The big Apple

29 September, 2011
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Something special happened recently. No, not the iPhone 5, iPad 3, Apple TV 3 or updatedMac Pros that you’re thinking about. Something that an Apple fanboy could only have dreamed about in the mid- ’90s when Apple was producing the worst computers in its history and was being run by MBA-style management taking instructions out of a text book.

I’m referring to the fact that Apple overtook Exxon to become the largest company in the world, based on market capitalisation. Well, to be fair, Exxon later retook the lead, then Apple, then Exxon again. It’s anyone’s game at the moment.

Market capitalisation, or ’market cap’, is a simple calculation – number of shares multiplied by the share price at any given time.

So what does it mean that Apple could now be the most valuable company in the world? There are no prizes for first place and I’m no business expert, but my guess is that in the history of big business this century there aren’t any better or more dramatic turn-around stories.

In the mid-’90s, in the pre-Jobs era, Apple was nearly out of cash and therefore business. Ironically, a promise by Microsoft to keep developing for the Mac and an investment of $150 million probably were partly responsible for pulling Apple out of the red.

And if you weren’t sure, Apple is very much in the black. At last count Apple’s cash balance was north of $70 billion. That’s cash – and the amount of cash Apple gets each quarter is also growing strongly.

Likewise, nearly every other important business metric like sales, revenue and, ultimately, profit is incredibly healthy and staggeringly better than other businesses in the same industry.

There’s little doubt that the main contributor to the explosive growth Apple has seen in the past five years is iOS. First the iPhone, then the iPod touch and lately the iPad.

Without these products Apple would most likely still be a very profitable company but nowhere close to the most valuable in the world.

So, where to from here? The news that Steve Jobs has resigned as Apple CEO has affected the share price, but how this will play out in the long term is unclear.

Some claim that Apple is out of tricks and that the rise of iOS will be subsumed by the Android army. I think for the most part they’re wrong, and Apple’s rapid innovation and success with the App Store will only lead to further success.

Google’s recent $12.5 billion acquisition of Motorola and HP’s potential exit from the consumer PC market and dumping WebOS only strengthens Apple’s position as being the leader in the smartphone space.

Couple that news with the fact that no manufacturer except for Apple is having any success selling tablets into consumer markets and the future is bright for Apple.

So what comes next for Apple? It’s obvious from Apple’s financial results that the engine that drives profits is iOS. With healthy margins and fat profits Apple may now be in a position to take over the entry-level mobile phone market with a cut-down version of the iPhone.

What that looks like is still unclear, but if I were a betting man I’d wager on a cheaper pre-paid iPhone 3GS or iPhone 4 for the same sort of money as the cheap and nasty Android devices that telcos are pushing.

For the iPad you could imagine the same thing. Apple could introduce the iPad 3 with a Retina display at the same price as the existing iPad 2 and then drop the iPad 2 price, a move that would have catastrophic effects elsewhere in the tablet market.

One Comment

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  1. Tex says:

    Read somewhere that 8gb iPhone 4 will also be announced by Apple.
    Just a rumor though? Also iPad 3 brought forward to Jan 2012

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