Saturday, October 01, 2011

Tech Thoughts Before IOS5

I am a fan of Apple so when I saw a stock analyst suggest that both Apple and Amazon would crash (he suggests that Apple would drop to $100) I read it with interest.  His suggestion is that a lot of Apple's business is in Europe and that is a basket case and therefore even though 10% of the company is in cash - a significant decline is coming.  He also makes the claim that Apple and Amazon will beat each other's brains in on content.

He makes the case the Amazon will have problems because they are expected to lose money on their new Kindle Fire.  But he also argues that with the imposition of sales tax across the country that its narrow margin of less than 3% will disappear.

The post was intriguing but the premises are wrong.   A lot of the future of both companies depends on the market they are serving.  The picture at the left is a graph offered recently by Jeff Bezos comparing E-book sales to traditional sales.  Note that the sales figures converged about a year ago.  I have not bought a hard bound book for more than five years.   Sure, Amazon will have to deal with sales taxes.  But their business seems to be well positioned to meet coming demands regardless of that change.  Book buyers are not going to go back to Borders and all of Amazon's other content providers are racing to get the marketing model that Amazon has pretty well down.   For me Amazon is one of the first places I look when I want to buy something.

Now to Apple.   There is a lot of chatter about the declining percentage market share that Apple will have with the Tablet market- while true all of the unbiased projections suggest that Apple will continue to be the dominant maker of tablet devices for several years - in a market that is evolving.  A lot of their future depends on the success of iCloud and of IOS5 but based on the last couple of revisions of Mobile Me and the earlier IOS versions - they will appeal to a large installed base.   We will see in the release of the new IOS and phone but both seem to be offering some real improvements.

Now to the coming war between Apple and Amazon.  Both offer content in terms of music, video and books.  (Indeed, I use both for different types of content.)  Both offer a Cloud service, although the Amazon cloud looks a bit clunky for what you get.  Both offer hardware - although Amazon seems to be using the Gillette model of marketing (give away the razor and sell the blades).   My impression however is that while they offer similar product lines their direct competition is not yet destructive.  Indeed, what their competition may be producing is a higher buy in for those companies that want to disrupt the marketplace.

This is a fascinating time for technology.  Increasingly everything from airline boarding passes to music and books to restaurant reservations are going to the net.  That iPhone is more useful than when version one came out.  (I spoke with one young associate who said he no longer uses a camera because his iPhone does everything he wants in a camera).   Both companies have a lot of stickiness - things that get me to come back again and again.  From my perspective that looks like a pretty bright future.

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