Apple's entry into new markets could maintain its stock momentum

Part 2
Apple's entry into new markets could maintain its stock momentum (Part 2 of 5)

Why connectivity between Apple devices would help lock in users

Apple introduced a number of features under the Continuity umbrella

During the recent WWDC event, Apple (AAPL) announced two new operating systems—iOS 8 for iPhone and iPad, and OS X Yosemite for Mac. However, the most interesting announcement was the introduction of the Continuity feature. Under Continuity, the Handoff feature enables the user to sync content on a phone, a tablet, or a computer, to be replicated across devices so as to avoid duplication of work. For example, a user having started work on a document on Mac can finish the work on an iPad. Other Continuity features include the receipt of text messages and taking and receiving calls on a Mac, which previously appeared only on the iPhone. Another feature under Continuity is the iPhone becoming a Wi-Fi hotspot when near an unconnected Mac.

Smartphone OS Market ShareEnlarge Graph

The Continuity feature would help Apple lock its users in to its ecosystem

By introducing the Continuity feature, Apple has made it even more difficult for its users to move out of its ecosystem. Previously, iOS and OS X had no integration, which meant users tended to either buy a Mac (on the OS X operating system) or the iPhone and iPad (the iOS operating system). The increased connectivity among these devices will help Apple generate a better halo effect, wherein once the user has bought an Apple device, the tendency to buy other Apple devices will be greater.

The strong halo effect is important for Apple, as it has been losing share to Google’s (GOOG)(GOOGL) Android OS in the smartphone market. The iPhone is the most valuable business for Apple, and although Apple deals in the premium smartphone market, ideally, it would want its market share to stabilize. As the chart above shows, iOS market share declined from 19% in 2012 to 15% in 2013, while Android’s share increased from 69% to 79% during the same period. Microsoft’s (MSFT) Windows Phone too gained some share, while BlackBerry’s share (BBRY) declined.

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