After a record high June quarter performance results in this year, it came as no surprise that today Apple greeted analysts’ expectations by crossing $1 Trillion in market capitalization to shareholders’ delights. What is surprising many is the resilience Apple’s showcasing amidst escalating US-China trade dispute and a highly volatile tech stock market. Apple has managed to achieve this remarkable feat by staying true to its brand values of thinking differently, questioning the norms and making great products that are useful and intuitive. It has made a sustained investment in not just product strategy and innovation, but also by optimizing its operations and supply chain, adapted to emerging trends while staying consistent and predictable to users and shareholders. What is even more interesting are the paths Apple has chosen to do differently from its other tech peers. no free products/services, Quality and security first, premium hardware balanced out by affordable software and services, no new product announcements on earnings call, providing a more pessimistic outlook to shareholders, and valuing user privacy at the cost of slower growth in areas like AI/ machine learning where products like Siri could have benefited from a more permissive data guidelines. CNBC Analyst, Cramer of Mad Money fame believes Apple is still selling quite cheap at $207 (with a PE of around 17%) when it has the potential to go north of $280 (with a PE near 30%). He thinks Apple should no longer be treated like a tech stock but like a consumer products company such as PepsiCo or a Colgate, that follow the razor-razor blade model. I am going to go out on a limb and say, Apple behaves neither like a pure tech nor like a fast moving consumer products company. Here is why. Why Apple is unlike other tech companies Tech stocks are typically growth stocks with a high level of volatility built into them. You either win big or go home, middle grounds are boring. Given the nature of tech, hype cycles are extremely short and so product releases are more frequent and new announcements made every quarter. This means tech companies must make a lot of investment in software research and development in a range of technologies, iterative tests, learning from user feedback, launches and further iterations to improve winners and decisions to kill off underperformers. In order to scale, they tend to offer free products and open source their popular tools. On the tools’ adoption by a critical mass of users, they then build an ecosystem where monetization opportunities like advertising, subscriptions etc can be leveraged. Apple, on the other hand, invests in hardware R&D, to build strong products and prices them high. And once users become captive to its ecosystems, it further extracts value from them through a plethora of services that are exclusively available only on its App Store. If we look at the FANGAM tech stocks, apart from Apple, everyone has placed their major bets on one of the other emerging technologies and almost everyone brings AI into their shareholder discussions. Microsoft and Amazon are going big on cloud, with Google playing catch up. Google, Facebook and Netflix are all about AI and machine learning, with Microsoft bringing up AI only in the context of the cloud and edge. Facebook is vocal about investing heavily in AR/ VR while others like Microsoft, Google and Apple are doing so quietly and cautiously. There was a time when Apple and Microsoft competed closely in the same spaces vying for the same markets, but off late they seem to have come to some kind of a mutual understanding. Microsoft has chosen to focus its efforts on the Enterprise customer while Apple has been ruling the consumer market. The above In its Q3 earnings call, Apple talks a lot about services, iPhone and wearables (clubbing in Siri here). And there is only a passing reference of AR and AI. Instead of talking about the tech, Apple chose to talk about ‘double digit growth’ repeatedly throughout the call and about how they honor their users’ privacy, how their business model is aligned with their customer’s long term benefits, and how they are investing in China’s clean energy Fund to reduce their supply chain footprint. To me that looks like a company, that know where it’s heading, how it is going to reach its goals and more important why shareholders should care. Apple is nothing like selling apples or cola for that matter Now coming to the consumer products analogy. Apple share a lot in come with consumer products companies in terms of how it manages its operations, logistics, supply chains and even its marketing and advertising spends and branding strategies. But the resemblance ends there. Consumer products are a high volume, high variety game. While wearables may behave this way to some extent, Apple does not produce 7 different colored AirPods for example. If we had to make a consumer product analogy, I would go for a car maker like Telsa that wows consumers with its right blend of technology, software, hardware, manufacturing finesse and design excellence. (without the falling stocks and controversies). Apple builds cutting edge ecosystems that have great functionality, aesthetics and make a statement; with hardware often as the gateway into that world. Recently though, services are proving to provide a sneak peek into Apple’s world for first time users. And that is a good thing for its hardware business too. Looking ahead To me the key challenges for Apple now in this next phase of growth are Should it decouple services from it’s hardware offerings to allow for higher services growth or should it keep it tightly knit to improve the plateauing hardware side? Protecting iPhone’s market share from the likes of Huawei, Samsung and Android Gearing up for a tough competition for AppleTV and also its streaming services Penetrating the self-driving car market Deciding whether to take others headon in the digital assistant market. If so, then making AI and cloud a larger priority for the business Mainstream adoption of wearOS and other wearables Disclaimer: The author does not own any Apple stocks or have investments in any allied tech and neither a longtime Apple user or advocate.