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What Apple's 2013 Shopping Spree Tells Us

Posted
11/5/2013 10:55:00 AM
By: Minyanville
Referenced Stocks:AAPL;BBRY;ERIC;MSFT;SNE

Halloween held tricks and treats for some companies this year. On October 31, the so-called consortium "Rockstar" -- which includes Microsoft ( MSFT ), Apple ( AAPL ), Sony ( SNE ), Ericsson ( ERIC ), and BlackBerry ( BBRY ) -- filed a lawsuit against Android manufacturers including Samsung (OTCMKTS:SSNLF) and Google (GOOG). That very day, Strategy Analytics also reported the Android operating system had a whopping 81% market share in Q3 2013. In the wake of such revelations, investors are left to wonder exactly what strategies Apple will turn to in order to stay competitive.

During the Q&A portion of Apple's fourth quarter earnings call last week, CEO Tim Cook indicated the company indeed has some tricks up its sleeve, stating that "we obviously believe that we can use our skills in building other great products that are in categories that represent areas where we do not participate today."

One such category may be wearable tech, and specifically smart watches. Apple has yet to confirm that it is making an iWatch, though recent reports that LG Display Co Ltd (LPL) is in negotiations to supply LCD panels for such a device, combined with Apple's recent hiring of Angela Ahrendt to lead retail appear to give credibility to the rumors that the product could launch in 2014. (Interestingly, former Wall Street Journal reporter and tech insider Jessica E.Lessin pointed out that Ahrendt is a "watch lady," having launched a high-end watch line for Burberry (OTCMKTS:BBRYF) while at the company.)

There's also speculation about what the future holds for Apple TV. Though the company did release its new iMovie Theater channel in October, and acquired Matcha.tv (whose service includes detailing all content available online and on TV) there aren't strong signals that TV is a key area of Apple's immediate focus.

But based on Apple's recent regulatory filing, there's a clear focus on forward momentum: Capital spending, which was $7 billion for the 2013 fiscal year (not including research and development costs) is projected to reach $11 billion for the fiscal year ending September 2014. Perhaps Apple is as focused on keeping pace with its competitors as it is with innovation. Its acquisition activity in the past year seems to prove the point.

Take for example, mapping, a technology with which Apple has notoriously struggled (remember CEO Tim Cook's open letter to consumers) despite its access to robust cloud-based data that it should be able to harness for accuracy and leverage for innovation.

In March, Apple's focus on stepping up to the "mapping wars" became clear when the the Wall Street Journal reported a $20 million purchase of WiFiSlam. According to the company's AngelList description, its technology capabilities include the ability to pinpoint a smartphone location "in real time, to 2.5m accuracy using only ambient Wi-Fi signals already present in buildings," and location-based mobile apps that provide "step-by-step indoor navigation, product-level retail customer engagement, and proximity-based social networking."

In July, Apple bought Locationary, a Toronto-based startup which powers local business listings using crowdsourcing, and "Saturn," its platform tool, which allows participants to control data in their own preferred format and in real time. According to Locationary's YouTube video, Saturn "help[s] fulfill the potential of local search and mobile commerce." Shortly after that acquisition, news broke that Apple bought HopStop, another mapping service which provides detailed subway, bus, train, taxi, walking, and bike directions to users in more than 300 cities. Soon after, it purchased Embark, a small Silicon Valley-based service whose mapping apps also help users navigate underground transit services.

But Apple's 2013 buying spree isn't really about mapping. It's about reclaiming its stake in innovation, and mapping has become a significant part of the user experience. Though Apple's 2011 official introduction of Siri once earmarked its position as the leader in artificial intelligence, it has since failed to keep pace. Siri is now as recognized for what it can't do as for what it can. Apple's newer Today feature, meant to rival Google Now, simply aggregates data to give a snapshot of a user's day. By stark contrast, Google Now uses predictive technology based on a user's email, social media, and calendar data to add value, with features like notification of traffic congestion and suggested routes.

But does the technology really drive a buying preference? Based on TechCrunch reporter Michael Panzarino's opinion and the market share divide, all signs point to yes: "Google Now can be considered reason enough to buy an Android phone, and I don't think Apple is blind to how good it is," writes Panzarino.

Based on Apple's October purchase of personal data aggregator Cue, which reportedly cost anywhere from $35 million to $60 million, Apple indeed has a big-picture plan in place -- and it has just been set into motion.

Twitter: @WellnessOnLess