What WWDC and Apple's 2012 Keynote meant for Apple investors

What WWDC and Apple's 2012 Keynote meant for Apple investors

Monday was packed with the pure excitement and adrenalin of Apple's annual WWDC keynote. Sure, the stock may have declined slightly that day, but this is mostly due to overall market weakness that day and not Apple pessimism. Now that we’ve had a couple of days to digest Apple’s announcements let’s discuss what it means to investors.

Let’s review what Apple actually unveiled in the keynote session:

  • The new Macbook Pro with retina display
  • Mountain Lion and its 200 new features to accompany the Mac product line
  • iOS 6 and its 200 new features, to accompany iPhone, iPad and iPod Touch

That’s it. Those were the big three new product announcements. If you wanted to stay very high level and miss a lot of the detail, you could suggest that Apple investors didn’t get anything to cheer about. Some upgraded products - big deal.

Digging deeper into the details

I think Apple has done a wonderful job of tightening up its platforms and making me, as a consumer and a business man, want to give them more money.

Apple has just made it easier for themselves to justify the high margins they earn on their products. This has everything to do with software and cloud services, and almost nothing to do with hardware (save the newly redesigned Macbook Pro which gave all of us a geekgasm).

Let’s look at an example: Apple is now integrating iMessage into Mountain Lion and simultaneously coupling it into iCloud. So iMessages delivered to an iPhone will now also be delivered to a Mac and iPad if they are all on the same AppleID.

Apple’s iOS device business is massive compared to the “puny” (yet still making every competitor jealous) Mac business. In fact, Apple has sold over 385 million iOS devices so far. Contrast that with 65 million Macs that are out in the wild. All of those iOS users now have more reason to buy a Mac. Perhaps this explains why the new Macbook Pro and Mountain Lion got so much airtime on Monday.

The iCloud glue

Apple has two powerhouse operating systems with iCloud glueing them together on many levels. This locks in customers to the Apple platform. Of course when we say “locks in”, we mean that in a good way. We all voluntarily lock ourselves in. It’s a psychological force, not real force. We’re free to leave Apple at anytime. We choose not to because they make products that add ease to our lives.

It also doesn’t hurt that Apple has gone out of its way to add extra differentiators to its products, which have nothing to do with tying the platforms together. The new Apple mapping service and turn-by-turn navigation is a good example. So is the elegant beauty of the redesigned Macbook Pro. Those are things that draw in new customers, while pleasing old customers enough to keep smiling and keep pulling out the credit card.

Speaking of credit cards...

Apple has 400 million credit cards on file with mass of customers who use iTunes and the App Store. That’s an insanely huge number of people. It’s probably close to 10% of the entire world population among those old enough to have a credit card. It’s probably the largest customer base in the world.

That gives Apple leverage with nearly any potential partner. Leverage drives gross margin.

I like that.

Chris Umiastowski

Chris was a sell side financial analyst covering the tech sector for over 10 years. He left the industry to enjoy a change in lifestyle as an entrepreneur, consultant, and technology writer.

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There are 4 comments. Add yours.

SockRolid says:

Re: "It also doesn’t hurt that Apple has gone out of its way to add extra differentiators to its products, which have nothing to do with tying the platforms together."
Apple's OSes and apps have always added huge value to their hardware products. The "extra differentiators" have been part of Apple's culture for decades. (Remember the "goodies" folder?) And Apple will continue to improve their software value add with OS X ML and iOS 6.

scott says:

I just LOVE how how the flip flops start. Since Android came out, all we have heard is that no two work the same, and lo and behold, now that with IOS6 no two Apple products will work the same, suddenly this has changed into a GOOD thing. And before you jump on the "koolaid" bandwagon, a little example: My daughter has a 3GS, and will upgrade this year. Her boyfriend has a 4, and she also has an Ipad 1. So, when IOS6 drops, all 3 devices will be different. Apple's game plan of forcing you to get rid of perfectly good devices is getting a little old. And as long as the app store exists in its present form (Apple getting a cut) we will NEVER get a complete OS. They have a financial interest in not doing so. You buy their product, then buy apps to fill the holes they leave in it. All the while, with them claiming to be helping the dev's. If that was completely true, they would allow people to sell apps outside of the app store. I can create an app, and I don't need Apple's help to sell it. But, I don't have that option, without going "underground" to do it.

javg says:

I get what you mean about older versions being left behind at some point, but this is just the byproduct of the speed of technology these days. We should all expect our smartphones and computer/electronic devices to be obsolete within a short number of years. It seems only refrigerators, microwaves, and toasters last more than a 5 year shelf-life. Nowadays, a laptop that is more than 3-4 years old it just past its prime without some hardware upgrades, if that even is possible. Smartphones seem to have an even shorter lifespan if you want to keep up with the latest speed, resolution, camera quality, and the newest apps intended to take advantage of the newest hardware capabilities. Yes, Apple keeps a tight grip on what apps make it to the App Store, and yes, I am one who has chosen to jailbreak my phone to add some features Apple just chose to reject. With my App Store apps and my Jailbreak apps, my 4S is just the best there is in the Smartphone market. Looking forward to the next version of the iPhone. No sense in getting rid of any old iDevices, unless you just have to have the faster, better, newer features. I still have and old 3G and 3GS that work fine.

iDonev says:

"So iMessages delivered to an iPhone will now also be delivered to a Mac and iPad if they are all on the same AppleID. "
How did they solve this curious notification problem? Do all devices go off at the same time? (imagine if you have four of them in one room...)