iCloud Will Further Strengthen Apple … Eventually

by Anthony John Agnello | June 6, 2011 5:25 pm

Apple (NASDAQ: AAPL[1]) CEO Steve Jobs took the stage at the Worldwide Developers Conference in San Francisco on Monday and detailed a suite of new products and services scheduled for release in 2011. Apple stock holders feeling some anxiety over Apple’s new cloud-based business were pleased with the event; Jobs detailed the release timeframe as well as new home and mobile operating systems — the latter of which introduces so many new features to the iPhone that it practically makes the device new. He also gave away full details of the iCloud and cloud-based iTunes services.

iCloud’s basic services will, in a surprising move, be completely free to Apple’s customers. The address book, email and calendar services previously offered as part of the $99-per-year MobileMe service are now free services in Apple iCloud. Folks will be able to use the iCloud service to back up data on any Mac PC, iPhone, iPad or iPod Touch — and that information will be backed up again automatically when those devices are charging. Apple’s digital stores iTunes, the App Store and the iBookstore will all be linked to iCloud with purchases accessible on every device Apple users own.

This is the most significant change that iCloud brings to Apple’s digital retail business. Apple has been stringent in how many devices they allow users to download products to, but now iCloud gives users ubiquitous access to app and music purchases regardless of the device the use — be it iPad, iPhone or iPod.

It’s difficult to tell how this might impact revenue generated by iTunes or the App Store, and whether it will in turn force product makers to adjust pricing on their games, utilities and other apps. After all, they will only get paid once per customer, not once per device.

However, a new revenue stream will be opened by the new iTunes Match service. The premium subscription service will cost $24.99 per year and it will let users re-download any music saved on their personal hard drive to any other device. Put simply, a user who has downloaded a song on their desktop computer will be able to download that same song onto their iPhone and iPad provided they are iTunes Match subscribers. This is another service that may or may not find a significant following.

iCloud’s chief benefit to Apple and its shareholders is that the service further strengthens the company’s product ecosystem. Apple’s business thrives on convincing consumers to buy not just an iPhone, but a Mac and iPad as well, an Apple product for every setting. iCloud links users’ content on multiple Apple devices simply. The service may not grab headlines in the same way that a new iPad release will, but it may ultimately have a more significant impact on Apple’s business in the coming months. Not to mention the company’s value.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello[2] and become a fan of InvestorPlace on Facebook.[3]

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