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Thoughts on ''Tech Wars 2012''
Swamp Tech

Fast Company published an interesting article on what is calls "The Great Tech War of 2012" among Amazon, Apple, Facebook and Google." The thought-provoking article describes various battlefields in a war to win our tech hearts and minds. My friend Raul's tweet that Apple didn't need dominant market share to win this war set off my "Media bias towards Apple" alarm.  Does Fast Company (or the article author) have a vested interest in Apple? Other media players (e.g. iOSWorld, aka InfoWorld) frequently exhibit bias towards Apple, promoting it's products and services, while glossing over its failures, and treating Apple's competitors with a much harsher approach.

Since I hacked an Apple IIe in 1983, I've never been a big fan of the company. Yes, the article treats Apple with kids gloves and glowing references ("brilliant"), with a much more critical view of its competition, especially Google.  Still, there is really only one battlefield where I had significant issues with the points presented: profitability.

From the article:

Apple, on the other hand, makes a significant profit on every device it sells. Some analysts estimate that it books $368 on each iPhone. You may pay $199 for the phone, but that's after a subsidy that the wireless carriers pay Apple. Google, in contrast, makes less than $10 annually per device for the ads it places on Android phones and tablets. That's because it gives away the OS to phone makers as part of its quest for market share. Google's revenue per phone won't go up after the Motorola purchase closes--Motorola Mobility's consumer-device division has lost money the past few quarters. So despite Google's market-share lead, Apple is making all the money. By some estimates, it's now sucking up half of all the profits in smartphones.

The reality of hardware in 2012 is that it is increasingly commoditized. IBM sold it's ThinkPad line of personal computers to Lenovo because the margins of a commodity PC business were too low. Although Apple may have enjoyed fat margins on MacBooks, iPhones and iPads, constant competitive pressure has forced Apple to lower prices to compete. Furthermore, it forced Apple to move to standard hardware like the same Intel chips that powered Windows laptops long before. That made it easier for competition to provide low-cost systems than ran Apple software. Bring back the lawyers! Using laws to protect high margins is much more difficult in the fast-growing BRIC countries.

Assuming that "some analysts" and "some estimates" are correct on smartphone profits, this hardly tells the whole story.  How much do these companies earn from the ecosystem around mobile devices?  Isn't that how the non-hardware based companies (Amazon, Facebook and Google) became major players?  The article itself answers this rhetorical question.

The article contradicts this assumption that profitability depends on the sales on smartphone when it discusses the telco / ISP as a roadblock and the desire of the four companies to cut them out of the picture.  Without the subsidies provided by the telcos, Apple's ability to make profit on high-cost devices would be severely impaired, unless the company found other ways to subsidize the cost - like advertising, which is how all the other companies do it.

Finally, Google bought Motorola for patents to defend against Apple's army of attorneys, not to enhance it's revenue share.

Bottom line: good article that presents several relevant discussion points about the major tech players of this decade through Apple-colored glasses.

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