A combination of compelling products and competitor missteps have made a charmed decade for Apple (AAPL). Ten years ago, Apple traded hands at $9, Steve Jobs had only recently dropped the ‘interim’ CEO title and one of his highly touted PC introductions, the “Cube,” would be halted within a year for poor sales. Remarkably the Cube would be the last failure for Apple. Today, Apple shares are over $300, it is the second largest corporation by market cap and it’s quite possible the momentum from accelerating iPad sales could propel Apple past ExxonMobil (XOM) to be the largest company in the U.S. within months.
Yet just as Caesar had his Brutus, it is inevitable that a company that is now an ally could challenge Apple’s dominance – that, or a company no one has heard of will exploit a weakness Apple doesn’t even know it has. After all, Microsoft (MSFT) once seemed unassailable, until Netscape - now part of AOL Inc (AOL) - opened up computer desktops to the World Wide Web at the same time a Bill Gates book on the future of technology failed to even mention the Internet.
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It’s also possible Apple could fall victim to its own quest for perfection. After all, the tale is that while Steve Jobs was running NeXT Computer, the company he founded after being ousted at Apple in 1985, his insistence that the computer be a perfect cube – absolutely no exception - caused design delays and ran up production costs. This past decade Apple has earned the largest gross margin growth in the tech industry, rising from 23% after the first iPod rolled out (nine years ago this month), up to 33% after the iPhone introduction to 40% today. It’s also possible Apple’s successful marriage of content management and hardware, like iTunes and the iPod for music, could be torpedoed by another company’s control of a coveted set of content. Quite possibly, Apple could simply run up against the inability to continue to grow its business at such a remarkable rate.
None of this means Apple is anywhere close to falling from its mantel. After all, Steve Jobs has been right far more than wrong in his insistence on maintaining Apple’s brand cachet. His decision to pull Apple products out of retailers like Best Buy in 1998, called by many as suicidal, led to agreements to better merchandise Apple products, and, eventually, the creation of brick and mortar Apple stores. There is still plenty of potential growth in margin before common sense would say no more was possible. After all, stodgy companies like Danaher Corp. (DHR), maker of mechanic’s hand tools among other items, boast a 49% gross margin. And, for all the wrangling over content, the past decade hasn’t done much to stem the tide of information and entertainment becoming more accessible, a trend that favors Apple by allowing it to sell hardware for purposes few imagined at the turn of the century.
So who are the likely Apple killers people will be wishing they invested in now? We can’t be certain, but it’s a good bet one of the following companies will be among them.
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