Apple's Attempt at World Domination…without Steve Jobs?

August 24, 2011

Apple's Attempt at World Domination…without Steve Jobs?

It is truly amazing that not one day goes by without Apple appearing in the news. Clearly, I, myself, am getting fascinated with this organization seemingly eying world domination. Apple's pursuit of lawsuits/litigation (see Apple: Litigation as Business Strategy) gains momentum on a daily basis, as evidenced by today's ruling against Samsung in a Dutch court. Galaxy tablet sales had already been banned in Australia, and today, Samsung was informed it can no longer sell smartphones Galaxy S, S II, and Ace because of similarities in the screen scrolling function with Apple's iPhones. A strong win for Apple.

Tomorrow, Samsung will find itself in court in Germany, trying to defend its technology. One of its arguments will be that Apple stole/copied the idea for the iPad from the 1968 movie "2001: A Space Odyssey." [The famous YouTube video everyone is talking about can be found here.] The goal is to prove that the external appearance was not first invented by Apple "and this may be enough to prevent Apple from enforcing its alleged intellectual property rights in relation to the physical appearance of its latest tablet." Go for it, Samsung. [This is turning into some sort of "reality show" and nobody can look away. Investors just seem to be wanting more, and more, and more…]

The same day Sprint announces that it will be able to make the new iPhone 5 available to its 52 million subscribers come mid-October 2011. The third-largest wireless carrier appears thrilled to add the iPhone to its portfolio and avoid customer attrition, but will have to accept a change in cost structure; Apple demands high margins. The new iPhone will supposedly be even lighter, thinner, with an improved camera and operating system. Another strong win for Apple.

So, on the same day, Apple claims victory over one of its rivals and announces a new ally. Even though, the term ally may be an overstatement. I find it hard to believe that the wireless carriers consider their Apple agreements as true alliances and partnerships instead of simply a "must-do" at "nearly-all-cost".

And then,…on the day when Apple appears to be just one step closer to world domination, the feared announcement is finally made: Steve Jobs resigns as CEO. Tim Cook, who previously served as COO, is reportedly taking over the reigns. While T. Cook has been in charge of managing operations, sales, etc. it has always been S. Jobs, who has been the visionary at the company, who created the dream [occasionally destroyed others'], set R&D priorities, and called the shots. Of course, Apple has faith in its new leader. The news seemingly came so late that it did not impact daytime trading: the stock was up. In after hour trading, the share price dropped. As of 9pm EST it was down 5.07%. In the official company press release, Apple quickly pointed out that Steve Jobs will take on the role as Chairman of the Board, and "will continue to serve Apple with his unique insights, creativity and inspiration.” Of course he is; imagine how investors would react if he was not going to remain engaged. Jobs himself was reportedly clever enough to reaffirm that he believed the most creative times were still ahead of Apple. AAPL After hours: $357.10 (-19.08; -5.07%). This is called situation management; dealing with the unavoidable. [Note: The man has accomplished great things and I do wish him well.]

I doubt that this announcement was truly news to anybody. Jobs had been on a leave of absence because of his health for quite some time. It was simply a question of how the succession would be managed and announced. I wonder how and if this announcement will impact the litigation in German courts tomorrow. The company is too strategic and smart for all of this to be coincidental. Some litigation wins were made, the ink dry on the agreement with Sprint. A good time to announce the change.

If Steve remains in the role of Chairman of the Board, I doubt that too many changes will take place in the immediate future. Operations and innovation will proceed as they did before; all in all, the focus will shift to Tim Cook for a natural phasing out of the brand Steve Jobs had built for himself. We may not notice any changes for a couple of years.

So will this impact Apple's path to World Domination? If they haven't gotten there by 2014, they probably never will.

Image: http://techicon.files.wordpress.com/2010/05/apple_world.jpg

Google's War Against Apple

August 17, 2011

Fun fact: You think this was a pricy acquisition? Not even close… The most expensive acquisition I could identify was Vodafone Airtouch acquiring Mannesmann in 2000 for $202.8 billion followed by AOL acquiring Time Warner for $181.6 billion in 2001.

Google's War Against Apple

The 63% premium Google is offering to acquire Motorola Mobility has caused quite a stir; the pending merger of "Motorolans with Googlers" [Googorlas??] has opened conversations about the value of IP and patents, the escalating number of lawsuits due to patent infringement, as well as the question about the future of the open Android operating platform. It is hard to filter out what analysts/investors really think about the deal by looking at share price activity during the day, given the instability in the financial markets right now, but here are the facts. At 3:30pm EST on 8/17/2011...                

Google (GOOG): -1.21%

Apple (APPL): -0.14%

Microsoft (MSFT): -0.87%

$12.8 billion is a hefty price tag and a 63% premium is steep. Google is gaining access to 17,000 patents. There were discussions in the Financial Times and New York Times about the new valuation of patents and a new focus on IP. But is that really true? Maybe in this particular space, analysts have not paid much attention to patent portfolios, and only now that litigation is publicly escalating and M&A activity between these tech giants is rising, they are beginning to take a closer look. The actual competitors in this space have always had a strong eye on IP. Certainly in other industries, patents have been essential and key to M&A valuations and acquisition premiums. Look at the pharmaceutical industry. Talk about the need to patent your formulations to guarantee future revenue streams.

Of course, ownership of patents during this time seems to be more relevant than ever considering that seemingly new litigation is filed every day and everyone is going after each other, like children on a playground…fighting for world dominance (see Apple: Litigation as a Business Strategy). In general, patent infringement suits are warranted, but the recent escalation is not only consuming tremendous financial resources, but also stifling innovation due to concern over legal action among smaller entrepreneurial businesses.

Another point that has been heavily debated back and forth since the official announcement of Google's acquisition, is the future of the open operating platform, Android. In its official investor relations' announcement, Google stated that it is firmly committed to its current Android partners and the "vibrant open source community". Some analysts have speculated that going forward, Google will give Motorola Mobility handsets some kind of exclusivity. Why risk having Google's current partners switch to a Microsoft-based operating system for their smartphones? Nokia may be a bit too optimistic assuming that "the acquisition will play into the hands of Microsoft platform."  Google will have to be careful in how aggressively it pursues direct competition with its current partners. There should be plenty of room for additional customer segmentation.

Initially, I believe there is truth in one assessment, which is that Google is indeed defending Android and its partners (FT: Lex Column). The acquisition was pursued as a means to "protect profitability of the handset manufacturers that deploy Android." In reality, this may be an opportunity for Google to build a stronger core (no pun intended) against Apple, based on existing and acquired patents, but also an opportunity for further innovation.  Together with all Android-partners, which may become loyal soldiers/allies if executed correctly, they can build one united front against Apple.

So yes, I do believe this is war against Apple…

[P.S. My husband says I am a cynic and should write about more positive things. There is always next time…]

Image: http://wpuploads.appadvice.com/wp-content/uploads/2011/08/google-android-motorola.jpeg

Apple: Litigation as a Business Strategy.

August 4, 2011

Apple: Litigation as a Business Strategy.

The article in the WSJ that inspired me today was the one entitled "Google: Rivals Ganging Up". It once again led me to look at Apple even though the more I read about Steve Jobs, the less enjoyable I find his quotes. "Picasso had a saying - 'Good artists copy, great artists steal.' And we have always been shameless about stealing great ideas." 

Professionally, I am engaged in the health care sector, which sees its share of litigation. Take a look at J&J's 2010 Annual Report and you will find pages, and pages, and pages in tiny font dedicated to ongoing litigation.

The article today drew my attention to Apple's current legal status and the amount of Dollars invested in lawsuits and patent infringement litigation is truly mind boggling. [Curious to know how many people are employed in Apple's legal department. As of today, there were 10 open job postings on Apple's Web site under "Legal". Maybe "Legal" is where today's job opportunities are.]

Lawsuits to collect royalties, prevent/delay competitive product launches, tie up resources of competitors otherwise invested elsewhere. Litigation is a fascinating business strategy! The other day, you may recall, Apple successfully closed a few select copy-cat stores in China.

By no means do I mean to imply that there is no justification for pursuing patent infringements legally. IP should be protected, however, in select industries including software, consumer electronics, telecommunications, the number of litigations seem to be escalating. True innovation in the space is clearly hard to come by and the window to benefit from the first-mover advantage and hold on to the differentiation is becoming smaller and smaller. But looking at this picture….





Image: "Current Litigation", Journal Of A So-Called Business Woman (8/11).

…. it does not appear to be so much about protecting rights as it is about stalling the competition and charging ahead.  Smaller companies who could really benefit from patent protection don't have the resources and are probably too intimidated to pursue legal actions against major corporations. Especially, since these litigations can drag on for years.

Imagine how the U.S. financial crisis could be helped if these funds were invested to relieve the government's debt. Wouldn't that be an interesting scenario: Each of the most profitable U.S. organizations acquires a stake of the U.S. government. A corporate-run America…. wait a minute!!!