How, and Why, Apple Overtook Microsoft
nytimes.com
nytimes.com
Apple is on top of the world right now, but so was Sony 2000. Somehow MS just feels more substantial to me than Apple in 2015.
I realize this is entirely subjective.
A common comparison between MS and Apple is that MS pours a lot of money into R&D and makes a lot of forward-looking videos. Meanwhile Apple is laser-focused, spends way less on R&D, and ships.
Microsoft lost a decade, and you feel that MS is more substantial in computing? Are you sure they're not just tugging at your geeky heartstrings?
Did it though? MS has been pretty strong in the enterprise. Also is the same decade of Xbox and Kinect.
And Microsoft ships more products than Apple does. I don't want to turn this into one of "those" posts because I'm sure you can find a list of products (and versions) that Microsoft has shipped over the past decade including the Surface line, which positively out-classes Apple's iPad.
How can you say that they "lost a decade"? Where you see "laser focus" I see lack of options. Where Microsoft has 3 products that cover a broad range of use cases that people actually need, I see Apple with 1 product that covers only the most common use cases. It's really nice for Apple's bottom line, but it's also the same reason that most businesses don't use Apple computers.
Stacking up Microsoft versus Apple, their businesses are fundamentally different - see exhibit: https://visualign.files.wordpress.com/2012/02/applemicrosoft...
Interestingly Apple (Hardware), Google (Ads), and Microsoft (Software) are quite dominant in different business areas. While Microsoft needs to keep a close watch on Google and Apple encroaching, I think AWS is a bigger rival in terms of growth opportunity.
It is very interesting how MS is the only one that have different basket of eggs. If Google ever lose relevance in the online Ads market then it's done. The same can be say of Apple (in a lesser degree) if the iphone becomes irrelevant.
Btw, Apple has never been open source. And they only have 5% desktop market share worldwide. Pretend that mobile doesn't exist. The "PC" world hasn't changed much in 20 years. Mac is more accepted but they're just a rounding error compared to Windows.
Finally, iPhone is Apple's big money maker. However, they have less than 20% market share in the global market. They're doing pretty well in some markets, but Android is the dominant mobile OS.
I think Apple offers a big walled garden for computing.
This is where Microsoft went wrong. They focused on providing the software and let vendors like HP, etc use it on their machines. Apple was smart in seeing that there are advantages to controlling both the software and hardware (the iPhone is a perfect example of this). By the time Microsoft realised they should have been producing hardware that used their software, Apple had already overtaken it in the great tech race. Apple had the hardware and were providing the software thus locking out any competitors from their platform. Not to mention, they were focusing on the design aspect of the devices themselves which others were not.
I think Microsoft have started clawing back. HoloLens looks like a seriously great product, I think the amount of time and effort they have been putting into hardware and infrastructure will undoubtedly catapult them back to the top. Not to mention Microsoft have cleverly changed their strategy to favour open source (something nobody would have predicted 7 years ago). The Xbox division also does pretty damn well too.
The question is: can Apple sustain their current success? It seems the iPhone is their meal ticket, if the iPhone eventually fizzles out, where will that leave Apple?
MS and Intel were brilliant to allow substitutes for the early IBM computers to rise to market by working with multiple customers. The first firm to fully copy IBMs system (allowing software purposed for the IBM computers to run on other machines) was Compaq. Henceforth, MS and Intel were able to commoditize the PC and extract tons of value from their portions of the value chain.
MS, Intel, and Compaq were key in effectively capturing about 1/3rd of IBMs value in a short time span. The factors that led to their success can probably then be assessed in the context of Apple et al.
I don't understand what you mean by this. A variety of personal computers were already on the market when the IBM PC came out, including models from Apple, Tandy, and Commodore.
The origin of Microsoft (rampant clones, many hardware vendors) is literally the opposite of the origin of Apple's recent successes (vertically integrated, does their own hardware).
Microsoft's original strength was its weakness this time around.
Lockout is one way of looking at it. Another way is that it gives them the ability to make things integrate extremely well. Seamless integration like Apple does is extremely difficult to achieve without complete control of the ecosystem.
> Not to mention, they were focusing on the design aspect of the devices themselves which others were not.
This is where Microsoft still falls hopelessly short. They make ugly, geeky looking hardware. Everything Apple makes looks and feels beautiful.
> It seems the iPhone is their meal ticket, if the iPhone eventually fizzles out, where will that leave Apple
I'm not sure which other phone I could buy that would integrate with the rest of the Apple ecosystem? Unless they lag really badly in whatever technical advances mobile phones make, this doesn't seem likely. Some people like myself don't keep buying iPhones because of its technical specifications.
I don't care how beautiful it looks if I cannot buy a CPU/GPU combo that I really need, nor if the only way to agree on device data requires some brain damaged software.
He may not have believed in it in 2011, but he may have changed his mind.
"There is a clear goal and it isn't to make money. The goal is to desperately try to make the best products we can. We are not naive - if you trust it, people like it, they buy it and we make money. This is a consequence."
"We won't be different for different's sake. Different is easy... make it pink and fluffy! Better is harder. Making something different often has a marketing and corporate agenda."
Over a long time focus on the best products and user experience can be powerful. Meanwhile Microsoft were doing things like killing the start menu which not many users were keen on.
In my perspective, Apple dialed in it's focus, avoided the same pitfalls, and came out a dominant player in a market not many were focused to innovate on. (i.e. smartphones).
Still - as they say in Italy - a fish rots from its head. Thats where the buck lies.
They didn't quite see the big picture, it's not that they didn't see it coming (they were already in it), they just didn't think you could do so many things so well and that people would want to do it.
MS lost because they weren't ruthless is copying iOS. Google won the licensed market because basically they dropped everything else they were doing in mobile (copying blackberry) and put it all behind copying iphone. Samsung did the same thing with their Galaxy line. These are the kind of moves 80's and 90's MS would do without blinking, they understood that "second place is a set of steak knives". But late 00's MS -- spoiled on decades of success and perhaps a bit cowed by EU antitrust -- couldn't pull the trigger.
They did have a mobile operating system, a mobile .NET framework for application builders, and a bunch of early PDAs shipped with Windows Mobile.
Apple just managed to redefine the mobile market completely, and make Nokia, Sony/Ericsson, Research in Motion, Kyocera and others irrelevant. Those others were supposed to be producing hardware devices that would license Microsoft's mobile products.
So they had a vision, just turned out to be wrong.
IMO, Microsoft (and other handset makers) focused a lot of their energy on the enterprise market. Looking at screenshots of early handhelds show productivity as one of the "bullet points on the box."
Apple had the luxury of approaching the phone market from the other direction. They've spent several years making the iPod, that a consumer-oriented phone was a natural evolution of that. They also knew how to sell it.
So yes, Apple's iPhone is like Microsoft's Windows. Both are hugely successful products that accounted for the bulk of their creator's profits. Microsoft was unwilling to threaten the enormous revenue it gets from Windows, and now that the focus of innovation has shifted away from PCs it has lost its dominance.
Will Apple make the same mistake? No. Its first attempt to one-up the iPhone was the iPad. For a while, it looked like it might succeed: iPad sales took off even faster than iPhone sales had. But then they plateaued, while the iPhone kept growing. Nice try, but no dice. The iPad is nice little business, but it won't eclipse the iPhone.
Next try: the Apple Watch. It's not out yet, so we don't know what will happen. But it's clear that this is Apple's next big move. This is not a hobby. They'll be putting all their weight behind the product line. It might flop or it might be another (multi-billion dollar) side business that lags behind the wild profitability of the iPhone.
Mr. Stewart ends with a quote from analyst Robert Cihra: “The question investors have is, what’s the next iPhone? There’s no obvious answer. It’s almost impossible to think of anything that will create a $140 billion business out of nothing.”
Well, maybe investors can't think of anything, but it's clear that Apple thinks the next iPhone will be wearables. And they sure as hell aren't killing promising products for fear of cannibalizing iPhone sales.
My impression from Apple's behavior is that they're focused on creating products that bring 'computers' into the lives of consumers in ways that are desirable by consumers, regardless of form or specific functionality. They had a smash hit with the iPhone, but they're probably just as happy with the iPad and, to a lesser degree, with Apple TV.
What interests me most is how they will react to a potential (and likely) breakthrough in VR, or AR. Apple doesn't seem to put much focus on that.
> the iPhone accounted for 69 percent of its revenue
They need to diversify even more but that means either back to their computer roots, which would be devastating to the stock price, or find even greener pastures than one of the most commercially successful products on Earth.
So would it be a good idea to load up on AAPL stock ?
Anyways, if you want my unsolicited stock advice, I think Tesla still has a lot of upside. The way I see it, it has a $25b market cap where as a lot of big name car companies are above $60b in market cap (BMW at $60b, Mercedes around $100b, Toyota around $220b). I think Tesla could easily catch up to them because of their potential for growth. So that's a somewhat likely 2x return on tesla stock if you want to look at it that way.
So if you can make 250k/yr and you get a %5 net return from an index fund, it's not worth it to play stock investor until you have $5mm in the bank.
So if you have $300k in the bank, the constant hours of life, labor and anxiety might get you +%5 more return than usual (doubtful) and you've spent a huge amount of hours to make an extra $15k that year. It usually ends up less than minimum wage and you were better off just doing contract programming work on the side.
And the reason why the stock market is inflated like crazy is because central governments of the world have been printing money like crazy with QE everywhere, and it has to go somewhere...
Just buy an index fund, your going to have a relatively large amount of apple stock indirectly as a result anyway.
Because you'll only make money if the stock stops being undervalued. And there's no sign that the reasons it's undervalued will change any time soon.