After writing about the disappointing happenings in the Chinese smartphone market and the likelihood that the health app wouldn't move the needle anytime soon, the enterprise app market provides one of the best opportunities for Apple (NASDAQ:AAPL). With a market cap of roughly $583 billion, Apple needs a massive market to move the needle and expansion in the enterprise market is a huge opportunity.
The Q214 Mobility Index Report from Good Technology highlights the lead that Apple has in the enterprise mobile market if it can only sustain market share. With the business sector primarily focused on computers with the Windows operating system, the ability to pull users into the ecosystem with tablets and smartphones has the potential to increase computer sales. Apple competes with incumbent Microsoft (NASDAQ:MSFT) and the continuous push by Google (NASDAQ:GOOG) (NASDAQ:GOOGL) into the enterprise space.
Good Tech Mobility Index
The Good Tech report continues to see organizations move forward with a focus on mobile apps for their workforce. The top app activations are for document editing, secure instant messaging, and custom apps. The hyper growth area is business intelligence apps and customer relationship management appears set to join the surge in mobile offerings.
The number that causes the largest pause for Apple investors is the total device activations during Q214 were 67% for iOS and 32% captured by Android. In total, iOS maintains a commanding lead with 88% of total mobile app activations during the quarter. Similar to the consumer smartphone market, iOS users download more apps.
The concerning news is that the Google platform captured a five percentage point increase in devices quarter over quarter. For Microsoft though, the numbers continue to be sobering with the Windows platform virtually non-existent despite owing the desktop market.
Dominance Of Tablets
While Android is making solid progress with smartphones, the enterprise market is almost completely tied to the iPad from Apple for tablets. In the latest quarter, roughly 58% of all app activations were on tablets helping lead the dominance of Apple. For Q214, tablet activations were nearly 90% on the iOS.
The lead in the enterprise market will not only drive more iPhone and iPad sales; but also potentially led to more laptop and desktop sales. Right now, Apple obtains less than 15% of sales from the Mac product lineup. The recent Q314 numbers for the quarter ending in June are presented below:
In the latest quarter, the Mac product line actually had the highest growth rate. Not only was the growth rate double the whole company's growth rate at 13%; but also it was the only division that saw sequential growth. Possibly this pickup in that category is a sign that the growth in enterprise apps is providing some follow through to the desktop products where Apple has a small market share.
The theory that selling consumers smartphones and tablets would eventually lead to computer sales has never paid off in a material way. The shift towards the enterprise segment could actually be the deal that unlocks that shift where previously consumers weren't as likely to pay up for a high-priced Mac when a low-end Windows product would work.
At roughly 13x 2015 earnings plus net cash, my target remains for Apple to reach around $115. Further gains in the enterprise market is the one segment where Apple has a real opportunity for material gains that could increase the target price higher.
Disclosure: The author is long AAPL. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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