The ten-year question . . .

  • Posted: 25 April 2009 07:39 AM

    It’s hard to argue with the premise that the general purpose programmable device market is by its nature winner-takes-all. If 85% of the devices are the same platform, that’s where all the specific applications are going to earn the most revenue, and all other platforms are marginalised. So Apple needs to be 85%, eventually, or will be marginalised.

    On the other hand, looking at the hardware manufacturing business, if Apple does not license, it must either sell most of the hardware sold, an thus lose the tight control its current small market share allows, or eventually lose the programmable device market.

    What is the precise path out of this conundrum for Apple? Licensing? Peaking at, say, 20% market share then declining (as the first time round)? Or can Apple really make substantially all the hardware sold (as with iPod)?

    The point is, if there is a way forward, and Apple has thought of it, when it is unveiled, it could strangle Microsoft more suddenly than we currently imagine.

    Somehow, IMO, Apple needs to eventually control the API of 85%. Ideas?

         
  • Posted: 25 April 2009 09:19 AM #1

    Could secure micro-payments play a part in widespread programable device adoption?

    If so, a super tight integration of applications and hardware may be the ten year winner.

    Subscription payments in the new iPhone operating system may give hints as to how Apple sees this playing out.  Of course, Apple can’t take a thirty percent cut on someone buying a cup of coffee or a bag of groceries, but having the payment processing infrastructure in place may give vendors and credit card companies a place to experiment with replacing cash.  A secure touch > touch “handshake” transaction could someday let people leave their wallets at home, and tight device integration is what will allow it to happen.

         
  • Posted: 25 April 2009 10:36 AM #2

    Ma & Pa, I agree that attachment to services is the future. Apple and Microsoft are both working to transition to service revenues.

    Yet the device is more powerful to capture the customer than the service; that’s why carriers heavily subsidize devices. 

    What triggered my thoughts was Microsoft’s plan to sell a cheap, crippled “Windows 7 trial edition” license to netbook manufacturers. That’s a weaker target for Apple to attack than full Windows 7 or even XP. What if there is a third version of Mac OS between the iPhone OS and the Mac OS; the “ibook OS X”. Like the iPhone version, you can only install signed apps downloaded from Apple; hence it’s malware proof, ideal for mainstream consumer and corporate use. But like the full Mac, it’s a viable platform for doing real work, with an ARM and an Intel version. There’s no restriction on Apps apart from security and decency and apple’s 30% cut; MS is free to put an Office version on there if they want. Now imagine Apple offers a limited trial OSX iBook for Intel PC’s as a free download, in the same way Safari and iTunes are free downloads for Windows. Doesn’t that enable a cascade platform switch effect without requiring or causing any sudden change in the PC hardware supply chain? In turn forcing MS to give “Windows 7 for netbook” away free, and cutting away the revenue that supports the whole Microsoft client computing edifice including Windows PC’s, Xbox, Zune, Windows Mobile?

         
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    Posted: 25 April 2009 11:12 AM #3

    sleepytoo - 25 April 2009 10:39 AM

    It’s hard to argue with the premise that the general purpose programmable device market is by its nature winner-takes-all. If 85% of the devices are the same platform, that’s where all the specific applications are going to earn the most revenue, and all other platforms are marginalised. So Apple needs to be 85%, eventually, or will be marginalised.

    I’m not sure that I agree with this premise. Nor do I think Apple’s goal should be to become the dominant OS. I believe being profitable, competitive, and having a significant market share is enough.

    For those that can remember, Apple tried to compete with MSFT for OS market share in the 90s and lost. And it almost bankrupt them.  SJ’s arrival more than anything refocused Apple back onto what they could do well and on profitability over market share.  More recently, Apple’s stated 2008 goal for the iPhone was just 1% of the market.

    To counter your argument, the XBOX, PS, WII are all competing in the same space. The availability of exclusive games as well as multi-platform games has enabled these to compete. And each thrives in its own way.  Likewise Mac OS, WIndows, and Linux each bring a different strength to the market.  Personally I like where Mac OS is sitting because it has room to grow, unlike Windows who is struggling not to lose rather than figuring out how to grow.

    Apple moving forward is doing well right now.  The iPhone OS is proving to be a winner and forcing everybody else to react. However, like the original iPod that entered the market with a 0% market share, there may be something developed that can have a similarly disruptive effect. With Apple focusing on innovation, ease of use, stability, competitiveness and profitability over trying to acquire a dominate market share, I feel secure in where Apple is heading.

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  • Posted: 25 April 2009 11:25 AM #4

    Ah….I see.

    A free, managed, Apple OS lite cuts MS off at the knees.

    I assume this mid-level platform would play nice with the iPhone OS as well as OS X encouraging the adoption of both, and the Apple devices that run them.

    I like it a lot….. grin

         
  • Posted: 25 April 2009 11:51 AM #5

    Play Ultimate - 25 April 2009 02:12 PM

    ‘m not sure that I agree with this premise. Nor do I think Apple’s goal should be to become the dominant OS. I believe being profitable, competitive, and having a significant market share is enough.

    The point I am worrying about is longer term. It’s about the long term viability of a minority API in the mainstream market. I’m not worried about Apple’s momentum over the next 2-5 years; it’s over 5-10 years that there may be a need to either get out of the PC market, or dominate it. If MS remains at 80% plus, they will repair their API’s broken product and business model, and Apple will return to confirmed minority status in people’s minds. If the answer is dominance, the installed base has to flip across to OS X in large numbers without immediately replacing their hardware; to trigger the halo effect writ large. At the same time Apple mustn’t lose control of its revenue stream in the same way MS is doing.

    Looking at it another way, lack of any copy protection whatsoever was an essential component to MS’s rise to dominance. People simply copied Excel, Word, Windows, DOS etc. if they couldn’t pay for it. Likewise, Apple has to give away iTunes, Safari, and perhaps OSX for netbooks.

    [ Edited: 25 April 2009 11:54 AM by sleepytoo ]      
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    Posted: 25 April 2009 02:04 PM #6

    I think the ability to win over the developers is the key for Apple.  The difference between the Cocoa Touch and OS X Cocoa is nowhere near the commitment of time from a developer that the switch from C++ or Java on Microsoft.  To win the next 10 yrs they need to keep developing solid API’s which open up the potential for developers to innovate using Apple’s ecosystem.  Apple has to give up some control if they hope to capture the market.  The problem Microsoft has is legacy support.  It is much more difficult for Microsoft to innovate because of backward compatibly.  Windows is still stuck with the DOS overhead.  Apple was able to shed their legacy OS and build on a modern OS, without losing all their customers.  When the next upgrade from XP is going to cost the user 2K, it is nearly as easy to shed all the legacy and move to a new OS as upgrading your existing architecture piecemeal.

         
  • Posted: 25 April 2009 02:05 PM #7

    Play Ultimate - 25 April 2009 02:12 PM

    I’m not sure that I agree with this premise. Nor do I think Apple’s goal should be to become the dominant OS. I believe being profitable, competitive, and having a significant market share is enough.

    For those that can remember, Apple tried to compete with MSFT for OS market share in the 90s and lost. And it almost bankrupt them.  SJ’s arrival more than anything refocused Apple back onto what they could do well and on profitability over market share.  More recently, Apple’s stated 2008 goal for the iPhone was just 1% of the market.

    What cost Apple much of its market wasn’t so much a battle for market share. Well after the intro of Win ‘95 most users conceded Apple made a superior computing product.

    What cost Apple its market (this during the days of Michael Spindler as CEO) was the effort to merchandise older technology at premium prices (the old 680X0 line) while failing to manufacture an ample supply of Power PCs. I remember the short supply of PowerPCs. Consumers were forced to choose between available Macs with old technology and Win 95-equipped PCs.

    This was exemplified with a dizzying and confusing Apple product chart that required a 3-page fold out to display and far too many model names with far too many configurations. Consumers could only scratch their heads in trying to determine what Mac to buy.

    Further, Apple maintained a closed peripheral market. Apple marketed under its brand name everything from printers to displays to digital cameras, in direct competition with potential product partners. In other words, no one else could make a profit on the sale of Apple-related products.

    The difference today is a deliberately simple product and marketing model and an aggressive effort to promote 3rd party peripherals and software development.

    Apple’s seemingly paltry market share is a misnomer. Apple controls the market for PCs costing $1,000 or more and thus a disproportionate share of the industry’s profits. It’s not nominal share that matters, it’s profitable. This is exemplified by Dell which ships millions more PCs than Apple each quarter yet can’t match the margins and resulting profits Apple enjoys.

         
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    Posted: 25 April 2009 02:10 PM #8

    deleted: my original post was wiped out ;(

    [ Edited: 25 April 2009 03:16 PM by Bryanyc ]      
  • Posted: 25 April 2009 02:32 PM #9

    Wow! 10 years eh Sleepy?  I have a hard time figuring out next week. Regardless of how it plays out I am happy that Apple has all the options open to move and counter move. But as we are looking out that far I have to consider the world situation. We have expanding free trade now which is great for Apple. But during the nadir of the past downturn there was a lot of talk of isolationism and tarrifs, duties and abolishing things like NAFTA. As we seem to have bottomed out the anti free trade voices are receding. But should that kind of thinking assert itself politically then the retaliation could be disastrous. Just imagine China ignoring PATENTS and
    proprietary hardware and software. Microsoft may not care but Apple and any innovative company would be devastated.
    So having their options open means that if Apple does not garner and hold 85% of the mobile API it can switch to licensing it. Strangely, Wall street might like this as they can predict Apple earnings further out. Licensing their OS has been discussed many times on this board and has been widely rejected by members. But never say never especially if and when SJ leaves. So I do not think Apple has to make a decision now. On another note some analyst observed after earnings that if Apple can perform like this in a recession imagine how it will do in the recovery!

         
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    Posted: 25 April 2009 06:02 PM #10

    Wow! 10 years eh Sleepy?  I have a hard time figuring out next week.

    I love this statement and it is part of the reason why I participate in the AFB discussions.  When I first started reading AFB it was obvious to me that as a group AFB had a lot of smart people who could help provide an edge to my Apple investment.

    I worked a project for the Dept of Defense back when I was active duty military called Joint Vision 2010.  The idea was to look at the technologies 10 years out which were coming down the road and decide how the military could best use the future capabilities.  I can tell you one of the biggest issues of the time was reachback.  What do I mean?  The ability to persecute parts of a war from home.  Example we have a Sensor platform like AWACS which provides our eye in the sky for our AF.  Currently it is flow by humans and the in the back we have Air Traffic Controllers and Intelligence personnel and such. The reachback which is the broadband pipe anywhere would allow us to push the data back from the sensor on the aircraft in real time.  This would allow us to put fewer people in harms way.  We would control the combat engagement from home and only deploy forward the minimum number of forces.  The cost savings is huge because you no longer need to provide food, water, transpo for all these extra people.

    How does this tie into Apple and the next 10 yrs?

    Apple has done a wonderful job of bringing capability to match the broadband pipe available.  Unlike others they are not delivering 1080p movies on demand, because the pipe doesn’t yet exist everywhere and they don’t have video on the iphone because the 3G network would cry under the load.  My guess is the mobile CPU in the next Iphone will be best in class which means to me best performance per watt.

         
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    Posted: 25 April 2009 06:32 PM #11

    sleepytoo - 25 April 2009 10:39 AM

    It’s hard to argue with the premise that the general purpose programmable device market is by its nature winner-takes-all. If 85% of the devices are the same platform, that’s where all the specific applications are going to earn the most revenue, and all other platforms are marginalised. So Apple needs to be 85%, eventually, or will be marginalised.

    On the other hand, looking at the hardware manufacturing business, if Apple does not license, it must either sell most of the hardware sold, an thus lose the tight control its current small market share allows, or eventually lose the programmable device market.

    What is the precise path out of this conundrum for Apple? Licensing? Peaking at, say, 20% market share then declining (as the first time round)? Or can Apple really make substantially all the hardware sold (as with iPod)?

    The point is, if there is a way forward, and Apple has thought of it, when it is unveiled, it could strangle Microsoft more suddenly than we currently imagine.

    Somehow, IMO, Apple needs to eventually control the API of 85%. Ideas?

    I believe that for Apple to care about gaining 85% market share is for Apple to begin thinking like Microsoft. I think Apple believes that it will continue to make innovative products and if more people like them, all the better. I don’t think that Apple sets out a business plan that is developed around 85% market share or that they need 85% market share. That’s what I think.

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  • Posted: 26 April 2009 12:07 AM #12

    Great thread.  Thanks, sg.  Still thinking about your free OSX-lite idea, but it seems promising.

    Random thoughts for the next 10 years:

    The human interface of tomorrow will not be a keyboard.  One iteration (maybe more) of the new interfaces will be superior and gain market share very quickly.  Being a leader in the new UI(s) is vital.

    Batteries, along with efficient power usage - also vital.

    It has been said before, by some moron from Redmond:  Developers, developers, ......

    Entertainment content.  Tough nut to crack, and SJ may not be the best person to get this done.  But we need to get all 6 movie studios on iTunes.

         
  • Posted: 26 April 2009 11:49 AM #13

    Eric Landstrom - 25 April 2009 09:32 PM

    I believe that for Apple to care about gaining 85% market share is for Apple to begin thinking like Microsoft. I think Apple believes that it will continue to make innovative products and if more people like them, all the better. I don’t think that Apple sets out a business plan that is developed around 85% market share or that they need 85% market share. That’s what I think.

    Yes, what I’m essentially asking is - will Apple in practice exit the PC market in the next ten years.

    But paradoxically, weakness can overcome strength. Apple is deliberately allowing itself to apparently sacrifice the PC market if that’s what happens(small market share, high prices, iPod/iPhone with Windows compatibility). The cheeky TV ads describe life and death for Microsoft, but will have served Apple even if there are no more Macs. By letting go of the PC market, Apple renders Microsoft powerless to harm it, and thus, perhaps, eventually wins the PC market.

         
  • Posted: 26 April 2009 12:04 PM #14

    Of course the endgame may not be Apple as the new Microsoft, but Apple -as the new Wintel. The OS embedded in the chip. Build an entertainment or communications device with a screen, and you’ll buy the central chip from Apple, not Intel.

         
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    Posted: 26 April 2009 01:27 PM #15

    10 years from now,

    Handheld computing market would remain an oligopolistic market.  Just like auto market, profitability is more important than blindly capturing market share.  Hence, no change in iPhone strategy necessary.

    Personal computing market.  Windows dominant position would be seriously damaged by cloud computing.  In addition to MacOS and Linux, there could be other viable platforms.  Sufficient critical applications would have migrated to cloud computing environment, some of which are best accessed with handhelds,  and many more with netbooks (and NCs and netPCs rolleyes).  Consumers/employees would have got used to cloud computing.  Except for certain niche segments e.g. video editing, platforms are irrelevant.  Apple only needs to target these niche segments with Macs (not MacOS raspberry).  Obviously, Apple needs to have a solution for netbook segment users.  It would be surprising that Apple doesn’t have a solution since SJ and his best friend are the one who come up with the NC idea i.e. they are aware of this segment fairly early.

    Apple has already figured above out.  There would not be a change in strategy 10 years from now.

    In short, all markets would eventually become oligopolistic.  So no need for capturing 85% market share.

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