Steve Jobs showed off his usual bluster during Apple's (Nasdaq: AAPL) last earnings call, bad-mouthing almost each and every one of his company's smartphone rivals while touting Apple's "integrated" approach to doing things. But as always, Apple followers are best served by paying more attention to what Jobs does than what he says. For while Jobs' tough guy act might have set the tech world abuzz, Apple's actions as of late show that the company is becoming much more pragmatic in the way it does business, with the company displaying a willingness to bend some old, uncompromising positions for the sake of countering the huge challenge posed by Google's (Nasdaq: GOOG) Android.
And from an investor's standpoint, I think Jobs' change of heart is far from a bad thing.
Embracing old enemies
Three recent moves show how Apple's newfound pragmatic streak has taken hold. First, there was an announcement that Apple would now allow third-party software development tools to be used to create applications for its iOS operating system, which powers the iPhone, iPod Touch, and iPad. As you might remember, Apple and Adobe (Nasdaq: ADBE) had quite a bitter war of words a few months ago over Apple's refusal to approve iOS apps created using Adobe's AIR platform, which allows apps written with it to be easily modified to work with different mobile operating systems. But the company reversed course last month, much to the delight of both Adobe and numerous mobile developers.
Then, Apple showed a change of heart on another matter: It began approving apps supporting Google Voice for the App Store, with a report arriving in late September that Google's official Voice app would also be arriving soon. Until recently, Apple was intent on keeping Google Voice, which provides a variety of great voice and text messaging-related features, off the iPhone on the grounds that it duplicated features that Apple had already baked into the device. But with Google Voice turning into a selling point for Android devices, Apple apparently decided that having some duplicate functionality was better than having some customer loss.
To cap things off, there was Apple's recent announcement that it would begin selling Wi-Fi-only versions of the iPad via Verizon (NYSE: VZ), in conjunction with a portable router that would give users access to Verizon's network. That's definitely a clunkier means of getting 3G access on your iPad than buying one with 3G built in and using it on AT&T's (NYSE: T) network, and Apple has quite the reputation for wanting to avoid clunkiness at all costs. But with Research In Motion (Nasdaq: RIMM) having announced its PlayBook, and with a slew of Android tablets likely to be offered by carriers within the next several months, Apple needs to do whatever it can to extend the iPad's big head start over the competition.
The end of the iPhone as we know it
Still, while app policy changes and increased iPad distribution are important, it's the credible rumors of upcoming iPhone launches that really have to make your head turn. First, there's the rumor reported by Kaufman Brothers Research analyst Shaw Wu that Apple is working on iPhones with both larger and smaller screen sizes than the 3.5-inch displays used thus far for every iPhone model. Apple clearly views 3.5 inches as striking the right balance between having ample screen real estate, and keeping a phone from feeling like a proverbial "brick" in a user's hands. But buyers of high-end Android phones with 4.3-inch displays, such as the Motorola Droid X and the HTC Evo, apparently disagree. And buyers of low-end Android phones from the likes of Huawei Technologies and ZTE, featuring displays as small as 2.8 inches, are apparently willing to accept a smaller display as a trade-off for obtaining a more affordable device. That makes Apple's insistence on a one-size-fits-all approach to iPhone a real liability ... and perhaps one that the company is willing to address.
And of course, no discussion of about-faces on Apple's part would be complete without bringing up the nonstop flood of rumors about the release of an iPhone that can run on Verizon and Sprint Nextel's (NYSE: S) EV-DO networks. With more than 141 million customers between them, you'd think that Apple would have jumped at the chance to deliver an EV-DO iPhone. However, such a move would've run afoul of Apple's obsession with simplicity, since it would mean selling an iPhone that, unlike the ones offered by AT&T, wouldn't work in the majority of international markets.
But competitive threats have a funny way of making companies rearrange their priorities. And with multiple research firms claiming that Android has blown past the iPhone in terms of new activations – propelled in no small part by Verizon's heavy promotion of Android phones – Jobs has apparently decided that he has no choice but to challenge Android in its heartland. Even if that makes Apple's iPhone lineup look a little less elegant.
Will Apple's attitude change be enough to crush Android? I doubt it – Google and its partners have created too much momentum for that funny-looking robot for that to happen now. But with the iPhone still topping Android phones in terms of customer satisfaction, and competing quite well against them in places where carrier exclusivity isn't an issue, I can see Apple's moves producing a much better 2011 for iPhone shipments than what Wall Street is currently expecting. With the iPhone now accounting for almost half of Apple's sales, that's likely to spell more upside for Apple's shares.
