What's also interesting about that chart is that software makes up such a small part of revenue. A bad CEO would see that and devote a similarly tiny amount of resources to software development because, you know, it doesn't make the company much money.
Not to say that Apple software is all awesome, but at least they don't treat it as a cost center that has to be trimmed.
We must not forget that each and every Apple device also comes preloaded with Apple software. They don't sell OSX for non-Mac computers. Therefore jumping to such a conlcusion is unwarranted as every single sale of a product of theirs involves a sale of their software. When one tallies up the percentages, a sale of an iPod or iPhone is classified as a hardware sale though Apple is also selling iOS in the transaction.
In other words, the only way to consume Apple's hardware is through Apple software. Therefore, every single sale of Apple's hardware also involves the sale of Apple's software. I find it a bit disturbing that the article does not mention this.
Steve's mantra is all about vertical integration. I don't think he sees a line between "iOS, the software" and "iPad, the product". That'd be a bit like looking at the chart and saying, "Hmm, they don't sell many CPUs, maybe they're not important." I think if there's one thing that Apple does get, it's that they're all a piece of the puzzle. For what it's worth, that's not new; pre-Microsoft, it was always understood that the OS was part of selling hardware.
Now, what they conceivably could do is to look at their aftermarket software and devote less resources to that -- especially in places where Apple's presence in the aftermarket doesn't make or break the platform (e.g. music sequencing -- there are half a dozen mature competitors to Logic that run on OS X). Also, I suspect some of those places Apple is in strategically because it funnels money away from companies they don't like -- Aperture cuts away from Adobe and iWorks pulls away from Microsoft, despite Photoshop and MS Office for Mac being platform-completing tools. Also their offerings there are important as leverage; Apple doesn't want to be back in the position of needing Microsoft or Adobe since they've been burned in the past.
You're absolutely right. Refer to his comments on Apple's Q3 quarterly earnings conference yesterday.
>>You’re looking at it wrong. You’re looking at it as a hardware person in a fragmented world. You’re looking at it as a hardware manufacturer that doesn’t really know much about software, who doesn’t think about an integrated product but assumes the software will somehow take care of itself. And you’re sitting around saying, well, how can we make this cheaper? Well, we can put a smaller screen on it, and a slower processor, and less memory, and you assume that the software will somehow just come alive on this product that you’re dreaming up, but it won’t. Because these app developers have taken advantage of the products that came before, with faster processors, with larger screens, with more capabilities that they can take advantage of to make better apps for customers. And they’re not… it’s a hard one, because it throws you right back into the beginning of that chicken-and-egg problem again, to change all the assumptions on these developers. Most of them will not follow you. Most of them will say, “I’m sorry, but I’m not going to write down a watered-down version of my app just because you’ve got this phone that you can sell for $50 less, and you’re begging me to write software for it.”<<
On the matter of Logic: disagree. Logic sells Macs. I know plenty of musicians who either have bought (my self included) or want to buy a Mac from the 'pro' lineup specifically for Logic. The only competitor that I see as truly being on the same level as Logic is Cubase/Nuendo, which seems to run better on Windows anyway.
As per GAAP accounting rules, Apple is likely to be doing this separation already. Hardware and Software sold together on a device are supposed to be revenue recognized differently.
Not to say that Apple software is all awesome, but at least they don't treat it as a cost center that has to be trimmed.