When it comes to Apple (NASDAQ:AAPL), journalists, company-watchers and product owners alike tend to focus on its positives. Some of us have rooted for the (one-time) underdog that seemed to be the only thing preventing a Windows-only world. Some have cheered an innovator that seemingly values aesthetic design as much as profit. Others love the company that keeps delivering what we didn’t realize we wanted (until it was there).
Whatever the reason, people seem quite willing to hold Apple in higher regard than the Microsofts (NASDAQ:MSFT) or Hewlett-Packards (NYSE:HPQ) of the world. Maybe it was Steve Jobs’ infamous reality distortion field.
However, it’s important to recognize that Apple is a corporation. It’s run for profit, and that means it doesn’t always play as nicely as is commonly believed. In fact, Apple can get downright ugly at times. So, as part of InvestorPlace‘s special report about Apple on the occasion of the iPhone’s fifth birthday and in the interest of presenting a balanced view of Apple, here’s some illumination into seven areas of what can be called the darker side of Apple.
Apple is an immensely profitable company that operates globally, yet part of that profitability is a calculated strategy to open subsidiaries and locate offices in tax-free havens to reduce the income tax it pays. Perhaps the most blatant of these measures is its subsidiary Braeburn Capital, located in corporate-tax-free Nevada to avoid the 8.84% corporate tax rate in California, where Apple’s headquarters is located. According to The New York Times, Apple paid just $8.3 billion in taxes worldwide in 2011, which equates to a 9% tax rate. Walmart (NYSE:WMT), in comparison, pays a 24% tax rate.
Crushing the Competition
Apple has a long history of incorporating popular features offered by third-party developers into subsequent updates to its own software. Once Apple incorporates a key feature into OSX or iOS, the unlucky developer finds its software goes from being a top seller to dud.
For example, Nuance Software’s (NASDAQ:NUAN) Dragon Dictate for Mac is a popular, $200 solution for hands-free dictation on Apple’s Mac computers. With the announcement that the next OSX release will include built-in dictation support, the future is grim for Dragon Dictate. This phenomenon has given rise to “What Did Apple Just Kill?” lists posted on tech news websites after every major Apple announcement.
e-Book Price Fixing
Do you remember when Amazon’s (NASDAQ:AMZN) Kindle e-books used to be $9.99? Then they started creeping up to the point that new e-book releases are sometimes more expensive than the paper versions. The U.S. Department of Justice thinks Apple had something to do with that, and it’s investigating the company for charges of colluding with publishers and using its eBooks store and iPad to break Amazon’s low-price model.