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TheStreet Open House

Is Apple Eating Its Seed Corn?

NEW YORK ( TheStreet) -- The PC revolution of the 1980s and the Internet revolution of the 1990s moved more slowly than the present device revolution, but created lots of after-market opportunities. Hardware, software, peripherals, services and accessories all boomed.

The device revolution, by contrast, has mainly been good for one company -- Apple (AAPL)

That's by design, but I'm wondering if it is even good for Apple?

So far, most of the "after-market" plays in Apple have been around peripherals such as Skullcandy (SKUL) earbuds and covers from companies like Zagg (ZAGG). The software profits have mainly gone to existing players, including Adobe (ADBE), which adapts its products for the new platform, as 9to5Mac reports or to games outfits like Zynga (ZNGA), which were born on other platforms.

Moves this summer by Apple indicate that's the way they like it.

  • When Nuance (NUAN) found traction in the voice dictation space, Apple placed its own version inside its Mountain Lion operating system, notes 9to5Mac.
  • Apple is changing the connectors on its new line of products, for which it will be the sole source, writes 9to5Mac.

Whenever an after-market does develop, as it did for GPS a few years ago, Apple quickly squashes it by making that capability part of the device, as About.Com reported. This is on top of the requirement that all software and content be sold only through Apple's iTunes store, with Apple taking a 30% cut off the top.

Many Apple shareholders (I've got 10 shares myself) think little of this. They've gone directly from the Cult of St. Steve to In Tim We Trust. Given the near-term results, and Apple's victory over Samsung before a California jury, it's hard for many people to disagree.

So let me be the first.

There may not be the rush Apple seeks of people going from the Apple 4S to the "new iPhone" or iPhone 5, whatever it chooses to call it. My daughter is with Jim Cramer on this one. The replacement rate for something that doesn't break is two to three years, not one.

Absent that, how are you going to keep people excited? Is Apple really going to rely solely on its own efforts to keep people interested in its stuff? It really thinks it can win, all alone, against the collective might of the rest of the hardware, software and services industry created over three decades?

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