Apple Enters Services Stage of Tech

NEW YORK (TheStreet) -- Apple's (AAPL) dive into the cloud may help obscure its eventual slowdown in gadget breakthroughs.

Last week's iCloud event helped usher in what may be a fantastic new era for Apple. Picture a future where Apple is raking in money from selling services like streaming media, storing data and connecting users via a messaging system.

It's a good future to point to when your main business -- innovating category-killing devices -- might be losing momentum and your chief product visionary is on limited duty with no firm plans for return.

That's not to say Apple doesn't have big products coming like the iPhone 5 or the iPad 3, but with or without Steve Jobs, there could be less in the pipeline in terms of major new innovations. The iTV and the Apple nanophone may one day materialize, but repeating the iPhone's success will be a challenge.

That's why Apple's expansion into service revenue and subscription fees could be a well-timed strategy -- a move that has helped other tech shops transition from hardware to services.

Unlike IBM (IBM), which overstayed its welcome in PC manufacturing before reinventing itself as an IT service company, Apple has at least a year or two of hardware strength ahead as it takes up the cloud services challenge.

Apple's first effort at cloud service -- the MobileMe syncing system -- was a failure, said Recon Analytics' Roger Entner.

"This iCloud is a lot more ambitious than what they've done before," he said. "But you can see how many of the pieces are coming together."

Though well positioned, Apple's success in digital media services isn't necessarily a slam dunk.

Rivals like Google (GOOG) and Amazon (AMZN) have already introduced cloud music lockers and tech giant HP (HPQ) is reportedly negotiating with record labels and preparing its own music locker service for its upcoming TouchPad tablet.

"This is the move they need to be making because Google, with Android has been going in the same direction," said Entner.

Google's Android software is spreading rapidly and delivering cloud services like Gmail, navigation and YouTube, but the quality isn't seamless from one device to the next.

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