The challenge that HTC, Samsung, Nokia and others will now have is that they will compete against two Silicon Valley giants, Apple and Google, who can design great hardware and sell it at low margins. Apple will recoup its costs with apps and content and Google with ads and apps. Instead, all other hardware makers will have to think of how to monetize after the hardware is sold or they will have a hard time competing. A proof of this is that nobody has come up with a product that competes with the iPad at $499 yet. No hardware makers can turn their hardware into a post-sales cash machine as Apple can. Now Motorola will be able to make Android/Honeycomb tablets at low margins because Google will milk them with post-sale profits from ads, apps and probably soon content as paid versions of Youtube and music services get going.

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Mark Cheshire on August 17, 2011  · 

I know you are very anti-Microsoft/Nokia these days. However Microsoft’s agreement with Nokia is somewhat of a trailblazer, in that they are effectively subsidizing the hardware platform vendor. Now that Google is competing with the strong and innovative Asian hardware guys, a real window (sic!) of opportunity has opened up for Microsoft. The should cut some aggressive, direct revenue share deals, to bring compelling phone and tablet products to market which can compete with with Apple’s subsidized price points. (Yes, I know they still have an uphill battle to get developers on board).
Much as I love Google, I really do not want to see integrated vertical stacks dominate the future, but want to see the business model for horizontally-layer stack reinvented to compete more successfully. This is because Apple are a real outlier in being able to do both hardware and software well. Most of the time companies are better to build a culture to execute well for software or hardware businesses separately.
Cheers, Mark

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