Apple the Serial Disruptor

  • Posted: 05 September 2011 02:18 PM

    We all know that Apple has disrupted many industies and even more companies. However, I, personally, have never catalogued the breadth and depth of this disruptions. Today I read an article entitled: What Apple destroyed, creatively. I did not agree with it’s every assertion, but I thought it was a good jumping off point for starting a discussion on the subject.

    My intent is to crowd souce all of the various Apple created disruptions. Of course, your intent may differ. As always, the thread will bob and weave in accordance with the AFB’s contributions to it.

    Introduction

    One thing that might have gotten lost in the avalanche of Steve Jobs coverage has been his impact on technology investors. Not the entire sector but rather the crushing effect that Apple has had on specific competitors. It is creative destruction writ large.

    Jobs remade entire industries according to his unique vision. From music to film, mobile phones to media publishing, and now computing, his impact has been enormous. And rumors abound about the next new thing, Apple?s remake of traditional television.

    While Apple 1.0 influenced how we think of the PC user interface, it was hardly the disruptive behemoth that Apple 2.0 became. The Cupertino PC maker hardly profited from its innovations ? Apple was a marginal player with a tiny market share. Yes, we know the original Mac was hugely influential and mostly ripped off by Microsoft. Indeed, the Mac-maker was kept alive by a $150 million Microsoft investment in 1997. With that, Bill Gates could retain a weakened competitor and argue that his firm did not own a monopoly in operating systems. The irony is that lifeline allowed a competitor to recover to the point where it is now a threat.

    But it is much more than just Microsoft. Today, the triple threat of iPod/iPhone/iPad has left behind a wake of overwhelmed business models, confounded managements and bereft shareholders. Let?s look at who has been hurt ? and helped ? by the perfectionist from Cupertino:

    Damaged

    Microsoft: Once a vicious and hated monopolist, Mister Softee is currently run by Steve Ballmer. Under Ballmer, Microsoft has become vulnerable on multiple fronts. It has missed nearly every major trend in technology over the past decade, with the Kinect being the lone exception. Ballmer famously said he wouldn?t let his kids use an iPod or Google, missing an entire computing shift. As recently as two years ago, he claimed Linux was a bigger competitor to Microsoft than Apple. Perhaps Ballmer?s sale of 49.3 million shares in his Microsoft stock in late 2010 ? that is $1.3 billion in cash ? is a better tell than his foolish proclamations. Microsoft still has its cash cows Windows and Office, but I imagine it could see significant attenuation over the next decade.

    Sony: Once owned the portable music space, but its Walkman was replaced by the iPod, and its well-regarded Vaio laptops are getting supplanted by iPads. It has a huge consumer electronics, film and television business but is being slapped by the Koreans below and Apple above.

    Intel: A mixed bag, to say the least. Intel is powering Macs and has some chipsets in other Apple products, but its PC business appears to be at risk.

    Challenged

    Google: A juggernaut in its own right, Google acquired Android and turned it into a legitimate competitor to the iPhone. But it doesn?t sell the OS ? it gives it away for free and retains the search rights (the bread and butter).

    It was smart to expand into mobile so as to not get eclipsed in that space, but it also created another set of headaches: patent exposure. Apple not only dominates the space but also acquired a huge trove of Nortel patents so as to insulate itself and challenge all comers. This forced Google to pay up for a comparable portfolio, grabbing (former Apple partner) Motorola for $12.5 billion. The jury is still out as to whether this will insulate some of the obvious Apple-inspired tech on the Android.

    AT&T: Was desperate enough to let Apple dictate terms for the iPhone, thereby transforming the industry. When iPhone calls got dropped in large numbers, Apple might have saved it from an ignominious demise.

    Verizon: We could argue that the phone giant could be put into multiple categories: Challenged? Benefited? Perhaps a foot in each camp?

    No doubt, the initial years of AT&T?s iPhone sales took some market share from competitors. But Verizon?s reputation for having reliable network coverage was enhanced. Its savvy advertising also limited the damage. As soon as AT&T?s exclusivity ended, Verizon was right there to become an iPhone4/iPad2 seller. Both products sold well for the company. Verizon?s Android sales meant they were also in a good negotiating position with Apple for contracts. That?s something most other mobile phone companies cannot claim.

    (Continued on next post.)

         
  • Posted: 05 September 2011 02:19 PM #1

    (Continued from previous post)

    Benefited

    Samsung: Similar to Verizon and Foxconn, Samsung benefits from Apple as a major supplier but is also a competitor in its own right. The Economist recently reported that Samsung makes 26 percent of the component cost of the iPhone. Indeed, there is litigation between the two firms over designs and patents, but so far, Samsung is a net winner in the new Apple econosphere.

    Sharp: Apple invested a billion dollars in Sharp to ensure a steady supply of laptop LCDs, and their ongoing relationship seems to be working well for the Japanese multinational.

    Corning: ?Gorilla? Touchscreen Glass is the supplier not only to the iPod Touch/iPhone/iPad but also to an entire industry. The i-line and its many competitive inspirations have been a boon to Corning.

    Sprint: Will reportedly begin selling the iPhone 5 later this year.

    Foxconn: Manufacturer of many Apple products continues to benefit from the relationship with Cupertino.

    STMicroelectronics: Makes the Accelerometer and Gyroscope in iPods and iPhones.

    Qualcomm: Produces the wireless baseband chips in iPhone4 and to be in iPhone 5.

    One day, a new competitor will come along and do to Apple what Apple had done to others. It is the nature of creative destruction that these innovative firms are temporary, lasting a few years to a few decades. Survivors such as IBM and GE are the exception, not the rule. This is why investors must always remain vigilant against losses. There is no such thing as a forever stock holding.

         
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    Posted: 05 September 2011 02:36 PM #2

    Destroyed

    ? Sony’s portable music division. I think people have forgotten just how dominant this was in the 80s & 90s.

    ? Palm, Nokia and (eventually) RIM. iPhone decimated the cell phone industry.

    Damaged en route to Destroyed

    ? Portable gaming: Nintendo & Sony PSP

    ? Console gaming: Xbox, Nintendo & Playstation. Apple TV with AirPlay will hit hard this holiday season. Subsequent iterations will continue the devastation.

         
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    Posted: 05 September 2011 02:51 PM #3

    For the love of God - start a blog already.

         
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    Posted: 05 September 2011 02:54 PM #4

    Challenged

    Google: A juggernaut in its own right, Google acquired Android and turned it into a legitimate competitor to the iPhone. But it doesn?t sell the OS ? it gives it away for free and retains the search rights (the bread and butter).

    It was smart to expand into mobile so as to not get eclipsed in that space, but it also created another set of headaches: patent exposure. Apple not only dominates the space but also acquired a huge trove of Nortel patents so as to insulate itself and challenge all comers. This forced Google to pay up for a comparable portfolio, grabbing (former Apple partner) Motorola for $12.5 billion. The jury is still out as to whether this will insulate some of the obvious Apple-inspired tech on the Android.

    I think it would be more accurate to characterize Google as unwisely walking into the lion’s den. They could easily have been an Apple ally rather than a challenger.

    AT&T: Was desperate enough to let Apple dictate terms for the iPhone, thereby transforming the industry. When iPhone calls got dropped in large numbers, Apple might have saved it from an ignominious demise.

    “Might have”? T is too big to die quickly, but without the iPhone it would have been pummeled by Verizon. It is only because of the iPhone that they remain in spitting distance of Verizon in the U.S. cell phone market. I would put them clearly in the “Benefited” column.

    Verizon: We could argue that the phone giant could be put into multiple categories: Challenged? Benefited? Perhaps a foot in each camp?

    We’ll never know if Apple was genuine in offering the iPhone to Verizon first in 2006. Would they really have built a CDMA iPhone only for the U.S. market along with the GSM version for the rest of the world? Who knows.

    But it’s clear that Verizon missed out on any chance of that happening by outright rejecting Apple’s offer. In an alternate universe Verizon could have left AT&T eating their dust.

    Verizon?s Android sales meant they were also in a good negotiating position with Apple for contracts. That?s something most other mobile phone companies cannot claim.

    What the…? How are Verizon’s contracts with Apple any different from AT&T’s?

         
  • Posted: 05 September 2011 03:14 PM #5

    Nagrani - 05 September 2011 05:51 PM

    For the love of God - start a blog already.

    Ha! Point taken.

         
  • Posted: 05 September 2011 09:56 PM #6

    The Anything But Apple pundits must be really struggling right now. One of their favorite rants is that Apple products are too expensive. But they can’t really say that with the iPad. And now competitors are struggling terribly to get their products to match the MacBook Air too.

    http://www.guardian.co.uk/technology/2011/sep/02/toshiba-unveils-ultra-thin-laptop

    It’s a brave new world for Apple. Best quality products. Best price too.

         
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    Posted: 06 September 2011 02:47 AM #7

    GameStop to carry iOS devices soon

    We?ve received a word from several sources that GameStop will soon begin offering the entire lineup of Apple?s popular iOS mobile devices such as iPhones, iPods and iPads at their stores.  The announcement was made to dealers at an annual trade show in Las Vegas this past week.

    http://9to5mac.com/2011/09/05/gamestop-to-carry-ios-devices-soon-begins-trading-in-used-iphones-ipads-and-ipods-for-in-store-credits/

    The plans for new devices haven’t been confirmed but would support GameStop’s own plans to reduce its dependency on physical game sales. While its business revolves around selling used physical game copies, the mobile gaming market is shifting quickly away from traditional gaming handhelds towards smartphone and tablet gaming, led primarily by Apple. After years of virtually unchallenged dominance in the space, Nintendo had to cut the 3DS’ price early after both slow sales at the original $250 price as well as dropping sales of the older DSi.

    http://www.electronista.com/articles/11/09/05/gamestop.could.sell.ipads.iphones.soon/

         
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    Posted: 06 September 2011 03:07 AM #8

    In a way, I’m a little sad.

    I’ve had many consoles over the years and a couple of portables too.  The DS Lite was a pretty sweet device.  But I had, I dunno, 4 games for it? 

    I’ve moved on, and Sony and Nintendo were either too slow to react…or doomed from the start.

    There’s a problem when I can buy a _true_ multipurpose, all-business no-gimmicks device for $229 (latest edition), and then proceed to buy tons of _high-res_ games on the App Store for $100.  Some offer seriously impressive gaming experiences.  And you don’t always have to buy them ‘em, since they go free sometimes! 

    Tablet gaming is even more immersive, with games going for a fraction of the cost of DSi or PSX entries. 

    Only one of the portable gaming players is skating to where the puck is going.

    Signature

    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Teamâ„¢
    Thanks, Steve.

         
  • Posted: 06 September 2011 02:13 PM #9

    FalKirk - 05 September 2011 05:18 PM

    Indeed, the Mac-maker was kept alive by a $150 million Microsoft investment in 1997.

    This ain’t canon !! Everyone credits Apple marketing, but somehow they are not able to sell the story about this “investment” to the journos.
    I wonder if Steve’s biography will set the record straight about this.

         
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    Posted: 06 September 2011 03:16 PM #10

    Hariharan P - 06 September 2011 05:13 PM
    FalKirk - 05 September 2011 05:18 PM

    Indeed, the Mac-maker was kept alive by a $150 million Microsoft investment in 1997.

    This ain’t canon !! Everyone credits Apple marketing, but somehow they are not able to sell the story about this “investment” to the journos.
    I wonder if Steve’s biography will set the record straight about this.

    What is it about the story that you think needs to be corrected? As I understand it, just as important as the money was Microsoft’s commitment to continue to update Mac versions of Office and Internet Explorer. Jobs has repeatedly said that Apple was 90 days away from bankruptcy when he returned in ‘97.

         
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    Posted: 06 September 2011 03:19 PM #11

    I never got sucked into the video game craze. My observations come from watching average gamers (cousins, nephews, niece, etc.), not the hard-core computer or console gaming addicts. The latter will always exist, but like Steve’s truck analogy, they are dwindling to a minority percentage, both in terms of raw numbers and money spent.

    Casual gamers seem to turn on the console device a few times a week, especially for multi-player games. But much of the interest is driven by new games. Once a game has been mastered (or a plateau has been reached), interest fades.

    Likewise with the dedicated portable devices like the DS. Even though older nephews have set up everyone’s Nintendo with dozens of games on a cartridge, new games don’t arrive very frequently.

    Such is not the case with an iOS device. Like you said, Mav, there are tons of cheap or free games arriving every day. More importantly, many of the game apps are frequently updated with new features. Doodle Jump, for example, cost 99? a couple of years ago and the kids are still playing it because new backgrounds are introduced every few months.

    AirPlay on Apple TV and the inevitable multi-player games that will eventually arrive using multiple iOS devices as controllers is going to kick iOS gaming into an even higher gear. Imagine a bunch of kids going to a birthday party bringing their own iOS game controller to participate in the fun. Everyone will want at least an iPod touch.

         
  • Posted: 06 September 2011 03:35 PM #12

    Hariharan P - 06 September 2011 05:13 PM
    FalKirk - 05 September 2011 05:18 PM

    Indeed, the Mac-maker was kept alive by a $150 million Microsoft investment in 1997.

    This ain’t canon !! Everyone credits Apple marketing, but somehow they are not able to sell the story about this “investment” to the journos.
    I wonder if Steve’s biography will set the record straight about this.

    Whoa! I never wrote this. In fact, I continuously fight this claim on the message boards by citing the following article: Stop the lies! The day that Microsoft ‘saved’ Apple.

         
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    Posted: 06 September 2011 03:53 PM #13

    FalKirk - 06 September 2011 06:35 PM
    Hariharan P - 06 September 2011 05:13 PM
    FalKirk - 05 September 2011 05:18 PM

    Indeed, the Mac-maker was kept alive by a $150 million Microsoft investment in 1997.

    This ain’t canon !! Everyone credits Apple marketing, but somehow they are not able to sell the story about this “investment” to the journos.
    I wonder if Steve’s biography will set the record straight about this.

    Whoa! I never wrote this. In fact, I continuously fight this claim on the message boards by citing the following article: Stop the lies! The day that Microsoft ‘saved’ Apple.

    Thanks for the link, FalKirk. I didn’t know the back story. Even if Microsoft was forced into the agreements with Apple, Jobs clearly wanted Microsoft’s full cooperation and was willing to let Gates save face by appearing to come to Apple’s rescue. It would have served little purpose at the time to rub Microsoft’s nose in it. Today the irony of it all must hurt whether Microsoft wants to believe the public or real story behind those 1997 agreements.

         
  • Posted: 06 September 2011 07:50 PM #14

    Drew Bear - 06 September 2011 06:53 PM
    FalKirk - 06 September 2011 06:35 PM

    Stop the lies! The day that Microsoft ‘saved’ Apple.

    Thanks for the link, FalKirk. I didn’t know the back story. Even if Microsoft was forced into the agreements with Apple, Jobs clearly wanted Microsoft’s full cooperation and was willing to let Gates save face by appearing to come to Apple’s rescue. It would have served little purpose at the time to rub Microsoft’s nose in it. Today the irony of it all must hurt whether Microsoft wants to believe the public or real story behind those 1997 agreements.

    I try to collect this little nugets as I stumble across them. Another article I find useful in rebutting anti-Apple Myths is: MYTH: Copyright Theft, Apple Stole GUI from Xerox PARC?Alto