Apple iOS 8 – No silver bullet

iOS 8 is not going to solve the long term services problem.

• Apple’s hardware and its ecosystem are world leading but both of them are being slowly replicated by competitors.
• Only apps and services that are exclusive to Apple will allow it to really differentiate in the long term and of these there is little sign.
• What there is today does not cover Digital Life very well and many of the services such as Apple maps and iCloud are not as good as alternative offerings.
• Hence, there is some hope that iOS8 will go some way towards addressing this issue but the rumour mill is not particularly encouraging in that regard.
• First, Healthbook.
• This is a service that tracks and aggregates health related data such as blood pressure, heart rate, blood pressure and health history in one place.
• It is in effect a medical record that the user carries around and updates as things change.
• The problem with this is that the user will have to input and maintain all the data manually making it cumbersome and labour intensive to use.
• Unless this can be automated and made cool and fun in some way, I can’t see this being of much interest.
• Second: Apple maps.
• A big update to this service is expected and it is hoped that this will bring it into line with Google Maps and Here.
• I think that this is extremely unlikely.
• Maps are not rocket science. They are labours of love.
• On average it takes 6 years, 6,000 people and $600m in annual OPEX to create a good map and I am convinced that Apple is investing a fraction of the required amount.
• Hence, I suspect that Apple is still miles adrift of Here and Google and I remain unconcerned their edge is about to be eroded.
• Third: iTunes Radio.
• iTunes radio is expected to be moved into its own application to boost its recognition and support.
• This will do little to improve its user experience when compared to Pandora, Deezer, Spotify and so on and so I expect that users will continue to use the services to which they like and to which they have become accustomed.

• All of these services have one huge advantage in that they will be embedded in every device that ships and will be set as the default services.
• History has shown that this is a huge advantage and usage of Apple maps has improved meaningfully as a result of this factor.
• This will go some way in addressing the functionality and coverage shortfall but it will allow Apple to maintain premium pricing for hardware.

 Take home message

• While iOS8 looks like it will be a solid update, it will not fix the longer term problem that Apple faces.
• Apple needs to come up with innovative and fun ways for people to live their Digital Lives on Apple devices that cannot be replicated elsewhere.
• Failure to do this means that margins are likely to steadily erode to around the 10% level over a number of years. (RFM estimate).
• In the short-term the outlook is stable and I am hopeful that the iPhone 6 will bring Apple back into contention with Samsung, HTC, LG and others in terms of hardware specification.
• The Apple story is well known and fairly priced. There are much more interesting places to look such as Yahoo!, Google and Microsoft.