A sixty-something hedge-fund manager looks at Apple and sees IBM. Or maybe AT&T.
From Andy Kessler’s “How to Slay a Tech Giant (Apple)” ($) in Monday’s Wall Street Journal:
At last week’s Worldwide Developer Conference, Apple announced Apple Silicon, its own line of processors. With that, Apple finally closed the loop. It already makes its own graphics chips, operating system, applications, app store (with a 15% to 30% cut), cloud storage, Siri voice interface, maps, even mediocre TV shows—soup to nuts. Its phones, tablets and Macs are world class compared with, say, Google Maps, Spotify music streaming, TikTok video clips, or Dropbox cloud storage. Apple has become IBM, it’s become AT&T—a vertical giant waiting for a future David to come along with a horizontal slingshot.
If I were an investment banker today (Lord help me) I’d be running around pitching a Virtual Apple. Neutralize its strengths and then attack new markets. Apple is showing that it’s vulnerable by selling an iPhone SE for $399, not $999. Unit sales of iPhones and iPad peaked years ago. As the company runs out of new customers, growth is coming from adjacent markets like watches and earbuds, and from online services. And now the Justice Department is investigating its app store for abuse.
Will a Virtual Apple put together a collection of cloud services that capture the imagination of consumers? Or a robust social-media market—outside Facebook and Twitter there are scores, from Fortnite to Nextdoor. Will the next-gen consumer platform be speech, augmented reality, home automation? I’d bet on a cloud-based intelligent service that simply knows what we want and does it.
Remember, IBM didn’t fail overnight—it took decades. But its growth rolled over and the stock market eventually figured that out and cut off access to cheap capital. Apple is a machine. Its devices are sleek. But new phone features—like “Wind Down Mode” to help you get to sleep on time, and a watch that scolds you if you don’t wash your hands long enough—leave me underwhelmed. A Virtual Apple might beat it at its own game.
Friend-of-the-blog Bart Yee’s take:
As usual, they think they know Apple, it’s weaknesses and its vulnerabilities. Wrong again. The biggest thing is that the major hardware platform challenger is Android, and the jumbled fragmented Android hardware and software systems prevent them from taking control. They only lead in unit sales based on cheap or inexpensive products while depending on Google to provide software features. No coordinated horizontal response there and of course Google has its own business model to defend and grow so no incentive to topple Apple either.
My take: What Bart said.