Apple: We Shall Prevail


Apple built a name for itself railing against Big Brother. Apple the upstart positioned itself as the underdog alternative, offering the computer for the rest of us, the quirky company with the quirky name that became the voice of a generation fighting against the establishment.

Flash forward 30 years and near death experiences by both the company and the CEO who co-foundedit have spawned a competitive urgency that has at once transformed Apple into one of business history's all-time success stories, and maybe into the corporate monolith it originally tried to displace.

It is no secret that I marvel at Apple's fundamental strengths and execution.

Far from a "fan boy," I'm a "fundamentals fan," deeply appreciating this company's ability to grow and innovate and defy the economic odds. And while it's easy to use Apple's Mac sales and market share as the linchpin to its "underdog" status, make no mistake: Apple has near monopolistic control of mobile, digital media thanks to iPod, iTunes, the App Store, and the increasing momentum of iPhone, iPad and Apple's overwhelmingly successful retail strategy. Nothing wrong with any of that. Apple built a better mousetrap, consumers beat a path to its door, and the company is wildly successful and deserves those spoils.

Remember that monopolies aren't illegal. Abusing them is. And that's where some say the Apple story starts to get a little murky. There are many who won't begrudge Apple's marketplace bullying, arguing that Apple has finally ascended the mountain and is now up there enjoying the view. After years of being bullied by the likes of Microsoft and others, it's payback time.

Apple needs to tread carefully.

Unlike Reagan and Bush, and even Clinton for that matter, in President Obama's administration, Apple faces an increasingly activist, regulatory climate. A victim of timing and circumstance, had Apple come of age during another administration, at another time, we probably wouldn't be having this discussion. Instead, the confluence of digital media, innovation, the consumer's rabid appetite for all things Apple, Steve Jobs' brush with death, and what appears to be his "making-up-for-lost-time/don't-just-beat-but-destroy-the-competition" are all sliding Apple under the microscopic lens of federal regulators. Just as there's nothing wrong with monopolies so long as you don't abuse them, there's nothing wrong with a little federal scrutiny to keep companies honest as long as it doesn't turn into a witch-hunt.

Look, I could care less whether Apple bends the law. You can't fault a company for maneuvering through the legal system. Stock options come to mind. Health disclosures too. You can argue that Apple has bent the law, but to date no one has determined that Apple broke the law.

It's a critical difference.

Which brings me to the latest flap about Apple, Adobe and reports that Apple may have run afoul of anti-trust law. If I'm to understand this, developers are angry that Apple prevents them from developing cross-platform apps by refusing to allow them to use Adobe's Flash software (for reasons detailed in an earlier post.)

Developers are arguing and the Feds are apparently examining whether this is an abuse of Apple's power. Spare me. This is Apple's marketplace-Apple's platform. And if developer's want to develop for the App Store, and the iPad and the iPhone and the iPod, they have to play by Apple's rules. Some developers complain that they have to go out of their way to develop one app for Apple, and then a different version for everyone else. Too bad. Walmart sets the rules for products sold in its store. Same with Barnes & Noble. Costco. If companies don't like it, they can sell their wares across the street.

But they won't, because they can't ignore the Apple marketplace. Apple says in a mere 28 days, consumers downloaded 12 million apps on the 1 million iPads they bought. Stunning. So if a developer has to go out of his way to take advantage of all this, then so be it. If he doesn't, he can take his app somewhere else. I sense Adobe is behind this, not necessarily the developers, but that's just me.

The problem here isn't this particular issue, but the fact that Apple is attracting the interest of regulators at all. Apple has to walk that fine line of enjoying its size, not abusing it. Working in Apple's favor: Google, Microsoft, Research in Motion, even Palm all tout their own app stores. Google faces anti-trust questions over its acquisition of AdMob, but Apple has Quattro. We can all throw around big words like monopoly, regulation, investigation, illegal, and anti-trust. But real competition trumps them all in this country. Critics charge Apple might somehow have become "anti-competitive." I'd argue that given what all the other companies in Apple's universe are doing to take Apple on, Apple isn't anti-competitive, it's hyper competitive.

Apple isn't shutting out developers; it's telling them to play by Apple's rules, which is Apple's right. Apple's original mission is alive and well, but the bigger it gets, the more careful it needs to be that it doesn't become the Big Brother it set out to destroy. Apple might in fact be a bully. But I don't see shareholders complaining. Apple saved the music business. And plenty of apps developers playing by Apple's rules are getting rich.

Tread lightly, Apple.

Just not too lightly.

Questions? Comments?