Last week, we addressed Apple’s (click ticker for report: ) iPhone 5 announcement, which we expect will be the best-selling smartphone ever. In the 24 hours following its release, the firm recorded 2 million preorders–double the amount of the iPhone 4S during the same time period. We believe the buzz surrounding the product is at an all-time high, and the only concern we have is that the firm will be unable to satisfy the tremendous demand in a timely fashion.
We continue to believe that Apple (as opposed to the supply chain) is the best way to play the iPhone release. Further, we think the success of this product could be a large negative for Google’s (click ticker for report: ) Android. Shares of the search giant aren’t expensive, but with computing consumption moving to mobile, we think huge market share losses in the smartphone and tablet market could severely damage the company’s competitive position. Apple is dedicated to Steve Jobs’ war against Google, as evidenced by Siri and the exclusion of YouTube from iOS 6. We think Apple will encourage developers in its computing ecosystem to do whatever is necessary to cut Google out of the information chain.
Another Apple victim also appears to be looming in Pandora (P). Rumors suggest Apple will create its own streaming radio service to fend off competition from Pandora and Spotify. Not only does Apple have a tremendous amount of capital to acquire content, but it also has long-standing relationships with content creators that could drive lower acquisition costs. If such a service is created, we think it can be seamlessly integrated into the Apple ecosystem with far greater success than its competitors.
We think the iPhone’s success will have a profound impact on several technology companies going forward. The more market share Apple obtains, the easier it becomes for the firm to lock out competitors and drive vertical integration within its products. With the firm’s substantial cash balance and proven record of success, Apple can make life difficult for any of its competitors. We continue to like the firm and hold the company in the portfolio of our Best Ideas Newsletter.