Apple burnishes while we wait for another breakthrough

Some readers have asked me for a post on the new Apple iPhones announced two days ago. I’ll get to that in time but prefer to do so when I actually have an iPhone 5S in my hands because I have a very specific column in mind. And no, it’s not the column you think it is. But this is still a good time to write something about Apple in general, which is how Cupertino appears to now stand at a crossroads.

There is a world of difference between Microsoft and Apple but one way they are similar is in facing a generational change. Another way they are similar is in having robust legacy businesses that both put a drag on such change (who needs change, we’re doing great!) and make it easy to wait or at least to go slowly. But no matter how much money they have in the bank, each company must eventually come to terms with how it is going to move forward in an evolving market. Neither company has.

Microsoft is in the tougher position because its core business isn’t growing, but Apple can pretty easily plot its own growth and see where that will eventually peak and tail-off, too. Before then there is still room for plenty of growth as Apple enters new global markets and eventually adds all carriers (China Mobile, for example). In Apple’s case I’m thinking of it right now as a mobile phone company, because that’s, for the most part, what it has become.

Following past trends the challenge for Microsoft is what next to copy, for Apple it’s what next to re-create. Microsoft’s job is easier but is made complicated by the company’s innate need to carry with it the entire Windows ecosystem. Yet there are some places where Windows just doesn’t fit. Apple’s challenge is to both re-create and to do so without Steve Jobs. Not wanting to overstate or understate the value of Steve to Apple, I see his role is one of demanding re-creation, which as anyone who knew Steve will tell you has nothing to do with recreation.

Two years since the death of Steve Jobs, Apple is still trying to get its bearings. Plenty is happening in Cupertino, I’m sure, but how much of that will make it to market? There’s a big numbers problem here: Apple has grown so large that its options for new businesses are limited to those that can add tens of billion in sales. Selling six million Apple TVs in a year is still a hobby to Apple, because that’s only $600 million.

To some extent I think Apple has been treading water or has even been indecisive, but I don’t attribute that to Steve’s passing. I believe it was already happening back when Steve was fully in charge. Secrecy, you see, can hide a lot of things, even nothing when the world wants to believe that something is there.

You may recall I wrote a column a couple years ago about Apple’s huge North Carolina data center. This was just before we moved back to California. In that column I questioned whether anything was even happening in the $1 billion facility since nobody was driving in or out. It seemed overkill to me. Then recently a longtime reader (and you know with me longtime means a long time) told me about meeting a representative of the company that built all the servers in that Apple data center -- all 20,000 of them.

Twenty thousand servers is a lot of servers. It’s certainly enough servers to run iTunes and Apple’s various App Stores as well as Software Update. Twenty thousand servers feels about right for the Apple we know today. But my friends who build data centers tell me that Apple facility in North Carolina could hold a million servers or more. The data center appears to be only five percent populated.

It’s one thing to build with the future in mind, but building a facility twenty times bigger than you need is more than that, it’s a statement, an obfuscation, or maybe it’s a joke.

For a company with a $600 million hobby, why not a $1 billion joke?

Google and Facebook have way more servers than that, so maybe Apple isn’t their competitor at all? And of course Apple isn’t, not directly.

My guess is Apple’s trying to keep its options open. There are sure to be competing forces inside vying to control which industry the company will next re-create. It’s probably fair to assume that decision has not yet been made. It’s also fair to predict that Apple would be smart to get on with it, whatever it is.

When Steve Jobs retired and Tim Cook took over as Apple CEO I predicted there was another shoe to drop. I simply didn’t see Cook, a manufacturing guy, as the one to lead Apple into its next stage of growth. I thought Steve had some grand plan, some big surprise. I even thought I knew who would be Steve’s eventual successor. Only when I wrote that, Steve reached out to me to say that -- "yet again" in his words -- I was wrong. It was the last time I ever heard from him.

I don’t know what’s happening with Apple beyond the obvious burnishing that’s taking place. Look at that iPhone 5S and you’ll see a piece of jewelry -- a luxury item in the tradition of luxury meaning good design and craftsmanship, not just a high price. I can’t wait to get mine. But the iPhone 5S isn’t the future of Apple. That’s yet to be written.

Reprinted with permission