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Apple Laughs When It Realizes Google Makes Computers (Update 1)

This story has been updated with additional information on Apple's share price and analyst downgrades.

NEW YORK (TheStreet) -- On Tuesday, Anton Wahlman set TheStreet and LinkedIn on fire with Google (GOOG - Get Report) Laughs at the New iPhones.

It is a splendid piece of financial media gold.

Earlier this year I published Google's 'Sneak Attack' Could Devastate 'Software Companies' Apple (AAPL - Get Report) and Microsoft (MSFT - Get Report). In that article, I noted that I had been wrong about Google. The company appeared (and still appears) positioned to challenge a dying Windows ecosystem and pass right by a relatively unambitious suite of Apple productivity software with its cloud-based offerings.

Even though this anecdote isn't about smartphones, I bring it up to show that I give Google its due as something beyond an advertising powerhouse.

Must Read: [video] Quick Take: Apple's a Drag, Verizon Sells Bonds

Plus, it's important to consider the direction Apple might be moving in vis-a-vis software and services as it fires a grenade at Microsoft with free iWork on all new iPhone and iPad purchases. Because, at Apple, software and services intimately link to the company's dominant hardware. That doesn't mean Apple is a software company -- it's not -- but software matters because it could help keep the Mac/iOS halo effect strong. While nothing has changed at Microsoft, Apple has stepped up its game -- and will continue to -- on the software front.

It's at this juncture where Wahlman, as nice of a job as he does trashing Apple, makes several grave conceptual errors disguised as biting analysis.

First, he's obsessed with price.

Second -- and I say this in the most lovable way possible because I know, like and respect Anton -- he's a tech geek too busy comparing specs to consider the realities of the consumer marketplace.

Third, he's running with the talking point Apple can no longer innovate without taking a reflective and critical look.

The tech media set Apple up to artificially fail this week, treating rumors of a cheap iPhone as fact and subsequently ripping the company for not producing something it never even brought up in the first place. And this had material ripple effects. A chorus of Wall Street analysts downgraded the stock, sending it down more than 5% on Wednesday. For better or worse, Wahlman leads the misguided pile-on.

I'm not sure how many times we have to go over this before it sinks in.

Apple does not compete on price. It doesn't have to. It should not. And hopefully it never will.

Apple doesn't produce products like bunny rabbits on honeymoon just to grab marketshare domestically or in a place such as China. It doesn't have to. It should not. And hopefully it never will.

If you don't understand this -- and it's clear Wahlman doesn't -- it's difficult to take the rest of any argument you make seriously.

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