The iPhone 5 Shows that Apple is Still the King

By Jason Hall - September 25, 2012 | Tickers: AAPL, GOOG | 0 Comments

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Maps.

Yep, that's it. 

That's the only thing that the Apple-haters have been able to point out that's not great with the latest iteration of Apple's (NASDAQ: AAPL) industry-changing, hand-held marvel. 

Okay, so before you run straight to the comments section at the bottom of the page and blow me up, I think you need to know a few things:

• I am an Android user.
• I abhorred all things Apple until a year ago, when I was given two iPad 2's.  Now they are the primary media consumption devices in our home. 
• I am writing this on a Windows-based computer, and have no intentions of moving to an Apple computer.

Okay, so now that that's out of the way, let me explain my position.  As I said, I use an Android-based phone.  I use Google's (NASDAQ: GOOG) Gmail & Google Calendar apps.  I am pretty integrated into the Google "ecosystem."  It's great.  My Smartphone is fast, sleek, and easy to use.  There are tons of apps I can download, and most of them are great.  The camera is nice, and works okay.  The big thing is that I have access to so many things at my fingertips that in the past I would have had to use multiple devices for.  That's what Smartphones are supposed to do, right? 

But honestly, it's not seamless, sleek, or as smooth as the iPhone.  I have a lot of friends and co-workers with both iPhones and Android-based phones, and the honest truth is, at least from the anecdotal evidence I have culled, the iPhone users are more emotionally pleased and satisfied with their Smartphone. 

When I pre-ordered my wife an iPhone 5 for her birthday (just after midnight on launch night) our expectations were pretty high.  So far, the phone has exceeded all of our high expectations.  Everything that other Smartphones do, the iPhone does faster, more smoothly, and more seamlessly. 

Except maps, of course. 

Five years have passed since the launch of the iPhone, and yet again, Apple has distanced itself with a superior product.  With the help of Samsung, Android-based phones are better sellers worldwide, primarily because these phones can be had for a much lower cost.  But with that lower cost comes a lot of sacrifice.  Let's use my situation as an example. 

I have an HTC Thunderbolt.  I bought it primarily because it has 4G and a big screen, and at the time, I wouldn't even look at an iPhone.  Because of my usage habits I need the extended battery, which effectively doubles the phone size and weight.  Yet I still can't make it a full day without recharging.  It constantly drops the 4G connection, and when I am streaming live baseball with the MLB.TV app, that makes for a miserable experience.  Or when I just finished typing a post on my Facebook, and it drops, losing all my work...  Ugh!

So a year later, we have the iPhone 5 with essentially the same features, only they are all much more elegantly integrated, and most importantly, they all work flawlessly.  No 4G drops.  The battery lasts longer than my phone, with less than half the size and weight.  The camera is superior in every possible way.  The screen is essentially the same size.  I could go on and on and on, but I won't.  I'll just say that with the exception of 4G, I have actually learned that the iPhone 4S is a superior phone to the one that I have. 

Here's an interesting perspective.  I have a close friend that is a tech expert.  He is always up to date on the latest technology, and is a strong advocate of both Android and Windows.  Let me rephrase that -- he’s about as anti-Apple as anyone can be.  I spent a half-hour on the phone with him last night arguing the reasons that the iPhone, and IOS in general, is better.  He kept going back to the "maps" debacle.  He even went so far as to say that "Apple is no longer the innovator," the first time I have heard him refer to Apple as an innovator.  In a nutshell, his argument that Apple was losing its edge included admitting that they were, or at least had been, an innovator.  Here's a funny question, and one that I think you should ask of anyone that tells you that the iPhone isn't a superior experience to the Android-based devices: 

"Have you ever used one?"

My friend had yet to even SEE an iPhone 5 with his own eyes, much less use one.  Yet he was ready to decry the death of Apple.  And here's the real kicker -- I never hear why Android is better -- it's always that IOS is worse.  Really?  What does that say?

But what's the investment case?

AAPL data by YCharts

Since the iPhone was first introduced, Apple has clearly been the superior investment, and in a relatively flat market.  But this isn't about what has happened; it’s about what will happen, right?

AAPL PE Ratio data by YCharts

Even after the extraordinary growth that the iPhone (and more recently the iPad) has brought Apple investors, the stock is still cheaper than Google, based on earnings.  And while that's not a clear indication of the future, the growth opportunity in Asia alone is enormous (remember that China's middle class is larger than the entire U.S.)  So what's an investor to do?

Buy both!  Apple today, Google tomorrow. 

I own shares of Apple (but only since early this year) and Google is on my watch-list.  If the market decides to under-value it a little, I may start a position.  The truth is that these two businesses are competing for the same customers, but for drastically different reasons -- Apple makes massive profits off its hardware, where Google's money is tied to advertising income.  And while Apple can make a small amount of income from Android users that may use iTunes to buy music and movies that they download and view on their Androids, Google is in a much better position to monetize iPhone users through their apps, including Google Chrome.

And Google Maps, if they can get their app out there before Apple fixes the one built into IOS 6...

Know What You Own

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