Steve Jobs doesn’t usually make a guest appearance on Apple’s post-earnings conference calls with analysts, but after Apple’s first $20 billion quarter, he made an exception. The result was an instant classic, as Apple’s CEO laid out how he views the phone and tablet markets, taking shots at Google and Research In Motion (RIM) and ripping the idea of a seven-inch tablet.
Blowing past BlackBerry
Jobs started by taking on BlackBerry-maker RIM by explaining that RIM is fading in Apple’s rearview mirror. In the just-concluded quarter, Apple sold 14.1 million iPhones, compared to 12.1 million BlackBerries sold in RIM’s most recently-reported quarter, which ended in August.
“We’ve now passed RIM, and I don’t see them catching up with us in the foreseeable future,” Jobs said. “They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company. I think it’s going to be a challenge for them to create a competitive platform and to convince developers to create apps for yet a third software platform, after iOS and Android... RIM has a high mountain ahead of them to climb.”
Debating with Google
Jobs focused most of his remarks on Android, Google’s competing smartphone operating system. He openly questioned the reality of Android market-share statistics and attacked the search giant for marketing its operating system as “open” versus Apple’s “closed” iOS.
“Last week, Eric Schmidt reiterated that they are activating around 200,000 Android devices per day,” Jobs said. “For comparison, Apple has activated around 275,000 iOS devices per day on average for the last 30 days, with a peak of almost 300,000 iOS devices per day on a few of those days.”
The Apple CEO lamented the lack of tangible data about the number of Android phones that are actually shipped. “Unfortunately, there is no solid data… we hope that manufacturers will soon start reporting the number of Android handsets they ship each quarter, but today that just isn't the case... We await to see if iPhone or Android was the winner in the most recent quarter.”
Jobs moved on to attack Google’s characterization of Android as a more open platform than Apple’s as a disingenuous attempt to obfuscate the reality of how Android differs from the iOS.
“Google loves to characterize Android as ‘open’ and iOS and iPhone as ‘closed.’ We find this a bit disingenuous, and clouding the real difference between our two approaches,” Jobs said. “The first thing most of us think about when we hear the word ‘open’ is Windows, which is available on a variety of devices. Unlike Windows, however, where most PCs have the same user interface and run the same apps, Android is very fragmented. Many Android [manufacturers], including the two largest, HTC and Motorola, install proprietary user interfaces to differentiate themselves from the commodity Android experience. The user's left to figure it out. Compare this to iPhone, where every handset works the same.”
As an example of why Android is a bad platform for App developers, Jobs cited a Twitter client developer (which he referred to as “TwitterDeck,” though presumably he meant TweetDeck) that reported it had to support more than 100 versions of Android software on 244 different handsets. Jobs also pointed out that in addition to the Android Marketplace, there are at least three other app stores being launched by vendors, causing confusion for users and work for developers.
“This is gonna be a mess for both users and developers,” Jobs said. “Contrast this with Apple’s integrated App Store, which offers users the easiest-to-use, largest app store in the world, preloaded on every iPhone.”
Besides which, Jobs said, “even if Google were right, and the real issue is ‘closed’ versus ‘open,’ it is worthwhile to remember that open systems don’t always win.” His example: Microsoft’s PlaysForSure venture used the PC model of separating hardware from software, but it crashed and burned. “Even Microsoft abandoned it in favor of copying Apple’s integrated approach,” Jobs said. “Even Google flirted with this integrated approach with their Nexus One phone,” he said.
“In reality, we think open versus closed is a smokescreen to hide the real issue,” Jobs continued, stating that the real debate is between “fragmented versus integrated” and which is better for the consumer. “We think Android is very, very fragmented and becoming more fragmented by the day,” Jobs said. “We think this is a huge strength of our approach compared to Google’s... When selling to users who want their devices to just work, we believe integrated will trump fragmented every time. And we also think our developers can be more innovative if they can target a singular platform rather than a hundred variants.”
Jobs then turned to skewering the iPad’s impending competition, most of which feature seven-inch displays. Jobs discounted the seven-inch tablet form factor as “only 45 percent as large as a 10-inch screen,” and mocked the concept of an “avalanche” of forthcoming tablets.
“It appears to be just a handful of credible entrants, not exactly an avalanche,” Jobs said.
Then Jobs turned to attacking the seven-inch tablet form factor. “The 10-inch screen size is the minimum size required to create great tablet apps,” Jobs said. “Every tablet user is also a smartphone user. No tablet can compete with a smartphone” when it comes to stashing it in a purse or pocket. “Seven-inch tablets are tweeners: too big to compete with a smartphone, and too small to compete with an iPad,” he said.
What’s worse, Jobs noted, current tablets run the Froyo version of Android that Google has specifically said isn’t ready for tablets. “What does it mean when your software supplier says not to use their software in your tablet? And what does it mean when you ignore them and use it anyway?”
Jobs predicted that, in the end, “the current crop of seven-inch tablets are doing to be DOA” because they will ultimately “offer less for more” than the iPad. "Their manufacturers will learn the painful lesson that their tablets are too small, and increase the size next year, thereby abandoning both customers and developers who jumped on the seven-inch bandwagon with an orphan product. Sounds like lots of fun ahead."