Apple’s (US: AAPL) market capitalisation has just soared past the $2trn (£1.5trn) mark, making it more valuable than all the companies in the FTSE 100 put together. It’s not the first time Apple has conquered a significant milestone – less than two years ago investors were celebrating its breach of the $1trn market cap.
Much of the investment case for the smartphone pioneer rests on its finely tuned ecosystem. Its products exist in almost perfect harmony: a message sent to your iPhone will seamlessly pop up on your Macbook screen while you browse the iTunes store. Documents can easily be ‘airdropped’ via the company’s wireless sharing feature which does not require access to a WiFi network, just two Apple devices that are in proximity to each other. And they probably are: just under half of British mobile-owners have an iPhone, according to data from statcounter.
While the company’s much-revered founder, Steve Jobs, can take credit for Apple’s obsession with premium designs, the product harmony is the work of Mr Jobs’ second-in-command, current chief executive Tim Cook. Mr Cook’s leadership has pioneered the integration of its devices with a new host of services, from music to news to pay, that pull the consumer deeper into Apple’s world.
But in some cases Apple’s walled garden has hurt the technology giant rather than helped it. Take one of the newer additions to the company’s so-called ‘wearables’ range: Airpods, a set of wireless earphones. When the Airpods were initially launched, critics mocked their appearance and the ease with which they might drop out of users’ ears. On the latter point, the skeptics were not wrong – CBS News reported that 104 Airpods, or their charging cases, were lost and retrieved from the New York subway system between July 2018 and July 2019. But the products have been successful – while Apple does not break out specific figures for each product in its wearables division, Mr Tim Cook described demand as “phenomenal” in a call with analysts back in January.
Initially designed for only the iPhone market, users are now able to connect the wireless earphones to smartphones made by other companies like Samsung Electronics (KR:005930) or Huawei. But not all of its features work when paired with an Android: for example, the battery level indicator does not display on the phone screen and users cannot pause audio by simply removing one AirPod from an ear.
This is not the first time that Apple has stopped short of making its products truly compatible with foreign devices. Take the first generation of the iPod – a device that could hold up to “a thousand songs in your pocket”. At initial launch in 2001, the device was only compatible with Apple’s Mac computers, which management hoped would boost laptop sales. But it wasn’t until Apple produced a version that was compatible with Microsoft’s (US:MSFT) Windows software, that sales picked up and iPod customers soared past Mac users.
Apple’s current management should take note. The company’s devices should allow anyone to use them to their full capacity, not just customers who are already embedded in their ecosystem. Those who are already there are unlikely to leave – last year sellcell, an American phone trade price comparison site, found that more than 90 per cent of iPhone users intend to buy another when they next upgrade, and less than a tenth were planning on switching to a new brand.
Allowing users to integrate with other operating systems, such as Windows software, will give consumers who exist outside of the Apple bubble a taste for devices such as AirPods. All the more important as competitors move in on its market share – research firm Canalys found that Huawei beat the Silicon Valley-based giant in the number of smartphones shipped worldwide in the second quarter of this year. If Apple wants to reach these consumers, it needs to make its devices compatible with the operating systems that they use. Otherwise potential customers will be walled off – which is bad news not just for Apple, but for consumers too.
