NEW YORK ( TheStreet) -- In June, I questioned fund manager David Einhorn's hipster-like contention that Apple (AAPL - Get Report) is a software company, not a hardware company.
I call it "hipster-like" because the uber-cool, pseudo-philosophical rhetorical tone of the argument blocks its wholly nonsensical nature. It's the type of lofty -- albeit interesting -- thought that has roughly zero practical application.
Apple generates the vast majority of its revenue from hardware sales, not software. If the next piece of hardware bombs, Apple takes a hit. If the piece of hardware after that bombs, Apple takes another hit and we might have a trend. And so on.
Without useful and beautiful hardware that people want to mix business and pleasure with, Apple dies. Or maybe the devices remain useful and beautiful, but, for one reason or another, people no longer want to buy them. Same outcome: a fall from greatness.
Software, services, apps, media -- it's all a dime a dozen. The only thing that matters in this life, other than getting them to sign on the line that is dotted (pat on the back to whoever names
movie), is tying it all together into an ecosystem that works better than everybody else's. Hardware drives Apple's superior ecosystem. Without hardware, it's pretty much useless.
At both companies, success results from how they're able to merge the ingredients. But the soft stuff, namely platforms and services, powers
(AMZN - Get Report)
e-commerce ecosystem. Without it, Amazon falls even harder than Apple would. While a nice driver, at day's end, hardware at Amazon is just one means to an end.
Amazon just disrupted the competitive landscape. In fact, it provided Apple the succession plan shareholders weren't sure it had when Steve Jobs was ill. It goes like this: Amazon unseats Apple as the dominant force in tech and related spaces.
At several points over the last year, Apple stopped dictating the rules of engagement. As a result, Amazon will unseat Apple this decade as America's premier company, without being No. 1 in market share for any device. It doesn't even have to make money on hardware sales.