We have always built and destroyed monopolies. Companies often start out good but slowly turn, for lack of a better word, evil. The twin dark stars of profit and market share bring even the kindest companies into a collision course with failure. I’d say Apple is headed down that road.
The company announced its 2012 Q2 earnings earlier this week and as MG pointed out, they’re nearly as impressive as the previous blockbuster quarter. A dive at wireless carrier’s financials shows that the iPhone accounted for a whopping 59% of smartphone sales in the U.S. last quarter. The iPhone 4S downright crushed a league of new Android flagship handsets. Android is faltering at the hands of the iPhone. Apple is on pace per some analysts to be the first trillion dollar company in history and will do so on the back of a trivial amount of products and services.
Apple’s success is made possible by keeping things simple. This started with the iMac’s one-size fits all mentality. Steve Jobs and Co. correctly identified that the average consumer doesn’t care about specs but rather capabilities. The spec has been dead at Apple for more than a decade. Where Dell, HP and the others target the average computer shopper, Apple looks to sell to their parents.
The same philosophy is driving the iPhone’s massive growth. There isn’t a better universal smartphone on the market. This isn’t open for discussion and the numbers prove it. Smartphones are now outselling less expensive feature phones with the iPhone as the number one seller. That states above all else that consumers overwhelmingly prefer Apple’s take on mobile phones. And for good reason.
I’m downright fed up with Android. Others must be with me. I’m ready to jump ship to the iPhone after being an Android user since the original Droid. Updates aren’t regular or useful and the vast fragmentation in hardware causes apps to be very inconsistent in quality. The only thing holding me back is Android’s workflow allowed by homescreen widgets. But the average consumer doesn’t care about workflow nonsense. They want a phone that works and they’re choosing the iPhone. And the iPad.
As dominating as the iPhone is to the mobile phone market, the iPad is even more so to the tablet market. The iPad is experiencing a crazy amount of growth due to the lack of true alternatives. Only the Amazon Kindle Fire offers any sort of competitive advantage but that’s only due to the $200 price tag. The Samsung Galaxy Tab is the main iPad alternative and according to a study released today, it only holds 15% of the Android tablet market. The Fire accounts for 50% of Android tablets and it doesn’t even show its Android skin.
This domination in two of the most important consumer electronic spaces — coupled by Apple’s astounding cash reserves and market valuation — is more frightening than Microsoft’s monopoly in the ’90s. There was a time when Microsoft was in a similar position. In fact there are several important parallels between Apple of today and Microsoft of yesteryear.
At the core of the U.S. Government’s case against Microsoft was that Windows users only had access to Internet Explorer. This came during the height of the browser wars when Netscape and Opera were trying to gain traction. Microsoft asserted that IE was a Windows 95 feature rather than a standalone product much like Apple states the App Store is part of iOS. The Department of Justice successfully argued against Microsoft in stating that it was too hard for consumers to choose a different browser due to the download speeds at the time. It is also nearly impossible for the average iPhone owner to find a different source of applications for their device.
However, these anecdotal points only paint half the picture. Consumers are willingly choosing the iPhone and iPad over a large assortment of similar competitors. Windows was the only option 15 years ago. Macs were, if you will, the BlackBerry of the day.
The computing world has changed drastically since the U.S. Government deemed Microsoft a monopoly and broke the company in two. The term personal computer is much less meaningful. It doesn’t just define a beige box sitting on a desk. Most agree that the iPad is a personal computer and it could be argued that smartphones are an even more personal device. But for the sake of analyst’s market share pies, tablets and smartphones are segregated from their x86 counterparts. But much like the honey badger, Apple is the most fearless company in consumer electronics. It just takes what it wants.
Never mind what Apple CEO Tim Cook stated in this week’s earning call. Apple is all about convergence and making products (and its internal workings) as simple as possible. OS X looks and acts very much like iOS. For better or worse, this is driving consumerism toward a simplified operating system void of traditional computing elements. If a true competitors do not step up now, Apple will soon be able to commandeer any market it wants.
Apple already owns the smartphone and tablet market. The PC market doesn’t matter anymore. The company has moved past caring about low-margin computing products. Talk of an Apple HDTV has been around for years and the market is ripe for the taking. The next big step for Apple is enterprise and education with medical not far off.
Even without directly targeting the corporate space, the iPad and iPhone are already a major force in corner offices. Apple simply needs to implement stronger email and security settings and grant IT departments a bit more control of devices to effectively kill RIM. On that same note, a legitimate alternative to MS Exchange would better position Apple against Microsoft.
Apple used to be synonymous with education, and with the launch of iBooks textbooks last year, the company took strides to regain that distinction. However, there is still just a limited number of these interactive textbooks available, and they’re rather costly to implement given the massive upfront cost and liability of buying iPads for students. But this is how Apple works. It often launches services such as iTunes and the App Store before there are devices to fully utilize the capabilities. Look for Apple to slowly gain a huge following thanks to just these educational tools.
Android is the only hope to stand tall against Apple and it’s currently in a sad state. Google is giving OEMs too much leeway. The old adage of choice is good is working against Android. Four years after Android launched, consumers overwhelming choosing the competitor within the last three months. Google needs to rein its armies back in and refocus with a unified message. As an owner of both an Android and iPhone, I sincerely believe Android is a better OS but the iPhone is a better device.
Samsung has the right idea with the Galaxy line. As their adverts assert, they’re anti-iPhones thanks to their larger screens and wide range of models. Motorola took a step in a similar direction with RAZR MAXX. The larger battery offers something different than iPhone clones. But even with the launch of these major flagships, the iPhone 4S trampled on their highly advertised launch parades.
It’s hard to imagine a future without Apple. Per a study released today, 33% of American households already own an Apple product. The iOS behemoth will not be stopped. Android’s needless fragmentation and constant infighting will ensure that. The iPad will slowly morph into the de facto personal computing device. There will still be alternatives. Android and Windows will not completely go away, but Apple’s massive cash reserves will allow it to sway markets and assert unquestionable power. Apple could, if it really wanted, cut the price of the iPad in half and absorb the losses. iTunes and the App Store have shown they’re a major source of revenue alone. It would also make the device much more tempting for educators and IT departments.
But Apple isn’t in the position for global dominance just yet. First, the company needs to make even bigger inroads into China. It was announced in this week’s earning call that revenue from the Chinese market increased threefold over last year’s second quarter to $12.4 billion. In fact that falls just short of Apple’s previous complete year revenue from the prior year. And this is without the country’s largest carrier, China Mobile, offering the iPhone to its 600 million subscribers.
After China falls into Apple’s pocket, the world will be its oyster which the iPhone will open. And that’s a bit scary.