The Damage Google has done to Apple

  • Posted: 27 May 2010 02:09 PM

    Other threads have been concentrating on which of the two companies will better prosper, particularly in the market space where they overlap. There are reasonable arguments favoring one side or the other—-and also a valid position that both will hugely prosper.

    What to me is indisputable is that Google’s forays into Apple’s targeted space (certainly helped by Eric Schmidt’s tenure on Apple’s Board) have taken (and will take) away significant market share from Apple mobile products and services. For example, the existence of Android has allowed a number of H/W manufacturers and their carriers to offer credible competition to iPhone years sooner than they would otherwise have been capable of. This is because a competitive touch-based phone OS and App ecosystem takes years to develop and—-without Android—-Motorola, HTC, etc. would have taken several years to get any significant position in the marketplace. These phone manufacturers had been caught seriously asleep at the switch and it was Google who bailed them out.

    Now, am I saying that Android-based phones are (or will ever be) a match for the iPhone? They will certainly not be! And, make no mistake, Apple will have major market share and the most profitable earnings position of them all. But Apple will have lost some significant market share and profit because of Google.

    My sense of the significant extent of this Google-caused damage has been heightened by the recent demo (video link below) of Dell’s Android-based Streak—-which will be launched in the UK in June and in the US later this year. This is an interesting form factor: large enough display (5 in.) to present a better video experience than the iPhone and small enough to have portability advantages over the current iPad.  In fact, I believe that a roughly 6 inch iPad may be the next form factor Apple will market for the iPad family (in a year perhaps). The Streak will not have nearly the success of an iPhone or the current iPad, but Android has again given an Apple competitor (and many others in the future at this or different form factors) several years of time-to-market advantage over what would have otherwise been.

    Will Apple have stunning successes with the iPhone and iPad?  Yes!  But not nearly as great as it would have if Google hadn’t squeezed into its market space with Android, AdMob, etc. via deceit and trickery.

    http://macdailynews.com/index.php/weblog/comments/25366/

    [ Edited: 27 May 2010 02:37 PM by Hannibal ]      
  • Posted: 27 May 2010 04:32 PM #1

    Sources said several large media companies, including Time Warner and NBC Universal, told Apple they won’t retool their extensive video libraries to accommodate the iPad, arguing that such a reformatting would be expensive and not worth it because Flash dominates the Web.

    Just like the early days of iTunes.

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    Posted: 27 May 2010 05:03 PM #2

    3 months from now, I foresee a new tune from them.

         
  • Posted: 27 May 2010 05:29 PM #3

    Hannibal - 27 May 2010 05:09 PM

    Other threads have been concentrating on which of the two companies will better prosper, particularly in the market space where they overlap. There are reasonable arguments favoring one side or the other—-and also a valid position that both will hugely prosper.

    What to me is indisputable is that Google’s forays into Apple’s targeted space (certainly helped by Eric Schmidt’s tenure on Apple’s Board) have taken (and will take) away significant market share from Apple mobile products and services. For example, the existence of Android has allowed a number of H/W manufacturers and their carriers to offer credible competition to iPhone years sooner than they would otherwise have been capable of. This is because a competitive touch-based phone OS and App ecosystem takes years to develop and—-without Android—-Motorola, HTC, etc. would have taken several years to get any significant position in the marketplace. These phone manufacturers had been caught seriously asleep at the switch and it was Google who bailed them out.

    Now, am I saying that Android-based phones are (or will ever be) a match for the iPhone? They will certainly not be! And, make no mistake, Apple will have major market share and the most profitable earnings position of them all. But Apple will have lost some significant market share and profit because of Google.

    My sense of the significant extent of this Google-caused damage has been heightened by the recent demo (video link below) of Dell’s Android-based Streak—-which will be launched in the UK in June and in the US later this year. This is an interesting form factor: large enough display (5 in.) to present a better video experience than the iPhone and small enough to have portability advantages over the current iPad.  In fact, I believe that a roughly 6 inch iPad may be the next form factor Apple will market for the iPad family (in a year perhaps). The Streak will not have nearly the success of an iPhone or the current iPad, but Android has again given an Apple competitor (and many others in the future at this or different form factors) several years of time-to-market advantage over what would have otherwise been.

    Will Apple have stunning successes with the iPhone and iPad?  Yes!  But not nearly as great as it would have if Google hadn’t squeezed into its market space with Android, AdMob, etc. via deceit and trickery.

    http://macdailynews.com/index.php/weblog/comments/25366/

    I agree with your view as it seems obvious to me. Some here think Google has helped Apple. I think they’re in denial. Disclosure: My friends just call me Apple, because for years I’ve told them it’s the only stock they need to own.

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    Posted: 27 May 2010 10:21 PM #4

    jeffi - 27 May 2010 08:29 PM
    Hannibal - 27 May 2010 05:09 PM

    ... My sense of the significant extent of this Google-caused damage has been heightened by the recent demo (video link below) of Dell’s Android-based Streak—-which will be launched in the UK in June and in the US later this year. This is an interesting form factor: large enough display (5 in.) to present a better video experience than the iPhone and small enough to have portability advantages over the current iPad.  In fact, I believe that a roughly 6 inch iPad may be the next form factor Apple will market for the iPad family (in a year perhaps). The Streak will not have nearly the success of an iPhone or the current iPad, but Android has again given an Apple competitor (and many others in the future at this or different form factors) several years of time-to-market advantage over what would have otherwise been.

    Will Apple have stunning successes with the iPhone and iPad?  Yes!  But not nearly as great as it would have if Google hadn’t squeezed into its market space with Android, AdMob, etc. via deceit and trickery.

    http://macdailynews.com/index.php/weblog/comments/25366/

    I agree with your view as it seems obvious to me. Some here think Google has helped Apple. I think they’re in denial. Disclosure: My friends just call me Apple, because for years I’ve told them it’s the only stock they need to own.

    Obviously, Google did damage Apple’s profitability.  Do you envision a time when Google’s share price would rise faster than AAPL?  When would that be?  Or what are the evidences that you are looking for?

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    Posted: 27 May 2010 11:57 PM #5

    Please excuse my post for i am a lurker here at these forums.
    I have a question.

    What would be the outcome if Apple let its iPhone OS become available to any OEM’s (at cost/free) while maintaining iPhones walled garden and ecosystem. In other words, do what Google has done with Android, let iPhone OS out of the gated community, but keep the status quo at the same time.

    Just thinking out loud.

         
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    Posted: 28 May 2010 12:08 AM #6

    Speaking of Google, look for some fool driving an SL with the top down waving at the Google car on Street View on 35W heading North and the onramp to 494 heading West in Bloomington, MN, in the shadow of Best Buy’s World HQ in a couple of weeks.  grin

    Re: market share: meh. Even this cheapo is planning on getting an iPhone this year.

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  • Posted: 28 May 2010 12:11 AM #7

    Eric Landstrom - 28 May 2010 03:08 AM

    Speaking of Google, look for some fool driving an SL with the top down waving at the Google car on Street View on 35W heading North and the onramp to 494 heading West in Bloomington, MN, in the shadow of Best Buy’s World HQ in a couple of weeks.  grin

    Re: market share: meh. Even this cheapo is planning on getting an iPhone this year.

    You would be the only self-described cheapo driving a SL.  Nice choice though.

         
  • Posted: 28 May 2010 12:28 AM #8

    Agreed, Android has caused Apple harm, and agreed, the antitrust benefit to Apple is way overblown.  That said, two thoughts:

    1)  There IS a somewhat compensating benefit of Android in terms of suffocating all of the other iPhone competitors.  At least until AT&T loses its iPhone exclusivity, people who don’t want to switch to AT&T still want smartphones, so somebody was going to get those Android sales.  Arguably better that its Google getting the sales, since it is an upstart behind Apple in so many ways, rather than Microsoft, RIM or Nokia, incumbents with a big head start on Apple.

    2)  Android’s harm is far greater in potential than in current actuality.  I doubt Android has kept too many folks from jumping ship to AT&T.  Those that haven’t jumped already are ether loyal to their carrier or deeply suspicious about AT&T.  Android has made very little dent outside the US.  And most importantly, all reports lead to the conclusion that Android owners are not downloading much to their device.  So the number of folks who have really adopted the Android platform are small compared to number of units sold.

         
  • Posted: 28 May 2010 12:56 AM #9

    Mace - 28 May 2010 01:21 AM
    jeffi - 27 May 2010 08:29 PM
    Hannibal - 27 May 2010 05:09 PM

    ... My sense of the significant extent of this Google-caused damage has been heightened by the recent demo (video link below) of Dell’s Android-based Streak—-which will be launched in the UK in June and in the US later this year. This is an interesting form factor: large enough display (5 in.) to present a better video experience than the iPhone and small enough to have portability advantages over the current iPad.  In fact, I believe that a roughly 6 inch iPad may be the next form factor Apple will market for the iPad family (in a year perhaps). The Streak will not have nearly the success of an iPhone or the current iPad, but Android has again given an Apple competitor (and many others in the future at this or different form factors) several years of time-to-market advantage over what would have otherwise been.

    Will Apple have stunning successes with the iPhone and iPad?  Yes!  But not nearly as great as it would have if Google hadn’t squeezed into its market space with Android, AdMob, etc. via deceit and trickery.

    http://macdailynews.com/index.php/weblog/comments/25366/

    I agree with your view as it seems obvious to me. Some here think Google has helped Apple. I think they’re in denial. Disclosure: My friends just call me Apple, because for years I’ve told them it’s the only stock they need to own.

    Obviously, Google did damage Apple’s profitability.  Do you envision a time when Google’s share price would rise faster than AAPL?  When would that be?  Or what are the evidences that you are looking for?

    Mace, are you being sarcastic regarding Apple’s profitability? It’s clear to me, right now, that there is no other single stock I’d rather own the AAPL (risk adjusted). That being said, for the purpose of diversification, I’m looking for the next best. Google is my number two risk adjusted play. I expect Apple to outperform Google as an investment for the next 6 -12 months and maybe the next three years. It’s too difficult to forecast beyond that. I believe Apple will outperform Google as an investment because of the strength of Apple’s current product line and the low penetration on their addressable markets (except for the Ipod). From an addressable market standpoint, APPL can double their income over an over again. On the other hand, I believe that Google’s advertising franchise is a safer long term bet than Apple’s ability to out innovate the competition. But, if I could only own one stock, it would be AAPL and it’s not even close.

    What am I looking for in a stock investment… Large cap, non-cyclical, technology stocks, that have long term secular growth, can leverage the internet, have high margins, great operating leverage, that scale worldwide, are accompanied by a defensible moat and billions in cash and no debt that have reasonable or better valuations. I want to be able to hold these stocks for years and years without generating a tax liability. What stocks do you think fit in my universe?

    What I don’t like about Apple’s business is that it’s part hardware, which typically entails lower margins and less operating leverage. Google’s various initiatives leverage the internet better and scale more easily which may translate into far more profits IF they can eventually monetize them. Lastly, in theory, open software models should eventually beat closed proprietary ones. The question is, will Apple’s products always be a step ahead? Apple is on an incredible roll, but what are the odds that they can keep innovating at this pace? I do believe that they will continue innovating and executing for next 12 -36 months based on what already exists.

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  • Posted: 28 May 2010 01:24 AM #10

    macorange - 28 May 2010 03:28 AM

    Snip…

    Android’s harm is far greater in potential than in current actuality.  Android has made very little dent outside the US.

    I believe this is wholly incorrect.

    Excellent article, A must read…

    “I think it’s safe to say that Android will soon be one of the biggest smartphone platforms on the planet, come what may. And by the end of this year, they are likely the second largest behind only Symbian.”

    http://www.fool.com/investing/high-growth/2010/05/27/deciphering-androids-smartphone-sales-figures.aspx

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    Posted: 28 May 2010 01:29 AM #11

    jeffi - 28 May 2010 03:56 AM

    ... What am I looking for in a stock investment… Large cap, non-cyclical, technology stocks, that have long term secular growth, can leverage the internet, have high margins, great operating leverage, that scale worldwide, are accompanied by a defensible moat and billions in cash and no debt that have reasonable or better valuations. I want to be able to hold these stocks for years and years without generating a tax liability. What stocks do you think fit in my universe?

    What I don’t like about Apple’s business is that it’s part hardware, which typically entails lower margins and less operating leverage. Google’s various initiatives leverage the internet better and scale more easily which may translate into far more profits IF they can eventually monetize them. Lastly, in theory, open software models should eventually beat closed proprietary ones. The question is, will Apple’s products always be a step ahead? Apple is on an incredible roll, but what are the odds that they can keep innovating at this pace? I do believe that they will continue innovating and executing for next 12 -36 months based on what already exists.

    Huh, I see where you are coming from now.  The biggest problem with hardware business is inventory management.  So long SJ is around, I won’t be worried about pace of innovation.  I’m surprise you don’t care about bang for the bucks.  Btw, I owned AAPL since 1997 (return of SJ) at an average price of $10.  13 years good enough for you tongue laugh.  If Google is my next target after three years, I would wish that Google makes plenty of blunders to a point of bankruptcy, Google boys decided to kick out Eric Schmidt, and GOOG at fire sale.

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  • Posted: 28 May 2010 01:32 AM #12

    jeffi - 28 May 2010 04:24 AM
    macorange - 28 May 2010 03:28 AM

    Snip…

    Android’s harm is far greater in potential than in current actuality.  Android has made very little dent outside the US.

    I believe this is wholly incorrect.

    Excellent article, A must read…

    “I think it’s safe to say that Android will soon be one of the biggest smartphone platforms on the planet, come what may. And by the end of this year, they are likely the second largest behind only Symbian.”

    http://www.fool.com/investing/high-growth/2010/05/27/deciphering-androids-smartphone-sales-figures.aspx


    See this from Forbes “Android has already passed the Iphone in China”

    http://blogs.forbes.com/velocity/2010/05/27/android-has-already-passed-the-iphone-in-china/?partner=yahootix

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  • Posted: 28 May 2010 06:37 AM #13

    Jeffi

    To the extent you want to rely on Admob, their latest report indicated 3 million Android phones outside the US, compared to 17 million iPhones outside the US. And that doesn’t include Touches and iPads. 

    Again, I’m not saying that Android isn’t a future threat outside the US, but so far the harm to Apple’s international revenues is a rounding error.

         
  • Posted: 28 May 2010 11:39 AM #14

    macorange - 28 May 2010 09:37 AM

    Jeffi

    To the extent you want to rely on Admob, their latest report indicated 3 million Android phones outside the US, compared to 17 million iPhones outside the US. And that doesn’t include Touches and iPads. 

    Again, I’m not saying that Android isn’t a future threat outside the US, but so far the harm to Apple’s international revenues is a rounding error.

    Android sales have now reached 100,000 per day (see link to fool.com article above). Therefore, Android has already caught up to Iphone sales, and they have more momentum (at the current run rate). Apple may have sold more cumulatively, but future sales is what drives valuation. Even if Android has more momentum then the iphone, I expect the iphones incredible growth will continue just at a slower rate than otherwise would have been the case. Android is taking share that would have belonged to the iPhone. The trend indicates that this will continue. Long AAPL & GOOG.

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    Posted: 29 May 2010 12:08 PM #15

    I’ve just posted on my blog a strategy most of which I believe Apple is already implementing which is designed to increase Apple’s revenue and decrease Google’s revenue and neutralise to the extent possible Google’s open web eyeball strategy. It involves Apple’s turning the tables and mimicking Google’s give away strategy of cloud services and tight integration with Google’s competitors. There’s no way of recapturing Apple’s loss of revenue from its innovative work but there is a way to choke Google revenue and decrease the amount of cash they have to rapidly copy (embrace and extend) Apple’s release of innovative products.

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