Apple's Competitive Advantage

Dear Reader,

Apple Inc., the iPhone, Mac, iPad and other consumer electronics producer, is consistently top 3 most valuable publicly listed company in the world based on its market capitalization, which currently stands at 2.24 trillion USD.

What is Apple's competitive advantage? Simply put, Apple makes the best hardware. Apple designs, although it outsources manufacturing, its hardware products like iPhone, Mac, iPad and at the same time produces the software that runs these devices in-house. Due to the seamless integration of its hardware and software Apple's products are arguably the best hardware computers, phones and tablets on the market. I use both an iPhone and an iPad, having previously used Android devices, and can vouch for that.

Yes, innovation and the cult towards Steven Jobs' personality and Steve Jobs' marketing genius have certainly helped Apple Inc, but Apple manufactures the best hardware devices on the market. Jony Ive contributed greatly to the stellar design of especially the Macs, which imbued Apple with great marketing and great customer experience. Great content came in a great packaging. 

Yes, Apples' closed system is its biggest disadvantage. The main reason Apple's computers are not ubiquitous is the lack of perfect Microsoft Office, especially Microsoft Excel, integration. Another factor is the high price. But the vertical integration, especially in the production of Macs, has contributed to Apple's capturing approximately 90 % of the personal computers market's profit. The PC market is basically an oligopoly shared between Microsoft's and Apple's operation systems. The smartphone market is well on its way to becoming an oligopoly.

Now Apple produces its own chips, which makes its hardware, Macs especially, even more productive and seamlessly working. Apple's hardware products are the vehicle for its future services revenue growth, which the company plans to drive the future development of the company.

Technology stocks in general seem to be a bubble. When the bubble bursts Apple's market capitalization could fall by 30 % to 40 %, but in 3 to 4 years Apple most probably will again regain its current market capitalization of 2.24 trillion USD and even surpass it by 30 % in 7 years from now. Because, as Warren Buffet, one of the largest investors in Apple's stocks would say, Apple has a durable competitive advantage, the quality of its hardware products.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich