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Apple, Google And Steve Jobs’ Earnings Call Trash Talk
Yesterday afternoon during the Apple earnings call we heard a lot of what might be called, on the basketball court (and elsewhere), “trash talk” from Apple CEO Steve Jobs. Jobs was “on fire” and took on various Apple competitors but especially Android and why he thought that Apple’s “integrated” approach was better and ultimately would be more successful than Android’s “fragmented” one.
Whether or not it turns out to be accurate, rhetorically it was a skillful “re-framing” of Google’s “open vs. closed” discussion. Jobs is indeed a master marketer.
Jobs also discussed why RIM was “in trouble” and why he thought 7″ Android tablets would fail. But he also acknowledged Android’s success several times, in several ways.
It was one of the most entertaining — and interesting — earnings calls in recent memory. Jobs’ highly passionate style stands in marked contrast to Google CEO Eric Schmidt’s unflappable delivery on Google’s earnings call last Thursday.
We sold 14.1 million iPhones . . . And it handily beat RIM’s 12.1 million Blackberrys sold in their most recent quarter ending in August . . . I don’t seem them catching up with us in the foreseeable future. They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company.
I think it’s going to be a challenge for them to create a competitive platform and to convince developers to create apps for yet a third software platform after iOS and Android . . .
“Open vs. Closed” and Android “Fragmentation”:
Google loves to characterize Android as open, and iOS and iPhone as closed. We find this a bit disingenuous and clouding the real difference between our two approaches. The first thing most of us think about when we hear the work open is Windows which is available on a variety of devices. Unlike Windows . . . Android is very fragmented . . .
Twitter client, Twitter Deck [sic], recently launched their app for Android. They reported that they had to contend with more than 100 different versions of Android software on 244 different handsets. The multiple hardware and software iterations present developers with a daunting challenge . . .Compare this with iPhone, where there are two versions of the software, the current and the most recent predecessor to test against.
In addition to Google’s own app marketplace, Amazon, Horizon and Vodafone have all announced that they are creating their own app stores for Android. So there will be at least four app stores on Android, which customers must search among to find the app they want and developers will need to work with to distribute their apps and get paid. This is going to be a mess for both users and developers . . .
“Open Systems Don’t Always Win”:
Even if Google were right, and the real issue is closed versus open, it is worthwhile to remember that open systems don’t always win. Take Microsoft’s PlaysForSure music strategy, which use the PC model, which Android uses as well, of separating the software components from the hardware components. Even Microsoft finally abandoned this open strategy in favor of copying Apple’s integrated approach with their Zune Player . . .
In reality, we think the open versus closed argument is just a smokescreen to try and hide the real issue, which is, what’s best for the customer, fragmented versus integrated. We think Android is very, very fragmented and becoming more fragmented by the day . . .
Seven Inch Tablets Are “Tweeners”:
[A]lmost all of [the forthcoming iPad competitors] use seven-inch screens as compared to iPad’s near 10-inch screen . . . The screen measurements are diagonal, so that a seven-inch screen is only 45% as large as iPad’s 10-inch screen . . . This size isn’t sufficient to create great tablet apps in our opinion . . .
No tablet can compete with the mobility of a smartphone, its ease of fitting into your pocket or purse, its unobtrusiveness when used in a crowd. Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet in our pockets is clearly the wrong tradeoff. The seven-inch tablets are tweeners, too big to compete with a smartphone and too small to compete with an iPad.
Jobs also spoke at some length about why it would be difficult for the 7″ Android tablet competitors to meet or beat Apple’s pricing.
Many of the questions during the Q&A session were about pressure on Apple’s profit margins and what Apple might do with its $50 billion in cash. But there were also interesting questions about whether Apple saw itself as the market leader or a niche provider of premium devices, as it has been with Macs historically. Jobs gave contradictory answers to that question, asserting that Apple only wanted to make great products even as he argued they would win markets:
[O]ur goal is to make the best devices in the world. It’s not to be the biggest; as you know, Nokia is the biggest. And we admire them for being able to ship the number of handsets that they do. But we don’t aspire to be like them . . .
[O]ur goal is to . . . make the best product in every industry that we compete in And to drive the cost down, while constantly making the products better at the same time. That’s what we did with iPod . . . The reason we wouldn’t make a seven inch Tablet isn’t because we don’t want to hit a price point, it’s because we don’t think you can make a great tablet with a seven inch screen . . .
Beyond all the criticism of Android, however, Jobs also acknowledged at several points during the call that Android was successful and that there was room for several players to succeed in the market.
Later Google’s Andy Rubin offered a Tweet-rejoinder to Steve Jobs:
Android will likely prevail in terms of sheer numbers (given all the OEMs supporting it) over the iPhone. But the iPhone and iPad will probably remain the strongest individual products in their respective categories.
The wild card at the moment is Microsoft and Windows Phones, which have received positive early response. If they are successful with developers, OEMs and consumers it may more directly impact Android than the iPhone since they’re positioned the same way (pricing is an important variable too). Regardless of what I think or the rest of the Techmeme set believe, consumers will speak with their wallets and buy the devices that they think best meet their needs.
It will be fascinating to reflect on Jobs’ remarks a year from now and see whether he was right or totally off the mark.