Apple's Recent Success A Harbinger of IT's Future: Analyst

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Apple’s iPad has proved to be a smash hit following its debut last month, reportedly selling over 1 million units of the tablet PC even faster that it was able to sell 1 million units of its megahit iPhone. But you ain’t seen nothing yet, according to analyst Phil Leigh, publisher of the Inside Digital Media newsletter.

IDM’s just-released Future of Apple market research report predicts Apple (NASDAQ: AAPL) is on a fast track for mega-growth that will carry it past $100 billion in annual sales in less than five years.

That estimate only accounts for Apple’s current product lines, with IDM predicting new products and services pushing revenue and profits even higher. Apple reported $13.5 billion in revenue and net income of $3.07 billion in its most recent quarter.

If Apple grows as IDM predicts, the impact will affect both consumers and competitors. Just as the iPhone energized the sleepy smartphone market, IDM said “most any business affected by the future of media will be directly impacted by Apple’s future innovations.”

Apple has traditionally enjoyed higher profit margins and more specialized products than its competitors.

For example, the Macintosh line is now limited to a few desktop and mobile models and the iPhone is essentially one model with different storage options (though the iPod Touch and iPad could be considered extensions of the line). But the growing number of Android-based phones and mobile devices are still considered a prime threat to Apple as they promise to address a much broader range of price points and form factors.

Android may continue to do well, but Leigh said it will not marginalize Apple the way Microsoft (NASDAQ: MSFT) and its many PC partners did in the 1980s and 1990s. Leigh argues that Apple’s vertical strategy of controlling both the hardware and software will win out.

“It’s really more a hybrid strategy because Apple controls the software platform but lets developers bring innovation via the App Store,” Leigh told InternetNews.com.

Conversely, Leigh predicts Android’s more horizontal approach and openness will be its undoing.

“One of the top two reasons people buy Apple computers is to escape the viruses and malware on Windows computers,” he said. Leigh predicts that as much as Google and the rest of the Open Handset Alliance partners behind Android will invest to keep the platform secure, its relative openness will make achieving that level of security difficult.

“Android’s openness will motivate a lot of innovation and opportunities for profit, but with that will come plenty of opportunities for fraud because it’s so open,” Leigh said, adding that Apple’s other big edge continues to be the fact that it provides a superior user experience.

What’s coming next from Apple?

While Apple’s clearly established itself as force in mobile, another key aspect of Leigh’s bullish forecast are products not yet in Apple’s pipeline.

“We think Apple will become quite active in the digital living room,” he said. “Apple TV is only the beginning.”

“We’re not disputing Apple’s strength in mobile, but the digital living room is a $220 billion opportunity we don’t think they’re going to ignore,” he added. “If they don’t move on it, they forfeit that market to Google.”

Apple officials did not immediately return a request for comment.

Beyond the enormous profit potential Leigh sees the iPad bringing to Apple, he thinks the device also has major implications for the IT industry.

“Apple popularized the graphical user interface and mouse, but now you can see how the iPad and touchscreen interface is radically changing the way we interact with mobile devices,” he said. “The iPad is going to significantly change the way people consume media where they work and in meetings.”

The Future of Apple report costs $1,997 and is available for download at the Inside Digital Media site which also features an audio podcastof the prospectus.

David Needle is the West Coast bureau chief at InternetNews.com, the news service of Internet.com, the network for technology professionals.