Tri,

Judging from your words, your whole rationale is that "Apple is already very big, so it can't grow much more."?

Every way I've looked at Apple, I just can't see them slowing down (this quarter might not match last, but YoY and outlook should continue to improve). Not to mention that their valuation isn't even that high. You can slice it a number of different ways but the fact of the matter is that their value isn't the result of on absurd valuation or hinged on promise of future profits after super stellar growth...they're just making a killing, with high margins and are growing in every direction.

And I'd like to state that I'm not a big user of their products. I'm a fan of their company and the numbers they are putting out. It's extremely impressive and I enjoy following along and tracking this growth. I'm not a fan of Google or Apple or anyone else specifically...I'm a fan of innovation and technology and right now, Apple is leading the way.

Look at every handset company in history - Nokia, Blackberry, Motorola

Everyone of them died bc someone came out with something better and realize or not but handsets are very difficult to produce. Thats why they can dominate for a number of years until the next thing comes out.

Now I look at the iPhone and I'm having trouble with where Apple could lose out but the bear catalyst has to be the emergence of a viable competitor.

I'm not quite sure what you're getting at Yowserrrs. We could use that argument for any company that has ever existed, if I'm reading you correctly?

Sure someone, somewhere could come out with something that drastically takes away from Apples business in one form or another. It might be closer than you think...

I think the competitor is already here in Android/Google. I've wrote extensively on what a tremendous threat Google's strategy with Android is to Apple.

Looking at the emergence, adoption and growth of Android in the mobile space has got to have Apple worried to say the least. And again, not that Apple can't compete with Android, or even survive without being the market leader (this is apples forte afterall) but I see margin pressure stemming from Google's "free" Android system in the coming years if they can continue to get user adoption.

As Google produces this open/free and widely popular mobile OS in Android, it subsidizes a lot of the costs that "handset companies" would normally have to front. HTC, Samsung, Motorola (soon to be owned by Google) and others now don't need to bear the heavy and expensive burden of development costs for that software, where Apple (and RIMM) still have those expenses on the books month after month.

The way things are going (to me, and this is still speculation at this stage) I see Android becoming the "standard" in mobile software...similar to MSFT and Windows back in the 80s and 90s. I wonder if the mobile arena will consist of one large dominate player in Google/Android or Apple/iOS, similar to the PC business with Microsoft/Windows. Or if it will remain like it is today with a more balanced market. I tend to think that this is a battle is being waged and the outcome, to me at least, isn't certain.

If I had to bet on how it unfolds today though...I'd probably say that Apple is relegated to a smaller player commanding high margins like they always have been. And Android is perfected, refined and adopted much faster and wider than iOS until it becomes the "norm". I still think this is a few years out however. Google did this with smartphones in a short amount of time, and now they'll try again with tablets and try to rein in the fragmentation of Android.

Despite this "outlook", I still think Apple has tremendous potential and room for growth in expansion to other markets like television hardware and content sales, growth either into new countries or reduction of prices in current ones due to large tariffs/taxes, reduction of costs in the supply and production of products and the continuing growth of unit sales as these newer products are quickly being adopted worldwide.

I guess time will tell...

Yeah I suppose you can extrapolate it to any industry really - but what I was getting at is that the cycle for handsets is particularly short and volatile. Youre talking about a 2-3 year life where sales go parabolic up and ultimately parabolic down. Thats why RIMM stock has gone down so much faster than RIMM financials.

Also you realize youre basically hinting at what killed Apple in the PC mkt - they want everything tailored to their platform only, refuse to play ball with mfrs, refuse to adj price to meet mkt, and ultimately they lost out big time. If I thought Android was going to take over, I would definitely not be long AAPL. The pipeline on television and cloud and everything else is great but it won't make up for the potenial losses on the iPhone. Keep in mind that the first 5 years of the AAPL boom was based on the iPod and that product is already obsolete. Pretty incredible.

What do you mean by Android is 'free'? I dont know the economics there.

I think you hit the nail on the head with RIMM. I've followed that company as well for sometime now and have been bearish on them for well over a year...maybe two now. So ya, I've watched as their outlook has fallen with the stock price, despite current operations/financials not showing major problems. RIMM is a very clear example of the market foreseeing problems farther down the road. I'm surprised the stock didn't fall sooner personally. I still think they have farther to fall as well. I don't know why a major company would want to buy them out at these levels.



Ya, I'm not even hinting at it...I think it's a very real possibility at the moment...not a certainty though. The battle is ongoing.

Android IS taking over but imo it's still too early to call it. There are more Android smartphones than iOS ones being used and activated currently, but iOS is still the lead mobile OS when you count iphones/ipads/ipods. Also, the iPad success is helping a lot as well, not just in the numbers being sold and revenue being generated. But it's helping lure people to the Apple environment. It's getting developers onboard and now it's starting to get schools and commercial customers as well.

To me, we're witnessing the early stages of the mobile battle. Very similar to what Apple and Microsoft did years ago. And Googles strategy, not just Android, but the way they are using it, is a very big concern if you're Tim Cook. Luckily though, the smartphone and tablet markets will probably grow so large, that Apple can make a killing selling their devices and not being the dominate OS.



Android is a mobile operating software, similar to iOS, being produced by Google (they originally acquired the technology, Google Andy Rubin if you're interested).

Android is "open" software. And while many debate on if that is good, or what it even means exactly...the main thing is that Google doesn't license this software to manufacturers, unlike Microsofts strategy with Windows.

So Google has teams of engineers, constantly working on updating this mobile operating system which keeps getting upgraded and perfected with more and more features being built in. This costs a lot of money that normally the handset makes of old would shoulder. Now however, Google handles the design and development of the software and the hardware manufacturers focus on producing hardware and just upload the software from Google. They add skins, and tweak it a little, but the large majority of development is done in Mountain View.

And anyone can use this software without paying Google for it. HTC does this. So does Samsung. So does Motorola. And LG, Sony Ericsson, Acer and on and on. I think Amazon even used the software on it's Fire tablet, but tweaked it heavily (which is ok since it's "open")

By Google entering the market, it brought world class engineers producing a very strong competitor to iOS...and then gave it away for anyone who wanted to use it...and subsequently compete directly with the iPhone.

Despite being late to market, Android is now the fastest growing mobile operating system thanks to this business strategy and the developers at Google. Google activates over 700,000 Android devices a day.

Without Google, I highly doubt Apple would have much competition. HTC, Samsung, Motorola and the rest of them would look like RIMM does today. And Microsoft would probably be number 2 or working it's way up there with it's mobile OS.

I put "free" in quotations because it isn't totally free to manufacturers however. If you've paid attention, you would have seen the ridiculous amount of patent disputes being directed at just about everyone, from just about everyone else, in the mobile space. Many Android adopters are now paying Microsoft fees for patents that Android uses. It's been said, and is probably true so far, that Microsoft makes more from Android right now than Google does.

If you ask me, I think it's a brilliant strategy and I can see why Steve Jobs was so upset. Not just because Googles CEO at the time, Eric Schmidt, was on Apples board while the iPhone was being developed. But because Google's strategy of giving this away to any manufacturer, made them all strong competitors to Apple almost overnight.

Thanks - right I know its open software but I dont understand the economics here. Why would Google spend all this money and just give it away? I'd think maybe search volumes but you'd think they get that anyway.

Also I thought MSFT is licensing Windows 8 to Nokia for their phones. Why would Nokia pay MSFT for Windows 8 when they can just get Android for free?

Search volumes and they get a cut in the app store sales. Google also makes a profit with all the ads in the free apps. They don't get any of this in the Apple universe.

And I don't think they'd get the search traffic (not all of it anyway) "anyway" because historically OEMs (see PC makers+ISPs and Anti-virus) have sold ad space to the highest bidder.

MSFT paid Nokia like a quarter of a billion to make Windows phones. Pardon me, they called it "investment."

They paid them 1 billion, $250 a quarter for 4 quarters.

I get that it can grows more. For all we know, Apple can be a trillion dollar company.

What I'm trying to say is as a small investor who has a chance to invest in a great 1B company versus a 400B company, it's more attractive to choose the 1B company.

Now, if you run a fund with billions under management, I understand why one would love Apple. But for small investors, there are probably better opportunities out there.

Like Grizy mentioned, Google believes it doesn't need to license Android to create some sort of return on it's investment.

And I think they're right. Controlling the environment and thus the user experience for hundreds of millions (and soon billions) of people is a very powerful tool.

They can make money off of all sorts of advertising, app sales, book sales, music sales, TV and movie sales, mobile payments and probably a lot more that I cant think of. Also, just having that sort of user base and control just ads value to the product itself...if Google for some reason ever wanted to sell Android. Android is already producing revenue through these methods, estimated in the hundreds of millions of dollars a year thus far.

The big thing though is control. This allows Google to control the mobile environment and to ensure they aren't pushed aside. This is why you see Amazon trying to put out tablets....they don't want the online mobile store of the future to be iTunes or Google Marketplace.

And yes, MSFT paid NOK $250m this quarter, to produce windows phones. And you can bet this wouldn't be the case if Android wasn't around. Why would any handset manufacturer license the unpopular windows phone OS when they can use the wildly popular Android OS for "free"?

http://arstechnica.com/apple/news/20...y-and-fast.ars

Apple is ditching the professional market for the consumer space. The Mac Pro hasn't been updated in forever. If you depend on having the hardware you need to make your living, don't count on Apple to provide it. Apple has a long history of killing legacy support and pissing off their smaller developers.

How "cool" is Apple going to stay when all the art students go to college and get told that all the programs they'll be using will be on Windows?

I'm guessing that the next battle ground is going to be integration with TVs or set top boxes. I think that Apple will be able to take a huge chuck of this market because they already have people tied into iTunes. When adoption starts to pick up it'll be interesting to see how Apples superior design plays out against the Android which will have a price and manufacturer advantage.

Great stuff, very good analysis!

Two questions for you:

1. Just curious, what do you personally use? iOS or Android?

2. Will we eventually see cheaper devices from Motorola once the sale is closed? Or would this hurt relationships to much with Android's other OEM's?

This is not true. Sure the Mac Pro is getting old, I have one from 2008 that works fine but sure could use a newer one. The problem is that Intel hasn't released any new processors aimed for professionals since them. Sure the consumer processor has caught up and are really a much better buy today, but they are still consumer processors.

Intel will release some new Xeons in H1 2012 which the Mac Pro really could use. And I bet Apple will have a nice update that should make some buyers happy.

The Mac Pro today is still almost top of the line if you can fork up the money which professionals can. 2x6core cpus are monsters with Geek Bench of 24k+. Sure they cost a lot of money, but professionals dont care. If you do care about the price then the iMac is really good value.

Dont blame Apple, blame Intel for the lack of new Mac Pros imo.

I agree it kind of sick with a 600day since update so a lot of people who didnt buy back then and want something new right now feel a bit left out. But I really doubt Apple will abandon them, Apple is just waiting for the new CPUs.

why would Motorola developing cheaper devices hurt relationships between Google and other OEMs? They would probably be happier if Motorola left the high end smartphone market.

Anyways, this article sums up what Androids "long term" goal is, and despite Microsofts attempts to sue every Android handset manufacturer, there will be more than enough outside of Microsoft's jurisdiction that eventually we should see Android on most low-end devices in the 3rd world:

http://www.osnews.com/story/25465/Wh..._Revolutionary

The mobile space is more than big enough to accomodate 2 major operating systems (and *maybe* 3, although I have my serious doubts about WP, but thats for another time), and those who don't want to see that don't know the value competition provides for the customer.

Thanks.

1. I actually used WebOS for the longest time (longer than I should have). I'm a very big supporter of how they handle multitasking on mobile devices. And while the Palm phones, hardware and developer support, weren't as good as other smartphones on the market. I really, really enjoyed the software. RIMMs QNX uses the same "card" design and gestures/multitasking...hopefully Google/Apple/MSFT can integrate some of the nice features that Palm had into their OS....it really was nice. Everything synced together very well, searching on the phone was very quick, simple and took less steps than on my iPhone, multitasking was a breeze and notifications were handled really well. But now, I use an iPhone. Driving in a car with a friend, I used her iPhone to live stream Google's Google Music announcement and bought the 4S the next day. I still use Windows PCs though.

2. I doubt you'll see much of a change in pricing from Motorola in the short term (1-2 years). At least, no difference than if Google didn't purchase them. Google has said they intend to keep MMI pretty separate, and probably operating in much (def not completely) the same manor. Google needs to walk a fine line with how it uses Motorola because as previously mentioned elsewhere...they risk alienating other Android manufacturers by favoring MMI. I'm hoping though, that we'll see much better phones from MMI once Google can control more of the process and better align software and hardware. This will probably happen, it just will take some time as they haven't even closed the deal yet. Maybe they'll start offering 1 or 2 phones at a time, similar to the iPhone strategy and try and control the Android fragmentation a bit. HTC recently said they'd be reigning in on the number of different devices they put out, I'd guess other Android manufacturers trend this way as well.