Will Resurging Microsoft Affect Apple?

  • Microsoft's October 6th Keynote showed promise for the company's future.
  • Rumors of an 'Apple Car' sent stock shooting up.
  • Apple's acquisitions show that they are building for long-term growth.

On October 6th, 2015, Microsoft (NASDAQ:MSFT) showcased a range of devices running Windows 10 which drew the admiration of top journalists. The biggest takeaway from the event was Microsoft's ambition to stay ahead of competitors- something they have arguably failed to do in the past. Plus, we saw a Microsoft focused on both hardware and software. It is worth noting that as the Microsoft event went on, Apple (NASDAQ:AAPL) stock suffered a drop; however it has since bounced back strongly (more on that further down)  With Windows 10 running devices likely to flood the market-where does that leave Apple and its investors?

Ecosystem

Apple has such tight control of its entertainment delivery network that it is going to be challenging for Microsoft to compete on this level. Approximately 1 billion downloads have been registered on the Apple app store while the figure for the Windows app store isn't even close. Moreover, due to the fact that Windows is delivered to manufacturers with their own entertainment ecosystems, Microsoft is unlikely to ever have 'one app store to rule them all'.

Secondly, Apple continues to find ways to grow its ecosystem. For instance, Apple Pay is available in 375 banks, and there is a gradual global rollout. Apple Music was launched to compete with Spotify, and although it lags way behind, there is room for Apple to grow.

On the other hand, Microsoft's Xbox Music offering hasn't enjoyed the same market penetration.

Innovation

Although Microsoft showcased an innovative virtual reality headset named 'Holo Lens', as is frequent with Microsoft prototypes we still don't know when it is going to be launched. Interestingly, they decided to showcase Holo Lens interacting with games. However, it was a big opportunity to endear the profitable science-and-tech-industry by showcasing solutions for them.

On the other hand, Apple hasn't given the world something, which causes us to reminisce about the buzz surrounding the first iPhone or the Macbook air in last few years. However, in the eyes of the everyday consumer, Apple still makes highly desirable products. For instance Apple sold 47.5 million iPhones in Q3 of 2015 alone, and 500+ million iPhones have been sold overall. And after record breaking sales by the iPhone 6s, Apple is gaining ground in the huge Chinese smartphone market.

Additionally, Elon Musk, Tesla Motors CEO, triggered a frenzy of rumors surrounding the 'Apple Car' by stating that Apple is hiring some of his engineers. This proclamation caused Apple's stock to shoot up 2.37%. Investors know that not only does this signal Apple's intention to enter the lucrative autos industry, but it may also signal an intention to be more than just a consumer tech company.

Plus, looking at the brand perception Apple enjoys, investors are almost certain that a car with an Apple logo could- if priced well- become the most sought-after vehicle on the planet.

Acquisitions

Microsoft has a long list of acquisitions, a significant number of which we are yet to see being integrated into their products or services. It is worth noting that if Microsoft were to take their time to strategize, and integrate their acquisitions more, they would probably be a force to be reckoned with.

Apple has a considerably smaller set of acquisitions; however, they seem to be more carefully selected as compared to Microsoft. For instance, Apple acquired Beats in Q3 of 2014, and have already integrated it into Apple Music. Moreover, due to the youthful brand image of Beats, this acquisition is likely to be one of their wisest.

Conclusion

In conclusion, it can be argued that Microsoft's keynote earlier this month was highly impressive, and showed a strong intent not to get left behind. However, as is the case with a lot of Microsoft's product announcements, a considerable period of time passes before the product is up for sale. For example, Holo Lens was announced in January of 2015, yet developers are going to get their hands on it early next year; therefore, a release date is anyone's guess. This type of action reduces the buzz by the time the product finally launches, causing a necessity to spend a lot of moeny on advertising.

Apple has a strong brand image, and makes highly desirable products. And this is partly why their stock is likely to perform well in the longterm. Microsoft is resurging, and if its next keynotes are as well received as the one on October 6th, they would be a strong contender.

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