Thursday, April 21, 2011

Apple Sues Again

Apple Computer, Inc., has filed suit against Samsung, claiming that the Galaxy S Tablet violates some of Apple's patents. The suit was filed last Friday. Apple says that Samsung is blatantly copying the iPhone and iPad in its Galaxy S product line. Samsung is one of the largest electronics companies in the US market in products ranging from cameras, DVD players and cellular telephones, and has emerged as Apple's most successful competitor in the Smart Phone and Pad Computer markets. Apple seeks to enforce at least 10 patents, and several other claims about the look and operation of the Galaxy S devices.

This is coming on the heels of Apple's lawsuit against Amazon over the use of the name "App Store" which Apple uses to market iPhone and iPad applications. Even though Apple still claims the largest customer base in the combined Smart phone and tablet markets, Android phones are beginning to outsell the iPhone. A combination of better pricing and non-exclusive distribution makes it possible for users to get Smart phone technology from more than AT&T and Verizon, where Apple has exclusive distribution agreements. Android has no such agreements, and so Sprint and T-Mobile customers can buy Android at a better price, and from more carriers.

Android enjoys wide availability and an open-source development environment, whereas Apple maintains exclusive distribution and a proprietary OS. At first, the exclusivity benefits Apple, due to the laws of supply and demand. Limiting the availability drives the price higher, making the iPhone a status symbol. Apple deserves much credit for pioneering the field, but their business practices have only short-term value. When the iPhone was new, people would make phone calls to other people so that they could show off their iPhones. When Android was introduced, it was not quite up to the level of sophistication that iPhone had, and apps were scarce. But the ability of people to own a Smart phone that worked like an iPhone for all practical purposes made it possible to jump-start demand. It could be argued that the AT&T-only distribution of iPhone was then a detriment to Apple's sales, when the other large carriers like Verizon and Sprint had the ability to offer similar technology.

This situation is a lot like the original Macintosh evolution in the 1980's. The Mac was a groundbreaking use of technology which commanded a high price, and many people took advantage of it. They were willing to pay more for the look and feel. Apple decided to keep the software and hardware together, and not to market the operating system except to their own hardware customers. At first, Apple made a lot of money on the exclusivity and limited availability, but Microsoft began to market Windows which would run on any manufacturer's hardware, except Apple's. The rest is history.

A change in Apple's practices at that time could well have made the Macintosh OS the dominant force in the PC market. However, Apple held fast to their marketing plan, and nearly went out of business. Apple instead decided to sue Microsoft over the look and feel issues. Apple did not fare very well in the suits. Microsoft was forced to make a few cosmetic changes to their Windows desktop, but Apple didn't get the financial relief they were seeking. Years later, Apple needed to borrow money from Microsoft in order to stay in the game.

The decision to switch to Intel processors and other industry-standard architectures over their proprietary hardware helped Apple to regain some of their marketability, due to lower costs of production and a wider availability of hardware expansion. They completely rewrote the operating system to run on a Unix kernel, and developed the Mac OS as a shell. These have kept the Macintosh alive, and somewhat competitive. However, the invention of the iPod and the development of iTunes made Apple a market force once more. Evolving the iPod to the iPhone and then the iPad have kept Apple a leader in new technologies, and helped make the company profitable. But the same marrying of hardware and software as nearly killed the Macintosh a decade ago may well be their demise again.

Apple's decision to market the iPhone to Verizon's customer base has come too late for many people. Samsung already had the Galaxy S phones in the hands of the major carriers, and Android had reached a critical mass in terms of available apps. There are still carriers who cannot distribute Apple's products, and the wide availability of Android products will allow people to stay with their carriers rather than to switch to AT&T or Verizon. It would seem that there are very few people willing to change carriers in order to gain access to the iPhone. At this point, Apple is asking for financial compensation for lost sales, which were the result of poor marketing decisions more than technology being copied or patents and copyrights infringed. It would seem that Apple has not changed much in 25 years.

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