Apple would rather be a monopoly than innovate?
Lack of M&A and gatekeeper policies driving business decisions!
Reaching $2.5 trillion in market capitalization, Apple has become the north star of American Capitalism and a big money printing machine for retail and institutional investors. At one point in time, it was equivalent to best of consumer products and an example of leadership in technology and the marketplace. Words, Steve Jobs and Apple could be interchanged at one point, with excellent understanding and passion for best product-market fit, ability to disrupt the existing ecosystem and not trying to target everyone but a niche and giving them the best experience was what company did best.
Not romanticizing too much about old times, today everything has changed. The only new products company makes are in the accessories segment and the rest is the optimization of existing technology. For a company that is this successful, profitable, and cash flow positive it has really managed to delay the downside from lack of innovation.
By observing press releases, WWDC, and launch events, one thing is clear, Apple has been trying to sell us on an idea of Security and Privacy. It has designed its software products on that idea and compared to competitors out there they are higher in the efforts. However, this doesn’t take into account the customer's willingness to share data with companies and app creators especially in this social media generation.
Going by first principal thinking of business being goods and services, Apple has come up with new products only in the peripherals or accessories market, air tags, apple watches, battery packs, speakers, and AirPods. M1 chipset is the new thing in apple devices that are all revolving around optimization and not innovation. All the iPhones look the same, with new system features that have been in other devices for years and sometimes decades, like widgets and moving icons.
Due to the target segment of people who can afford it, apple has been cash flow positive for a long time and have large amounts of it reserved. Instead of investing in something new, it has been doing two things with its money, trying to act as a gateway and competing with existing tried and tested products, and making office space from the ground up. Trying to spend money on expanding and growing a big successful company is always encouraged, however only new investment into property and nothing on the business side doesn’t sound encouraging.
For being a gateway, it has really leaned into taking revenue and having no other way for the open market to function in the Apple ecosystem. Its recent example of a lawsuit against Epic Games, or blocking Spotify from telling its customers of a cheaper option, or trying to use data it obtained from partner company ‘Tile’ and copying its technology and customer details. This is what Amazon.com has long been accused of trying to be a gateway and a dealer at the same time.
In the words of a popular reporter and angel investor in the Silicon Valley circle, Jason Calacanis, “Tim Cook needs to go”. Even though the software ecosystem of Apple has been the reason why it has managed to retain customers and avoid churn, at its core Apple is still a hardware company. Its lack of M&A in the said field has been putting the company at higher risk of competition and a decrease in growth. One of the most commonly used phrases in the investing world, “Always diversify your portfolio” is what apple needs the most. Even in the software front the most common applications like Maps or increasingly popular voice assistance and adaptation of AI, Apple has been behind in this front as well.
Apple is betting big on its privacy marketing strategy, however, one has to wait and see if more scrutiny from Congress and antitrust laws would make Apple less doorkeeper and more innovative and M&A net positive.
