So it's official: Apple (Nasdaq: AAPL) isn't in the business of making computers. Steve Jobs is running a wholesale gadget guru of an operation, and that's the way he likes it.
How many eggs can you fit in one basket?
Speaking at the Goldman Sachs Technology Conference this week, Apple COO Tim Cook reiterated what Jobs already told us about that transition, only in more elaborate and official terms. Cook compared Apple's $15.7 billion of revenue in the December quarter against the "huge mobile device businesses" of market giants like Sony, Samsung, and Nokia (NYSE: NOK) -- and "found out that we were the largest in the world, measured by revenue. So, yes, you should definitely look at Apple as a mobile device company." Whether fuzzy math or not (Nokia's revenue totaled over $17 billion last quarter), it's clear that Apple is a top-tier mobile maven.
It wasn't too long ago that Apple measured itself against computer builders like Dell (Nasdaq: DELL) and Hewlett-Packard (NYSE: HPQ) first and foremost, but the runaway successes of the iPod and iPhone products lines changed all of that. Now Cook looks back to 1991 as the start of Apple's mobility revolution, which is when the company launched its first portable Macintosh computer. OK, so that's a somewhat subjective way of defining the mobile devices sector, but that's Apple's prerogative. This is a mobile electronics outfit now, folks.
It's all in the platform, stupid
In Cook's eyes, the true strength of Apple lies in how the company controls the entire platform of its gadgets from top to bottom. Most of the competition doesn't really work this way. For example, you buy applications from the Apple-run App Store to run on your Apple iPhone, which runs a mobile version of Apple's operating system. From store to hardware and everything in between, Apple controls all the pieces and you are guaranteed a seamless experience. Compare that to a Dell computer running Microsoft (Nasdaq: MSFT) Windows.
That's the general idea anyway, and the prime example of where it really works is the iPod/iTunes symbiosis. The world's leading music store is intrinsically linked to Apple's hardware, and no matter how much the Microsoft Zune team and Amazon's (Nasdaq: AMZN) MP3 store work on it, their music-buying experiences will probably never be as smooth and polished as Apple's.
As Cook puts it, "The traditional model, where one company does an operating system, another company does key core apps, yet another company does hardware really begins to fall apart significantly in a mobile device world."
The secret is out!
So there's Apple's magic formula in stark black and white, and that's why the company is rushing headlong into the mobile space. That's simply where these guys feel most comfortable. It's also a complete antithesis to the strategy at Google (Nasdaq: GOOG), whose Android platform runs open-source software on hardware from multiple third-party handset designers and whose upcoming Chrome OS relies on the openness of the World Wide Web.
But to declare one strategy victorious over the other seems presumptuous. Truly mobile computing is still in its infancy, and the Android solution is still learning how to walk. Check back in a couple of years and we shall see which mobile platform fell behind. I believe that the platform that Apple rules with an iron fist will continue to grab the headlines for awhile -- until one of Google's many entries wins the lottery with some stupendous design, jaw-dropping innovation, or simply by sheer force of diverse market presence.
The model of licensing out an operating system to a bevy of third-party manufacturers will never be as pretty as the results of controlling all elements of the mobile device, but it does bring about partners innovating and grabbing gobs of market share as they release offerings that appeal to every level of the consumer market. One size does not fit all. No, not even turtleneck sweaters.
Cook kept dropping golden-tongued nuggets about the "magic" of the deeply flawed iPad, how the iMac is "the best desktop computer in the world," and the "mind-blowing," "incredible," "jaw-dropping" Apple stores around the world. Close your eyes and Tim does a remarkable impression of Steve Jobs, so I guess that removes one risk factor from Apple's future.
But the mobile gadget world is way more crowded than the personal computer sector, and Apple simply can't be expected to keep hitting home runs in every at-bat. So, Apple the mobile gadget guru looks even riskier to me than Apple the all-around technologist did. You can tell me I'm wrong in the comments below, but it'll take a Demosthenes or Churchill of an orator to convince me. Give it your best shot.
