Apple's iProduct strategy -- you ain't seen nothing yet

Inside Digital Media analyst, Phil Leigh, introduced his 'Future of Apple' report this week, and took some time to talk about his findings.

In context: Apple is moving fast to consolidate its mobile products by extending its value proposition with the introduction of online service models exceeding those already provided by the company, the analyst explained.

Lookin' at the Benjamins

This combined hybrid model for the future of computing -- in which devices communicate with each other and with online services all managed by putting individual users at the critical centre of the value chain -- will see Apple (AAPL) exceed revenues of $100 billion each year within five years, the analyst thinks.

Apple achieved revenues of $35.89 billion in its 2009 financial year (yielding $5.56 billion profits) according to published company statements.

Today, Apple is evolving insanely fast from the desk-bound minority PC manufacturer it was into a driving force across every converging industry.

History shows Apple isn't always first to get into a product category (take a look at the iPod, for example), but seamless execution and the focused purpose behind its vision mean it has become the "biggest innovator" in most of its fields. It tends to eventually define those sectors it plays in.

Convergence is in Apple's DNA

Apple's battle with Google is the inevitable consequence of the rapidly accelerating tech-driven reinvention of every modern industry. A new business ecosystem in which unlikely and unconnected businesses can find themselves in surprise competition.

In Apple's case, it is staking a place at the heart of the future of artistic/technical/business convergence Apple CEO Steve Jobs has so frequently described as central to the company.

Asked about his feelings at the huge success of the iPod during a 2005 interview with the Wall Street Journal, Jobs observed: "The great thing is that Apple's DNA hasn't changed. The place where Apple has been standing for the last two decades is exactly where computer technology and the consumer electronics markets are converging."

Apple's set to become more active, said Leigh. In future Apple will offer a wider range of transactional services, including subscription services; while also extending its family of available entertainment devices, he notes.

Apple will not cede to Google

There's a huge opportunity. "At an estimated $220 billion in the USA alone, the market is simply too large to ignore. If they fail to move aggressively, they'll forfeit that to GoogleTV," Leigh explains, noting Apple is unlikely to want to cede any space to the search giant.

In-Stat recently noted shipments of digital televisions with Wi-Fi will grow more than ten-fold, from under 5 million units in 2009, to more than 60 million units in 2014

"Wi-Fi swept through the computing market, driven by the need to access and share broadband connectivity," said Frank Dickson, In-Stat's Vice President of Research in a press release.

Leigh notes that media companies must accept that their chances of keeping TV's isolated from the "real" internet are very limited, creating a "gigantic market opportunity".

Apple's installed base of iPhones, iPod touch and iPad devices show the use of such media devices as potential remote controls for future devices designed to profit on the front room opportunity, the analyst speculates.

iPad is transformative

Leigh remarks that the impact of the million-selling iPad will also be of huge consequence to the company's future plans, calling the product transformative for two reasons.

"One it takes the touch-screen interface to a point where it becomes a new computing metaphor," said Leigh.

"Secondly, it opens-up a latent market for Internet media consumption by sharply reducing inconvenient barriers that retarded usage of laptops owing to its lightweight, touchscreen interface. Simultaneously it is also a convenient communications and transactional appliance for things like email and online transactions," he added.

More than this, the iPad is evidently "a cloud-centric tablet computer", which, like the App Store itself, seems set to open up another category to stimulate what Leigh calls a "huge untapped market".

Apple's recent investments point to continued development of Web-based services and as fellow Computerworld blogger, Mitch Wagner notes, Apple is developing the infrastructure it needs for cloud-based services.

Including, might I note, a huge installed base of mobile devices constantly connected to the Internet.

Mac sales shoot higher

Looking at the competition -- led by Google -- Leigh notes that Apple's in a good position because of the proprietary silicon (the custom-made, ARM-based A4 chip) it is using inside its portable products, beginning with the iPad.

"This will be hard for competitors to duplicate," he notes, "The iPad will not be easily cloned like the PC was in the '80's."

This increased activity will continue to drive Mac sales higher, creating a perfect storm in which Apple's "existing product lines alone will carry the company past the $100 billion revenue threshold in less than five years," the analyst added.

Underlying Apple's adventures in new media, Apple's Mac sales are projected to rise from about $18 billion this year to $27.5 billion in Fiscal 2014, the analyst notes. That's a 50 pecent mark-up in an overall computing industry that's anticipated to be relatively flat.

Interesting times. How much more can Apple achieve?

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