Jason Schwarz is the author of The Apple Revolution, an e-book.
Steve Jobs is walking the same path as Walt Disney.
As soon as California's Disneyland was completed, Disney knew he had made a terrible mistake by not securing the surrounding real estate. He had built this wonderful
destination but his oversight allowed hotel chains and restaurants to come in and make more money off his customers than he did. So Disney immediately went to Orlando, Fla., and built Disneyworld the right way.
The moral of the story is that
isn't something you want to depend on for your livelihood. Jobs' goal is to build a closed digital neighborhood where Apple controls who makes money and who doesn't. I'll bet that in one of those Apple board meetings that
CEO Eric Schmidt used to attend, he realized that Jobs was on the verge of building AppleWorld and he's been scared ever since.
Once you enter AppleWorld, you have no reason to leave. This strategy began with iPod plus iTunes and has taken off with iPhone plus App Store.
quickly realized that apps would one day overtake dot-coms. Apple knew that mobile devices would overtake PCs. And last but not least, Apple knew it had a two-year head start to completely control this mobile community.
This didn't sit well with Schmidt. He had always envisioned Google as the king of the Internet age. He knew that his only hope was to build a competing community. So Schmidt left the Apple board under bad terms and Google has worked to develop the Chrome OS, the Android OS, the Nexus One,
, Google Tablet, and so on, into its own community.
But what happens if these Google innovations fail to catch on? What if nobody uses the Nexus One? It leaves Google completely dependent on the Apple and
communities for its success, exactly what Schmidt has been trying to avoid.
Google has no moat around its search. Users can change their habits in a day and they will. Jobs thinks mobile advertising is terrible and is ready to revolutionize it with Apple's purchase of
. Why should he allow Google to make money off the billboards in his neighborhood?
Apple's stock is at $210, Google shares are at $585. Twenty-four months from now, the two stocks will have changed places. There is a reason why Google is behaving like a company in trouble and burning all of its partnership bridges: It's because Google knows exactly what's coming.
Schmidt knew it two years ago. The competition from Microsoft,
has reduced Google search into a commodity. The stock market hasn't caught on, but it soon will. The high valuation that Google commands because of its history of high growth will begin the process of deterioration that is the destiny of all maturing large-caps.
Google's business will remain an important player in the evolution of the Internet age. But the writing is on the wall. Sell Google, buy Apple.
At the time of publication, Schwarz was long Apple.
Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.