If AT&T's CEO Is Right, Apple Is In The Perfect Spot. But Can It Keep The Lead?

| About: Apple Inc. (AAPL)

If you own Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Samsung (OTC:SSNLF) or Microsoft (NASDAQ:MSFT), you will want to click the link below and watch the 3 minute interview with Randall Stephenson, Chairman and CEO at AT&T (NYSE:T) about the future of smartphones. It is insightful and it is clear he has given it a lot of thought. He says "We want to mobilize everything" and that the smartphone "is going to more and more become the remote control of your life". I'm not exactly sure what AT&T can do to take advantage of this trend except to put a lot of emphasis on mobile, but I think Apple and Samsung are in a great position to benefit from the trends he describes, and to a lesser extent Google. Excerpts from the interview and a link to it are at the end of this article.

In my opinion, no company is better positioned to "mobilize" functions and applications than Apple, but if things move as fast as Mr. Stephenson thinks they will, Apple needs to move fast to stay in the lead. If you are an Apple Bull, don't take this comment the wrong way - I am overweighted in Apple - but Apple has a huge advantage that I hope they don't lose. We are all remember how Blackberry (NASDAQ:BBRY) lost its advantage and some of us remember Palm, Inc. (I used to have 2 of the PalmPilots which looked remarkably like a smartphone and even came with a belt holster. Palm even came out with a smartphone in 2007 called the Centro that had many of the features smartphones have today, such as email, instant messaging, camera, MP3 player, Bluetooth, contact manager, calendar, etc. and some had as much as 16 GB of memory. In 2008 Verizon sold the Centro for $99 with a 2 year contract. Palm was in a great position but no longer makes smartphones).

Apple needs to really think about all the opportunities the iPhone is creating and where there is "low-hanging fruit" that Apple could easily take advantage of to protect its ecosystem and build recurring revenue streams (more ongoing revenue streams as opposed to relying so much on hardware sales). All of us who own Apple agree that we would like to see a higher P/E. As of 1-13-14, Google closed at a 30 ttm P/E. If Apple even sold at half that (a 15 ttm P/E) it would be at $596 a share instead of $536.

One thing I hope Apple does is take advantage of its loyal, upper-income customer base to start Mobile Payment Processing. It would be easy and low-risk for Apple to do that, and if Apple doesn't do it, a competitor will. With the security features in iPhones, Apple's payment processing would be more secure than credit cards. Payment processing wouldn't be a Home Run for Apple, but it could increase EPS by 5% and the diversification might increase the P/E. Apple already has over 500 million iTunes accounts with credit cards on file, compared to 135 million PayPal accounts. Click here if you are interested in reading more about why mobile payment processing is a natural step for Apple.

There are probably lots of other things Apple could easily do to create revenue streams. Apple is so secretive, it isn't going to tip its hand, so if you have any ideas about things that are easy and logical for Apple to do to create revenue streams, I hope you will share them in the Comments below or by contacting me. Some people say Apple should stick to its "core" business. I think Apple needs to consider anything related to its current business that makes financial sense. As we know, Apple already has iPhones, iPods, iPads, Apple Maps, iTunes, iTunes Radio, iCloud, Apple TV, is working to integrate its Operating System into cars, and is considering watches and probably many other things. Anything that helps Apple's ecosystem is good for Apple and it is especially good if it keeps Samsung or Google from eroding Apple's customer base.

I think Mr. Stephenson nails it when he says the smartphone is the "remote control of your life" - for iPhone users the iPhone is already so much more than a "phone", and that explains why they spend so much time on their iPhones and are willing to pay premium prices.

Some quotes from the 3 minute CNBC interview with Randall Stephenson, Chairman and CEO at AT&T are below --

"6 years ago there were no smartphones. There was no such thing as an app store or apps in general."

"We think the next 5 years are going to move at an even faster pace than the past 5 years."

"We think the next 5 years will transform every industry."

"We want to mobilize everything. Because what we have seen over the years is that if you take any application, any function, and if you make that function or application mobile, the utility of it explodes."

"The phone has become, and is going to more and more become, the remote control of your life."

"We believe the phone will be the driver of the car experience and it will be the driver of the home automation experience."

Disclosure: I am long AAPL. 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.

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