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What Should Apple Tackle Next?

What Should Apple Tackle Next?

Cell phones, personal media players, online music stores -- Apple didn't invent any of these technologies. Instead, the company sought out existing segments that it felt needed change and then took them by storm, in some cases dominating the space within a few years. What's the next tech category Cupertino's preparing to shake up?

By Chris Maxcer MacNewsWorld ECT News Network
06/24/08 4:00 AM PT

First Apple built personal computers, then portable media players, and now the company is manufacturing cell phones. Apple also has its own branded set-top box -- Apple TV -- and its iTunes store is one of the biggest e-commerce marketplaces for music and videos in the world.

What's next for Apple? What product categories might the company in Cupertino leap into? Car navigation? Video games? Or perhaps something a little closer to home, like an e-book reader or a tablet?

Are there any technology sectors that Apple could really up-end, should it ever decide to move in a new direction?

Who Says Apple Needs Anything New?

Of course, there's the countervailing notion that Apple doesn't actually need to do anything new to maintain a sustainable and profitable business. With iPhone and the upcoming iPhone application store, Apple has one of the most widely used personal devices -- the cell phone -- handily covered. It can easily spend many comfortable years tweaking and tuning it. Heck, with Apple's design prowess alone, the company could probably make money just by making cool new cases.

"I think that Apple has a pretty full plate with the current offering. The company business strategy consciously constrains its offering to a manageable number of products. This is counter to most companies, which are always looking to expand their offerings," Van Baker, a vice president of research for Gartner, told MacNewsWorld.

"Apple chooses a contrarian path and chooses to replace products frequently. They often 'end of life' a product at the peak of its popularity. This allows them to take limited resources that they have and really focus their efforts on the limited number of products that they choose to bring to market," he added.

A Love for Surprises

Even so, "what Apple will do next is anybody's guess, as they play the secrecy card very well," Baker noted.

Judging from past moves, it's not likely that the company will create an entirely and radically new category of product. For example, MP3 players were on the market for a few years before Apple unveiled the iPod.

"Apple doesn't like to invent segments, they want to reinvent them," Stephen Baker, vice president of industry analysis for The NPD Group, told MacNewsWorld.

"So look for something that gives a poor -- or at least suboptimal -- experience today, and think about how to make it better. ... It should also leverage Apple's two sales platforms, the retail stores and the iTunes store, if possible. And finally, it should be something where they can have some extra level of control to allow them to deliver the margins they want," NPD's Baker explained.

In this context, Apple might be ripe to reinvent e-book readers, dive into the video game market, or get into car electronics. However, each of these three areas presents obstacles for Apple, Stephen Baker said. E-book readers still seem to be too small a market to pursue. Video gaming already comes with a great experience, and the margins are difficult to control. As for car electronics, the auto manufacturers need very long lead times. They aren't so easy to deal with, and Apple wouldn't be in control.

The Rise of the MID

On the other hand, some sort of Mac tablet or mobile Internet device (MID) seems like a real possibility.

"I think that Apple could also do a line extension for the Macbook family that included a tablet. The one market where the tablet form factor has seen some good success is the education market, where Apple already enjoys strong success. This makes a tablet a good bet," noted Gartner's Van Baker.

While a tablet PC and/or a MID -- larger than an iPod touch but smaller than a laptop -- seems likely, it's hardly a given.

"I am intrigued by the idea of a larger device, not quite a phone, but something with a screen size of 4 to 7 inches," Roger Kay, president of Endpoint Technologies, told MacNewsWorld. The device he has in mind, he said, would have multi-touch features based on those found on the iPhone's screen or the MacBook Air trackpad.

"I've talked to the touch pad vendors and the guys who build that kind of software ... and it's not trivial. It turns out that getting that kind of touch to scale up in screen size is not easy to do, which is interesting because it gives Apple an area where they can excel, where they can create a unique capability through sheer engineering prowess," Kay added.

The interesting point about a tablet or MID touch-screen device is the potential versatility of such a product. It could be an e-book reader, a gaming platform, a media-playing device, or a teaching tool in the classroom. For enterprises, it could fit the ultramobile laptop category and out-perform current PDAs.

Apple TV, Take 3

"Based purely on my speculation, I think they will likely devote some resources to the Apple TV product to improve its performance and position the product to drive more iTunes revenue. Web-delivered incremental services for the platform are the logical next move," Van Baker said.

When it come to television sets, one rumor that's been floating around has been that Apple would produce its own Internet-connected TV. That would bypass an extender device like Apple TV to deliver a high-definition TV that incorporates the company's talent for design.

"The global market for TV is huge. There are ample opportunities to add to the experience through software design, GUIs (graphical user interfaces) and usability and hardware design," NPD's Stephen Baker said, noting that television production could leverage their existing assets and partnerships and has a great growth path.

"They don't need 50 percent share immediately to make a difference in the category or in the earnings or revenue," he added.

Forrester Research, which recently published a report by analysts J.P. Gownder and James McQuivey, "The Future of Apple Inc.", believes that Apple will aim to become the hub of the digital home by offering products and services that connect PCs and digital content to the HDTV/stereo/audio-visual infrastructure in consumers' homes.

Two of the most intriguing Forrester predictions are a home server product an "AppleSound universal music controller".

The home server product would likely be just that -- a server to power and connect all the digital devices in a home for sharing and streaming media and files. It would not, however, include the word "server" in the name of the device, the report says. "Think about names like 'Time Capsule' for network attached storage (NAS) backup," the authors point out.

As for the so-called AppleSound universal music controller, Forrester explains: "Exceeding the style and matching the functionality of similar high-end devices like that from Sonos, the AppleSound device would work both as a standalone iPod and as a controller for music (and video) through dedicated home stereo amplifiers in the home. With its touchscreen, direct Internet connection, and easy access to the Apple home server product, the AppleSound device would serve as a handy controller, player, remote control, mobile Internet device, and ultimate gateway to a unified AV/IT digital home experience."

Of course, becoming a digital media hub for consumers isn't exactly easy -- many of Apple's products are so intuitive they don't even ship with real instruction manuals. Can Apple become the hub of a home? Forrester thinks Apple would have to expand into in-home installation services to get it done.

Reverse Look

Heading back to car electronics, Apple might yet be infiltrating auto manufacturers.

"I'm always curious when I hear about the iCar [that] Apple and [Volkswagen] are working so closely on," Sven Rafferty, technology blogger and director of Internet technology for hypersven.com, told MacNewsWorld.

"I can't imagine it's just for an iPod/iPhone hook-up. It has to be more than that, and choosing VW, one of Europe's largest car manufacturers, is also a flag to note. Apple struggles in Europe in just about everything -- iPhone sales have been poor when compared to the States, and Macs are near nonexistent -- that VW would be the, forgive the pun, perfect vehicle to start an 'EU halo effect,'" Rafferty explained.

Existing car electronics found in even high-end cars from BMW and Audi leave much to be desired, Rafferty noted, as do efforts using Windows-based systems so far.

"I think Apple's expertise with interfaces will come to cars, and I believe VW will be the launching platform," he added.

Now, if only Apple would turn its efforts to increasing fuel efficiency in autos ...


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