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Is Apple Drifting to the Wrong Path?

By Rob Enderle
Feb 7, 2011 5:00 AM PT

History is filled with stories of companies that dominated their segment and then either fell from that high spot or fell off the map. RCA is probably the best example of a firm that went from dominance to obsolescence because, in its case, it played chicken with the U.S. government and lost.

Is Apple Drifting to the Wrong Path?

A lot of us think the iPad is unstoppable, but many of the same people thought netbooks were going to take over, that Windows tablets would eclipse laptops, and that Apple was going to fail in the 90s. Just because you believe in a thing doesn't mean that thing is true.

With Steve Jobs possibly gone from Apple forever, a lot of us are looking for a sign of whether Apple will continue to prosper or will begin to slide. Given that Apple lives on the bleeding edge of hit products, that slide could be fast and sudden. All it would take is one big miss or mistake. Charging for e-books that others sell may be that mistake. Let's explore that this week.

This week's product of the Week is the Nvidia Tegra 2, which is becoming the Intel Pentium (the keystone of Intel Inside) for the next generation of potential iPad beaters.

RCA Lessons Learned

RCA was a case of too much control. At the early phase of the TV market, it wanted it all and had the TV segment locked up -- and, because it knew it would need content, RCA locked up the networks as well. It got stepped on and was forced to spin off what later became ABC, but from there all roads seemed to lead downhill for the company. It ended up being rebought and then effectively killed by GE -- which, in an AOL-like move, recently sold off the last big part of that old company NBC.

The sad thing about this is had it not gone to all this trouble, TV likely would have moved into the market much more slowly than it did. Folks certainly weren't interested in buying a product if there was no programing on it. However, the U.S. government got concerned that RCA had too much control over the airwaves.

The lasting lesson is you don't want to make it look like you are controlling content, and while Google is likely much scarier than Apple in that regard, Apple is at the moment doing some foolish things with eBooks.

IBM Lessons at 100

One of the few companies that have been around for 100 years is IBM, and it celebrated that anniversary last week. However, I worked there when it almost failed, and core to that failure was its belief that customers loved it so much -- and that there was no competitor who could compete -- that it did something really stupid.

IBM mined its customers for revenue and charged them for pretty much anything it could think of -- including bug fixes, which pushed many over the edge. In what seemed like a few days, IBM went from Wall Street Darling to being on death watch and, to my knowledge, it has never mined its customers since that time.

Apple vs. E-Books

Last week, Apple indicated that it wanted a cut of any eBook that was consumed on one of its devices. This would be like Sony saying it wanted a cut of the video rental, ad, or cable revenue that its TVs were supplying. This starts to look like excessive control and, in this case, control over what people read.

Further, it starts to feel like an Apple tax. The easy fix for the e-book suppliers is that rather than just giving you access to the book you bought on their services on an iPad, they charge a 30 percent tax to do it -- all of which goes to Apple. Now imagine if this were text books, or a reference book required by a government employee.

Recall that Apple banned a book it disagreed with -- iCon Steve Jobs -- from the Apple stores, along with every other book (including Mac user texts) that publisher produced.

Granted, that didn't work -- but if Apple controlled the reader, it could. What if Apple took that step next and chose what you could or could not read? Governments tend to make leaps like that. There are not only control issues here; governments really don't like companies that aren't governments taxing citizens.

From the user perspective, it is just annoying, but it can showcase a sudden need for a company to generate cash, which suggests it is concerned about future performance. The model Amazon and others used was known up front, so what just changed? When companies start focusing excessively on revenue, red flags should start flying.

Is the iPad a Failing Idea? Is the iPod Redundant?

So, what is Apple suddenly worried enough about that it needs to tax users? Could it be a fear of redundancy in its lines? With the laptop, tablet, MP3 player and smartphone isn't at least one redundant?

There is little doubt in my mind that one or two of these four devices are redundant. If you look at the next generation of tablets, they offer multiprocessor support, stronger graphics, and much more utility. The comparatively crippled first generation iPad will quickly be passed if Apple doesn't keep up. There is little doubt it will keep up, but there is increasing evidence that these devices are cannibalizing PC sales.

In addition, with a new device class, it generally takes several generations before we even know what we want. I doubt the iPad will go away in the near term, but what about the iPod, which is increasingly being made redundant by smartphones?

Remember the Palm PDA? Folks couldn't live without it until they did. This could be what Apple is worried about -- particularly given that it has lost Steve Jobs, who was core to convincing folks that products like the iPad were cool.

Wrapping Up

This may be nothing, but given my IBM experience and the lesson from RCA on issues like this, Apple is suddenly making me nervous. A big part of this is that I still don't think it can replace Steve Jobs, and it will need to restructure the company for whoever eventually takes that job.

Like most companies, though, it won't realize its problem in time to avoid a downturn. RCA, IBM and Palm all represent possible futures for Apple. We'll know in a few years what fate holds in store.

Product of the Week: NVIDIA Tegra 2

Product of the Week Last week, I was working on a comparison between four tablets (well, five if you consider I had to talk about both the first- and second-generation iPads).

The two products that came the closest to providing a real alternative to the iPad in that review were the Motorola Xoom, product of the week two weeks ago, and the new Dell Streak 7 (which I have under review now). Both products used Nvidia Tegra 2 technology to get there.

Nvidia's Tegra 2 Mobile Super Chip
Nvidia's Tegra 2 Mobile Super Chip
I then recalled that my product of the week last week, the revolutionary Motorola Atrix (the company is on a roll) also had Nvidia's Tegra 2 in it.

Suddenly, it hit me that the coolest products that weren't from Apple seemed to increasingly have Tegra 2 in them, and I recalled when Intel was getting similar play for its Pentium part. Add to this buzz that Tegra 2 appears to be the early favorite for Windows 8 on ARM, and suddenly Nvidia appears to be on a major roll.

What Tegra 2 brings to the market is superior graphics, and one of the highest performing multicore Arm implementations. Right now, if there is an iPad beater, it likely will run Nvidia Tegra 2 -- and I'd like to see some more strong competition in this space. As a result, Nvidia's Tegra 2 is my product of the week.


Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.


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