Seeking Alpha
Long/short equity
Profile| Send Message|
( followers)  

<< Return to Part 1

How do you eat an elephant? Apparently, you won't have to as Apple's (NASDAQ:AAPL) Siri will do it for you!

Last year, when Analysts and pundits were busy lining up thrashing Apple's "miss" and the iPhone 4S, I wrote:

The Street have been wrong about AAPL's prospects for more than 22 quarters like they've been recently wrong about SIRI. There is no reason why it would be different this time.

In the end, you can only connect the dots looking backwards. My "gut" tells me that Apple is about to reinvent our world again starting with SIRI.

My last Apple article dealt with a "mechanical" trading signal on Apple without knowing it was the week of WWDC or what Apple was about to announce. As if on cue, pundits are dimissing the keynote as a non-event and seemed to be more worried about the "lack of ideas" and how the new OS isn't backward compatible with the original iPad. If I worried and whined as much as they did, I'd be bald! In order to understand this article, you have to watch the presentation of Mountain Lion and OS6 in the keynote.

In this article, I'll share with you why Apple continues to be a compelling buy on dips and warrants a double down on any retracements before or after the next iPhone release.

Quick... think about a product feature/function that was considered "not a big deal", but ended up disrupting an industry; what is the common denominator? You are correct; none of them seemed like a "big deal" or "good enough" to replace the status quo. Think about the tape deck, the CD, the MP3 player, the touch screen, flash memory, etc

While the Street focuses on complaining how the new Apple Map isn't as good as Google, since it doesn't have any Transit information (which can be added by App developers later), I prefer to figure out how Apple is dealing with Google's (NASDAQ:GOOG) ongoing threat.

Apple, as soon as the software updates are launched, will have three unappreciated disruptions concurrently brewing: (1) Siri (its voice recognition "assistant"), (2) Retina display, and (3) Passbook. Again, I would suggest you watch the keynote presentation in order to appreciate the implications of the technology. By the way, why would ordering "Black and Tan" be offensive in Ireland? I wished I knew before I ordered it! It all boils down to perspective and knowledge!

Siri: When it was launched, it was treated as a novelty and it was panned as a failure. It made me wonder if the pundits were "willfully ignorant" or they must know something I don't since Apple plainly stated that the functionality was in "beta". Fast forward 6 months from the launch, the server farms in North Carolina must've gotten smarter and are now kicking in!

Right now, what do we use Google for (aside from searching for porn!)? Isn't it a coincidence that Yelp, Open Table, Rotten Tomatoes, Facebook, Wolfram Alpha, Baidu and now Apple maps are going to be integrated with Siri? Furthermore, Siri is now moving deeper along the foodchain as it will now be available to the iPad2 and the new iPad.

As an app developer, is there more money developing apps for Apple vis a vis for Android? What was also lost in the news (at least for us here in North America) was that it will now support Japanese, Korean, and Chinese. How will this impact Google's revenue model?

Did you also notice that almost every major car manufacturer will be working with Apple to include Siri? I'm sure one of these car makers will figure out an elegant dashboard design that can dock an iPhone or iPad instead of those ugly third party docks! Designing these docks would save the manufacturers in having to include the standard AM/FM CD unit and/or GPS system!

Retina Display: Beauty is in the eye of the beholder. I've seen the displays on the new iPad and they are absolutely fantastic. Assuming this is patented and Apple has already locked in the supply requirements for the materials; where will the competition go? I'm sure these displays will not be limited to the $3,750 MacBook Pros; it will only be a matter of time for us to see a thinner iMac line up as well, given how these panels are designed.

The so-called experts were generally disappointed that the Mac line didn't get a full face lift; I get it. However, what if Apple wanted the next generation of laptops to work not only with WiFi, but also with Cell signals and the chips weren't readily available?

Remember Foxconn's deal (via Hon Hai) to purchase a piece of Sharp (which happens to have a technology that can rival the Retina display)? I wonder how this puzzle will eventually fit in the ecosystem.

Passbook: From a consumer's point of view, the technology definitely makes our lives easier. For businesses and app developers; the world just opened up! Apple has no intention to be another Amazon (NASDAQ:AMZN); it does, however, have the potential to be the "middle man" for each and every online transaction that goes thru its ecosystem.

It was definitely weird watching the WWDC keynote without Steve. I thought Forstall did well again; Schiller seemed "rushed" and Federighi shouldn't raise his arms again! Speaking of Forstall, did you guys notice that he sold off 95% of his Apple holdings? What's up with that Scott? Of the guys in the senior leadership team, he strikes me as the odd man out. Is he staying or is he going? Does Tim have a "plan B"?

What about Spain, Greece, Italy and...

Click to enlarge)

Interestingly enough, there hasn't been a direct correlation between Apple and the debacle in Europe. The greatest opportunities usually show up when there is fear.

What about the Apple TV? I've always believed that this won't happen until Apple is able to line up the contents. Tim, at D10, pretty much said this indirectly. Also, if you noticed (as D10 happened before WWDC), the questions that Tim tried to avoid where it was product specific... his hints were pretty much there (like the one on Siri). What if Apple TV isn't really a TV, but more like an iTune with different channels in form of apps? If you have a jail-broken Apple TV running XBMC and NaviX, then you will understand the potential behind that little box. Pretty soon, an independent can probably produce their own small budget sitcom or reality show!

While most pundits are yawning at the announcements made during this years' WWDC, I happpen to think that Apple is eating the elephant (Google) one chunk at a time, using Siri as the enabler.

Between now and September; we will most likely trend sideways. Channel check rumors will start and the next iPhone will be thrashed as usual (as not being good enough). Keep your powder dry as it may mean we are ready for the next leg-up!

Which companies do I think will suffer collateral damage from these features? I think Research in Motion (RIMM), Garmin (NASDAQ:GRMN), and Dell (NASDAQ:DELL) will be affected over time. It will be interesting to see Google's and Microsoft's (NASDAQ:MSFT) next moves.

Disclosure: I am long AAPL.

Continue to Part 3 >>

Source: Apple: This Is The Week That We've Been Waiting For (Part 2)