During the past few weeks, Apple (click ticker for report: ) has re-entered the market’s collective psyche in a big way. First, CEO Tim Cook was grilled by congress over how the company skirts US income taxes. While Apple broke no laws, the company still got targeted for its complex tax avoidance structure. We think this news couldn’t be any less material, especially since literally thousands of other companies use similar tactics. In our view, Apple was singled out because it’s one of the largest companies in the world. The hearing is nothing more than a silly sideshow, and we doubt it will amount to anything more than a few weeks of headlines.
On the other hand, Cook spoke on a variety of topics at the All Things D Conference earlier this week, and we believe he unveiled some of Apple’s plans for the future. For one, Cook prominently displayed his Nike (click ticker for report: ) Fuel Band, noting that there is a strong future for wearable technology. The big implication here: iWatch. Although we admittedly have no edge in what the iWatch may include, we think it may capitalize on the growing trend in biometric and personal data monitoring, as well as syncing with other Apple devices like iPhones and iPads.
Image source: PC Mag
Biometric monitoring is still in its infancy, but its growth is real. The Nike Fuel Band, as well as the various Nike athletic watches allow users to monitor calorie output, steps, distance, and even GPS. Smaller companies are making strides in the monitoring sphere, with Jawbone (shown above) being one of the best examples. The Jawbone UP system allows users to monitor caloric input/output, distance traveled, and sleep, but we think Apple’s enormous R&D department could create an even better product. The firm is digging into flexible displays which might make the product more physically resilient than the Nike Fuel Band. There aren’t readily available sales figures on either product, but we see both growing in popularity. Phone apps like Moves, Sleep Cycle, and MotionX have received wonderful reception, and we think demand for these health monitoring products will grow as consumers become more interested in the power of data tracking.
Of course, this presents an odd conflict of interest. Cook sits on Nike’s board and is privy to inside information for both companies. Could the iWatch have Nike Fuel integration? We think so. In fact, we wouldn’t be surprised if the two ended up collaborating on the iWatch or on other biometric monitoring devices.
Cook also criticized Google (click ticker for report: ) Glasses, which is no surprise given that the companies are bitter rivals. Cook declared it a “niche product,” and we don’t necessarily disagree. However, we wouldn’t put much credence in what a CEO says about another company that people perceive as the better innovator. Admittedly, Google Glasses look awkward, but there have been plenty of absurd fashion trends before.
Oddly, Cook noted that the company isn’t interested in getting into the content business, though he did express interest in the TV market. The price of content may be expensive at this time, but we believe owning content is a great strategy for increasing a firm’s competitive positioning. Imagine if Apple usurped DirecTV’s (click ticker for report: ) exclusive Sunday NFL Ticket package, forcing NFL fans to purchase an Apple device to see the package. It could be a profit windfall for the company, and Apple is one of the few companies that could afford to do it.
Another interesting revelation during the conference focused on form factors. The myth of the “phablet” dominating the iPhone has been prevalent ever since Apple’s stock started to fall off its all-time highs, but even Samsung caved, unveiling a Galaxy S IV Mini. From what we heard, we believe Apple hasn’t ruled out different iPhone sizes for future product generations. Again, we have no inside on what the future may hold, but the lineup may look similar to what we saw from iPods, which expanded beyond the classic design to the Shuffle, Mini, and eventually the touch.
Ultimately, Cook didn’t deliver as many quotable moments as the late great Steve Jobs, but we came away from the talk feeling a bit more reassured about the company’s future. Given Apple’s fantastic execution since the days of the iPod, we feel the company is well-positioned to deliver more game-changing products. We continue to hold Apple shares in the portfolio of our Best Ideas Newsletter.