Apple Inc.: Why This Tech Is “Strategic” to AAPL Stock

An Important Foundation for AAPL StockAn Important Foundation for AAPL Stock

The “iPhone” is far and away the most famous Apple Inc. (NASDAQ:AAPL) product ever made, followed distantly by the “iPad.” But there is another device which has helped fuel AAPL stock.

I’m talking about the original “Mac” desktop computer.

An industry-wide slump in desktop sales convinced many analysts that home computers were a thing of the past. But the truth is that they still play a vital role in the Apple ecosystem, something that CEO Tim Cook made clear in a recent note to employees.

In his note to staffers, Cook addressed worries that Apple was phasing out the “iMac.” Many observers had noticed that Apple had not upgraded the iMac software in 430 days. Naturally, this kick-started speculation that Apple would scrap the aging hardware altogether.

But Cook brushed aside those rumors. He reminded everyone that iMacs are “very strategic” to Apple’s overall structure, not to mention the future of AAPL stock. (Source: “Apple is working on some ‘great desktops,’ CEO Tim Cook promises,” Business Insider, December 20, 2016.)

“Some folks in the media have raised the question about whether we’re committed to desktops,” wrote Cook. “If there’s any doubt about that with our teams, let me be very clear: we have great desktops in our roadmap. Nobody should worry about that.”

Despite their shrinking importance on the income statement, desktop computers are still a part of everyday life. For many people, they are essential for work. But more to the point, iMacs are a crucial part of the Apple ecosystem.

The bulk of Apple’s revenue comes from iPhones; that much we know. But what is it that keeps Apple lovers buying more Apple products? Why don’t they have an Apple iPhone, a Samsung Electronics Co Ltd (KRX:005930) tablet, and a Hewlett Packard Enterprise Co (NYSE:HPE) laptop? What is it that motivates them to stay within the Apple universe?

Unsatisfying as the answer might be, it’s because Apple offers a device for every experience. If you need a smartphone, get an iPhone. Need a laptop for work on-the-go? Get a “Macbook” or an iPad. But, if you have a permanent workstation, get an iMac as your desktop computer.

It’s this seamless suit of armor that made AAPL stock impenetrable. The closed loop of hardware products was underlined by distinctly Apple-centric software. They didn’t want you buying outside the Apple universe, so they made it difficult to integrate with outside hardware.

This is what Tim Cook meant. He understands that Apple’s hardware lineup is a chain-link fence that keeps out the competition. If they remove a single piece, like the iMac for instance, rivals could invade their market share. And that would most certainly be bad for AAPL stock.