Apple is screwing it up

Apple doesn’t get it.  Yes, the iPhone is still the standard bearer amongst smartphones. Yes, you can now get a 16GB 3GS iPhone for as little as $97 at Wal-Mart of all places. Yes, the iPhone is clearly still the dominant smartphone. Yes, the iPad takes the iPhone/iPod platform to a new level. And Apple rode these events to $240 a share and a market cap of over $200 billion. But none of these will matter if Apple keeps screwing it up.

It’s the Android platform, stupid. Frankly, Apple has had a free pass until now. Nokia, Microsoft, Palm and RIM never put together complete packages which could challenge Apple on usability or features despite what Walt Mossberg will say. But Android is growing at a breathtaking speed and already comprised 9.0% of the market by March. Android is the first real smartphone competitor Apple has  — and it is revealing all of the Walled Garden weaknesses in Apple’s business model.

Here’s the problem with Apple. Steve Jobs wants too much control – over the manufacture of iPhone/iPod/iPad platform devices, iPhone’s suppliers, over its apps market, over Flash, over everything. Where are the batteries with extended life or the microSD Cards? They don’t exist because Apple wants complete control over its product. But this walled garden approach doesn’t work.

Last week, I joined what must be millions of other technology nerds (if my Twitter and Facebook friends are any indication) in getting rid of my iPhone 3G* in favor of an Android-based phone…

Here’s the breakdown of the reasons I jumped ship, and why I think many formerly loyal iPhone users might be jumping ship, too.

First, there’s AT&T… I don’t really care if Verizon’s 3G isn’t quite as fast as AT&T 3G. Slightly slower but reliable beats faster and spotty every time…

Then we have Apple’s app store policies. Apple is changing the terms in their OS 4 update to the iPhone (coming this summer) to basically disallow any intermediate software layers in the creation of iPhone apps. This means devs can’t use Adobe’s popular Flash-to-iPhone compiler, nor products likeMonoTouch… But shouldn’t developers and consumers be the ones to decide if software is crappy or not? And if Apple is so concerned about software quality, how come so many Apps make it to the App Store in an almost unusably buggy state? How come there are so many completely worthless junk apps? Apple’s quality concerns are demonstrably B.S.

Apple also refuses to support Flash in its browser. Fair enough. Maybe the future of web video and interactive entertainment is HTML5, but the now of web video and interactive entertainment is Flash… Google went ahead and demonstrated how well Flash can run on a phone – Apple claims they give you the "whole web" on iPhone and iPad, but Google is actually delivering it.

Why I Switched from iPhone to Android, PCWorld

Long story short – Apple wants to restrict what you can do and how. They claim its to maintain high standards, but many believe it is to stifle competition. That’s all fine and good as long as Apple is producing a superior product.  But Android has closed the gap with the Droid Incredible which is arguably the first phone to fully rival an iPhone. Moreover, reports confirm the new Android OS, Froyo, is lightening fast. The result has been a huge erosion of market share for everyone except Android. In fact, NPD Group reported that that Android had the second largest install base in the US in Q1 2010 at 28% – and ahead of the iPhone.

It’s not like Apple shouldn’t have seen this coming. Everyone was talking about this. I even wrote a post back in November entitled "Apple: Can it stop the Android menace?" Of course, your usual fare of Apple fanboys dismissed worries like mine. However, my point is still operative: Apple cannot possibly expect to remain predominant in the Smartphone space as a single vendor against a multitude of competitors once the usability gap is closed.  When that happens, the coolness factor that iPhones enjoy will wear thin and people will seriously start to look elsewhere. We are already seeing more application developers make software for Android for that very reason.

In any event, Apple’s response to date has been to extend the iPhone/iPod Touch-style platform to the iPad and to up the ante with a 4G iPhone. These are good moves. But they still don’t address the fundamental problem of vendor support, which is crucial in pushing product to carriers. The difference in reception between the Nexus One (bomb) and Droid phones (unmitigated success) shows how crucial this element is. I guarantee you Samsung, LG and Motorola are all watching the Droid Incredible and ready to try fabricating their own iPhone killers.

So, as we await the Apple 4G, these words from Jason Cross at PCWorld bear remembering:

Ultimately, my reason for switching can be summed up thusly: I used to feel that, to get the best smartphone software and hardware experience, I had to live in Apple’s walled garden. Now, the walls are getting higher, and life outside the garden looks better and better. I can get a really great smartphone without some company telling me I can’t switch out the keyboard, or the dialer, or the voice mail program, or the browser. I can get a world-class smartphone without putting up with AT&T’s spotty network. I don’t have to put up with supporting a company that enforces its restrictive App Store policies in a seemingly arbitrary and draconian manner. I’m not sure I agree with those who say Google has "leapfrogged" Apple in phone development, but I certainly think they’re doing a comparably good job.

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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.