Thursday, January 15, 2009

E-Summit 09: Day 1: Epilogue (Part XII + I)

We all applaud Mr. Jobs for his innovative work at Apple but even he has made mistakes. He launched the first iPhone with a faulty price plan. He has struggled to get television shows and digital movies to the mainstream. He was probably 10 years late in getting Windows on the Mac. There is no doubt that he is a creative genius who produces top notch products but the scoreboard shows that no Apple product, beside the iPod, can claim even 10% global market share.

What Steve Jobs has done is laid the foundation for Apple to grow, with or without him, for the next generation. Nobody who buys this stock should be buying it because of Steve Jobs. This story is much larger than one man. Apple is protected by rigid barriers to entry. Do you realize how difficult it is to crack into the computer operating system market? I'll use the word impossible.

Microsoft (MSFT) has created such an OS monopolistic ecosystem that it has become impossible for any competitor to get compatible software written for their start-up. Apple was smart/lucky enough to maintain a niche group of loyalists who used the Mac OS through the generation of Microsoft's growth phase. That was so vital to their success because there were always just enough users to warrant software development for the Mac platform. Good luck to any company who wants to try and launch a new OS, there won't be any software to run. We happen to live in a time when computers and phones are more than just gadgets; they have become essential elements of business and social society. These devises are more of a necessity to us than cars, clothes, and according to the latest data, even religion. Not a bad era to have the only OS in town.

Microsoft's folly with the Vista release has allowed Apple to become a mass market share player. In the most recent Net Applications Survey Apple's share of the operating system market grew 5.69% in May to hit a record 7.80%, while Windows in all its flavors dropped half a point to 91.17%. That's a record low for Microsoft, which nonetheless still runs on 9 out of 10 computers on the Internet. This trend has taken years to develop and Apple is about to reap the rewards, with or without, Steve jobs. He has set something very powerful in motion that not even he can stop.

Apple's use of Leopard on the iPhone will cause every $199 iPhone user to become comfortable with the Mac system. If you thought the iPod had a nice halo effect for Mac Computers just wait for the iPhone halo. Apple's OS provides the solution for modern day touch screen technology and mobility.

Apple is the next Microsoft but they will be even bigger because they dominate the hardware as well. Legendary investor Warren Buffett says, "In business I look for economic castles protected by un-breachable moats." Thanks to Steve Jobs' reluctance to outsource the Mac OS, Apple is perched in the protected castle. His company will live on much longer than he. It's time to come to terms with the fact that Steve Jobs won't live forever and that doesn't change the fact that Apple has the best fundamental growth story in the world.
-- Dominique Trempont

With this, E-Cell concluded first day of the E-Summit. The audience stood up in applause, visibly dazed after such an enlightening session. We, here at IIT Kharagpur, remain truly indebted to the respected speakers for giving us their valuable time. The day was far from over though. Sramana Madam and Dominique Sir were surrounded by budding entrepreneurs from the audience, whom they were gracious enough to answer despite their tight schedule. They were also very generous in allowing E-Cell to use/distribute the slides freely. Sramana Ma'am also left us with a copy of the first volume of her series on demystifying Entrepreneurship, Entrepreneur Journeys, which I hope to get my hands on.

Till then, lets just call it a day and continue with our present journey, with E-Cell, IIT Kharagpur. The Summit has just begun... see you on Day 2!!

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