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Six Colors

by Jason Snell & Dan Moren

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By gartenberg

Calls for Apple’s breakup are nonsensical

Note: This story has not been updated for several years.

[Michael Gartenberg is a longtime industry analyst who previously worked at Apple. He’s the Contributing Analyst at Six Colors.]

Apple dominates the technology industry. Love it, hate it, admire it or stand in awe of it—in today’s world you can do anything but ignore them.

Recently there has been some chatter that perhaps Apple has become too successful. Perhaps now that Apple has become a trillion-dollar company it’s time for the government to step in and break Apple into pieces. Perhaps the folks in Cupertino are just too successful, thanks to the combined effect of Apple’s position in devices, music, apps and other services.

I am not a lawyer, much to my Mom’s chagrin, but I’ll venture in to this territory regardless.

As much as pundits like to believe that there are natural fracture lines between services, applications and hardware, the reality is that Apple is far more complex than that. Apple is, for all intents and purposes, an applied research company. It creates end-to-end solutions that make up a whole. Those solutions continue to surprise and delight users.

I also don’t believe that breaking up Apple into pieces would lower costs for users. In fact, the more likely scenario is higher costs. A sectioned-up Apple would likely split core parts of the ecosystem arbitrarily, potentially raising total cost and creating barriers to complex technologies working well together.

One of the big complaints users have about technology is that different products don’t work well—or at all—together. A break-up would make the user experience more hostile for everyone. All users will pay the added price of supporting the profit structures of multiple companies that don’t work seamlessly together.

If Apple split apart, who would benefit? Only Apple competitors who could react much faster without the constraints imposed on a split company. For Apple, future success won’t necessarily mean market dominance. The strength Apple achieved in the in the markets it plays in most won’t be repeated in the future. It wasn’t that long ago that the government wanted to break up Microsoft because of its industry dominance. While Microsoft remains a powerful and important company, it no longer constitutes the threat it once might have been. Breaking up Microsoft would have been disastrous to the company as it matured, turning from a dominant player to just one player among many.

Apple’s current successes are far from total dominance. Success without total dominance means there will always be strong players whose market positions will be large enough and stable enough to provide competition. A divided Apple would be unable to compete effectively in the rapidly changing technology industry. Today, many of its strengths are also its weaknesses, and many of the markets it would like to bring to market are new to it and other companies. Today’s rapid pace of technology, not the breakup of Apple, will serve to level the competitive playing field.

If Apple really is engaging in inappropriate behavior, it should be forced to change its conduct. Anything beyond that is a punishment that doesn’t fit the crime and doesn’t serve the public interest, Apple’s customers, or the industry at large.

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