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Stephen Foley: Apple is exceptional but its rivals are queuing up to take a bite

Saturday 16 October 2010 00:00 BST
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US Outlook: The world of technology has only one superpower, and it is Apple.

Little wonder that the doctrine of Apple Exceptionalism holds sway. Wave after wave of innovation attests to its unique culture, as personified by its founding father Steve Jobs. Enduring profitability attests to its strength. Above all, the wild popularity of its inventions and devotion of its followers is proof enough that it holds an exceptional place. But the doctrine of Apple Exceptionalism cannot endure in a multi-polar world, and that is what we are entering.

This is a prediction for the future. For the present, Apple is celebrating another milestone: its shares topped $300 for the first time this week. The iPhone and iPad maker is the second-largest company in the US these days (after ExxonMobil), with a market value of more than a quarter of a trillion dollars. I don't suppose there is a person in the West who doesn't know why. Under Mr Jobs, the company changed the way we listen to music, revolutionised how we think about our phones, and even persuaded us that we simply must get a tablet PC for Christmas this year.

The stock only passed $200 for the first time 12 months ago. At 20 times this year's earnings, falling to 16 times next year's, it is not as maddeningly expensive as some technology stocks, and it would be surprising if we don't see a number beginning with 4 before the end of 2011.

Underlying the share price move, though, have been a few developments in the past weeks that point to a very different trajectory for Apple as a company. The iPad, six months on the market, is now being rolled out for sale through discount retailers such as Wal-Mart and Target. The iPhone, meanwhile, will soon be available on a second carrier in the US, at long last. Both of these developments mean that Apple products will increasingly be seen outside the sleek, exclusive confines of Apple Stores and in side-by-side competition with rivals – just at the time when rivals are getting more potent.

Apple's present dominance has more to do with the joy of its operating system for the iPhone and iPad, with its rich choice of third-party apps, than it does with the admitted attractiveness of its devices' design. In smartphones, we have already seen Google's operating system Android proliferating and pressure from the competition authorities has seen to it that developers will be able to develop apps that work on both Apple and Google operating systems. Google is now heavily pushing Android for use by the makers of tablet PCs, too.

This Christmas will be Apple's holiday season, no doubt, but from next year there will be more competition from more devices offering comparable experiences – and serious competition on price.

Already, Dell, LG and Samsung are producing tablets using Android's operating system, and – as in smartphones, like in the personal computer market before it – the aim is to undercut Apple on price.

Now, Mr Jobs is no more likely to give up Apple's industry-leading profit margins in a price war than he is to swap his black turtleneck-and-jeans combo for Hawaiian shirts and sandals. Which means that, while this holiday shopping season might belong to Apple, this year could be the exception.

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