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 (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.
(Click to enlarge)
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 (SSNLF.PK), by offering phones with different screen sizes, or Nokia (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.
