Google: A new Microsoft attacking both iPhones and Macs. And, unlike Microsoft, with free software.
CBS News has published a nice summary of battle between Apple and Google, “War In The Valley: Apple vs. Google”. There are some fairly keen insights posted to what is going on.
It was long overdue: Eric Schmidt (Google's CEO) finally resigned from Apple's Board of Directors. Usually, these resignations are handled in the smoothest of ways: Thanks for the distinguished service and the like. This time, Steve Jobs issued a pointed statement: "Unfortunately, as Google enters more of Apple's core businesses, with Android and now Chrome OS, Eric's effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest." Full officialese here.
Then, the post addresses Google’s strategy, and some insights in to that.
A new Microsoft attacking both iPhones and Macs. And, unlike Microsoft, with free software. That's what Apple sees in Google.
But, wait, there is more!
Apple's business model is bound to change. In plainer English: Until recently, Apple's profits were built on hardware sales. Everything else, system software or iTunes music revenue only mattered as a way to buttress hardware profits. For example, when iTunes came out, analysts expressed concern that music margins were thin or negative. So what? iTunes's sole role is to prop up iPod and iPhones margins. Apple talks up its software, operating system and applications, spends hundreds of millions of dollars in development and generates modest or no direct revenue from it. It's all in the service of Mac and iPhone sales and profit margins. That's the picture so far, fast becoming the past.
With the iPhone, Apple hasn't just broken into a new product category, it has shouldered its way into a new world of service revenues. Legally call it the way you want, the difference between the retail price of an iPhone, $199, and the pathologists' number, $850, is a service revenue. According to other dissectors, the manufacturing cost of an iPhone would be about $179. So, the retail price covers the product cost, all the margin comes from the service revenue rebated by AT&T. That's a business model change - and for the largest business unit.
It will definitely be a year to watch. Great read.