Why I love Apple’s business model

avatar By: IS
Date posted: 12.02.2009 (5:00 am) | Write a Comment  (1 Comment)

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logoThere are a few examples of business models that seem to be perfect to build an empire and in my opinion, that is exactly what Apple has. They have built a line of products that were created initially to watch music (Ipod) but have grown to become so much more.

Video was added as was the ability to view photos, listen to podcasts and more. Then, it became possible to capture photos and now even videos. It basically became the ONLY gadget you need in your pockets, except for your wallet. And even that may eventually be replaced by the Iphone. But the real game changer happened when Apple opened its store to applications.

iphone_homeWhy do I believe that? Because that’s when Apple created a business with major revenues and no costs. How often does a company have that opportunity? Here is one example sent by a loyal reader, but there could be hundred of other cases. Take a look at this article published in the UK media about research that is being done on an application to detect respiratory problems (potentially could help detect viruses such as the H1N1. The great thing about this is not the application itself. But just imagine how much money is being spent to develop such applications. Apple has NO RISK here. If the application does not turn out to work, it will have cost nothing.

And if it does work and become a hit, Apple will split revenues with the app creator. Isnt’ that the perfect business model? And there are no signs of this trend slowing down because Apple continues to gain market share thanks to its Iphone. And as long as it can break even on the Iphone sales (it does come out with a profit though), the business will continue to be a great one.

Apple shipped 7.4 million Iphones in the last quarter, that is 7.4 million users that will be buying all types of products through the Itunes store. The biggest danger right now for Apple would be to have a major rival come out with a superior product but there are no signs of that happening. The truth is that I think most competitors have almost given up on catching up with Ipod for the time being, it is too expensive and has shown little to no results. Both Sony and Microsoft gave it a shot but without any luck.

The next battle for Apple will be for the much anticipated Tablet, which could become as important of a product as the Iphone/Ipod. However for that medium, Apple will come out late with competitors such as Amazon’s Kindle already working well. So it will be a different challenge.

Does this mean that I am automatically a buyer of Apple? No of course not. Although I do currently have a live trade on Apple. Its valuation reflects most of these facts already. But it does give us ideas of what to look for in the “next Apple”.

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1 Comment

  1. avatar

    [...] have written a few times about Apple and found it very interesting to see the reaction to the launch of the tablet a couple of weeks [...]

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