Apple is Boiling The Competition’s Frog

| Editorial

Apple has an uncanny tendency to start modestly and build. That’s true for its products, but also for its financial growth. The Q4 results punctuate the turning point: Apple has slowly boiled the competition’s frog and is on pace to reach US$100B in annual revenue, perhaps as soon as next year.

It only took ten years.

Back in 2000, Apple was in the unenviable position of having quarterly revenues that were about the same as Microsoft’s profits. Today, both Apple’s revenues and profits are very much in line with what Microsoft produces - and poised to leave Microsoft well behind.

In other words, as Steve Jobs has said in the past, Microsoft doesn’t have to lose for Apple to win.

Even more exciting is the fact that Apple has been successful in laying a foundation on which to base all its new products. For example, while RIM and Google partners struggle to develop a tablet OS, iOS moved seamlessly from iPhone to iPad. This technical infrastructure is what allows Apple to steadily gain traction and grow while competitors work in disarray. For example, as Steve Jobs said today, Motorola and HTC are developing proprietary UIs for their Android phones to differentiate themselves. That leaves customers to figure it all out — including the 100 or so different versions of Android out there.

Growth in an aggressive, growing consumer market, like smartphones and tablets, depends on how quickly a vendor can deliver coherent products and new products with seamless updates and new technologies. Using iOS on the new Apple TV is a prime example. Here’s another: Mr. Jobs today doubted the wisdom of 7-inch tablets. In his opinion, they’re too small to be a good tablet and too big to be a good phone. Apple user testing suggests that the human finger will have a tough time dealing with tablet functionality and key tablet presentations and features on such a small screen. That could result, he said, in vendors giving up, backtracking, and moving to bigger screens — leaving older products in the hands of annoyed customers and the software, perhaps, orphaned.

The fact that Apple is vertically integrated means that Apple is able to create a 9.7-inch tablet at competitive prices. The competition may be finding that it has to limit itself to 7 inches to be price, performance and battery-life competitive.

Even Google says not to put the current version of Android on these tablets, but vendors are, Mr. Jobs suspects, going to do it anyway. They pocket the revenue and customers are left to rationalize why they bought an inferior product. This is why Apple retail stores are shoulder to shoulder with customers on the weekends.

All that bad decision making, all the poor integration of hardware and software, and the lack of pre-planning for fabulous development tools is what slows the competition down and is what allows Apple to build on growth.

That compounded growth is now coming to the forefront and validates Apple’s strategy for the last ten years. What’s even more important is that this growth is going to continue while the competition remains in general disarray, always playing catchup, always regretting their lack of investments in fundamental technologies, always hoping that Apple will stumble so they can back into success. Annual revenues of $100B for Apple are not far away.

Comments

Tiger

Microsoft doesn?t have to lose for Apple to win.

So plain, so simple, yet, so many seem to think otherwise.

Lee Dronick

Microsoft doesn?t have to lose for Apple to win.

So plain, so simple, yet, so many seem to think otherwise.

Two many people in the computer tech industry can only think in buynary. There is no color, no 256 shades of gray, just win or lose.

Sorry, for the bad wordplay, it is late in the afternoon.

MyRightEye

Hmmm… But reality is though that Microsoft _IS_ losing. I live in Boulder, CO, home of CU Boulder. Go on campus or any cafe in Boulder, and 7 out of 10 laptops are Macs. Closer to 8 now. These are the future business leaders and professionals of all kinds. The world is going Mac, and that’s just a fact. This means Microsoft is indeed losing, and in a very big way. In a few years, perhaps even on Wednesday, you’ll hear the announcement that Apple is finally licensing OS X for PCs from Dell, HP, and other top-shelf companies. The pirates of course will have it running on their home built geek boxes within 2.3 nano seconds. Wait, they already DO! And then what? You see teens are growing up with knowledge of Apple rather than Microsoft, and these teens are demanding Apple products. I could guarantee you that people are already calling Dell sales asking for an iMac. Asking for OS X. We are about to see the quickest transition of computer OS ever as people by 2014 will almost all new computing devices will be running some form of Apple OS. Mark my words.

Apple is winning, and Microsoft is indeed losing.

jfbiii

Apple isn’t going to license OS X to OEMs while Steve Jobs is still alive. And after he’s dead, it still won’t happen. Apple isn’t interested in being the next Microsoft. Licensing will kill the Mac and the Mac is still a valuable property for Apple. In fact, it’s more valuable than it’s ever been. They’re not going to sacrifice that cash cow for market share.

MyRightEye

I can guarantee you that you’ll be wrong on every point.

aardman

MyRightEye needs new glasses if he thinks OSX will be licensed by Apple.  Microsoft licensed DOS-Windows because:
1.  They had and still have zero knowhow about great hardware.
2.  Back then, if they tried to acquire hardware knowhow, IBM (their biggest customer) would have stomped on them.  Mainly by dropping DOS as the OS of choice for the IBM PC.  Microsoft would be dead two minutes after such a move by IBM.
3.  So instead of a frontal assault on IBM by building their own hardware, Microsoft encouraged the growth of a PC clone industry by licensing DOS-Windows to anyone who wants it.  To his credit, Bill Gates knew that if there were a gaggle of clone makers competing vigorously against each other, he gets to be the head honcho in the PC industry.
None of the above applies to Apple.  They have unparalleled hardware expertise, why would they want to share OS-X with any other computer manufacturer when they can build the computers themselves?

vpndev

Oh come on. MS licensed PC-DOS because that’s what IBM wanted to buy. Bill Gates was smart enough to retain rights for MS to also sell it (i.e. the license to IBM was not exclusive).

Microsoft was next-to-nothing before IBM. And Bill G had no interest in doing hardware - he wanted to make and sell software. And he did exactly that.

Extensor

Apple doesn’t need the headache of supporting all kinds of different hardware, that is a one way ticket to bloatville for OS X. Apple will keep doing what they do.

Mike Weasner

Steve confused me a little bit by his “fingers on 7-inch tablet” comment.  Gee, my fingers seem to work fairly well on a much smaller screen (hint: it is from Apple).  I’d love to have a paperback book sized iPad.  I think my fingers could work that pretty well, given that they are experienced with that smaller screen device.  In fact, the only problem I have with that smaller touchscreen device is due to the case I have: it blocks my finger from reaching the very edge of the screen, making it difficult to select text at the edge.  As to the 7” tablet being too big for a phone; yes, it is.  But with a Bluetooth headset and total voice control through the headset, it wouldn’t be too large as the tablet could stay in a case, backback, coat pocket, wherever.  Apple already has this voice control in iOS.  So, 7” iPad with phone is not impossible.  To quote 007, “never say never again”.

Lee Dronick

@Mike Weasner

I too have the problem selecting text at the edge of an iPhone screen. I found that I can usually do it by using the finger on my other hand. But yeah, maybe a bit more of a margin would help.

I am one who thinks that 7” iPad/iPhone is not Goldilocks compliant, too middle. But of course others may find the porridge to be just right. What have buzzing in my head about the 7” screens that are supposedly being built is that they a for some sort of touch screen on a MacBook; Time will tell.

John Martellaro

I believe Mr. Jobs was referring to the kinds of things one does with iPad specific apps on the iPad’s larger screen.  Of course, the iPhone developers, knowing how small the iPhone screen is don’t have the design latitude that the iPad developer does with the 9.7 inch screen. For example, there’s no Keynote for iPhone. How well would we do developing content with Keynote on a 7 inch screen?  It’s that kind of thing I think Mr. Jobs was driving at.

Dnice

My right eye wrote:
” In a few years, perhaps even on Wednesday, you?ll hear the announcement that Apple is finally licensing OS X for PCs from Dell, HP, and other top-shelf companies. “

Apple tried to license it’s software in the 80’s it was a mess. There were alot of inferior machines running the Mac OS

Lee Dronick

Apple tried to license it?s software in the 80?s it was a mess. There were alot of inferior machines running the Mac OS

Yup! That was Apple when Steve Jobs wasn’t there.

MonkeyT

You may have something about the current Android on tablets.  Unless they’re careful, they may end up souring the milk the way Newton’s initial failures at handwriting recognition threw up public perceptions better iterations of the device would never overcome.

If the first Android tablets are reviewed harshly, the Android portion of that market may well never recover among the broader public.

MonkeyT

Gee, my fingers seem to work fairly well on a much smaller screen (hint: it is from Apple).

Apple is doing their best to establish a white-space heavy design dogma for the iPad - big buttons, lots of breathing room for the elements.  Why?  A) it does make operation simpler when there’s lots of margin around controls to allow for error, and B) they don’t want iPad apps to ultimately resemble the worst of what happened to MS Office - 30%  of the screen filled with tiny buttons, 20% filled with margins and scrollbars.  Cross-platform developers often err on the side of adding too many irrelevant options - Apple wants simpler, better presentation of relevant choices.  If they set up a precedent of crowded, small controls, developers will make the problem worse.

jfbiii

At the same time, Apple has taken great pains to leave the rejection for any specific app for whatever reason it deems fit an open question. So even if there weren’t interface standards in place, Apple could choose to enforce a de facto standard.

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