Holman Jenkins On Apple

Holman Jenkins, Jr., wrote a very interesting column in yesterday's Wall Street Journal concerning Apple's recent product extensions, entitled "The Microsofting of Apple?"



In a nutshell, Jenkins contends that Apple is beginning to behave like Microsoft

"Rumors abound that Apple is considering a deal with Microsoft's search engine Bing to displace Google on the iPhone. Rumors abound that Apple will get into the advertising business, that it will expand its cloud services to compete with Google's. Who is this beginning to sound like?"

As the nearby price chart for Apple and Microsoft illustrates, the latter's price plateaued shortly after it won the 'browser war' with Netscape.

It can be argued, as Jenkins does, that Microsoft's spread into internet browser, its online business unit, and even gaming, gradually eroded and unfocused the company's software strengths.

The details of Jenkins' piece involve Apple's refusal to support Flash software on its iPhone and iPad, making them suspiciously built to only download material from the iTunes store.

In an era of interoperability, Jenkins notes, Apple seems content to and intent on restricting its products' owners to content available only from Apple. He also relates stories of Steve Jobs lately becoming obsessed with Google and its infringement on Apple turf, e.g., the Android cell phone operating system.

I think Jenkins makes good points. Generally speaking, when companies expand beyond their original areas of competitive advantage, their profit margins fall. Growth is purchased at the expense of margin, and, in time, the key unique elements which originally defined the firm become blurred.

In a word, well, two, really, Schumpeterian dynamics at work.

Sad to say, the areas into which Apple is rumored to be looking to grow, and, with the iPad, is growing, aren't quite so unique as its recent sources of growth. That alone should give one pause concerning Apple's future prospects.