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Apple’s On Top & How They’ll Self-Marginalize

AppleApple Exceeds Exxon’s Market Cap

An article was shared on a discussion list I am a part of about Apple having the same market cap as Exxon.   I wasn’t forwarded the original reference, but I think this story can be attributed to  The excerpt:

Apple was actually bigger during part of the trading day, while Exxon pulled slightly ahead by the closing bell. Do you realize what that means? Exxon has long reigned as the world’s largest company ranked by market cap (price per share times the number of shares). By the time 4pm rolled around, Apple was valued at $346.7 billion, about $1.5 billion less than Exxon. Apple (“AAPL”) gained $20.80 on the day to close at $374.01 a share. Remember that Steve Jobs isn’t just into making hardware – he wants to control a lot of the IP-delivered traffic going to those devices. Just try getting something new onto your iPad without going through iTunes or the App Store. Pretty soon, a lot of radio will be going through Apple devices

As one person commented, “they have done a master job at creating brand awareness through advertising”.  Agreed.   But I also think there is more to it than that.

The “Apple Look”

Bringing touch screen computing to the masses via the iPhone was a big risk & a huge payoff.  They executed that perfectly.   It was the first small form factor touch screen with a user interface that could be understood by non-geeks.  Combine that with the sleek Apple “look”, which was used as a marketing tool itself, and a superb run of advertising campaigns (as Randy pointed out) and Apple exploded back onto the market overnight.

IMO, a key element here was the pervasive “Apple look”.  From the hardware itself, to the graphics on the devices, to the product packaging, even to their stores.   The attention to detail on the brand appearance was far beyond anything before it.  It was something most mainstream consumers had never seen before, that sort of attention to detail was reserve for exclusive luxury brands most consumers never see.  Apple raised the ante on what it takes to present a quality consumer experience, recognized that fact, and leveraged it in their branding & awareness campaigns.


Will History Repeat?

Now to see if Apple can stay ahead of the competition.   Their stranglehold on the proprietary elements of their platform & the tyranny of requirements to play in their sandbox suffocated them once before. They are showing signs of repeating history.  Many of the tech guys I know prefer open Android platforms for development.  The other 10% drank the Apple Kool-Aid and barely acknowledge the existence of any other brand.  The only reason most of these tech people do IOS (Apple) development first is market share, but that part of the story is changing rapidly.

My Prediction

My guess is that Apple will retain their stranglehold on their channels and will continue to irk the hardware and software developers that make the IOS platform so successful.   The Android marketplace will continue to refine their products, market share will grow, and eventually Android will become the “go to first” platform for developers.   Soon after it will be the go-to platform for consumers as well.

Maybe Apple’s cash position will provide the resources to save themselves. I’m betting they go from defining the market to becoming a reactionary company that starts bleeding a lot of that cash.   They’ll bleed cash pushing more & more advertising.  They’ll start pushing product development outside the box in high risk moves that won’t pay off.  They’ll start cutting prices and working the “loss-leader” angle.

Eventually Apple might relax their policies.  It will be too late and they’ll have tainted a large part of the developer channel.  Many development firms won’t come back to the IOS platform purely on principle.    Within a few short years Apple’s market dominance will once again be marginalized just as it had been in the early PC market.  They’ll again be representing 10% of various market segments.

I’m hoping this doesn’t happen, but Apple sure is showing their typical colors here.  Just look at the Apple v. Adobe fiasco.   When people see my Toshiba Thrive the FIRST QUESTION they ask is “does it run Flash”.   “Of course, it’s a Droid!”.

Sound Off…

What is your opinion?  Where do you think Apple is headed in the next 3-5 years?