Apple to Split into Apple Computer & Apple Electronics

by James R. Stoup Mar 24, 2006

Remember back when the US government tried to split Microsoft apart? They wanted the company to be divided (at the very least) into two separate entities. One that produced an operating system and another that produced applications that would run on that OS. Unfortunately for all that didn’t happen, but for a while there it didn’t look good for Gates & company. Ultimately the government caved and the public never got to experience the software that such a breakup could have effected.

Fast forward to the here and now. I am about to propose that a major player in the computer market split apart, and amazingly enough, it isn’t Microsoft, it is Apple. Yes, Apple computer, maker of the Mac, the iPod and other such wonderful products. Apple, who is currently riding high atop record setting sales. Apple, innovator supreme. Yes, that Apple. It needs to be broken up, and sooner rather than later.

Now, I don’t think it should be split apart along a hardware/software line. That wouldn’t do anyone any good. And this split has nothing to do with licensing OS X or authorizing clones to be built. Rather this split should separate Apple’s computer business from it’s consumer electronic business.

Note: I didn’t say Apple’s iPod business or its media business, because those two things are just pieces of a bigger picture. Do you know what Apple actually sells? I mean, what they really and truly sell? It isn’t computers. It isn’t software. And it most certainly isn’t MP3 players. No, those are just the components most people notice first. What they really sell is an experience. They package up the whole deal and from start to finish they are there, and they make sure everything goes smoothly.

Welcome to the new digital age. This is the time when features aren’t as important as usability. This simple truth has been proven by the iPod’s continuing dominance in its field. Steve Jobs knows this. He also knows that the key to Apple’s success in the future is to ride this trend as far as it will go. And to do that he is going to have to concentrate all his energy on one of two projects, Apple’s computers or Apple’s electronics. My bet is that he will choose the latter.

I think that in the next two years Jobs will put Jonathan Ive in charge of Apple’s computer business so that he can focus his energies on turning Apple Electronics into the premier personal electronics supplier. The iPod is just the tip of the spear. Imagine Jobs churning out every device needed to truly connect the digital home. Apple Electronics can be what Sony should have been had they remained innovative. Give it time and Jobs will allow you to buy any type of media you desire and use it on a custom Apple device, elegantly designed, expertly made and wildly popular.

Give it time and you will see, Apple is destined to become two companies.

Comments

  • What makes you think that Apple can’t currently be good at expanding their electronics offering without the computer/software stuff getting in the way? You really think Sony failed just because they also make computers? I think a split would be at the expense of their computer/software (what Apple has always been known for) since Apple the computer/software company would no longer be associated with the success of iPods.

    Bart had this to say on Mar 24, 2006 Posts: 23
  • Is Sony two or more companies? They do computers, consumer electronics, music, films etc. Are their electronics and computers two separate companies?

    When you go to their site, it says “Welcome to the world of Sony: Music. Movies. TV. Games. Electronics”

    I think if Sony can do it all as one business, so can Apple.

    Chris Howard had this to say on Mar 24, 2006 Posts: 1209
  • The reason why the DOJ wanted to split up MS was over monopolistic practices.  If that happens anywhere with Apple, it would be a split of iTMS from the iPod.  That would be a seperation of Apple’s content distribution division most associated with the music, TV, and movies industry away from the hardware/software division associated with the computer/tech industry.

    Beeblebrox had this to say on Mar 24, 2006 Posts: 2220
  • Apple is already heading towards a showdown over anti-competitive practices w.r.t. iTMS & the iPod. Class action lawsuits, Attorneys General getting interested, countries other than France passing similar laws- it will get interesting.

    Devanshu Mehta had this to say on Mar 24, 2006 Posts: 108
  • The iTMS and iPod are not a monopoly just because they’ve done so well. Apple was forced to use DRM by the record companies. Consumers still have the option of purchasing CDs and copying them to their iPod. Besides why go to another online store when the iTMS has the most choices and the best quality. The other stores are still using a codec that’s over ten years old (MP3)

    This article is ridiculous. With as little products as Apple makes, it would be foolish to split into two companies. The fact is, the computer is the hub for the digital home. The iPod is just a compliment to the computer. They feed off each other. You can’t cut the line between them. The way all this is tied together is through Bonjour, wireless networking and connectivity with existing electronics (i.e. TV). Why do people have such wild ideas about this company? Think simplicity and functionality. That’s what drives Apple.

    Justin Dearing had this to say on Mar 24, 2006 Posts: 1
  • The iTMS and iPod are not a monopoly just because they’ve done so well.

    That’s right.  They’re a monopoly because they own 80% of the portable music market and used that advantage to lock out the ability of other manufacturers to compete.

    Consumers still have the option of purchasing CDs and copying them to their iPod.

    Consumers still have the option of using a Mac or Linux.  Does that mean that Microsoft isn’t a monopoly either?

    The iPod is just a compliment to the computer. They feed off each other. You can’t cut the line between them.

    This is exactly the argument that Microsoft used for including IE in the OS.  And I don’t disagree.  But that doesn’t mean that either company isn’t a defacto monopoly or that they’re using that monopoly to make it more difficult for competition to get a foot hold.

    Beeblebrox had this to say on Mar 24, 2006 Posts: 2220
  • > That’s right.  They’re a monopoly because they own 80% of the portable music market and used that advantage to lock out the ability of other manufacturers to compete.

    Hyperbole.  I have several Macintoshes, two Windows boxen, several iPods, a Rio, and they _ALL_ work together.

    What don’t I use?  Fairplay-DRM-encrusted music files.  That stuff is evil (so is all the other DRM.)  I rip CDs, and don’t buy CDs with DRM.

    What's the Frequency Kenneth? had this to say on Mar 24, 2006 Posts: 11
  • I honestly don’t think it’s quite fair of you to vilify Apple for using their advantage “to lock out the ability of other manufacturers to compete”. It’s not surprising that Apple’s protective of their DRM: firstly it’s going to be necessary to have some kind of drm to get content, and secondly they’re hardly going to use microsoft’s “open” [scoff] alternative.

    What Apple *should* do is work to develop a standardised non-proprietary drm supported across tech and content industries. (Not least because it would royally screw microsoft!) But we can’t expect miracles, unfortunately.

    Note that the ITMS doesn’t make money, but operates at or close to break-even. It exists entirely... let me reiterate: ENTIRELY... to sell iPods.

    (And to secure a strong media-delivery position for future platforms.)

    Benji had this to say on Mar 24, 2006 Posts: 927
  • Ben, how you can you accuse me of vilifying Apple and then turn around and admit that them opening up their DRM would be a miracle that we can’t expect to happen? 

    Ultimately we’re both advocating the same thing, that Apple license their DRM to competitors so that we can a) use iTMS songs on other music players and b) use other major music stores with our iPods. 

    You just don’t happen to define their refusal to do so despite an 80% marketshare as unfair or monopolistic; I do.

    Beeblebrox had this to say on Mar 24, 2006 Posts: 2220
  • If the government couldn’t split up Microsoft, there’s no way they’re going to be able to split up Apple.

    Also:
    “What [Apple] really sell is an experience. They package up the whole deal and from start to finish they are there, and they make sure everything goes smoothly.”

    So then, doesn’t it make sense to have one company doing all the work, so that the pieces can fit together as smoothly as possible?

    Two companies are never going to be able to make as integrated an experience as one company.

    Even look at PalmOne and Palm, or whatever they’re called now.

    JJJJJ had this to say on Mar 24, 2006 Posts: 7
  • @Ben Hall, it is not wrong for Apple to use one arm of the company to help the other. It IS wrong and bad for the consumer if Apple uses its monopoly in one area to build monopolies in others by anti-competitive practices. The key word is anti-competitive.

    This is what Microsoft has done, what Standard Oil has done and AT&T was in a position to do before each of them caught the attention of the US Justice Department. Apple is heading in that direction and unless they license their DRM, they are on a collision course with the JD.

    Devanshu Mehta had this to say on Mar 24, 2006 Posts: 108
  • I didn’t say it was wrong. I was trying to get across that it’s the only way we can reasonably expect apple to behave.

    The interesting point that you and Beeb appear to subscribe to is this:
    You just don’t happen to define their refusal to do so despite an 80% marketshare as unfair or monopolistic; I do.

    In other words, the fact that the marketshare is so high:
    1. makes Apple a ‘monopoly’
    2. means that they should open their DRM

    Now I’m no expert but I don’t think that having high marketshare qualifies as a “monopoly” in the sense that we mean it.

    That is, apple does have a “monopoly” because no-one else can really get a look-in. But the question we really ask when we say “is apple an unfair monopoly” is: have apple obtained their lead by monopolistic competition.

    From wikipedia:
    Industries which are dominated by a single firm may allow the firm to act as a near-monopoly or “de facto monopoly”, a practice known in economics as monopolistic competition. Common historical examples arguably include corporations such as Microsoft and Standard Oil”. Practices which these entities may be accused of include dumping products below cost to harm competitors, creating tying arrangements between their products, and other practices regulated under antitrust law.”

    I don’t think apple should open their drm just because they have a high market share. I think they should open their drm because:
    1. It creates a tying arrangement to ipod.
    2. It is probably true to say that they have obtained their monopoly by monopolistic competition.
    3. It will only benefit them in the long-term to have an open DRM since when their monopoly is eventually broken up, production will swap to other companies who will otherwise all be using microsoft’s version.

    On the other hand, I did read this article only an hour ago:
    http://daringfireball.net/2006/03/ipod_juggernaut

    Benji had this to say on Mar 25, 2006 Posts: 927
  • Actually I’m not sure that I subscribe even to the view (ostensibly mine…) that most of apple’s market gain has been due to monopolistic competition. Despite the big numbers (...unless you pay me… one… BILLLION… songs!) buying from the iTMS is, I think, of secondary importance to most ipod owners. And itunes itself can hardly be called a tying arrangement, since it’s only fair that apple ship software that allows us to USE the ipod.

    Quelle énigme!

    Benji had this to say on Mar 25, 2006 Posts: 927
  • When was the last time Apple moved out a division in a separate company? Newton Inc.? Didn’t work so well,

    Apple is about the whole thing, the whole experience, start to finish. All its products are tightly integrated, which contributes highly to their excellence. There is little logical reason to split up the company. Jobs also seems able to run more than one high profile & profit company simultaneously, and he doesn’t seem to lack any focus as it is.

    As for the monopoly thing - pfff! There are countless PMPs out there, working with countless musicstores. You have plenty of options. I am sure though that the US or European legal system will in some way allow for someone to jammer his way through so he is finally granted the privilege of using DRMd low-fidelity downloads on his niche DAP instead of just frick’n ordering the CD or DVD from Amazon offering perfect quality for possibly even less money. Because that’s justice.

    Bad Beaver had this to say on Mar 25, 2006 Posts: 371
  • MS was convicted of illegally using a monopolistic position in one market (Operating systems) to stifle competition in another market (chiefly internet browsers, but other apps too.)  The practices they got in trouble for include tightly controlling (through threats and intimidation, I might add) the software that PC manufacturers can preload in their product.  In short they stifled consumer access to competing products by closing off the most effective distribution channels.

    Apple is not doing anything remotely similar to MS’s nefarious practices.  They are not using their iTMS or iPod near-monopoly to stifle competition illegally.  They are not stopping anyone from promoting, marketing, or selling competing products.  If you want to use a different DRM, music download service, or MP3 player you can go out and easily acquire and use that competing system/device.

    Success in the market by itself is not a criminal act.

    tundraboy had this to say on Mar 25, 2006 Posts: 132
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