Editor's note: This is the third excerpt of an e-book on Apple by Jason Schwarz, an analyst at Lone Peak Asset Management in Westlake Village, Calif. Part 1 appeared Monday and Part 2 Tuesday.
If we are going to use the Internet to store our photographs, our home videos, our digital libraries, our school work, our medical records and our personal information, then we better know who controls our precious data. The only way consumers will trust putting that information online is if they trust the custodian. For Apple ( AAPL) or any other company to achieve success in the era of cloud computing, it must command consumer trust. Apple already has a competitive advantage because of its success with iTunes. For the past 10 years, more than 100 million consumers have developed a relationship with Apple through the iTunes platform. For many, this was their first experience buying products (music) online with a credit card. If Apple didn't execute music sales and the subsequent storage of that music flawlessly, it would not have been given a second chance. The seamless integration between iTunes and the iPod is what led to the halo effect of consumers migrating to Macs. The level of trust in iTunes produced consumer willingness to take the next step. This pattern will only grow as we evolve deeper into a society dependent on digital storage. It has become common for companies to deliver products that fail to meet expectations. Why has Apple been able to cultivate a reputation of reliability among consumers? Look no further than the expertise and precision of Chief Operating Officer Tim Cook, who was brought on board in 1998 to streamline the company's manufacturing and distribution operations.