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One Big Step for Apple, One Giant Leap for the IoT Movement

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During my leadership class in my MBA Program, I was given an interesting assignment by my leadership professor which involved researching a potential mind-boggling invention that will be part of our daily lives far into the future.  The second part of the assignment was to take our research and create an inspiring marketing piece.    Thus, I combined solid research skills with my wild imagination and found a website called FutureTimeLine.Net.    This website predicted that anti-gravity propulsion will become so commonplace that it is possible that we may have flying cars by 2079. For a more poignant conclusion to my piece, I pointed out the potential inevitability that we live a life similar to the Jetsons. While I’ll continue to hold my breath on flying cars, Apple’s ($AAPL) latest game-changer may place the Jetsons lifestyle within reach a lot sooner than 2079. This week, Apple introduced its upcoming HomeKit innovation at its Worldwide Developers Conference.

The Apple Homekit app has a common interface that will allow the iPhone or iPad to play the role of remote control for one’s own home.   Home accessories such as garage doors, lights and webcams can be integrated and accessed through the HomeKit Application.    Siri integration is also included in the application. The HomeKit allows for greater unification in the smart home process.    HomeKit allows your home devices to be arranged into different “scenes” once the devices have been integrated into the application. Before bedtime, a user can say to Siri “Go to Bed” and the iPhone will turn off the thermostat and key lights in the home while making sure the garage door is locked.    This was an example pointed out by Craig Federighi, Apple’s SVP of software engineering. Certainly, one can imagine several household scenarios that it could be deemed beneficial to have key devices operating strategically at the same time.    If the wheels are not spinning in your head as you are currently reading this, it should.

Of course, there are still questions that Homekit has to answer with regards to security.  Federighi has alluded to the fact that they have developed an intricate security process.   We shall see if this is so.

With this move, it appears as if Apple has started the process of shifting its focus beyond the smartphone market. Given that Internet of Things devices are expected to outpace the number of smartphones very soon, one cannot blame Apple for such a pivotal maneuver. As I have covered previously, there is plenty of evidence to suggest that the Internet of Things devices are on the rise and that the momentum of the smartphone market is slowing down.   According to Business Insider Intelligence, there are 1.9 billion dollar IOT devices today and 9 billion IOT devices expected by 2018.  In 2018, the number of IOT devices are expected to equal the combined total of smartphones, tablets, PCs computers, wearable computers.   The graph can be seen below:

gintdevice - bii

According to IDC, 1Q 2014 worldwide smartphone market share fell by -0.7% from last quarter to a total of 287.8 million dollars.   Android continued to capitalize on its efforts to capture volume by tapping into the low end of the smartphone market.   Android’s 1Q 2014 market share increased by 5.8% to a total of 81.1% from the first quarter of 2013.   On the other hand, Apple’s iOS market share fell by 1.9% to 15.2%.   Largely, this was due to a seasonal downturn after the holiday season.    In spite of its market share, Apple managed to take 65% of all handset profits for the entire cell-phone industry. Thus, Apple is still clearly miles ahead of other competitors in terms of margin. Apple’s venture into the Internet of Things space  puts them a couple of notches ahead of Google in the race for supremacy in the space.

Google’s acquisition of Nest Labs allowed the stalwart to have a small taste of the proverbial smart home via a thermostat.   Apple’s HomeKit App allows the thermostat to be one of many devices that could be potentially operated simultaneously in order to commence momentum towards an inevitable smart home. It will be interesting to see how Google counters Apple’s latest move.   As for now, Apple’s latest app may hasten the arrival of the IoT movement  in mainstream society.

Andre Waldron

Andre Waldron is the founder of Market Eyewitness. He provides financial analysis and commentary on equities, economic indicators, industries and mutual funds. In addition, Andre Waldron is also a contributor to Seeking Alpha as well as The Street.

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