Apple at the Crossroads: Leadership in Client Computing at Stake

My brother Mark has done very well by his investment in Apple stock over the past decade. Given the recent,  relatively substantial  downturn in Apple stock PE ratio he received an  investment advisory from ye Editor. Here is the jist of those remarks.

 I think Apple is at a crossroads– they could have become the major desktop PC player if Steve Jobs had lowered the price of Macs to within 10-20% of the equivalent PCs and allowed multi-touch to be delivered to Mac screens 2-3 years ago when Microsoft committed the Vista Blunder. However, Steve did not,  so Macs still have only 14% of the PC market share. However,  Apple financials have far outpaced Microsofts as seen in the table:

5Yr Financial Comparison: Apple vs Microsoft 
CriteriaAAPL 2007AAPL 2011MSFT 2007MSFT 2011
Market Value$94B$363B$280B$216B

thanks to the overwhelming success of Apple’s mobile iDevices – iPod, iPhone, and iPad. Steve Jobs took the PC and expanded it into the Mobile Client Computing market where highly portable, touch screen controllable, sensor self aware devices came to surplant most desktop  and laptop PCs. HPCCs-Highly Portable Client Computing has  become the new client computing paradigm pioneered by Apple. But  the burning question is why did Steve Jobs short-change  Macs and his ultraloyal Mac media design community?

Steve Jobs Legacy

There is no doubt that the prime legacy of Steve Jobs is that he so completely and broadly expanded client computing twice. First nearly 30years ago  by bringing GUI and mice to the rapidly emerging PC market  with the Lisa and Mac machines.Then 25years later Steve brought  highly portable, touch screen easy-to-use iDevices to market and once again redefined client computing. It was a broader definition and market that Apple scored  dominating positions in with iPod, iPhone and then iPad.

The new client computing markets are so big and disruptive of  the PC status quo that Steve Jobs broke the Windows  dominance and monopoly in personal computing. It has been a revolutionary disruption few envisaged even 3-5 years ago.

Microsoft has had to come to the mobile client computing world not just with ultrabooks but a totally redesigned Windows 8 that supports a second chip architecture, the low power sipping ARM processors. Add to this Metro, a new Windows GUI interface. Metro is not a carbon copy of Mac or iOS interfaces with its own attractive features; but  also Metro would not have happened without the resounding competitive success of iDevices with iOS plus Android  smartphones and tablets. This ability to twice turn computing markets in his company’s  favor by means of innovative and well styled software+hardware design – this is the enduring Jobs legacy in computing in general.

However with this great success there is an irony as well. In creating such a detailed and wildy successful system, Steve Jobs used a closed, proprietary ecosystem around iOS and his iDevices. In doing so to an extreme, Steve Jobs may have sewn the seeds for Apple slipping into a secondary role in  key areas of the new Client Computing market which  he largely  created.

One tantalizing answer is because Steve’s next hardware+software platform was the iDevices which were designed  to replace Macs[except Mac trucks – the big, often multi-screen, huge hard disks, large-scale media processing  machines ]. Apples iDevices stormed into markets pioneered by others like  Motorola, Nokia  RIM, and Palm or left fallow by Microsoft in the case of tablets and smartphones. Apple’s vision of client computing has gone through three phases using a consistent service theme.Remember this service theme because combined with compelling product design, they are a winning  feature set  that others like Microsoft failed to deliver in their products:
Apple’s Winning Mobile Feature Set
Apple’s iDevices have gone through three phases – first easy media consumption with the iPod delivering  music, then images, and finally documents and messaging. iPhone became a smart message center for  verbal, text,image and video  channels. Apps  tied into sensors enhanced the way the channels received, stored,  and distributed messages. Finally, the larger screens and computing power of the iPad tablets, allowed iPads to do all of iPhone tasks plus had enough extra computing power and display space to do analytic and creative tasks as witnessed by such apps asApples GarageBand[music creation], MicroStrategy’s BI App[business data display and  analysis] ,and Filterstorm[touch-oriented image editing].
But iDevices brought more to the client computing table than just  a desirable feature set – it brought the  ‘it just works”  service theme inherent in the Apple ecosystem.  Here are the characteristics of that ecosystem in which Apple  provides well designed and inventive software+hardware  that will “will just work”:
1)Products will be touch-easy to use [multi-touch gesture operations that are intuitive, consistently applied and easy to learn]  in state-of-the-art products; styling and designs. Touch easy means that  the touch and gestures  used to operate the devices are intuitive and easy to learn, apply universally and are also easy to recall and operate over time. Thus it should not be a surprise that the iPad  and iPod have become one of the most popular computing device for 6-12 years olds as well as  65++ users;
2)Access will be provided to music,  other media and app  markets where prices will be low with smooth and convenient  market access [iTunes, AppStore, etc]such that  the alternative of illegal download, copying or other means of acquisition is not worth the time, effort or other security/legal risks;
3)iDevices will have a battery life of at least 8-12 hours if not more. This capability continues to be an important  selling point for many iDevice users. This feature is the true mark of Jobs genius – he displaced ever increasing computing power as the highest priority in chip design for PCs to with lower power consumption and and longer battery life to deliver true HPCC-Highly Portable Client Computing .
4)iDevices will be highly portable with dimensions sized for convenience[iPods and iPhones fit in a shirt pocket, iPad in a jacket pocket] and reducing weight as much as possible[iPod Classic= 140gms, iPhone 4s= 140gms, iPad 2=601gms].  Portability coupled with all day mobile usage is a consistent target for iDevices;
5)Unique sensors and devices like accelerometers, GPS,  cellphone connectors, altimeters, gyroscopes,  digital cameras, etc. These provide unavailable-on-PC features. For example, in 2009, the iPhone becomes the most popular camera  used on Flickr. And GPS on smartphones has become the driver of social media outlets like Groupon and Yelp.
Finally do not underestimate the value of Apple’s fast  but measured rate of  product refinement and upgrade. This may be the “secret sauce” in Apple’s winning Mobile Feature set. Customers are assured that once every year there will be a major refresh of their iDevice. They can upgrade or hold onto the existing iDevice knowing in the latter case  that an  iOS software upgrades will likely pass along  some key enhancements and performance improvements. But iDevice users also know that there is a reasonably strong aftermarket  for their gadgets.
Steve Jobs Legacy: Expanded Role for Highly Portable Client Computing

There is no doubt that the prime legacy of Steve Jobs is that he so completely and broadly expanded  client computing first with his Lisa and Mac GUI 25 years ago and now with light, touch and sensor powered  iDevices . His magic has also been to bring a service theme of “it just works” to client computing. In effect, Jobsian magic has expanded client computing  twice when it got bogged down in monopoly settings [IBM PC 25 years ago and now Microsoft Windows PCs].  In effect his iDevices finally broke PC dominance and the Windows monopoly on client computing.Microsoft has had to come to the mobile client world not just with ultrabooks but a totally redesigned Windows 8 that supports a second chip architecture, the low power sipping ARM processors, and a raft of  Apple-like service theme features.

So with the Metro interface Microsoft has re-envisioned its client computing interfaces by adding dynamic icons; frameless, scrollable panels; touch and gesture expandable/collapsible data hubs/tables; and animated transitions between UI working spaces. Metro is not a carbon copy of Mac or iOS interfaces; but Metro would not have happened without the resounding competitive success of iDevices plus Android  smartphones and tablets. Redmond with its monopoly profits, gaming successes, and Kinect interface may still be in denial on the reversal of leadership engendered in post-PC client computing.

However, in creating  his iDevice Magic, Steve Jobs instituted  a closed proprietary ecosystem. First, only Apple can design and produce iOS hardware and devices. Contrast this with Android or Windows smartphones and tablets that have many vendors among some  of the world’s top electronic manufacturers.  Second, consider the degree of control Apple exerts over iDevices software. Apple controls what apps can run on iDevices and at what  price ranges can be applied to apps while  taking  a 30% cut for all app sales [apps must be bought from Apple’s AppStore].  iTunes is the privileged supplier of media on iDevices. And Apple strictly controls what development tools and languages can be used to write native apps for iDevices. Java, Flash, and most program generators are banned. Finally, Apple has  taken out thousands of patents on its iDevices hardware and software and within the last year has engaged in a patent war with Android smartphone and tablet vendors.

Three key benefits are cited for Apple’s proprietary control:
1)Because apps are developed with only two major development tools there is less fragmentation in design and operations of  software on iDevices;
2)Because apps have to be tested and approved by Apple there is reduced risk of viruses and security threats;
3)Because apps are delivered exclusively through the AppStore and are subject to review and  update controls, Apple can promise a)a higher level of app reliability and security plus b)a  more uniform update cycle;

So far this  control has meant very few  virus or security risks on iDevices and a unified look and feel for the basic interface and iOS apps.  But it may have restricted the rate of innovation for iDevices as Android phones  and tablets have managed a)to develop a wider range of  hardware designs  and b)have caught up on the smartphone side in the number of apps after having conceded a 50 to 1 app advanatge to iPhone at the outset[see below for details]. With Android Ice Cream Sandwich and Windows 8, the same may inevitably be happening in the tablet space – a rapid catchup in number of apps and OS software features.

So the irony is that Steve Jobs, having broken the Windows monopoly hold in client computing, may have gone too proprietary with the iOS ecosystem – and thus created an opportunity for  Google, Microsoft, Samsung, Asus, HTC, and others to succeed in “his” market. Steve Jobs may have sewn the seeds for Apple slipping into a secondary status in some of the new Highly Portable Client Computing markets which  he largely  created. But that market is moving and changing fast creating opportunities that any major player from Apple through Google to Microsoft may seize on — the die are certainly not cast on the Post-PC era.

Client Computing: Changed Forever

The Jobsian  Highly Portable Client Computing-HPCC  is now known as the Post PC era. This is seen in the fact the PC is no longer the sole delivery tool for client computing. Web browsing is available on iPods. But with Moore’s Law improvements in chips, storage and even batteries and communication bandwidth, some mobile devices are turning in on themselves and are becoming the next generation of “better PCs”. Smartphones and tablets are becoming so powerful that they  are becoming equivalent to netbooks and laptops but better.   With quadcore processors and ever better batteries and storage devices, smartphones and tablets are becoming as powerful as laptops of 1-3 years ago.

First HPCC devices are not just portable but highly connected. For example, the  venerable iPod Touch has Bliuetooth, Wifi, plus USB and HDMI [through special Apple 30pin connector].  The Samsung  Google Galaxy Nexus  smartphone is the latest Android reference implementation and it has Bluetooth, WiFI, 3 cellphone 3G/4G connections, NFC, microUSB, GPS, 2 audio, 2 video, and UPnP-Universal PlugnPlay connections. Literally mobile client computing devices are teeming with programmable connectivity on a short range [Bluetooth, microUSB, NFC, audio+video connectors] and long range basis[cellphone connectors, WiFi, GPS].

So the emerging generation of mobile devices go beyond  media  consumption  plus communication/messaging centers back to broader PC tasks like creation and analysis  required in business and other organizational settings. Web client server and Cloud Computing systems that are fast emerging provide the additional scope and power while using the mobile devices as client computing interface of choice. Currently, even smartphones [Samsung Galaxy Nexus]are reaching 1280 x 720 pixels of display space while tablets at 1360  x 800 pixels with 11.6 in screens are appearing And if Apple or Samsung delivers the retina displays on the smartphone or tablets that display space could jump to 2500 x 1600 – as good as  most giant PC laptop  screens.

And new forms of input beyond touch and gestures have been empowered on mobile devices. First, devices are much more status aware and respond to changes of state – ambient lighting, location, orientation, altitude, barometric + heat values, etc. Second, voice command and response have been pioneered by Android and taken to a new levels with Apple’s Siri [But, shush! – in public and business settings voice control is not always acceptable]. Finally with JavaScript and Flash, animations and video are also becoming accepted means of output beyond static reports or PDF files. While the “old” Web 2 can feed onto mobile devices through HTML+JavaScript powered browsers new ways of interacting with users. In the sidebar and discusion below , some of the new client computing opportunities are explored.  But first, consider the new competitive pressure that Apple is under that will help to explain the downward PE ratio Apple is seeing in the stock market.

Apple Under Competitive Pressure

Samsung’s clever The Next Big Thing Is Already Here ads
So client computing has changed and that is seen most clearly in the smartphone. Ye Editors favorite fliptop Razr does not hold a candle to today’s smartphones.  And as the clever Samsung ad underlines, Apple is no longer at the head of the class. The  smartphone market has moved ever faster. Many rival mobile OS  foundered as in the case of Palm and then HP with a well designed webOS, Nokia with Symbian and Meego, and RIM barely keeping head above water with QNX. Google took the expedient of using two open systems OS designs- Android and Chrome while Microsoft has tried three times with Windows Mobile 6.5, Window Phone 7 and now Windows 8. Only Android has indisputably succeeded as seen in the chart below showing Q2 worldwide smartphone marketshare as measured by Gartner:

iPhone Now Playing Catchup in key Mobile  Markets

The chart above is crystal clear – Apple no longer dominate smartphones like it did just 2 years ago. Google has succeeded with Android in gaining unprecedented smartphone market share in 2 years time. Not only displacing Apple’s pioneering smartphone but also RIM’s Blackberry, Windows Mobile, and Nokia’s Symbian phones. Google decided that it could not allow Apple to have a monopoly on access to mobile eyeballs. So it deployed an Open System with Android that courted not just developers but also devices suppliers with a free and open OS for their smartphones and tablets. This is in stark contrast with Apple which  has a closed ecosystem with exclusive hardware rights plus other  access limitations such Apple-only app, media, store delivery that ensures that Apple gets the bulk of the profits to be gained in both smartphones  and tablet sales.
True, by setting up a screening of apps and UIs Apple has enhanced the reliability and   security of its iDevices and apps – the bane of Microsoft Windows. Likewise,  by doing all the hardware and iOS operating system development exclusively, Apple can control the quality, timing and integration of hardware and software intros while also managing their update cycle. So Apple’s bet is that with its lead it could out-innovate the competition.
But Google  with its free Mobile OS offered major consumer electronics suppliers the opportunity to increase their profits by  delivering smartphone and tablet  devices directly  to consumers. The net result has been an ironic repetition of what happened with Macs nearly 30 years ago when Microsoft copied the interface design and let dozens of PC suppliers use it in their clone PCs. With a freely accessible Windows API, Redmond got thousands of developers to do exactlythe same by developing for Windows preferentially . History is being repeated as shown in the comparison of the latest iPhone 4S versus the top of the line Android  4 Galaxy Nexus and Razr phones:
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State of the Smartphone Hardware Art – iPhone Trailing
Clearly, the iPhone is running behind the Android phones in a number of hardware features as the table above shows. Perhaps the two most glaring deficiencies because they should be easily corrected are  half the memory of the Android at only 512MB and no 4G LTE network support. But ye Editor was also surprised to see that the iPhone 4s conceded NFC support. Near Field Communication will be a means of not only convenient document exchange but also is a key component of mobile based payment systems. Letting Google lead in this important arena is surprising. However, that is a trend also seen in mobile OS software as iOS also concedes advantages to Android’s new Ice Cream Sandwich version:
Comparison of iOS5 and Android 4 Mobile OS – Where each OS Leads/Dominates
FeatureApple iOS5Google Android 4
UI Operations-Simple, Easy to Use UI leader
-First and standard setter
on touch and gestures.
-Widgets UI and customization
-Menu and tile navigation fits
reveals multi-tasksing apps.
-Better customization of UI.
Communications-Siri answering and control.
-Facetime is Apple only.
-Integrated Apple and IM.
-Text auto-reply for call refusal.
-Google+ video  phone to any device.
-Voice keyboarding of messages.
Apps-More Apps on iPad, less on iPhone
-Better Apps appear first on iOS
-More Secure apps
Take the lead on phone apps
Way behind on tablet apps
Promise to be first choice for developers 
Media+camera-Improved camera in iPhone4s
-Poor cameras on iPad
-Gallery for direct camera control
-Better image edting effects, features.
-Panorama picture taking and other
direct camera controls.
-Video editing features and effects.
Multitasking-Multitasking is privileged state
All tasks are suspended for battery life
-Multitasking is  robust Linux model
-Running Apps List easy control
Deeper integration with Web services
Cloud Integration-iCloud catchup with syncing, backup.
-Auto syncing to iTunes assets.
-Auto app, contact etc updates.
-First to cloud with media and info syncing.
-Now beyond Gmail & Picasa with Google+
and many Google/other cloud services .
Utilities-OS Firmware upgrades
-iOS Mail App for multiple mail accounts 
-Data Usage Monitor
-Gmail better search, contact integrattion
-better notification Ui and services
Google Search more complete
NFC-Near Field
-Surprise – no support.-The key to Android Beam to Share
and Google Wallet apps
Web Browser-Improved but big Flash hole-Chrome is tops in features, HTMl5, speed
Development-Closed and highly proprietary dev.
-No Java, Flash, nor cross platform tools
-Open Source base atracts HW
and SW developers

-Reference implementations prevent
-Many development paths and tools
-ADK, NDK acessory & Native Dev kits 
Color Coding: Leading in specSignificantly lags in spec
Yes, for two years Apple iOS has been   the client computing operating system of choice. However, Google with Android 4 as seen in the above table has come to match and better iOS  in  a number of OS software features. Also Microsoft with Windows 8 a)hopped on the bandwagon sooner than anticipated and b)have added their own innovative UI wrinkles. So now, after wresting away the client OS mindspace leadership and  monopoly from Microsoft – Apple faces roaring competition for the newly expanded client computing market leadership.
The table above shows three key areas where Apple has fallen behind in mobile OS software.  First and foremeost, Apple continues to protect its multi-tasking, suspending multitasking processes  of all but its own iOS privileged task plus a limited set of 3rdparty app tasks. This is done to give iOS devices special battery saving capabilities. But the downside  is twofold: a)battery technology improvements make the gains superfluous as does cpu-technology[Tegra’s 5th devoted low-power core for example] and b)the emerging new client computing opportunities really demand true multitasking capabilities. In sum,  sipping for power by suspending multi-tasking is much less of an imperative.
Second,Apple has limited development  of apps in iOS severely. For example,  development  of apps for iOS is restricted mainly to two tools- proprietray Objective C and a still immature and slower HTML5în October of 2010, Apple opened development to other languags. In addition, by eliminating cross platform development tools like Java, Flash, and many cross platform generation tools, Apple is saying  to both businesses and software vendors – you will have to develop your software  for our platforms in a strictly  Apple approved  way. This was fine when Apple was the only smartphone or tablet game in town; but as  the table and chart above show, the  smartphone game has changed such that developing only for Apple has become a drawback and burden.
Third, Apple is not leading in key emerging technologies. In mutitasking, cloud computing integration, notifications and voice control Apple’s iOS5 has been playing catchup [and with Siri  for voice control, go ahead ]. But just as fast as Apple catches up, Google Android forges ahead with WiFi Direct, NFC control API, pen/stylus advancedAPIs and expanded encryption and face detection options. True, Apple leads in some mobile OS options, but that lead is smaller than ever before and behind in key emrging technologies.

Client Computing Trends

Client computing is riding on 2 potent trends. First, Moore’s Law is still operative across all of electronics [chips, storage, communication bandwidth, even display technology  nd battery technology for the moment]- that is a doubling in capacity for the same price every 18 months or so. The second trend is continuing disruptive innovation in which new products displace old technologies about every 5-10 years is the norm. Now despite the fact that the NYTimes raises the question of whether consumer markets have been “gadgetted out”, ye Editor see a widespread revolution in Client Computing coming down the pike.
A whole slew of smart devices utilizing many of the winning traits of Steve Jobs iDevices are likely to to reach the market in the next 1-5 years. Here are some:
TV+Game+media controller – Xbox/Playstation/iPod become the universal remote controller as Apps WiFi-linked to electronic products like TV, printer, stereo, etc become universal remotes.
SmartHome/Appliance remote – instead of entertainment, this universal remote manages the home appliances, heating, lighting, water more economically. One standard device uses touch screen apps to setup, customize, and toubleshoot heating/lighting/ plumbing/electrical problems in the home or even office. The downturn in the Homebuilding market is holding up adoption of Smart Home but ever increasing power, water, and home-repair costs will drive this market. Just look at what is happening to new car control centers. Question – will the device be tablet or smartphone or its own breed?
Dockable business tablet – a tablet that becomes a laptop with keyboard, trackpad,and connectors like USB/HDMI/Thunderbolt /WiFi/etc to a wide range of specialized peripherals and storage devices required for creative business work. The tablet can be instantly unplugged and carried to meetings where proceedings can be recorded or documents exchanged through NFC or Wifi. Dockable tablets will become the dominant business computer in 2-4 years time.
Smartphone/Wallet/Bio-reader – will carry in encrypted storage and data communications money supply, phone/text/email/video messaging, plus interfaces and sensors to critical bio-readings for dental, medical, physical health. This will be highly personal and monetary data hence the security measures associated with these devices.
Tablet/Wallet/Bio-reader – same as above with bigger screen and and more computing power. Not sure which technology will win out.
Health/Science/Engineering Industrial Tablet – has the specialized apps and connectors for hospital, plant/engineering, and scientific lab/operational work.
Home PC Lan/WiFi Server – This big box will run the LAN/WiFi services that powers the TV/Game/Media controller and/or the SmartHome/Appliance Universal remote while providing back ups and offline operations for the dockable business tablet and smartphone/wallet/bio-reader. The downturn in the Housing market has held up this and other SmartHome devices.
In sum, expect Client Computing devices to proliferate as PCs morph into App-smart, portable, touch-easy to use personal aides that can link users to one another and the need to know sensors and data that surround their daily activities.

AppleTablet Leadership Also in Danger

Already Android phones have nearly doubled the market share of iPhones.  With the new iPhone 4s glitches[Siri misfiring, battery drains, muted or tinny voice, etc]  the Apple “it just works” reputation in the smartphone market is under fire.  Android 4 Ic eCream Sandwich’s winning features may widen that gap in favor of Android smartphones. In tablets, Apple has a big lead with the number of apps; but the hardware advantage , as seen in the table below, follows the smartphone pattern and is swinging towards Android tablets.

The problem is Apple’s exclusive  on iPhone hardware. There are so many good innovations from so many Android hardware vendors, Apple is hard pressed to keep up.It must be chilling for Apple users to see the same situation that happened in the contest of Macs versus Windows being repeated in iOS versus Android and Windows 8. Hardware innovation is happening faster and more broadly  among the many Android vendors. Consider such varied Android devices like Motorola’s Atrix 4G, LG’s DoublePlay game console and phone, Asus Transformer and then refined Transformer Prime as dockable tablets,  Acer Iconia dual touch display, Sony Ericsson Experia game+phone, the dual purpose Asus Padfone, and HTC Status Facebook Phone. What is really interesting about all these design prototypes is not the danger of fragmentation but rather the opportunity to hit/grab the brass ring of  market design success. Literally innovation is about trying, missing, but getting closer each time.  And Asus Transformer Prime, the 4th or 5th dockable tablet, appears to be honing in fast on one of the best dockable tablet designs which should please businesses looking for the multi-value – a notebook that transforms into a very capable tablet.

Tablet Hardware Comparison
Apple iPad 2 vs Asus Transformer Prime
CategoryApple iPad 2Transformer Prime
Facing Size187 x 242mm181 x 262mm
Thickness8.8 mm8.3mm
Display type9.7 in IPS10.1in Super IPS
Display area1024 x 7681280 x 800
Display Dots Per Inch132 DPI150 DPI
Display glassoleophobic Gorilla glassoleophobic Gorilla glass
CPU1GHz Dual Core1.4GHz Quad Core
CPU add-onnone5th low-power core
Storage16GB, 32GB, 64GB32GB, 64GB
Storage add-onNoneMicro-SD card slot
Camera – rearvideo at 30fps 720p
stills at 960 x 720 pixels
video at 30fps 1080p
stills at 3264 x 2448 pixels
Camera – frontvideo at 30fps 480p
stills at 640 x 480 pixels
video at 30fps
stills at 1250 x 960 pixels
Camera features5x digital zoom, geotagsautofocus, flash, f2.8
Stereo speaker jack
hires microphone
2in1 stereo and mic jack
Specialty stereo speakers
electronic compass
light sensor
GPS in 3G device only
electronic compass
light sensor
GPS location
Input/Output30Pin adaptor for HDMI, USB,
left and right speaker out.
Requires special adaptors.
Micro-Sd card
micro HDMI connector
Network ConnectorsWiFi 802.11(a/b/g/n)
Bluetooth 2.1+EDR
WiFi 802.11(b/g/n)
Bluetooth 2.1+EDR
No 3G/4G connection yet 
Battery25 watt-hour Li-polymer25 watt-hour Li-polymer
Docking FeatureNoneDocking Station with
USB +SD Card connectors.
6h battery supplies tablet,
no draw on tablet power. 
Color Coding: Leading in specSignificantly lags in spec
Sources: Geek.comAndroidCommunity, AppleAsus 

In tablets Android devices also begin to lead hardware race
Just as in case of the iPhone, Android tablets have caught up with and now better iPad in some  basic tech specs. Now some will say this is the give and take of competitive announcements that are “out of sync”. And others may cite the disupting effect of Steve Job’s death.  Finally others will say that the soon-to-be iPad 3 and iPhone 5 will turn the advantage distinctly back in Apple’s favor with retina displays, Apple’s own improved CPU chip, better 4G LTE support, NFC capabilities, TV support, etc.
But the Bottom Line is this: Apple no longer dominates in smartphone or tablet hardware. Nor does Apple dominate in  mobile OS software. Yes Apple holds an impressive lead in tablet apps; but not so smartphone apps. Yes, Apple currently leads in first development of new Apps; but Google’s Schmidt expects that to change in 2012. And if the number of new Android -based client devices [see 2nd sidebar, Client Computing Trends], continues to proliferate, then the apps battle advantage may swing to Android mobile devices simply because there are so many providers for so many different Android mobile device submarkets.

And do not discount Microsoft and Windows 8. The design and interface ideas are ahead of iOS and Android rivals in design  and have critical acclaim. But  the delivery tasks for Redmond are formidable and were fumbled badly in the case of Windows Vista. What is delivered in the Windows 8  public beta  planned for February 2012 will be most revealing. Microsoft is promising to be at CES in Las Vegas in January and what they reveal will move markets. As can be seen in the chart below Windows 8 certainly does have six languages for developing for Windows 8. But like Apple, all Microsoft tools  are proprietary while getting Windows 7 and Windows 8 Metro working together it still is an enormous integration task complicated by ARM chip instructions being added to the x86 development stream.

Will Redmond be able to deliver a radically diffferent UI – yes. Will Windows 8 be well integrated in with good response time and reliability ? From Missouri. Will the ARM software be a part of the beta test and work well? From Missouri. Will Windows 7 programs works as well in Windows 8 as they do currently in devoted Windows 7 ? From Missouri. However, the change in executives at the top of Windows 8 development so late in the game is not entirely encouraging.

So there is going to be a battle royale for client computing  market leadership this next year. Going to CES in January will allow one to see who among Android and Windows 8  vendors will be likely to take a leadership position in smartphone or tablet design.  It will also allow one to see who is doing what with next generation of Quadcore chips from  NVidia, Qualcomm, TI and others. Will some of the conjectured Client Computing Trends emerge as practical devices?

What Can Apple Do?

Tim Cook has the unenviable position of succeeding an innovation legend. And before he died, Steve Jobs insisted  that Apple had a plan for 3-4 generation of devices. So what does Tim do? Steve was able to focus and work  fiercely while getting  many of his troops to do the same. Will Tim want to imitate that style? Will the Jobs strategy and plan become The Law?  Steve was able to reverse himself on key issues[reputedly on no 3rd party apps for the  iPhone for example]. Does Tim Cook have the same leeway? If ever a superb  case study of executive management leadership could be constructed for later MBA analysis, this is it.

Clearly some portions of Jobs strategy are not working as well as he and  Apple  intended. The loss of hardware leads on both the iPhone and iPad are but one example. The `thermonuclear`patent wars with Android vendors is another that is starting to produce decidedly mixed results.  But perhaps the hardware setbacks are only temporary, awaiting an iPad 3 annoucement in February which will reveal how much catch-up and new leap-ahead  designs Apple will take in tablet hardware [but it appears Samsung will match  the iPad3 if it chooses to use a retina display and WiFi Direct  connection to TV and other peripherals].
Similarly, the iPhone5 coming likely in June has a lot of ground to cover versus the Androids  How will it establish a leadership position? Perhaps with a  TV linkup as a move to become the the universal remote where the TV, stereo, and other appliances have an app that controls their operation. No need for a set  top box as the universal remote is able to sync with a Mac or PC or up to the Cloud to provide the data bits for a total entertainment experience. Or is this an Ipod Touch added feature[who wants a remote interrupted for telephone use].But iPhone needs to establish some unique Apple magic like Siri voice control leaping over Android`s lead. Will iPhone deficits in screen size and resolution, 4G LTE support, and CPU chip performance be replaced by Apple leap-ahead technologies? How well positioned is Apple to do this leap-ahead across its iDevices?
There are three factors working in Apple`s favor. First, Apples enormous technology buying clout makes it the Gorrila in supply chain management of technology parts. With 300 million iDevices each year to build, Apple can  command the best technology, the best prices, and even buyout supplies of critical parts  that only the largest of Android and Windows suppliers can hope to break into. Second, with more than $80B in cash and investments and no debt Apple could afford to buy Nvidia for $11B and assure a supply of superior GPU and ARM CPU chips plus BlackBerry RIM for $10B and its patent treasure trove along  with enterprise  mobile management software and still have more than $60B leftover. But Apple is actually buying for $0.5Billion Anobit whose flash technology both increases the reliability and speed of critical flash chips used throughout iDevices for their low power-high speed capabilities. And in the past two years, Apple has made 8 buyouts[but none above ¸0.5B illion]. And perhaps another Israeli startup, Pebbles, with its better than Kinect 3D gesture recognition will be on Apple`s leap-ahead technology list.
So the third factor is that Steve appeared to lower if not eliminate  the NIH [Not Invented Here] factor in Apple`s tactical planning. For example,  Siri is an important example of  anti-NIH technology that allowed Apple to leapfrog Android ‘s previously leading voice enablement in smartphones.  In sum, Apple certainly has the cash – and possibly all the  savvy and will to make  leap-ahead technology buys when necessary.
This leaves the question of what to do about Apple`s Luxury and  Proprietary branding. Make no mistake, for the past 10 years Apple has been the luxury car brand in electronics and computing. Apple`s consistent profit margins  around 25% are pipe-dreams for Cisco, Dell, and  HP. But if Apple starts to play a consistent game of catchup in its iDevice markets, then its luxury brand and margins are in danger. That is why this advisory has spent so much time establishing the fact that Samsungs jibe that The next big thing is already here has substance in fact. Apple cannot afford to lose is its innovation leadership for say 8 to 10 quarters or more, lest it fall victim to more than  the jibes it threw at Microsoft for the Windows Vista disaster just 3 years ago.
Hence the concern about exclusive and proprietary products. Apple has a long history of not allowing clones of its hardware and software- so that is not likely to change. But the issue gets blurred with software apps and hardware addons. So far Apple has been miserly in providing USB, HDMI, and other hardware connections to iDevices. But sharing hardware  may be essential for Apple to make leap-ahead wins in say the fast emerging Personal identifier-wallet-health and bio-reader market. Likewise the SmartHome is a fast growing market  which requires a universal remote able to link to dozens of different appliances and control systems . Apple`s preference  for proprietary and non-cross platform does not stand up well in these emerging markets.
A lot of  acceptance of Apple client computing solutions  will depend on   two  factors. First, will  software and hardware vendors continue to turn first to Apple when they now have a very viable Android development path. And possibly the same precaution will be taken with newly Open Sourced webOs and  Microsoft heavily promoting its Windows 8  [remember Business would much prefer a Windows-compatible solution for its huge archive of Windows programs]. Likewise will developers continue to program first for iOS and Apple? They have to give up 30% of their revenues and have a much more limited set of development tools to use. HTML5 is not top-tier performance and feature ready on iOS [or any other mobile OS]. So programming for iOS and iDevices is primarily  in one language, Objective C, which is a non-trivial learning exercise even for seasoned C programmers. Contrast this with Android`s diverse set of tools  with a wide range of pedal to the metal NDK based C/C++ or more developer and cross platform friendly languages like Java, Flash and other tools available from Google and Android.
Will Tim Cook move to change any of these  development  hurdles? Or will he rely on Thermonuclear patent wars against Android. And for Windows 8, straining under a  much bigger development task than Windows Vista, can Tim Cook rely on Redmond  to produce  enough slip ups to effectively take Microsoft out of most if not all of the client computing emerging markets. Take a 5th on ye Editor if you can accurately predict Tim Cook`s choices. Double that if your and Tim Cook`s choices prove to be winners over the next 1-2 years.
Apple Investment Advisory
Given the trends cited above, some awfully big investment players are dumping their Apple stock. However, this may be from a position of substantial gains.  But the client computing market leadership battle is just starting. And making big investment bets is a risky business- hence the volatility of the NASDAQ and the tech sector over the past two years.  The next two quarters will be a testing ground for Apple under Tim Cook.  Will he be able to plot a winning course  despite the narrowing of the gap by Google Android and threats from Windows 8?  Ye editor thinks 4 events will tell the tale:
1)What Android  client computing smartphones and gadgets including Google TV 2 get revealed  at CES  or the Mobile World Conferences in January.
2)Microsoft`s Windows 8 first full beta in February.
3)Apple`s iPad 3 announcement in Feb-March, and
4)whether North America dodges the Europe`s Recessionary bullet.
For what its worth, ye Editor is following his own advice and has no position in any of the stocks mentioned in this posting.

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