Is Apple Wise To Reject Converging IOS And OSX?

  • Apple's CEO, Tim Cook mentions in an interview that converging iOS and OSX into one device isn't feasible for the company at this present time.
  • There are some solid reasons why a convergence might boost sales and stave off Microsoft's advancement.
  • A device which converges iOS and OSX arguably goes against Apple's business model.
During a recent interview with the Irish Independent, Tim Cook mentioned that Apple (NASDAQ:AAPL) has no plans to converge iOS and OSX into one device. Interestingly, hybrid devices seem to be the next generation of mobile computing. Plus with iPad sales declining, a hybrid device could boost sales. Saying this, one can see the reason why Tim Cook decided to make this move.

Firstly, a hybrid Apple product is likely to reduce sales across Apple's product line. After all, why get an iPad or Macbook when you can get both in one? And Apple's business model is built around making consumers want to buy into the ecosystem of products and services. Therefore, a one size fits all approach doesn't bode well.

Saying this, Apple recently launched the iPad Pro, which has desktop like internal components, a large screen, and functionality which puts it head-to-head with the Surface tablet line of products. I am going to stick my neck out and state that the iPad Pro is Apple's way of 'testing the waters' to determine how well received a hybrid product will be. After all, at $799 at the low-end, the iPad Pro is certainly not a mass market device.

Consumer pressure might 'force' Apple into creating a device that converges iOS and Mac OSX. Here are the reasons why:

1) Microsoft's Windows 10 was clearly built with convergence in mind. In fact, The metro UI is arguably more suitable for a tablet than it is for a desktop. And Microsoft (NASDAQ:MSFT) is encouraging their partners to increase their hybrid product lines. It is hoped that this will push the idea of something along the lines of: "Why buy two devices (tablet+laptop) when you can buy one.

2) iPad sales are declining and a converged device sprinkled with a bit of Apple marketing magic can boost sales and increase revenue.

3) In the perpetual battle for developer support, a converged device might allow Apple to win the battle over Microsoft. The chance to create one app and have it available on mobile and desktop platforms could prove irresistible. Moreover, the fact that Apple users spend 4x more on apps- as compared to Android users, means that developers can make more money.

On the other hand, Apple might not need to converge iOS and Mac OSX into one device, and here is why:

1) When it comes to revenue, Apple aren't exactly on their hands and knees. They have reported an impressive growth at 29% compounded over the past 5 years. And with their foray into the growing middle class in the Asian market, expect it to grow significantly next year. Additionally, Apple can claim

2) Mac sales are still going strong, and they are unlikely to want to jeopardize that.

Conclusion

In conclusion, Apple continues to grow from  strength from to strength. Admittedly, changing consumer needs might put pressure on Apple to bring the two operating systems together into a device which offers the best of both worlds.

From an investor's perspective Apple remains a stock which outperforms its industry on key metrics; for instance, a price to earnings ratio which stands at 12.8x,which is against the industry average, emphasizing its industry-leading status.

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Comments on this article and stock

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dmarinescu
neutral
very wise, your comment is inspired by gogle, which is not a software company, nor they have their own destop os
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abdulj
neutral
I believe the piece was 'inspired by' Microsoft. And Google does have a desktop OS (Chrome OS). Moreover, Google is a software company; albeit in the cloud.
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