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The Power of the Apple iPhone: Will People Switch to AT&T Just to Get One?

"Deciding whether or not to sell the rest of my clients' Apple shares has been a tough decision. For now, I have trimmed back larger positions to be average-sized at most. There is currently enough potential for me to hold onto some shares, but given I am getting a little skeptical - Apple is no longer is a large position in the accounts I manage."

While I can understand that the altitude is enough to make shareholders a bit dizzy, giddy and frightened, it might help to take a rest, look up and ponder the long view. This is not some local hill at the state park, this is a friggin mountain. This is Everest. And once you get your bearings you will begin to realize that we have only completed the first leg of the climb. Weekend warriors, hedgies and those with their noses hopelessly buried in charts will bow out and pat themselves on the back for a nice double. Investors with vision and guts will press on because soooo much farther to go before that even get close to that peak.

Yes the iPhone has been hyped, analyzed ad nauseum and to some degree success has already been factored into the share price. Yes expectations are high but I think the current buzz will pale in comparison to the buzz generated when customers finally get their hands on it. This IS a revolutionary product in terms of it's elegance, integration, user interface and software (which BTW has now been opened up to third party developers). Those who dissect and it and claim there is nothing new here fail to see that the iPhone is more than the sum of it's parts.... which is the secret of formula of Apple as a company as well. It's not about the parts, as important as they are....it is about the design, integration and simplicity of the whole and how it "connects" with other species in the same ecosystem and ultimately how it connects with the user. What Apple offers in it's various product lines is nothing short of the anecdote for a fragmented, overly complex user experience otherwise known as modern life.

All the buzz and hype we have seen to date speaks volumes about the clutter of the mobile space pre iPhone. Once it comes out and people can get a first hand experience of the touch screen, seamless integration and the power of top shelf software it will be a must have for anyone who can afford it as well as many who can't. The road to this holy grail reaction will have been paved by the hopelessly convoluted user experience we have all been forced to accept by default. Furthermore, and this is already in evidence, you will see Apple's ability to either inspire or pull out the best in their partner AT&T. So count me in as one who has been waiting and will switch to T. If T can manage to roll out an equally simple and attractive plan there will be no stopping this train.

But in terms of the stock the iPhone is merely the tip of the iceberg. Even if it is only a mild success the stock has a long run ahead of it, stretching out over the next several years. This is an excellent company flush with cash that just keeps getting better with age. They have the discipline to selectively focus on picking their projects carefully and giving them the attention needed to make them best of class. And right now that includes several classes, any one of which is capable of growing and sustaining monster companies. What Apple brings to the table is best of class software and UI/design and that is the underlying leverage that will allow them to compete head to head and beat the established top dog in any given arena. And the biggest arena is right in their own back yard, desktop and laptop computing. There is still 94% market share out there waiting to be taken.

Hardware, software, MP3, media distribution (music, audio books, podcasts, video, TV, film), phone, servers, retail distribution (check out the the just updated Apple site and hugely expanded third party software offerings now available at the online Apple store). Whereas Apple has historically been dependent on third parties for distribution it now controls a large piece of that distribution and now profits from the distribution of selective third party hardware and software while at the same time generating an additional halo effect around it's own products, not to mention higher margins.

Apple is a company firing on all cylinders right now and the halo effect(s) are just beginning to light up and mutually and reciprocally spread like wildfire to all other units regardless of which unit you might designate as the original halo. Meanwhile Apple's competitors (Dell, Microsoft, CompUSA, Blockbuster, Netflix, Tower Records, Nokia, RIMM, Motorola,....) seem dazed and confused by comparison. Apart from product halo effects Apple has captured the imagination of youth, Hollywood, the creative community and is increasingly on the radar of corporate IT professionals who are trying to penetrate their organizations with Apple products as a means cutting back on endless trouble shooting busy work. All of the Apple products, user segments, distribution dynamics, and a large unintended helping hand from the competition is gradually setting up a tipping point of epic proportions. While it might be bumpy day to day the long view is steeply up. Catch the dip and keep climbing.

Disclaimer: Long Apple as a result of the observations outlined above and not vice versa.