I recently wrote this article about how Apple (AAPL) still has scope to innovate, and that those who say that it must have run out of ideas are most likely wrong. One of the most interesting and insightful comments I received on the article was from a member called Sorrwohrrcom, who wrote the following about his experience with Apple:
About five years ago or so I started with an iPod, then another iPod then another then gave several to friends. Of course the kids had iPods and iTunes, then they got MacBook Pros for the school and play (four years later the machines still work fine). Then my wife and I got iPhones. Then we got iPads. We share an iCal account to keep everyone's schedules up-to-date. My 2005 Dell Windows XP has 2 large hard drives maxed out so... two months ago I bought an iMac.... Several of my business partners have similar experiences with their personal use of computing devices etc. We still have about 55 PCs in our small business - the specialized software that runs the server and the PCs as well as all the connected specialized devices are all Microsoft (MSFT) Windows based. So I doubt at work we would consider Macs until all this software is available for Mac.
I think that in a few short lines this commenter sums up the way in which Apple has developed in most households over its lifetime. I know from personal experience that a couple of members of my family had Apple computers before the iPod, but the iPod, as in the comment above, was really the driving factor. In a similar way to Sorrwohrrcom, I bought an iPod, then another, then another, then we got an iMac, then MacBooks, a couple of iPhones and then an iPad. However, as Sorrwohrrcom points out, very few people end up using Macs at work.
I think that this is an essential point for Apple, and could prove the turning point in its growth. Its products are gradually dominating the personal electronics market, as people buy the iPhone, MP3s and computers. Unless you have an SLR camera, there are very few electronic functions that Apple products don't fulfill but where Apple fundamentally falls down is its use in business. I'd like to come at the solution to this problem from three different angles.
One of the initial reasons that businesses don't use Macs, I think, is that they seem slightly unprofessional. The interface is simpler, they're easier to use and friendlier, and they lack the professional "sophistication" of a difficult to use, repeatedly crashing Windows PC. Now perhaps that is a little sarcastic, but the basic point is that Macs don't really seem as professional as good, hard, number-crunching PC's; there's something slightly informal about them.
My first solution therefore is that the attitudes of businessmen change. I have found that over the past few years the smart, suited up business attitude is perhaps becoming less formal, as more businesses adopt "business-casual" dress codes, without suits and ties. I think this decrease in formality could bode well for Apple, and allow in the informal Macs more of a place in the business environment. A catalyst for this change could potentially be increased iPad use, and as more businessmen use iPads on the train to work, or even in the office, then the use of Apple computers will likely start to creep in too.
My second solution to the problem is that Apple move more towards the needs and attitudes of businessmen. I include this solution because it looks at the problem from the other direction, but realistically Apple's image is firmly planted, and I think formalizing the way in which it markets and sells its products would be harmful to its overall image. This would not be a solution I would choose.
My final solution addresses the software issue in the comment from Sorrwohrrcom. Currently most software used in business, a major example being Bloomberg, is incompatible with Macs. Compatibility is a huge issue for Apple, and one that is being gradually overcome. If more major software developers started producing software that was equally good but compatible with Macs, then that would be an enormous turning point for Apple.
As simple as it sounds though, it's a bit of a Catch 22. Software developers wont start funding development of Apple business software until the demand from businesses is there, and the demand from businesses (in the form of Apple computer ownership) wont be there until software developers start funding development of Apple business software. How to break the cycle is incredible difficult, but at some point the turning point will come, Mac users will reach the critical mass, and development will explode.
The market for computers in business is clearly enormous; I don't have the figures but it seems logical that it should be considerably larger than the personal electronics market. However, as it stands, it is a market that is clearly dominated by Microsoft and PCs. If Apple can start to move itself further into that market, through any of the means addressed above, then I think it could be a major catalyst for growth within the company, and sales of MacBooks and iMacs could soar in a similar way to the iPad and iPhone sales of the last couple of years.
Apple dominating the personal and business electronics markets; now that surely is a trillion dollar company.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAPL over the next 72 hours.
