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понеділок, 18 квітня 2011 р.

Why Apple Should Make the Move to Content

The biggest failure of my life was getting let go from an employer many years ago. I was young, found the job kind of boring, and after a while I mentally checked out. But I decided that it would reflect poorly on me to leave it so soon after starting, so I resolved to stay for a set period of time and then quit. Well, I guess the feeling was mutual, because my boss beat me to the punch by a few weeks. That failure left a permanent scar on me, and I resolved to never let it happen again.

I bring this up because in thinking about Apple (AAPL), I can't help but grimace and wonder if it will be soon be facing a crossroads not unlike the one it faced in the late '80s. There, it failed. Macintosh computers were fantastic products, superior to PCs in most ways (so people tell me -- I was in early elementary school at the time and was more focused on Mario 2), and yet they lost to Wintel-based systems. As innovation slowed down it allowed lower-price, commoditized competitors to catch up and beat Apple on price and customization. Apple fell into a morass from which it did not reemerge until Steve Jobs returned to the company in the late '90s.

Today, Apple is one to two years away from a similar crossroads. Innovation is slowing. The iPhone and iPad remain category killers, though slowly but surely you can see Google's (GOOG) Droid-based competition and others nipping at their heels. In the long run, hardware gets commoditized. That's not a game Apple is positioned to or desires to win. It's not clear where it goes from here, with iPod/MacBook/iPhone/iPad all at various stages along the maturation curve. It's in their DNA to try to compete with Microsoft (MSFT), IBM (IBM), and Hewlett-Packard (HPQ) in the services/enterprise world -- that's for losers like PC guy.

Apple needs to make a big move into a new product category. Something as big as the first iPod, iPhone, or iPad. Which brings us to its cash horde. Apple currently has about $60 billion in cash, and is projected to earn a ludicrous $50 billion in earnings (not revenue) over the next two years. It's going to become a bigger and bigger investor concern -- what can Apple possibly do with $100 billion?

Two options. One, give it all back to investors. Two, buy something gigantic. But what should it buy? Increasingly its moving away from computing and toward being at the intersection of computing, communications, and media delivery. That's its vision of a post-PC world. It's already world-class at computing, communications, and media delivery. The missing piece to the puzzle, of course, is content.

Enter Disney (DIS). The music industry more or less accepted its fate of being at the mercy of iTunes. The TV industry has had more time to respond and they're fighting back with Hulu and their own initiatives. They see what Netflix (NFLX) is doing to their business. Google's got YouTube. Amazon (AMZN) is muscling its way into the business. Facebook's going to give it a shot. It's clear this fight won't be as easy for Apple as music was. What better way for Apple to show its dominance than to buy Mickey Mouse?

And if it's a media company, it's gotta be Disney. Steve Jobs is already on the Board of Directors. He loves brands, and Disney is a top 10 global brand, and stands for creativity, wonder, and imagination -- not unlike Apple.

Steve Jobs is the Walt Disney of our age. Might as well make it official.
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