Pundit Wants Apple to License iOS to Fix a 30-Year Old Mistake

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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.

Searching for market share amidst Apple's pile of profits.

Searching for market share amidst Apple’s pile of profits.

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.

Marketsharechosis

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.

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Paul Goodwin
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Paul Goodwin

Lots of good points here for not licensing. The best hardware specs don’t make the best phone. It’s the user experience of the hardware design and OS integrated into a first rate product that produces the profit in the end. Nobody but Apple has been able to execute this at the level they have. Good point Wab95 about buyers changing in the overseas markets. They too will realize that paying just a little bit more is more than just worth it. And that extra cost over 2-3 yrs is minimal. The buyers will always learn what is worth it and… Read more »

ibuck
Member
ibuck

As noted above, user experience is key. If a consumer buys hardware which has licensed an OS, and that OS is updated (with added functions) at a subsequent time, say, a year later (but it could be shorter), then that hardware, if not upgradeable, becomes obsolete in a year. This is the Android model, and it compels the user who wants the latest functions to buy another piece of hardware. And that increases Android market share. If this happens in several consecutive years, Android market share stays high, while Apple customers hang on to their devices for a few years… Read more »

wab95
Member
wab95

Bryan, Mr Wadhwa, et al: While I appreciate that the idea of Apple licensing their OS (macOS, and now iOS, watchOS, and tvOS), is not new, I welcome the opportunity that Mr Wadhwa’s piece affords us to revisit the topic under fundamentally different circumstances than those under which BG originally offered his advice. Further, while predicting alternative histories is fundamentally speculative, there are real world events that can inform and harden that speculation. Whether or not Apple or the world would have benefited from licensing their macOS back in 1985, there is no guarantee that Apple would have employed all… Read more »

Lee Dronick
Member
Lee Dronick

There was no mistake 30 years ago; else Apple would not exist today.

Spot on bigPaise, The last time that they licensed an operating system it was almost the final death knell.

bigPaise
Member
bigPaise

There was no mistake 30 years ago; else Apple would not exist today.

Jamie
Member
Jamie

Jeeze, history, repeat yourself much? The only reason they have an opinion at all is to ensure that their own pockets get sufficiently lined. Believe it or not, once upon a time in the prehistoric ages, people invested in things initially because they believed in the idea, company, or product. It’s just a big shell game now, as it was in other insidious, unregulated times (yes, this has happened before. Didn’t end well at any of those times), they are all fat cats that could never be fat enough for their liking. I’m glad Cook and co. largely don’t seem… Read more »

2old4fun
Member
2old4fun

To be a successful business one must have a good business plan and execute it correctly. A good business plan must include a product that can be sold at a profit. It can include several products but all products must contribute to the profit. Each in itself does not have to be profitable as long as it enhances the profit of other products. This definition does not include any reference to marketshare. Marketshare is a number derived from dividing the total market by ones portion of the market. This does not measure the success of a company which is only… Read more »

Member
wadhwa

Bryan, you are missing the point. Over the next 5 years, with the price of smartphones dropping dramatically (to the $25-50 level in China and India) and Internet connectivity becoming pervasive, 2 – 3 billion people will be coming online. They will all be buying mobile devices. These devices are not going to be Apple devices because Apple was targeting the same elite group that it has since its inception. Now look at what happens in the early 2020s: Apple will have 300-400 million users and Android, 3-4 billion (yes, the Apple numbers will be shrinking from the estimated 500… Read more »

domsin
Member
domsin

Right On, Bryan! (Sorry if that’s a little dated) I hope the current management of Apple after SJ never forfeit their values for market share.