Apple in Review: Tech Struggles, Office to the iPad?
As the largest company in the world, there's no shortage of news surrounding Apple (NAS: AAPL) on a weekly basis, and this week had some particularly interesting stories. Let's check in on a couple of news items Apple investors should be keying in on.
Struggles in tech land
After Cisco (NAS: CSCO) first warned of weakening tech spending when it released earnings on May 9, tech earnings have progressively gotten worse and worse. This week, Dell (NAS: DELL) was the latest notable victim. The company's operating margin in consumer devices has slid all the way to 1.1%. Compare that to the operating margin of 39.3% Apple posted last quarter.
The question for Apple investors is whether weak tech earnings say anything about Apple itself. On one hand, a struggling economy matters. Apple's slowest growth rates across the past five years came during the first three quarters of 2009. With headwinds facing global spending -- Europe and China are now in focus -- that could affect geographic markets seeing some of the highest growth rates over the past half-decade at Apple.
On the other hand, Dell's struggles are largely because of Apple. The company mentioned struggles due to "alternative devices" and mobile. Put in non-corporate Dell speak, they don't have a competitive smartphone or tablet to compete with iPhones and iPads. The more Apple dominates, the more it encourages competitors to "give up" on spaces where they can't make a beachhead.
Second, we saw a similar scenario play out last summer, except instead of Europe in focus it was the U.S. and its debt standoff. Companies like Cisco and Dell screamed of slowing tech spending, but after a slowing September quarter in which consumers were waiting for the next iPhone, Apple pulled out of the situation just fine.
Office, on the iPad?
AppleInsiderthis week reported that Microsoft (NAS: MSFT) was bringing a native Outlook Web App to the App Store. Many users would welcome a new native email client for Outlook, so in and of itself that's an interesting report. However, the broader implication of Microsoft developing for the App Store could be the more important long-term impact.
There have been rumors of Microsoft developing Office for the iPad for over a year. Boy Genius Report cited a source this week once again claiming Microsoft was developing Office for iOS this fall. While past reports have centered around iOS development, the Boy Genius Report informer also says there's a version in the works for Google's (NAS: GOOG) Android.
I think such a move would be a net positive for Microsoft. It would be "last decade" Microsoft thinking to hold back Office as a means of preventing the spread of tablets. The change is coming whether they like it or not. The company would be best off getting the incremental revenue stream off Office, and knowing that almost every Office app sold would be complementary to a PC version instead of a substitute.
As far as Apple goes, it's obviously a win for them as well. If Office does see release only on tablets, that's a space where Apple has a huge lead over Android. Cisco killed off its Cius tablet this week citing employees bringing their own tablets to work -- the long-running theme of the consumerization of IT. Having Office on the iPad would just cement its status as a tablet that's powerful not just with consumers, but as a business tool as well.
A better idea than Facebook
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At the time this article was published Eric Bleeker owns shares of Cisco. The Motley Fool owns shares of Google, Cisco Systems, and Microsoft. The Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple, Google, and Microsoft.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Microsoft. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.