Middle-Aged Apple Might Get A Sports Car, New Girlfriend
As Apple ( AAPL ) turns 40 on Friday, some observers say the tech behemoth might be tempted to go the way of the stereotypical middle-aged man and get a sports car (the rumored Apple car?) and a young girlfriend (acquire a hip new company?). The Cupertino, Calif.-based company has seen a lot of changes over the years as it fueled the PC revolution; survived a near bankruptcy; reinvented how music is distributed and enjoyed; launched the smartphone era; and created the tablet market. Now people wonder what’s ahead for the storied personal technology company. Apple CEO Tim Cook acknowledged the milestone at the company’s spring product launch event on March 21. But he said Apple doesn’t spend much time reflecting on past accomplishments. Cook introduced a short video (“ Apple – 40 Years in 40 Seconds ”) and then moved on to the news of the day, which included the 4-inch iPhone SE and a 9.7-inch iPad Pro. More than four years after the death of the company’s iconic co-founder and leader Steve Jobs, the big question is whether Apple can continue to innovate. IPhone Drives Two-Thirds Of Apple’s Revenue New product categories launched under Cook’s leadership include the Apple Watch and Apple Music. Cook also oversaw the $3 billion acquisition of Beats Electronics, which got Apple into premium headphones and streaming music, in August 2014. Under Cook, Apple has become largely a smartphone company, with the iPhone driving 68% of revenue in its fiscal first quarter ended Dec. 26. For the near term, Apple will continue to use the iPhone to grow its sales. It still sees growth opportunities in emerging markets like China and India, and it wants to attract more switchers from the Android smartphone camp. “There’s an urgency now at Apple to continue growing the iPhone market,” Tim Bajarin, an analyst with Creative Strategies, told IBD. Apple’s new low-cost iPhone SE, which starts at $399, is a move toward getting more price-conscious consumers, he said. But iPhone sales have been slowing in recent quarters. The company is expected to post its first ever decline in iPhone unit sales on a year-over-year basis in its fiscal Q2 report on April 25. Meanwhile, Apple’s iPad tablet sales have fallen for eight straight quarters on a year-over-year basis. And the company’s once-core Mac computer business is a slow-growth, mature business for Apple. At the same time, other big tech companies are capturing the imagination of consumers and Wall Street with bold initiatives. Facebook ( FB ) is leading the charge in virtual reality headsets with Oculus Rift. Amazon.com ( AMZN ) is touting its well-received Echo smart speaker with the Alexa personal assistant AI. And even once-stodgy Microsoft ( MSFT ) has earned plaudits for its HoloLens holographic computing platform and augmented reality glasses. So what’s the next big thing for Apple? Apple’s Cash Horde Stands At … $215 Billion It certainly has the resources to make big bets on new technology. Apple had $215 billion in cash and securities as of the end of last year. Sticking with the middle-aged male metaphor, these are the prime earnings years for Apple. It’s cash-rich and its main businesses continue to generate significant profits. But it doesn’t have the youthful vigor it once did. If the balding, slightly pudgy Apple were to buy a sports car to spice up its life, what would it be? It could be an actual car. Apple has been rumored for some time to be working on an electric car to rival those built by Tesla Motors ( TSLA ). It’s known to have been hiring automotive engineers, including staff from Tesla. And it also has been creating such a racket at a reported car-testing facility in Sunnyvale, Calif., that the neighbors have complained about the noise. Bajarin, though, doubts that Apple will come out with an actual car. He theorizes that Apple is working on technologies for smart cars, something it began pursuing with its CarPlay software. It would license the technologies to automakers. “I’m in the camp that says Apple will do stuff that will revolutionize the driving experience, as opposed to creating their own car,” Bajarin said. Bajarin says Apple’s next big thing will be its own virtual reality headset. The company has made some high-profile hires in the VR and augmented reality sector. Apple is likely to come out with a VR headset within 24 months, he says. “VR is a game-changer,” he said. “I don’t see how they can stay out of that market.” Apple would be attracted by the huge potential market size and the consumer focus for the technology, he said. Apple keeps a project roadmap for the next five to seven years, Bajarin said. It takes two to three years to go from designing a product to bringing it to market, he said. Apple doesn’t thrill people with new products like it used to, Roger Kay, an analyst with Endpoint Technologies Associates, told IBD. You don’t see as many people camping out to buy the latest new Apple gadget. “Sleeping in front of stores . . . there’s a lot less of that,” he said. “So from the excitement point of view, that’s gone away for them.” Is Apple Attracted To … Tesla? GoPro? Continuing with the metaphor of Apple as a middle-aged man, if the company stuck with the stereotype it might try dating a much younger lady to feel young again. That could take the shape of an acquisition of a hot new company like Tesla. Others have suggested that Apple could buy GoPro ( GPRO ) or even a movie studio. But Apple executives have been loath to do large acquisitions. They prefer smaller deals to acquire technology and engineering talent that it can tuck into current projects. They also don’t want to dilute the corporate culture they have nurtured so meticulously. Apple has taken notice of disaster-after-disaster of tech companies trying to do big mergers and acquisitions, and they decided that wasn’t right for them, Kay said. Apple’s new girlfriend might already be on its doorstep, not an acquisition but its fabulous new “spaceship campus” headquarters now under construction a few miles from its current headquarters. The $5 billion project will look like a flying saucer landed in leafy-green park. Some might see it as a vanity project, but it could actually spark innovative thinking among the workers there, Kay says. Plus, the building should help Apple maintain its “super cool, premium brand,” he said. Gartner analyst Brian Blau said Apple is going to be around for a long time, making products that consumers crave. “Apple will be relevant and influential for years to come,” Blau told IBD. “It’s clear that people like Apple technology and the Apple brand.” Apple, he says, has a great track record for product development — and it would be foolish to bet against it.