Which Is Apple's Biggest Threat, Microsoft or Google?

Much has been said about the rivalry between Apple and Microsoft. I agree with those who said that Microsoft has used its monopoly power to kill off competition.

But times change; Apple and Microsoft no longer want or need to defeat the other. They have become dependent in strange ways. The biggest changes are the threat of regulation and the rise of new competition.

Should Apple Buy Nokia?

This situation is so important that we cannot ignore it when addressing ways for Apple move forward at Microsoft's expense. Bruce Upbin wrote a good article, Why Apple Should Buy Nokia. Doing so would give Apple better map data and increase its patent coverage for the iPhone. It may even help with the future Apple TV.

It would have a big impact on the deal between Nokia and Microsoft. (Nokia is the only major smartphone vendor using Windows Phone.) He thinks it would be a great way to hurt Microsoft and screw up the Windows 8 Phones that are in the works.

The problem is that Windows Phone is not a competitor to the iPhone. It is a very different style and design of user interface. It may succeed, but not from imitating Apple, like Android phones. Future versions may become more iOS-like, but for now it is little threat to the iPhone.

Apple and Microsoft have never been much for direct competition. They like each other for the appearance of competition. For computer operating systems, Microsoft still holds the largest market share by far. It has the market for preferred Office suite of applications. Apple gets the high value computer market and the consumer electronics market, where Zune never made a dent. They've divided these markets between themselves.

Apple is never going to license its operating system. Therefore it does not directly compete with Microsoft, even though it appears to compete in the overall computer market. This difference is what allows Apple and Microsoft to coexist. The appearance of competition without actually competing is a wonderful advantage.

Each has a virtual monopoly power in their respective markets, but they get to point to the other as "competition". The competition keeps them free of regulation that follows when a company becomes a recognized monopoly. (Even Google is being threatened with antitrust investigations. They better hope Yahoo can survive to create the disguise that competition exists.)

Microsoft realized this a little too late during the browser wars. They gave up a lot of power once government regulators were able to convince a judge that Internet Explorer had a monopoly on Windows PCs. There is no way that could happen today with a strong Apple to use as a shield.

Google, the New Enemy

For both of these companies, Google has become real competition. Google first attacked Microsoft in an effort to weaken Microsoft's attack on its lucrative internet advertising business. Microsoft could have used its control of Internet Explorer to push out Google. The search bar could have been made to default to Bing, if Microsoft hadn't lost to regulators.

Google pushed this loss of Internet control by Microsoft on several front. It used free Internet apps like Gmail, support for Firefox, and then its own Chrome browser to cut into Microsoft's dominance. [Publisher's note: Among Windows users reading Low End Mac in the past month, 37.7% are using Chrome, 30.9% Firefox, and 29.3% Internet Explorer.]

Google is the worst enemy. They are an advertising firm going up against for profit product companies. What makes Google so much trouble is that it don't have to build a better product. Google only has to build a good enough free product. The product is just a hook to collect users so it can sell advertising.

The free-but-good-enough strategy was developed to fight Microsoft. This strategy extended with Android and threw Apple in the same basket. This strategy made an enemy of Apple and strengthens the partnership between Apple and Microsoft.

Apple doesn't want to buy Nokia to hurt Microsoft. It would be simpler for Apple to have Nokia go bankrupt. Then Apple and Microsoft could buy all the patents through a joint venture holding company. Apple could get the mapping business and license it to Microsoft. Microsoft could take the phone business and go head-to-head with Motorola/Google/Android.

Apple could benefit from buying Nokia's map service, but it also wins if Microsoft/Nokia can take some market share away from Google/Android. It is not only wishful, but also wrong, to think that Apple wants to hurt Microsoft. The ties between these two companies couldn't get much stronger.