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While many perennially misunderstand Apple, the chorus of criticism always builds in direct proportion to a decline in price. (Though long-term AAPL investors should be grateful, otherwise AAPL would be like the stocks of so many other great businesses: too expensive to buy.)

This is from the Berkshire board recently:

"I think that's the point. The rest of the industry splits the Android market. Apple is the only company that sells their product. Samsung vs Xaomie vs Huawei vs LG vs Google Pixel vs Moto vs OnePlus - they all share the other half of the market."

Eerie how much that echoes the Mac vs Windows/PC clones situation a few decades ago.



Not sure exactly what the point is here.

First of all, there is so much misunderstanding regarding the so-called Mac vs Windows war, and as a result, so much misunderstanding in seeing that as analogous to the current smartphone (rather, pocket-computer/camera/gps/etc device). The critical issue that allowed Windows to win was that they had a several-year head start with DOS; by the time they marketed Windows, DOS was already entrenched in many businesses, and a software developer ecosystem already had momentum for DOS/Windows by the time Mac came on the scene. The other critical issue is that the bulk of the purchasers of personal computers were businesses, rather than the people actually using the devices; businesses mostly wanted cheap...what the users wanted in terms of user experience didn't really matter.

Well, those dynamics were basically flipped on their head with iPhone. The iPhone and its App Store were essentially first-to-market (at least in terms of the modern iteration of the "smartphone"). Moreover, the purchasers are in large part the users, who are consumers rather than businesses, and who care deeply about user experience (which is far more complex than simply user interface).

So, the situation is in large part flipped, at least with the higher end of the market (where all of the money is made).

There's a further point in this whole Mac vs Windows story. Early in the smartphone race, the majority were convinced that as the low end of the market became "good enough", everyone would shift to those cheap-but-adequate devices...just like happened with personal computers. Low-end disruption and all that.

But there are at least two problems with this:
1) it has not only failed to happen, but somewhat the reverse. Even though raising its prices quite dramatically, iPhone has maintained its share. Indeed, if we divide that market into high-end and non-high-end (which seems to me the best way to understand it), iPhone appears to be gaining some share amidst these price increases.
2) even in the personal computer industry, there have essentially been two different markets/stories. Wintel has seen an unrelenting decline in both prices as well as units sold, for many years. How about Apple/Mac? Prices have basically held steady for many years, and almost every quarter for well over a decade, Mac has gained share (not so much by selling more units, but rather by not seeing declining units, while the rest of the industry withered.

I suspect that #2 above is precisely what we'll see with iPhone vs Android going forward. iPhone units will be roughly flat, and pricing will be maintained (though not likely significant further increases from here). Any growth for Apple will have to come from other areas. As Apple has shown, it can still grow its user base, independent of new units sold...which allows its services to outgrow handset sales. New devices will also help. I think it would be foolish to count out Apple Watch; it is doing quite well given that its only on its fourth iteration. And some day, it seems all but a certainty that a significant part of the population will wear smart-glasses; though Google failed in its attempt, it would be very Applish for Apple to hit a home run years after the first "concept vehicle" appeared (and I'm sure many will then still criticize Apple, saying they didn't "invent" smart glasses). All of the competitive advantages Apple has will be at play here: 1) an enormous and relatively-wealthy user base, who can afford to pay for yet another device, 2) an enormous user base who is inclined to trust Apple, and give such a device a try...thereby making the investment of many billions of dollars and many years in the necessary R/D by Apple for this a conservative move, 3) the engineering and design talent to produce a device that "just works" and probably most importantly, is not an embarrassment to wear on ones face, 4) a head start on a large developer market pioneering augmented reality applications for iOS, as augmented reality will be the "killer app" for smart glasses...one thing for which a smartphone simply cannot substitute.


p.s. In both standard media as well as on this board, with the price of AAPL in decline, so many are starting to again raise comparisons to Nokia. Please...that's ridiculous. And, of course, those who raise such comparisons never elaborate to make a sophisticated comparison between the two situations...because there is no comparison.

p.p.s. Again, whenever AAPL price declines, we hear everyone claiming that since Jobs, Apple doesn't invent anymore...as if Jobs had an iPhone moment every three years. A few points about that:
1) first, no one else is either. If there were others who were coming up with world-changing new categories of consumer technology devices, I'd be more worried.
2) related to #1, there are only so many world-changing devices to be made. They're not going to happen every few years. Get real.
3) Apple Watch is an attractive offering by Apple. Of course they didn't "invent" the smartwatch...just like they didn't "invent" the smartphone or desktop computer or portable digital music player.
4) Let's re-address this when Apple hits another one over the wall with smart glasses. Will take some time, maybe a long time; the technical challenges relating to vision/optics are immense. But when it finally erupts, Apple has an enormously good chance at dominating that market.
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