1 Major Key to Apple's Future


What Apple (NAS: AAPL) has accomplished in the past decade is nothing short of remarkable. The company redefined music players, revolutionized the smartphone, virtually invented the tablet market, and managed to grow its share of the PC business in the process.

But now that Apple is the largest public company in the world it has become far more complex and the target on its back is much bigger. Google (NAS: GOOG) has built a mobile platform that now has more market share than Apple, Microsoft (NAS: MSFT) and Intel (NAS: INTC) are teaming up to make a run at the iPad, and foreign companies like Samsung are improving their products to the point that they may be better than Apple's.

So what will keep Apple ahead in years to come? In my experience as someone who has a Mac, iPhone, iPad, Apple TV, iPod, and AirPort Extreme, it's not the products themselves that will keep me with Apple, it's the iCloud that has now become most important.

The wow factor is gone
Apple used to wow crowds at product launches. The iPod Nano was amazing when it was introduced and just five years ago the iPhone blew people's minds. But in the past few years the wow factor has been missing. The iPad was cool, but our expectations had gone through the roof by that point and Apple wasn't redefining our expectations the way previous devices had. Simply put, Apple and the tech industry have raised the bar so far that it's hard to fly over it at this point.

This is important for a couple of reasons. First, it allows competitors to catch up when you can't make a giant leap forward with every generation of your product. Second, customers become more demanding as older features become the norm.

For example, the iPhone has never been a great phone, but I can overlook that because it does everything else well. The Mac doesn't integrate well with a lot of programs, including many made by Microsoft, but I can get around that if it works flawlessly for day-to-day activities. But if Apple isn't going to wow me with products these deficiencies become more important by the day.

Samsung, Google, Microsoft, and others haven't helped by creating products that are almost as beautiful as Apple's. If you were new to the smartphone market it would be easy to argue that a Samsung Galaxy S II is actually better than the iPhone in a lot of ways. The same goes for tablets, computers, and music players as well. And smooth integration, once Apple's calling card, is becoming harder to do.

Smooth integration is becoming more complex
When I made the switch to a Mac almost three years ago, there was a woman at the store who said the best thing about Macs is that they "just work." After slowly watching my Dell PC become a paperweight, all I wanted was a computer that could access the Internet, run Word, and hold my pictures and music so something that "just worked" was perfect. The Mac was perfect for me because everything integrated nicely and the speed with which everything worked was light-years better than my old computer.

Fast-forward to today and I'm becoming increasingly frustrated with my Mac and Apple's own software. For example, I think iWork's Numbers is a great program, better than Excel for the novice user, but why is it the slowest program on my computer?

iPhoto isn't much better and this is one of Apple's flagship programs. It's slow on the Mac and now that I have iPhoto on my iPad I find the integration between them to be clumsy at best. Some features are available on one, but not on the other, organizing photos isn't easy, it doesn't always sync the way I expect, and good luck finding a photo if you want the actual file. This might be user error, but Apple used to be so simple that even someone like me didn't have to think too hard about integrating correctly.

My point here is that Microsoft used to be hated because it added so many features and capabilities to the PC that it bogged down day-to-day usage, leaving an opening for the Mac. Apple seems to be falling into the same trap as more customers ask for capabilities and engineers at Apple provide them. Integration is no longer the selling point it once was.

The iCloud is key
This brings me to what I think is the key for Apple going forward: the iCloud.

Despite my increasing frustration that Apple's products aren't as seamless as they used to be, I'm locked in because the iCloud makes extra Apple devices easier to own. I can get all of my music and apps to all of my devices, my Calendar and notes are updated instantly, pictures sync between the three, and I don't have to think about the storage the way I would with other services.

Portals like Google and Yahoo! will no doubt make all of this easier in the future on multiple devices but for now Apple has its hooks in me. Where Google and Yahoo! may be able to stand out is the ability to integrate millions of free email users with things like calendars, messenger, stock quotes, news, and other services in one place so Apple can't stand pat.

If Apple is going to stay ahead of the game it is going to have to stay ahead not only on devices, but on services as well. The iCloud is key to the future and improving integration between all of Apple's devices will be important.

Apple has led the revolution into smartphones and tablets, but who will lead the next trillion-dollar revolution? Our analysts think they have the answer and reveal it in a free report that can be found here.

At the time thisarticle was published Fool contributorTravis Hoiummanages an account that owns shares of Apple, Intel, and Microsoft. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdingsor follow his CAPS picks atTMFFlushDraw.The Motley Fool owns shares of Google, Intel, and Microsoft. The Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Intel, Apple, Microsoft, and Google.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Microsoft.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. 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.

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