An Apple Shareholder’s Perspective: Thank you, Google!

  • Posted: 22 May 2010 02:33 PM

    My latest missive at Posts At Eventide.

    A snippet: “Google has successfully convinced the public there’s a competitive market in smartphones that may not exist to the extent Google would have it appear. For all of the adrenaline pumping persuasion, Google is doing Apple a huge favor.”

         
  • Posted: 22 May 2010 03:04 PM #1

    Nice post, DT.

    I used to giggle every time Steve Ballmer would pontificate in an interview about how many more “phones” Microsoft was selling compared to Apple.  All MS was getting from a “sale” was a few $$ for the mobile OS while Apple was racking up $600 per iPhone plus sales of accessories, MobileMe fees, App commissions, and iTunes music/video purchases (and now iAd commissions).  Not to mention huge Apple brand recognition and a halo effect for all its other products, while MS had to split any brand visibility with the phone manufacturer and carrier.

    Our Cupertino pals have put together one of the most stunning business models in history and there is much more yet to play out in this act.

         
  • Posted: 22 May 2010 03:57 PM #2

    The current lack of a multi-product mobile device revenue paradigm may have a few of the folks at Google soiling their pants. I suspect it’s much of the motivation for all of the bravado behind the Android push.

         
  • Posted: 23 May 2010 02:09 AM #3

    There’s another AFB topic with a similar premise to the discussion.

         
  • Posted: 23 May 2010 06:50 AM #4

    Good post, DT.

    Once over the shock of allies with shared board member(s) suddenly turning into belligerent (on Google’s side anyway) enemies, I think most people will see things this way.

    The problem (that supporters are calling a strength) for Android, that won’t go away, and for Chrome too, is that no-one can own the long term customer relationship, so no-one underwrites the overall customer experience, so the only business model for Google partners moves to competitive lock-in and exploitation of a resentful user community. Google threw the baby out with the bathwater. (do people still say that?)

    If it eventually works, Google will be the new monopolist, attracting regulation, and marginalising Apple. They will keep Apple alive by permission, as Microsoft had to. But either working or failing, Google’s actions delay the advent of a viable competitor for Apple.

    What this means in turn, is that, for a few years, Microsoft and RIM may become Apple’s allies in forcing true web standardisation, because they are the ones who are still in a position to parallel Apple’s open-plus-walled-garden platform model. Maybe HP too. But they need time, and by helping to structure an Apple-friendly market, they will get it.

    Apart from MS, they’re probably all too focussed on this quarter and this year’s numbers to make such long term arrangements.

         
  • Posted: 23 May 2010 10:13 AM #5

    Although we didn’t know it at the time, this story was probably indicative of Google’s plan to stop being platform neutral. Simplify was pulled from the app store.

    Simplify media will be part of Android’s exclusive feature list, apparently, even though there is no technical reason for that. So Google is almost definitely turning into a platform company.

    Does Google walk on water, or does it sink beneath the waves?

         
  • Posted: 23 May 2010 03:31 PM #6

    sleepygeek - 23 May 2010 09:50 AM

    If it eventually works, Google will be the new monopolist, attracting regulation, and marginalising Apple. They will keep Apple alive by permission, as Microsoft had to. But either working or failing, Google’s actions delay the advent of a viable competitor for Apple.

    That’s if it works. The issue for Google now is lack of a multi-product paradigm. Further, Microsoft has yet to respond and won’t respond until the fall in the mobile device environment. Microsoft will be hitting hard at each of Google’s core markets and in my view the Android is an illusion in terms of both success and platform development.

    Google, in my view, know it’s vulnerable and so the BS barrage is intense.

         
  • Posted: 24 May 2010 01:31 AM #7

    DawnTreader - 22 May 2010 05:33 PM

    My latest missive at Posts At Eventide.

    A snippet: “Google has successfully convinced the public there’s a competitive market in smartphones that may not exist to the extent Google would have it appear. For all of the adrenaline pumping persuasion, Google is doing Apple a huge favor.”

    Reposting original article reference.

    See also sleepygeek’s topic on Google’s planned platform.

         
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    Posted: 24 May 2010 01:51 AM #8

    Right now, Google seems like a good test case for companies that take more of a “shotgun” approach to business, versus Apple’s “laser-like” approach.

    It seems to me that Google’s relative lack of focus lately, along with its “PR” campaign, are distractions from success.

    [ Edited: 24 May 2010 01:54 AM by Mav ]

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  • Posted: 24 May 2010 01:40 PM #9

    SJ heaves the hammer. Google is the target.

    Personally, I think Google picked a fight it can’t win and did Apple a huge favor by entering the ring.

         
  • Posted: 24 May 2010 03:56 PM #10

    DawnTreader - 24 May 2010 04:40 PM

    SJ heaves the hammer. Google is the target.

    Personally, I think Google picked a fight it can’t win and did Apple a huge favor by entering the ring.

    Agreed. I think a lot of people who didn’t previously give this much thought will have been shocked into trying to figure it out. SJ will be telling them in simple, brief terms what’s really happening, and could absolutely decimate the Android platform with a couple of brief demos, but probably won’t dignify Android with that. He may however expose Gundotra’s main bullet points for the drivel they are.

    Vic Gundotra opened his talk with an anecdote which no one could possibly believe, indeed if Eric Schmidt believes it, he had a legal obligation to immediately quit the Apple board three years ago, and should be under investigation by the SEC. On his first day at Google (June 2007, immediately before iPhone shipped), Andy Rubin told him that “without Android we faced a draconian future where one man, one company, one device, one carrier would be our only choice”. How could Andy possibly know that piece of nonsense, which isn’t remotely true even today, 3 years ago?  (By telling the story in this way, of course Gundotra puts the evil nonsense into someone else’s mouth, who in turn can deny it if it ever went legal.)

         
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    Posted: 24 May 2010 05:56 PM #11

    I think until Schmidt went after Apple’s core market their was a bit of detente between the two, but as SJ pointed out, Google went after Apple’s market.  Maybe we will see more effort in Apple’s cloud offerings with WWDC.  The new version of mobile me might include the online version of Pages, Keynote & Numbers and moves Itunes to the cloud with OTA sync for Music, Movies, Books, & Apps.  Goggle just proved via the Nexus that they are not yet ready to sell hardware so they will be in direct competition with Microsoft as they bring their new wares to the world as ad supported computing.  Microsoft while bruised will provide a bit more fight but I wonder if they can ever get back on their game. This will be an interesting year, we have commodity hardware players trying to differentiate via a commodity OS and not much customer service.  It is hard to believe that Google will have success against Apple’s core.  My question is will all the OEMs jump ship and head back to Microsoft with the release of Windows 7 or go off on their own with a homegrown OS once they realize that the grass is not always greener.  HTC & Moto have hitched their wagon with Android but Microsoft already provided patent cover for HTC so my guess is they will be building a bunch of Windows 7 phones.  I think Samsung will go with Bada if they can find any traction and LG & Sony/Erricson will move with the wind.  All of this confusion can only help when Apple tells consumers we will take care of you and has move users forward with technology.

         
  • Posted: 24 May 2010 06:18 PM #12

    I see no reason that Apple would change its policy regarding syncing at WWDC.  I am not a programmer but it would seem to me that all OTA sycing is controlled by Apple alone and thus it requires no developer interaction.  The feature seems like a perfect fit to taking iTunes to the cloud, if indeed that is Apple’s intention.  iTunes handles syncing now and it can continue to do so just ‘in the cloud’.  and the itunes announcements are the fall shindig.  That’s where my hopes lie for a some type of announcement.

         
  • Posted: 24 May 2010 11:27 PM #13

    DawnTreader - 24 May 2010 04:40 PM

    SJ heaves the hammer. Google is the target.

    Personally, I think Google picked a fight it can’t win and did Apple a huge favor by entering the ring.

    I’m as big an Apple fan as anybody, and I believe AAPL will go to $400 or more in the next 12 months. That being said, and with all due respect to DawnTreader, I cannot drink this coolaid. We Apple investors would have been much better off if Android never existed. As far as antitrust is concerned, Apple commands 3% of the cell phone market and less than 25% of the smart phone market. Apple has no where near monopoly market share. Google did not do us a favor regarding antitrust. In fact, Apple did Google an antitrust favor with Admob. RIMM and MSFT are much less formidable competitors than Google’s Android as their application selection is much further behind Androids and their platforms are were not designed for the future. Apple does not have an impenetrable lead in applications as compared to Android. Microsoft took 90% of the computer OS market with an inferior product. Google will capture the largest share of this market as well because, to the masses, price matters more. Additionally, hardware development for the Android platform will advance faster due to the vast number of hardware developers frequently leap frogging each others advancements.  Lastly, Apple cannot match the distribution or combined manufacturing capacity of all of the combined Android manufacturers. Apple will win by selling a premium product at high margins. Apple has lost the potential to become a monopoly in the smart phone sector because of Android. If this is an antitrust victory, I’d rather have lost. More importantly, Google’s Android OS will port well to the tablet platform. If not for Android, Apple would have had a monopoly on this platform. This is the biggest negative of all. Once again, I reiterate that there is no better risk adjusted stock play then Apple right now. I could only imagine how much more upside there would be if not for Android.

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    Posted: 24 May 2010 11:43 PM #14

    In my local newspaper yesterday there was an article about Google and its attack on Apple. It was written by Jessica Guynn for the LA Times. In short Google’s Vic Gundotra said “If we did not act, we faced a draconian future where one man, one phone, one phone carrier was the future. That’s a future we don’t want”. Google is actually trying to portray itself as some kind of savior. I guess it would be OK if Google was the one monopolizing the market. rolleyes

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  • Posted: 25 May 2010 01:14 AM #15

    jeffi - 25 May 2010 02:27 AM

    More importantly, Google’s Android OS will port well to the tablet platform. If not for Android, Apple would have had a monopoly on this platform. This is the biggest negative of all. Once again, I reiterate that there is no better risk adjusted stock play then Apple right now. I could only imagine how much more upside there would be if not for Android.

    Jeffi:

    I think you’re confusing quantity with profitability. This isn’t a market share battle. It’s an eco-system contest. Apple is a handset maker with high margins on each unit sold, a highly successful app store environment and an ad services program for a fully integrated product solution.

    Google is not only battling Apple, it will also need to confront RIM and contest with Microsoft at each point of major operations. I’m not concerned about Google’s smartphone venture. Unlike the PC business there’s another party in the mix - service providers. Each party is vying for revenue and monetization opportunities.

    If there’s a lesson to be learned from the PC business it’s being a hardware OEM leads to limited profitability absent control or ownership of the OS. For example, Dell now has hardware margins of less than 1% on consumer PCs.

    This isn’t an issue of who ships the most phones. You can slight Apple’s position in the PC market based on market share. But you can’t dismiss the company’s revenue share . Apple’s decision to forgo Flash integration ( a smart move) came under question and Apple’s fully integrated monetization model was coming under public scrutiny. The more Google pretends to be a success in the smartphone market, the better for Apple.

    In my view, Android is exactly what Apple needed at exactly the time Apple needed it. The more Google talks, the freer Apple becomes to pursue its monetization model unfettered by regulatory concerns.

    In my view Google is at least two years behind Apple in delivering a multi-product eco-system. Even Google execs admit Chrome is the future. Android is a stopgap.

    If Apple was ever concerned about iPhone market share, in an instant it could make an iPhone available for “free.” I note your points but I don’t agree.