Apple is a Trojan Horse of Innovation
When we think of American innovation we often think of Amazon or Google. However Apple is re-investing its incredible cash pile back into its business diversification. This will mean Apple will be able to attune itself with an evolving Services ecosystem, the advent of its smart car and a real AR glasses product that will go mainstream.
That’s nothing short of a trinity of innovation pillars in the 2002s.
Apple will spend $1 billion to open 3,000-employee campus in North Carolina
Even as Microsoft has achieved next-level business diversification with the Cloud and the stay-at-home period of the pandemic, fueled by things like LinkedIn Ads, Apple too has the opportunity to diverse its business model to become a lasting corporation of the 21st century. America’s semi-destruction of Huawei allows Apple to enter a second-life period.
Apple will spend over $1 billion on the campus, and it will employ 3,000 people working on technology like software engineering and machine learning. Apple’s expansion will be located in North Carolina’s Research Triangle area, which gets its name from nearby North Carolina State University, Duke University and the University of North Carolina.
While Apple has slipped behind in AI in recent years, it’s service ecosystem will become a gated moat that will spur new innovation and even an entry into digital Advertising.
Apple allowing consumers to say no to tracking is a big-win for Apple’s reputation and consumers who feel betrayed about their online privacy. Apple is the good guy, if Facebook and Google are the bad guys. Microsoft is a good guy too, just don’t tell that to Slack of Salesforce. Don’t tell that to Discord, who they failed to acquire.
Apple is so rich they can even be late to innovation and win. This is what we may see in the future of the smart car and in their entry into AR products. Even if Apple fails in its EV and AR product, their business diversification moat will increase in the 2020s.
Apple Inc. rolled out a software update for its mobile devices on Monday that gives users the option of stopping apps from tracking their location and sharing other identifying information with third parties. This attracts customers who want to be out of the loop of Facebook and Google’s evil duopoly on their data.
Apple announcement of its $430 billion investment in US with 20,000 new jobs shows a company committed to putting its money to good use. Apple has around $200 Billion cash on hand. Apple’s market cap is all of a sudden $2.26 Trillion. Apple represents around 6% of the S&P Index.
Given its own ability to scale into new verticals with its Service ecosystem, new innovation is inevitable. Given its consumer retention and profit margins, it’s poised to actually innovative in the coming years. That’s not something I would have said five or even two years ago. Apple is at a pivotal moment in its business trajectory and it must prove it can innovate again.
Its pivot from hardware to software (Huawei is doing this as well btw), will be the defining moment of whether it can accomplish this. An AR product or an EV car is hardware, but can it build the next-gen of software that is a vibrant ecosystem that’s diversified in a way that Facebook or Google obviously couldn’t? Apple will become even more profitable as it gets into Ads.
Apple isn’t changing how digital Ads work because its a good Samaritan, it’s doing it become it will be the one to disrupt Facebook. This even as the likes of Amazon, ByteDance, Roku, LinkedIn, Alibaba, Snap and others will erode the future of the advertising duopoly.
Apple’s stock is $134. The stock is a buy below $120. Given the profitability of Apple in the 2020s, it’s stock is still a good lifetime investment. If the number one thing in business is trust, Apple is a company consumers trust. In the future of business diversification, that’s Apple’s trojan horse secret in its ability to innovate into software services in the 2020s. In a work from home new normal, Apple’s software services ecosystem begins to become more attractive.