Taking Stock / Things You Should Know About Apple

What is Apple? The most important company in the world. More than Microsoft, more than Google, more than IBM.

1 Apple isn't a high-tech company any more. Nor is it a computer company or a media company or an Internet company.

What is Apple? The most important company in the world. More than Microsoft, more than Google, more than IBM.

Not because of its impressive financial results, published last Monday - revenues of $20.3 million in the third quarter of 2009, an increase of 67% against the same period of 2009, and net income of $4.3 billion, an increase of 70%. The company's profit for the first nine months of 2010 beat analyst expectations by 13%, which is a lot. Apple also has exceeded analyst forecasts for revenues for eight quarters running.

Nor is it because Apple has become the third biggest company in the world, worth $280 billion, more than Microsoft ($220 billion ), Google ($195 billion ) or IBM ($176 billion ).

Apple is the most important company in the world because it is changing the consumption habits of hundreds of millions of people; because it has and is changing the business models of whole industries; and mainly because it keeps doing these things. It manages to do these things in surprising ways, sometimes in ways that seem to contradict logic.


2 "It looks like a big iPhone," scoffed Eric Schmidt, CEO of Google, when I asked him in January about the hugely hyped launch of the iPad, Apple's tablet computer, the night before. At the official launch in April, not a few pundits dismissed the iPad as just another toy. It was an iPhone that couldn't be used to make phone calls, some sniffed. Others just shrugged in disappointment.

The iPad has been slow to take off in Israel, and it's expensive. But make no mistake. Like the personal computer, the Macintosh, the iPod, iTunes and the iPhone, it's going to change the consumption habits of hundreds of millions of people around the world. That's going to happen fast, too. Next year 30 million of the devices will be sold. In its first year, the iPad will break the sales record for any device.

Remember how you felt the first time you saw an iPhone, and how your feelings about it have changed in the last year. By the end of 2011, there will be a million of them (and of copycat devices ) in Israel.

The iPad is the first device to almost perfectly merge video, text, sound, images and data with high quality, speed and resolution. One-year-olds and 70-year-olds find its interface equally intuitive and clear.


3 Apple founder Steve Jobs was ousted from the company in 1985, following a battle on the board of directors about his management style. He returned in 1996, to a company in crisis. Its market capitalization had shrunk to $2 billion.

Legend has it that when Jobs returned, he told the company's programmers that from now on, they would be focusing on the user experience, which would be the platform from which they addressed the technological aspect, not the contrary.

Since then, he's done it again and again, each time with a new line of products - personal computers, media players, digital media stores, mobile phones and iPad computers. The user experience with Apple products is completely different from any other product made by rivals, and people will pay a significant premium for that experience.

Jobs has become one of the richest people in the world. But his unique status isn't based on his wealth; it's based on his creativity, his innovativeness, his genius. Jobs may not be Mr. Congeniality or particularly modest, but he certainly is the most highly esteemed man in the business world.


4 Microsoft controls the world of computer operating systems. Google invented a brilliant search engine and a business model that prints money. But only Apple has revolutionized the world of computers, software, music and media again and again and again and again. In the last decade Apple shattered paradigm after paradigm.

Jobs has shattered the paradigm that the Internet is for freebies, and that you can't sell anything aside from gambling and sex. First he did it with the iPod and iTunes, which became the biggest music store in the world. Now he's repeating the act with applications for iPhones and iPads. People are forking over billions of dollars a year for these applications.

Jobs has shattered the paradigm that the Windows operating system is unchallengeable, because it controls all the computers in the world.

And with the iPad and iPhone, he's destroyed the biggest paradigm of them all. Until their appearance, it was accepted that Internet and open source architecture would control the digital age forever.

The iPhone has a closed source that connects only with what Jobs wants it to connect with. No open source for Steve Jobs. You can use the open-source Internet to your heart's content, says he, but then you don't get my unique user experience in my closed-source world.

In three years, his closed source world has become the biggest thing in digital. iPad is an extension of this world; it's also shut tight.

With each passing day, the number of people willing to pay for applications instead of surfing for free is growing. The convenience and speed overcome the admittedly tremendous advantages of the open-source Internet to which we have become accustomed.

You don't even have to open your wallet. When buying an iPad or iPhone, you hand over your credit card and then, month in and month out, more and more money is sucked from your bank account. People who wouldn't pay a red cent for anything on the Internet are forking over major money for their Apple devices. The result is that tens of thousands of software developers are busily designing even more applications. The entire digital economy is being reinvented around applications, and it's more profitable than ever before.

While about it, Jobs shattered the concept that only software or content are of value, while devices are mere tools. He sells the devices and the software bundled together, at margins that nobody else in the industry would dream of charging. By the way, he tried that concept before, 20 years ago, with the Mac, and failed. But his years in exile outside Apple made him stronger and when he came back, he was even more brilliant, extraordinary and dangerous than ever before.


5 Apple's business model looks scary. It flies in the face of the business concepts built over the last 10 years for the Internet world. Apple and its boss are extraordinarily arrogant, and their rules are not the usual rules of the game. But after five years of stratospheric growth, with $50 billion in the company's kitty, Apple has a brand and power that no other technology company in the world can match.

Its biggest risk lies in the health of its boss. He is the man with the greatest, most megalomaniac and most exciting vision the world of computing has ever known. He can do. Millions upon millions of people around the world grind their molars and pay the sky-high prices he demands for his products because they want them that much.

Desktop Internet began 15 years ago as closed-source too. Now it's wide open. Cellular Internet may be moving to open platforms, too. But even if Jobs ultimately loses market share to open platforms, his impact on the industry remains.

Apple's products and services haven't made major inroads to Israel yet, and its goods are mainly for the rich.

But I wouldn't bet against the company, or ignore it. There's a good chance that Apple, not Google, not Microsoft and not IBM will be the company that most affects consumer behavior and the media in the years to come.