Some people say that smartphones and tablets are going to take over the personal computing market, but that view is really short-sighted. There are very few people who would be able to meet all of their computing needs using only a tablet -- and most of those people who fit that bill wouldn't be buying more than a lower-end laptop anyway.
Need proof? How many people do you know who have more than one way of connecting to the Internet?
In reality, all these different devices means that technology has more ways and means of becoming integrated into our lives. And that is exactly what companies like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) are banking on.
Apple Rocks the Ecosystem
Right now, Apple is trading at just over $430, off a 52-week high of $705.07. The decline is enough that the company even made a choice to pursue funding. Add to that Google's (NASDAQ:GOOG) recent release of Google Now, a Siri-like free app recently made available for iPhone and iPad, and Apple may not be looking like the best bet right now -- but think again.
Love it or hate it Apple is a major player, and a large part of how it got there was by creating products that work together so well that once a person buys into the Apple "ecosystem," buying another company's product isn't just unlikely -- it's practically unheard of. This is because it all works so well together. Everything syncs using just your Apple ID -- and who doesn't love easy?
Going forward, Apple is continuing its focus on innovation. "Our developers have had the most prolific and profitable year ever, and we're excited to show them the latest advances in software technologies and developer tools to help them create innovative new apps," said Apple Senior Vice President of Worldwide Marketing Philip Schiller, referring to the company's Worldwide Developers Conference (WWDC) to be held this June. "We can't wait to get new versions of iOS and OS X into their hands at WWDC."
It's hard to say whether the public will be receptive, but I wouldn't be surprised if we are seeing a turnaround led by the company's innovative way of connecting users and devices.
Microsoft Works the Cloud
Now, Microsoft is getting in on the action. When the company released the newest incarnation of its popular Office software, Office 365, at the end of January, it did so as a subscription-based service rather than a one-off fee software. The idea is to have Cloud allow users to connect seamlessly between other people and different devices. "[The] launch of Office 365 Home Premium marks the next big step in Microsoft's transformation to a devices and services business," said Microsoft CEO Steve Ballmer. "This is so much more than just another release of Office. This is Office reinvented as a consumer cloud service with all the full featured Office applications people know and love, together with impressive new cloud and social benefits."
In other words, Microsoft is positioning its Office suite to take on Google Apps. Google, of course, has a different aim. "Our goal is to get to the 90% of users who don't need to have the most advanced features of Office," said Google Vice President Amit Singh in December. But, with Microsoft making its Office software more accessible and easier to connect, that could be an uphill battle for Google.
Microsoft is currently trading at $32.61, near the upper end of its 52-week range ($26.26 to $32.84). The day before the Office 365 announcement the shares closed at just $27.91 -- that's an increase of nearly 17%. Analyst consensus gives the company a one-year target estimate of $32.48, but I don't see any reason the company won't rise much higher as Office 365 catches on. Cloud computing is a major driver as more and more companies, and even many homes, turn toward that type of interconnectivity to keep communication open and stay on task, be it organizing a project or remembering to pick up the milk after soccer practice.
In a technology-driven society, innovation is the name of the game, but if it all doesn't work together it just won't cut it -- regardless of how advanced a new development may be. Apple and Microsoft are paving the way to conquer the market by providing that connectivity and the inevitable ease of use that comes from systems linking without much user involvement. Apple may be trading low and Microsoft high relative to their respective weekly ranges, but investing really has little to do with where companies have been. It only matters where they are going, and investors can expect Apple and Microsoft to rise straight to the top.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.