is a known fitness enthusiast, and reportedly wakes up at 4:30 a.m. every morning to hit the gym before heading to Apple HQ. Cook is also on Nike's board, and is frequently seen sporting his own FuelBand at public events. Apple also sells the FuelBand and Up in its retail stores. That's why Apple will probably integrate fitness capabilities into the iWatch. If so, the iWatch could be a threat to the FuelBand, which could create a conflict of interest for Cook.
In an extreme case, Cook may need to recuse himself from board meetings or potentially step down from Nike's board, much like how Google ex-CEO and current Chairman Eric Schmidt had to do when he was on Apple's board. However, FuelBand sales are negligible relative to Nike's consolidated revenue ($6.2 billion last quarter), so it's less of a concern than having Schmidt listen in on iPhone and iPad talks.
Online services exec Eddy Cue and marketing chief Phil Schiller are both known as car buffs, and Cue recently joined Ferrari's board of directors. Apple director Mickey Drexler once confirmed that Jobs had always dreamed of making an iCar to take on the automakers. Of course, Apple will never enter the car market directly, but what the company can do is to integrate its technology deeper into vehicles to broaden the appeal of its devices.
To that end, Apple has been collaborating with automakers to integrate Siri's Eyes Free functionality, starting with General Motors and Honda, among others. Volkswagen just unveiled an iBeetle, which was specifically designed to integrate with iPhones. iOS 7 is expected to make a big push into car integration with Siri and Maps.
Direct auto integration would be highly complementary for Apple's mobile gadgets.
These are just two examples of how Apple management will likely pursue personal interests in expanding Apple's horizons. Schiller is also a "rabid hockey fan," so the Mac maker could even be preparing to disrupt the lucrative hockey puck industry. Incumbent puck manufacturers won't know what hit them when the anodized aluminum unibody iPuck strikes.
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.
The article How Apple Chooses Where to Go Next originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple, General Motors, Google, and Nike. The Motley Fool owns shares of Apple, Google, and Nike. 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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