Is Apple Running Out Of Ideas?

| About: Apple Inc. (AAPL)

Everything that can be invented has been invented.

--Charles H. Duell, Commissioner, U.S. patent office, 1899

Does this sentence describe the post-Steve-Jobs Apple (NASDAQ:AAPL)? It seems so. Apple just announced that it has put Retina display on MacBook Pros. Earlier, Apple put Retina display on the new iPad. So this marked the second time this year that Apple has been re-hashing its own invention in a marginal way.

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Is this a harbinger that Apple is running out of ideas? To answer this question, let's examine the history of Apple's inventions on the iPod and iPhone. Not to be bogged down with unnecessary details, I focus only on the interface directly interacting with consumers and didn't include the more "invisible" upgrades such as memory or CPU speed.

1. iPod

Date Event Inventions Product line expansion Upgrade
2001 Invention 10 GB hard drive, mechanical scroll wheel
2002 Upgrade 20 GB hard drive
2003 Upgrade touch wheel 40 GB hard drive
2004 Product line extension color screen mini 60 GB hard drive
2005 Product line extension flash storage nano, shuffle 80 GB hard drive
2007 Product line extension touch
2007- Upgrade storage capacity increase

2. iPhone

Date Event Inventions Product line expansion Upgrade
2007 Invention 100% touch screen interface, thin
2008 Upgrade (3G) GPS
2009 Upgrade (3GS) camera, connection speed, larger storage
2010 Upgrade (4) Ratina display thinner, front camera
2011 Upgrade (4S) Siri larger storage
2012 Upgrade (5) ? ? ?

What does this piece of history mean? We observe that Apple usually does not add large scale inventions to a product once it is successfully launched. Just like many conventional businesses, Apple relies on incremental upgrades and product line expansions to stay ahead of its competitors. Therefore, Apple's core competency is in getting into a new product or category early and maintaining the lead for the next 5-10 years.

Using this theory, we may soon observe product line expansion on the iPhone 5-- if it doesn't happen this year. In this sense, Apple may be copying its copycats such as Samsung (OTC:SSNLF), by offering phones with different screen sizes, or Nokia (NYSE:NOK), by offering phones with different colored cases. That script would be just like what Apple did with iPod.

Before we see Apple's next big new idea under Tim Cook, we shall expect to see more incremental changes like applying Retina display to the MacBook, or tweaking the design of the iPhone a little bit. We shall not, however, expect to see dramatic changes in the iPhone 5.

What does this mean to Apple's stock price? It means the market will stay anxious about the potential risk of Apple not catching the next big thing. Apple is likely to stay somewhat undervalued despite its earning power. A $900 stock price may not happen-- until Cook pulls a surprising recipe out of Apple.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.