Apple as ‘The Evil Empire’

by Brad Moon | December 13, 2012 8:51 am

What happens when a technology company gets so big and carries so much clout that second-guessing what it’s up to begins to materially affect areas where it doesn’t directly play?

I’m talking about Apple (NASDAQ:AAPL[1]), of course — what other tech company currently has the sphere of influence that this one does?

The specific issue of the moment is near-field communication (NFC) payment, the ability to pay for stuff at the cash register using a smartphone instead of having to haul around a wallet stuffed full of cash, credit cards and debit cards. According to a report from Juniper Research, Apple’s stance of snubbing NFC has set the adoption of mobile payment with smartphones back by two years in North America and Western Europe[2].

NFC payment has been the center of considerable buzz over the past few years. There’s a lot to like about it. By putting an inexpensive NFC radio chip in a smartphone, consumers would be able to pay for products at bricks-and-mortar retailers by merely bumping their smartphone to a terminal. No swiping cards, making change … or having to carry a wallet, for that matter. Since more than half of U.S. mobile phone owners carry a smartphone — including nearly 75% in the 25-to-34 demographic — NFC payment holds real promise.

Most of the other top smartphone makers, including Samsung (PINK:SSNLF[3]), Nokia (NYSE:NOK[4]), RIM (NASDAQ:RIMM[5]) and Google’s (NASDAQ:GOOG[6]) Motorola, include NFC capability. There’s public demand for NFC payment, but there are competing standards for mobile payment[7] to contend with. There were rumors in the lead-up to the iPhone 5 launch that Apple would include NFC support[8] in its flagship smartphone, ending the impasse, but those hopes were dashed when Apple instead touted the new PassBook feature in iOS 6[9] as a way to use gift cards and movies passes on the go.

Without the weight of Apple’s support, NFC remains more or less a novelty in the U.S., where retailers don’t want to risk investing in point-of-sale terminals when there’s a risk that Apple could come out with a competing standard. Fractured mobile payment options remains the status quo, with Google going so far as to hedge its bets by turning to plastic with a Google Wallet card[10].

Apple’s played the spoiler in ancillary industries before. Its refusal to adopt Blu-Ray support in its Mac computers (Steve Jobs famously dismissed Blu-Ray as a “bag of hurt[11]”) was a factor in the slow growth of the high-definition movie distribution format. Apple’s refusal to support Flash on iPhones and iPads eventually killed Adobe’s (NASDAQ:ADBE[12]) standard for mobile Web browsers. And it’s destroyed a Dumpster’s worth of now largely abandoned technologies — everything from floppy disks and the optical drive to its own 30-pin iOS connector.

Whether it deserves it or not — after all, Apple isn’t actually telling retailers to hold off on installing NFC point-of-sale terminals — the company is at risk of a consumer backlash over the idea that it’s just too influential.

Microsoft (NASDAQ:MSFT[13]) could tell Apple all about this effect, after being criticized relentlessly in the 1990s as being an “evil empire” for the sway it held and the perception that it stifled innovation. Apple made a dramatic comeback in part by playing up its underdog status as the hipper, more tech-savvy alternative. (In early episodes of The Simpsons, then-Microsoft CEO Bill Gates would show up to “buy out” (i.e., crush) Internet companies; in recent years, the pop culture favorite TV show has relentlessly skewered Apple, including cult-like references to the “Mapple Store” and “MyPod.”)

In 15 years, Apple went from near bankruptcy to the being the world’s largest company, even if it has lost a bit of that swagger in recent months[14]. One of the big risks of being at the top — especially when you’re primarily a consumer technology company — is that consumers can be fickle. Apple was cool when it delivered smash hits that either reinvented a category (the iMac, iPod, iPhone and MacBook Air) or established a new one (the iPad). It could be seen as less than cool if it’s perceived as holding back promising new technology such as NFC payment, even if it’s merely indifferent as opposed to actively blocking it.

Losing its cool factor and essentially taking over Microsoft’s role in the public mind as the “evil empire” wouldn’t bode well for anyone who bought Apple at $700 with long-term growth in mind.

As of this writing Brad Moon doesn’t hold any securities mentioned here.

 

Source URL: https://investorplace.com/2012/12/apple-as-evil-empire/

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