The Great Platform War Is Upon Us
Steven is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When a single company develops hardware and software into one package, they create the basis of a platform. Platform is the new buzzword that’s all the rage with investors, especially when it relates to mobile computing. It’s been an investing theme of mine this year because I believe software companies are more valuable than standalone hardware companies. I think software is improving the user experience more than hardware because the latter has become very robust (think quad core cell phones). Innovation is coming more from the software side of the equation than the hardware side. This helps explain why hardware companies tend to trade at lower multiples than software companies. Companies that develop platforms are leveraging a winning formula, provided it garners mass appeal. In this commentary, I will examine the current state of the platform war and what I’ll be watching for in the future.
Atop the platform food chain are tech titans Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), and Microsoft (NASDAQ: MSFT). Each has tremendous support from their coffers of cash and is serious about winning over the consumer. Apple needs no introduction into mobile platforms, having practically pioneered the industry with the first iPhone back in 2007. Google was not far behind, with the introduction of Android OS in late 2008, but they didn’t have a hand in developing hardware until 2010. Microsoft is most certainly the farthest behind, but the Surface tablet has some serious potential for mobile users looking for a more robust experience. They have largest user base to leverage and they’ve been the most successful in the gaming console wars with Xbox 360. Although rather new to mobile, this isn’t their first rodeo in developing platforms.
In terms of who’s winning this very second, undoubtedly it’s Apple. Perhaps it’s because they do not allow OEMs to develop hardware for the framework, giving them more control over the entire experience. Pretty much, they’re control freaks, and it’s paid off handsomely for shareholders. That’s what it’s all about for a successful platform. More control creates a unified experience and that’s what captivates users – fluidity.
Promise and Peril
Every rose has its thorn and every platform has its faults. For Apple, being overly controlling inhibits the spirit and openness of the developer community. They have a tendency to wow us when new products are introduced and only “ahh” us when new generations are released. Given their track record, it’s relatively obvious what future Apple devices will be like. You can almost guarantee they’ll be sleeker, faster, and the same price as the previous generation. With that being said, Apple has managed to captivate the minds of consumers because their devices are beautifully minimal and the software is extremely intuitive. It creates that fluid experience we desire. Knowing all Apple computers and iDevices are going to work flawlessly with one another has proven extremely valuable.
The risk Apple faces comes from the competition sneaking up on them while they are in a period of predictability. At some point, the competition will deliver a compelling product that may slow Apple’s momentum. It’s exactly what Microsoft is banking on with the new Surface tablet.
Microsoft’s Surface tablet has not hit stores and won't until later this year. It’s a beautiful device paired with an innovative cover/keyboard, offering promise to enhance productivity for tablet users. I think it’ll be a great contender as a compelling device. The preliminary reviews have been optimistic, citing snappy responsiveness. Unfortunately, promise is all the Surface offers. We have all grown too familiar with how promises can be broken in the tech world. Microsoft has the largest app library known to man, with the largest installed base of users to leverage. There is a tremendous amount of potential energy for this thing to take off, provided the experience is more than adequate. They took their time meticulously designing the device, so my hopes are high it will be a success.
Microsoft may look like a bunch of copycats of the Apple iDevice model, but the goal here is a bit different. They aim to offer a near identical computing experience between mobile and desktop computing. It’s all about full-blown Windows in a mobile form factor. Yes, Windows RT is not full-blown Windows, but it’s a heck of a lot closer than iOS is to Mac OS. If power is the objective, the Pro version of the Surface will take care of users needing a full version of Windows 8.
Google is bit more wishy-washy when it comes to developing a unified mobile platform. On one hand, Android OS and OEMs are the primary drivers of hardware. This direction has created massive market share for Android, but has done so at the expense of a fragmented experience. On the other hand, Google co-develops hardware under the Nexus line. It’s not really clear which way they want the user experience to fall. Especially when considering the Motorola (NYSE: MMI) acquisition, which they may or may not sell its hardware unit. It’s all still a big mystery if Google wants in on the hardware game. I think they will want in once they become more committed to unifying Android’s user experience. The OEM thing works great until someone like Apple comes along and ups the ante.
One thing is clear: Apple is the established leader. Google and Microsoft are going to start taking more direct shots at the fruit dynasty. Knowing Apple’s rhythmic product cycle gives the competition an opportunity to strike while they are being predictable. The way Apple maintains its throne is by inviting the element of surprise far beyond the natural progression of this cycle. Both Microsoft and Google face uphill battles ahead of themselves. Innovation and strong delivery are the only clear paths that have a chance to shift the tides away from Apple. And that's what I'll be watching for.
TopDownTrends owns shares of Microsoft. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.