Tuesday, April 6, 2010

The iPad and Apple's strategy

Since January, Apple fans have only had one thing on their mind. The subject of their dreams finally became a tangible reality for those in America on Saturday, April 3rd when the iPad was officially launched. While reviews are still coming in from all angles and users in general seem to be far from certain about the iPad, investors and analysts seem almost unanimously in accordance that the iPad is good news for Apple.

Pre-launch reports suggested that Apple's manufacturing partners expect to ship 2.5 million iPads between March and May, many more than the previous estimate of 750,000 units during the same period. It is because of estimates like these that investors are so keen on Apple, doubling Apple's market capitalization in the past year, driving it past the likes of Google and Walmart and at US$214 billion, making it worth more than every other American company other than ExxonMobile and Microsoft.

Because of an array of reasons, most of them rooted in practicality, it is readily accepted that a company's stock price should be used to gauge the success of that company and its strategic decisions. Apple's incredible recent performance in the stock market could be seen as affirmation of its strategy, which has wildly differed from that of many other players in the industry. While Silicon Valley has tended towards a culture of greater openness, Apple has maintained a stranglehold on its products, deciding exactly what kind of content can be used on them. The question that arises from the varying success that these divergent strategies have seen is which one is most representative of the way the industry will look in the future? While the answer is obviously far from certain, it may be that there is room for both strategies, even if each one's success is weighed in terms of their stock value: if Apple is a good example of maintaining control over its products, Google can be offered as an example of a company leaning the other way - Apple is trading at 23 times its profit from the past 12 months, Google's price-to-earnings ratio is 28.

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