2 February 2016

How Apple's 'thermonuclear war' on Google has changed since Alphabet

JANUARY 29, 2016

The search engine giant, which recently reorganized under the name Alphabet has seen its market value soar and invested in moonshot bets such as self-driving cars. Meanwhile, analysts have wondered about Apple's future, as smartphone sales slip and both companies vie to be No. 1 in schools.

In an interview with biographer Walter Isaacson before his death in 2012, Apple co-founder Steve Jobs venomously described his feelings toward Google’s Android operating system, arguing that Apple had originally developed its technology.

“I’m going to destroy Android, because it’s a stolen product," he said. "I’m willing to go thermonuclear war on this."

Four years later, Mr. Jobs’ thermonuclear war appears to be taking a different form, as Google — which reorganized its divisions into the holding company Alphabet last year — is emerging as an increasingly viable competitor to Apple’s status as the world’s most valuable company.

By the end of trading on Thursday, Apple’s market value was $522 billion, while Alphabet was valued at $515 billion, the Associated Press reports.

While Apple remains a critical darling, with its annual media events drawing rapturous crowds, analysts have been pointing in recent months to a declining smartphone market that contrasts with a growing market for digital advertising, which still makes up a large part of Google’s primary business.

But perhaps more significantly, the search engine giant’s reorganization appears to point to a desire to move its business beyond individual products into broader areas that affect users’ daily lives, while emphasizing “moonshot” bets on technologies that may or may not pay off.

The Alphabet reorganization separates Google’s products from its investments in self-driving cars, its Google Fiber Internet effort, a focus on life science technology through Verily, and X, which is working to developdelivery drones.

“In the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant,” wrote Larry Page, Google’s co-founder, who now serves as chief executive of Alphabet, in a blog post from August announcing the reorganization. “Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related."

The approach appears to be paying off, as Apple was previously valued at $643 billion, almost twice Google’s $361 billion 13 months ago, before the reorganization, the AP reports. Alphabet is set to release its quarterly financial results on Monday, separating them into two categories — Google and “Other Bets,” which includes efforts such as Verily, which has developed a contact lens that measures glucose levels.

Apple is also rumored to be working on new products such as self-driving cars, virtual reality, and Internet TV that could push its revenues back up — it reported a decline in iPhone sales earlier this week, the first since the smartphone launched in 2007. But the company’s plans so far have been more vague, with senior vice president Jeff Williams saying last May that “the car is the ultimate mobile device.”

“We’re exploring a lot of different markets,” he added.

One market where both companies have tried to establish their dominance is in schools, where education technology is reported to be an $8 billion industry in the US.

So far, Google appears to have the leading edge, with its low-cost cloud-based Chromebook laptops surpassing 51 percent of the education market, according to a recent report by market research firm Futuresource Consulting.

Apple products, including iPads, laptops, and desktops fell from 32 percent to 24 percent during the third quarter of 2015, the firm said.

But Apple has been redoubling its efforts in education, including adding a simplified login screen and the ability to more easily share and manage secured iPads in schools to its recently-released mobile update, iOS 9.3.

On Thursday, the company said it acquired education technology startup LearnSprout, which makes software that helps schools and teachers track students’ performance. The company is also rumored to be working on education tools for the iPad that would allow students to see and share interactive lessons more easily.

“Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans,” spokesman Colin Johnsontold Bloomberg. Technology journalist Jessica Lessin, editor of news site The Information, tweeted that the purchase had actually happened in July:

Whether the two companies fortunes could change further is likely still an open question, especially if Apple introduces new products or Alphabet moves further in ventures such as self-driving cars later this year.

But with the reorganization, Alphabet’s Mr. Page appears to be taking a longer view, moving into a role that focuses more on discovering and nurturing new technologies at the company, the New York Times reports.

“What makes something interesting for him is a big technical challenge,” Terry Winograd, a computer science professor who was Page’s thesis advisor at Stanford University, told the Times, adding, “It’s not so much where it’s headed but what the ride is like.

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