Second Time Around: What Have We Learned?

A great analyst post caught my attention the other day, talking  about the apparently defensive behavior seen in Apple's most recent earnings call.  It's hard to see why Apple might feel defensive - but there are a few reasons: Android devices are surging into the marketplace and they're, collectively, taking leadership.

Is it just me or have we seen this movie before?  A standardized operating system commoditizes hardware, leading to a wide variety of devices and very low costs.  Consumers, bedazzled with low up-front prices abandon a superior product for the cheap one.  In the end, the makers of commoditized devices destroy each other in an lethal price war, driving most out of the business and leaving the rest with a miserable slog through commodity hell.

From one standpoint, given the story-line, Apple could just stand back and say: guys: go for it!  Destroy each other in an Android price war ( make no mistake, the days of the $600 unsubsidized handset are coming to an end) and when you're all done killing each other, we'll be on top.  The problem with this is that while all the hardware makers may slaughter each other, that still leaves Google as the new Microsoft and Apple as a niche player (albeit a very profitable one).

I can't believe that anyone at Apple wants things to replay this way.  So what's the plan to avoid this?  How will Apple deal with the burgeoning volumes of device hardware and what are likely to be plunging device prices?  Apple does not want to sacrifice all it's margins and it does not like making crazy numbers of complex devices either.  Apple is never going to be like HTC or RIM - producing dozens of similar but not quite the same devices.

So what are Apple's options?  I have a few ideas - but I believe that Apple must have a vision going forward:

• Grow the number of devices and allow margins to decline, but refuse to license or enter into an all-out price war.  Settle for market leadership (e.g. the biggest player in every market) but not necessarily dominance.

• License selectively.  Let some partners take MacOS and iOS into specialized markets like ruggedized devices.

• Attack The Low End.  Use Apple's powerful supply chain to drive drastically lower pricing in a category of new, lower priced devices.  Use Moore's law to start making iOS devices like the iPad into the very low end of the market.  In one to two years, a new iPad could cost as little as $99 at retail

I won't beat around the bush: Apple's a great innovator.  I'm rooting for them to succeed.  I just hope we're not going to see a sequel in 2012 of 1993.

Please, don't make us go through this again.  Photo from Flickr.