There is something magical about Apple that befuddles and confuses some observers. Time and time again people proclaim Apple’s imminent or eventual demise; label success failure; or—and this is my favorite—say what Apple really needs is to do what everyone else does. And that’s what I have for you today, a bold proclamation that Apple must “license the operating system and undo the mistake of 30 years ago.”
This advice comes courtesy of Vivek Wadhwa, a Distinguished Fellow and professor at Carnegie Mellon University Engineering at Silicon Valley, writing for Marketwatch.
It’s Like Gil Amelio All Over Again
His central thesis is that Apple needs to get out of the hardware business and license iOS to third party hardware manufacturers. You know, like Microsoft did with Windows (and the failed Windows Phone/Mobile/Whatever), and Google does with Android.
“Instead of owning a big chunk of a large pie as Alphabet’s Google, Apple owns a decreasing share of an increasing market,” Mr. Wadhwa wrote. “It may have the most profitable slice, but as the numbers show, this won’t last.”
The central conceit of that central thesis is that market share is all that matters. In the minds of such people, he who owns the market share wins.
- Never mind that Apple makes almost all the profits in the smartphone market despite having low market share.
- Never mind that Apple is the most profitable PC maker despite having low market share.
- Never mind that most of the value proposition of Apple’s iOS is predicated on the whole widget model, and that this value proposition evaporates in an open licensing model.
- Never mind that Google makes little money on Android despite having a dominant market share.
- Never mind that Apple became the most profitable company in history precisely because it did NOT do open licensing.
These things don’t seem to matter to Mr. Wadhwa. He sees the proliferation of cheap Android devices at the low end of the market as the sweet spot Apple should chase. He believes that services, app, and content purchases by this segment would make up for Apple’s lost premium hardware profits.
Again, never mind that Google doesn’t get those revenues or profits now despite owning this exact same segment of the market. Never mind that Apple’s services business is a huge business precisely because Apple’s owns the high of the business.
In other words, never mind the bullocks, here come the market share chasers.
Same as It Ever Was
It’s so weird to me, but Mr. Wadhwa is far from alone in pushing Apple to follow-the-leaders into mediocrity. It used to be a regular feature in Apple’s quarterly conference calls. Analysts would congratulate Apple on another record quarter and then ask when the company was going to start doing things like its competitors.
Now that Apple had back-to-back quarters that were down year-over-year, I expect that theme to return. Analysts and pundits alike (like Mr. Wadhwa) will be emboldened by Apple’s short-term decline to argue Apple should join the race to the bottom and pursue market share.
Never mind that even with its two-quarter year-over-year decline Apple still makes more money than all those other companies combined.
Part of the problem for folks with Marketsharechosis is they assume everything good about Apple’s ecosystem exists independently of that ecosystem. They appear to believe iOS would be just as good on a Samsung device as it is on Apple hardware. Accordingly, in their minds, iOS would just crush the market if every Tom, Dick, and corporate Harry could license it.
This is a fundamental, gross misunderstanding of Apple’s business model. It’s a gross misunderstanding of why devices work better when the company making the software designs the hardware. It’s a gross misunderstanding of how the attractive aspects of iOS are able to exist.
There are any number of ways to measure success, and there are always plenty of reasons to complain about Apple. But when Apple is kicking every other company’s butt in profit and quality, it’s really bizarre to argue Apple should stop being Apple and start being Google or Microsoft.
I mean, seriously. It’s weird.