Apple (Nasdaq: AAPL) Takes Aim at Rivals at WWDC

Apple Inc. (Nasdaq: AAPL) did not unveil any sexy new hardware at its annual developer's conference today (Monday), but what was discussed tells us a lot about the company's long-term strategy.

The keynote at the Worldwide Developers Conference (WWDC) focused almost entirely on features that will be included in the next version of the Macintosh operating system, Mac OS X "Yosemite," and the next version of the iPhone/iPad operating system, iOS 8.

Both will be available as free downloads later this year.

AAPLWith the mainstream media having unrealistically raised expectations, investors pushed AAPL stock down about 1% through the course of the two-hour event, although it closed down just 0.69%.

But in the disappointment over what Apple didn't say, many observers are missing the significance of the changes and new features the Cupertino-Calif.-based company did announce.

Those features show that Apple is well aware of the competition posed by its rivals, chiefly Google Inc. (Nasdaq: GOOG, GOOGL) and Samsung Electronics (OTCMKTS: SSNLF), but also Microsoft Corp. (Nasdaq: MSFT) and Amazon.com (Nasdaq: AMZN).

The primary theme of the WWDC keynote was improved integration, with Apple devices running the new systems better able to share and update content seamlessly via "the cloud" as well as simply by being near each other.

As Apple Chief Executive Officer Tim Cook has watched rival hardware makers using Google's Android copy the iPhone and iPad, it seems he has realized that trying to stay ahead of the competition by dreaming up more new features that will be quickly copied is not the answer.

But Cook knows AAPL has one advantage that its rivals can't copy, at least not without great difficulty - the company's tight vertical integration of hardware, software, and services.

The WWDC keynote showed that Cook is placing a renewed emphasis on that vertical integration, knowing it's the best way to fight back against Android, which has taken 78% of the global smartphone market and 62% of the tablet market.

Here are some of the most important features unveiled at the WWDC keynote today...

Integration, Integration, Integration

One of the most notable features of the next Mac OS is "Continuity," which leverages a constant connection to the cloud to allow users to move from device to device while working on the same documents.

Edits to a document or photo made on one device show up almost immediately on another.

A similar feature, "Handoff," allows AAPL devices on the same network to "know" what another is doing and lets the user start a task on one and finish it on another.

While these features are useful, they also help lock users into the Apple world. You need to have an all-Apple line-up of devices to get the maximum benefit. An Android phone or tablet won't fit in.

Three rumored features revealed in the keynote also fit into this integration, but expand it in several significant ways.

The HealthKit app is designed to integrate data from lots of other wearable tech health devices into one comprehensive place. Apple has made it easy for such companies to make their devices and software compatible with HealthKit.

The HomeKit app lets makers of "smart" appliances, such as lights, thermostats, door locks, and so on, connect to Apple's HomeKit app, so all of those things can be controlled from an iPhone. Several big names are already on board, including Koninklijke Philips NV (NYSE ADR: PHG), Kwikset, and Honeywell International Inc. (NYSE: HON).

Finally, AAPL said it was opening the TouchID feature on the iPhone 5s to developers, so they could use it in their apps. This opens up a lot of new possibilities for apps that require secure access.

Cook also let loose some salvos against Android in his pitch to keep developers in the Apple fold despite shrinking market share.

WWDC Keynote Shows How AAPL Plans to Combat Android

Cook was armed with plenty of brutal statistics. He noted that 130 million people who bought AAPL devices over the past 12 months were first-time Apple customers.

"Many of these customers were switchers from Android. They had bought an Android phone, by mistake, and then sought a better experience. And a better life. And decided to check out iPhone and iOS," Cook said to laughter.

But of more importance to the developers in the audience was that 89% of the users of Apple's iOS devices are using the latest version of its operating system, compared to just 9% for Android. And Cook didn't even mention the countless versions of hardware running Android.

That kind of fragmentation makes it harder for app developers to write code that will work reliably and consistently on every Android device. That Apple makes just a few variations of its hardware, and its users tend to stay current with the latest operating system, makes life much easier for developers.

Keeping developers in the AAPL fold is key to ensuring that the Apple ecosystem stays healthy, with lots of new apps in the pipeline.

And Apple offered up several other goodies to keep its developers happy. One is called "Metal," a way for game developers to directly access the CPU, the "brain chip," to allow a 10-fold increase in performance.

And the other was "Swift" a new programing language that got the loudest cheers of any of the keynote's announcements. It makes writing apps for both iOS and the Mac much easier.

"You've seen how our operating systems, devices, and services work in harmony," Cook said. "[We offer a] seamless experience for our users that is unparalleled in the industry. This is something only Apple can do."

Will you be upgrading to Apple's new operating systems when they become available? Do you prefer Apple's integrated ecosystem, or resent that it locks customers in? Chime in on Twitter @moneymorning or Facebook.

The WWDC keynote was not the only event of note for AAPL today. This was the record date for the AAPL stock split that takes effect on Friday after the market close. Here's what investors need to know about the AAPL stock split...

About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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