On Google: We did not enter the search business, Jobs said. They entered the phone business. Make no mistake they want to kill the iPhone. We won’t let them, he says. Someone else asks something on a different topic, but there’s no getting Jobs off this rant. I want to go back to that other question first and say one more thing, he says. This don’t be evil mantra: “It’s bullshit.” Audience roars.
In Apple’s fiscal 2010 first quarter, ended Dec. 26, iPhone and related product revenues were $5.578 billion, 36% of Apple’s total, compared with $4.45 billion for computers and $3.39 billion for iPods. The iPhone is largely responsible for doubling Apple’s sales over three years. While computer sales are up, iPod sales are roughly flat over the period. What’s more, Apple’s gross margin has risen to 40.8% from 31% in that period, courtesy of the iPhone. The device’s gross margin was about 60% in the quarter, estimates Sanford C. Bernstein, helping lift the overall number. So it should be no surprise that Apple’s cash from operations has skyrocketed to $5.8 billion in the latest quarter from $1.8 billion three years earlier.
In this battle, Google has a few key advantages: in stark contrast to the iPhone, Android phones (and Chrome OS devices) are based on a open platform. Developers are not subject to the will, the devices and software of the parent corporation; they are free to create what they want using the hardware and software they prefer and let the marketplace decide whether they are successful. Google does not control the distribution of media, either, the way that Apple does with iTunes. Finally, Android devices make use of standard ports and such whereas the iPhone does not; Apple forces you to buy proprietary accessories.
I believe that the “open” philosophy is key to winning mind share and is already helping Android to rapidly gain market share at the expense of the iPhone. In its last earnings release iPhone sales missed expectations by 5%. It’s no coincidence that during the same quarter Android devices grew their market share by 200%. Steve Jobs has very good reason to be worried, it seems.