April 29th, 2013
04:59 PM GMT
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Editor's note: Victor Basta is the MD of Magister Advisors, an M&A advisory firm to the technology industry. The firm has worked on 16 transactions since it was founded three years ago, including the sale of C3 to Apple for $250 million and LoveFILM's $320m exit to Amazon. Below is his view on Apple's future.

After last week’s earnings, it is even clearer that Apple is not the company you think it is. Its future value will not be as a hardware designer and innovator. It will more likely be as a great software and services business, underpinned by the everyday actions of the hundreds of millions of credit card-enabled users subscribed to the iTunes store.

The iTunes store is now ten. But read the newspapers and you’ll find nearly zero references to iTunes, despite it being core to Apple’s future.

All the talk last week was about hardware and the battle with Samsung. This is the “last war.” Even if Apple steps forward with its “best ever” device in the autumn, how many days before Samsung responds with a better product? Apple can no longer become the first $1 trillion company by simply making better mousetraps.

Apple executives are clearly frustrated by this constant device focus. Tim Cook, on the earnings call, audibly emphasized “SERVICES” as much as he felt he could. Apple’s next products only need to be “very good”’ to keep consumers loyal and spending money on software and content. Keep it that way and the Apple profit machine will march on, though not without strategic threat.

Amazon, rapidly building its capabilities as a device-assisted ecosystem of credit card-enabled users, is Apple’s new major competitor. A string of acquisitions leaves little question that Amazon will offer new digital devices and services. In recent years Amazon has quietly acquired SnapTell, an image matching startup; IVONA Software, a text to speech service; Yap, a voice to text startup; Touchco, a specialist in touch screen technology; and Evi, a Siri-style mobile app that turns phones into mobile assistants.

Amazon clearly has broad aspirations to be a key mobile player, which puts it on a collision course with Apple. Amazon has a huge ecosystem of credit-card-enabled users, great devices to download content, a huge trove of valuable content behind the devices, and a world-class buying experience that other retailers try to copy. Apple will face bigger challenges from Amazon than anything it is seeing from Samsung.

This is a two horse race. Neither Google, Facebook, Samsung, Nokia nor Microsoft have this combination of great consumer service and software nor a huge credit-card payment base. Amazon though, importantly, is not hamstrung by legacy or expectation.

Amazon has another emergent advantage. The Kindle, which Amazon astutely sells at a loss, is now owned by tens of millions of customers. They use their Kindles to buy from the Amazon store. This is exactly the same as Apple’s model, yet arguably the model is better.

Amazon currently gets a fraction of the attention that Apple gets. Yet there is a no doubt that it is fiercely competitive. Many great retailers have already been “Amazoned” by the online book-seller from Seattle. It leaves us wondering, if Apple and Amazon’s strategies are heading in the same direction, albeit from different starting points, is even the mighty Apple at risk from this relatively quiet achiever?

soundoff (7 Responses)
  1. Lyles

    If Apple actually came out with a broader diversity of devices, not just different slightly upgraded versions of their products, they would be unstoppable, but sadly, slightly making the Ipad better is not "innovation" just stalling for time.

    May 8, 2013 at 8:56 am |
  2. Longhorn Web Design

    Reblogged this on Longhorn Web Consulting.

    May 26, 2013 at 6:58 pm |
  3. FH

    Hat dies auf besserwerber rebloggt und kommentierte:
    Add your thoughts here... (optional)

    May 27, 2013 at 10:06 am |
  4. Leonel Wedin

    There are more than 7,500 known cultivars of apples, resulting in a range of desired characteristics. Different cultivars are bred for various tastes and uses, including cooking, fresh eating and cider production. Domestic apples are generally propagated by grafting, although wild apples grow readily from seed. Trees are prone to a number of fungal, bacterial and pest problems, which can be controlled by a number of organic and non-organic means...'^

    My very own blog

    May 30, 2013 at 4:20 pm |
  5. Jessica

    Reblogueó esto en La mutación Neomuray comentado:
    Add your thoughts here... (optional)

    July 14, 2013 at 5:16 am |
  6. RaWolfe

    Apple has been the industry leading tech guys with innovative ideas, but the rest of the world is catching up, mostly following apple products and coming up with diverse products targeting different consumer taste. Like apple has been coming with iphones, basically little faster and few new tricks but consumers are getting bored with same type of phones every year, what's coming up next iphone 6? I love iphone, has been using since the 2nd gen but when i saw samsung note II with huge screen I was sold right away, that's what i've been waiting for. I do online business but don't want to carry my computer or ipad all the time so a phone with a computer capability is exactly what i was waiting for. So to compete with the other companies Apple really needs to diversify its products, surprise us, it has been lately too predictable.

    July 18, 2013 at 12:06 am |
  7. NYC fitness events

    'm so excited to see what Apple releases at the end of this year. I need a phone with a bigger screen. That is what is so important to me. I also think Apple better push the release date because they are going to lose out on a lot of customers.I hate waiting!

    February 21, 2014 at 3:33 am |

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