I have to say, I disagree with Kenny’s view that Apple is losing to Android. In fact, when Artem asked me what I thought of his article a few weeks ago, I went off for about 15 minutes listing reasons it was just plain wrong (at which point, I then debated back and forth with him for another 20 minutes).
I’m going to say up-front, I’m thinking short-term here – over the next few years. I’m no oracle, so I can’t say anything more specific than over the next 2-5 years (broad, I know). Certainly, Apple won’t be on top forever, if only because history teaches us that nobody stays on top forever. A company may always be “successful” in that they turn a long-term profit, but they will not always stay remain the king of the kill. Still, as I said, I think Apple will remain on top for another few years.
Apple didn’t lose the computer war
This may seem a little off topic, but stay with me here – it supports the rest of the article, and you’ll see why in a bit. Kenny argues that Apple lost the computer war to Microsoft, and that’s why they’ll lose the smartphone war. Did they lose the computer war, though? Let’s look at two nearly identically-specced laptops, one a Dell and one MacBook:
You’re going to want to full-size that, but what it shows is a Dell costing $950 and a nearly identical MacBook costing $1,800. Yes, the MacBook is aluminum. Yes, the Dell has a larger hard-drive. There are a number of minor differences, but essentially they’re neck-and-neck (also, full disclosure: there were a few Windows laptops for less – starting at $730 - but for fairness I wanted one that had a LED backlit screen).
My point should be pretty obvious, but just in case it isn’t – despite having nearly identical product costs, Apple is charging an $850 premium (that’s nearly 90%) on their laptops. As Kenny compares them to Microsoft, I’ll keep that analogy going – Microsoft sells just the OS, so they get a minor cut of profits. Apple? The whole damn thing is theirs, not just the OS. Lost the computer war? I think not.
Financial statements don’t lie
As Kenny moves on to talk about Nokia, I’ll do the same. Sure, Nokia is the worldwide leader in terms of sales numbers. But take a look at their income statement (I’m abbreviating it here to show relevant parts; this is for financial year 2009):
|Less: Cost Of Revenue||$39.77bn|
|Gross Profit (Total – Cost)||$19.03bn|
|Less: Cost Of Revenue||$25.68bn|
|Gross Profit (Total – Cost)||$17.22bn|
Who cares about raw sales numbers?
Still, if you want to talk sales numbers…
As Kenny pointed out in his article, 77% of the iPhone’s US sales were users upgrading from previous iPhones. 77% is a lot as a percentage, sure – but that still means that 23% were new users. 23% of 1,700,000 is still 391,000. Sprint sold 66.5k EVO’s in the first 3 days (from Sprint stores, granted), and they were damn excited about that. AT&T and Apple sold 391k to new users alone in the same period. And let’s not forget, even if 100% of the new phones were sold to existing iPhone owners, a sale is a sale (and as I’ve said above, that sale means huge profits).
Some other comments
All that said, I think that the tides are slowing their flow towards Apple. Despite the amazing sales of the i4, I think they’ve seen more and more bad publicity lately (iPad user data stolen, iPhone 4 reception issues, etc). Consequently, I think their perfect image is cracking – the more users they gain, more problems are reported. Apple had a reputation for making products that “just worked,” but they’re losing that image due to issues with newer products. They’re experiencing growing pains, and I think that’s likely to continue.
Regardless, as I said above, they’ll always have their core customers who are willing to pay a premium to be a member of the Apple cult.