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    Home»Opinion»Duncan McLeod»Big iBoots to fill

    Big iBoots to fill

    Duncan McLeod By Editor31 August 2011
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    [By Duncan McLeod]

    Steve Jobs announced last week that he was stepping down as CEO of Apple, the company he co-founded in April 1976. But what was his greatest achievement, if it wasn’t the Mac, the iPod, the iPhone or even the iPad? It was the powerful ecosystem he built around those products.

    Apple’s rise to prominence in the past 15 years has been phenomenal. From being months from bankruptcy in the late 1990s, when Jobs returned, the company recently overtook Exxon Mobil — despite high oil prices underpinning the energy giant’s valuation — to become the most valuable company in the US.

    It’s even more extraordinary when one considers that by most investment measures, Apple’s share price is far from overvalued. Remember, this is a large company that is more than doubling its earnings year on year. Unsurprisingly, many US analysts have “buy” recommendations on the stock and have valued it far above its current share price.

    The rise of the company started with Jobs’s return and the introduction of the iMac, the colourful, all-in-one bubble-shaped computer that grabbed the attention of consumers in a world where grey and boring PCs running Windows 98 dominated the landscape.

    But it wasn’t until Jobs unveiled the first iPod digital music player in October 2001 that Apple’s share price began its decade-long march upward to the point where it is worth more than US$360bn. Stealing a march on Sony, which had dominated the earlier era with the Walkman tape and CD music players, Apple tapped into digital music formats.

    More importantly, under Jobs’s direction, the company launched the iTunes Store, a convenient way for consumers to buy music online. At the time, 2003, peer-to-peer file-sharing services like Napster, which consumers used to pirate music, dominated news headlines. The record industry faced a bleak future and Jobs provided an avenue to legitimise online music and rescue the labels from their predicament. It rapidly became the biggest source of legal music downloads in the US and, last year, sold its 10 billionth song through the platform.

    With the introduction of new products such as the iPhone and, more recently, the iPad tablet computer, Apple continued refining the store, offering consumers application downloads (through the App Store), movie and TV purchases and rentals and reinventing the way consumers buy media, all within a controlled and managed ecosystem.

    The approach of selling a limited range of well-designed and highly desired products was key to Jobs’s success at Apple. But the way the company ties the software that powers its computers and devices to a powerful back-end ecosystem has arguably been Jobs’s crowning achievement.

    The model has its detractors, who argue the closed approach limits choice — and the jury is still out over whether it will work in the longer term. The question is whether, as in the PC era in the 1980s and 1990s, Apple will be relegated to a marginal player.

    This time around, Apple is far more powerful than it was in the PC’s heyday. Today, the iPad controls more than 70% of the tablet computer market and the iPhone still owns almost a third of US smartphone sales, though it is losing ground to devices powered by Google’s Android.

    With powerful competitors lining up against it — not least Google and a reinvigorated Microsoft — Apple is going to have to keep churning out the hits to maximise its ecosystem. With Jobs no longer at the helm, attention will shift to new CEO Tim Cook, for years Jobs’s right-hand man at the company. His success is not assured, but there’s no doubt that Jobs is leaving him a great platform on which to build.

    • Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
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