Paul Krugman’s Take On The Apple Inc. (AAPL) Business Model

For example, consider BlackBerry. For the most part, its business model was built on selling phones to the very IT heads Krugman believes are too conservative to make a change. Yet, that didn’t stop Apple coming in and destroying BlackBerry’s business. The trend of bring-your-own-device eviscerated any protection BlackBerry had when it came to corporate loyalty.

Android could replace both iOS and Windows
What Apple did to BlackBerry, Google Inc (NASDAQ:GOOG) could do to both Windows and iOS. The growth of Android’s market share has been nothing short of astounding in recent years, with Android phones now accounting for about 80% of the smartphones sold worldwide.

But Android’s dominance could extend beyond just the phone. Research firm Gartner said back in April that it expects Android to obliterate Windows within four years. Although Android may never become a desktop operating system, the growth of tablets and smartphones has had some cannibalizing effects on traditional PCs.

For Windows, it might only be a matter of time. But for iOS, it’s a bit trickier.

Android surpassed iOS in market share for the first time over two years ago. Yet, developers continue to flock to iOS when it comes to making new apps. As long as that software gap exists, iOS is likely to remain relevant.

Operating systems and network effects

As Krugman observes, companies that depend on selling operating systems rely on network effects — operating systems only have value if they’re widely used. Once dominance in an operating system is established — like Windows in the PC realm — it’s hard to break, as the large software library makes switching to a rival system nearly impossible.

With Android’s exploding market share, iOS’ advantage in terms of software might not always be there. As Krugman notes, it will be difficult for Apple to sell its relatively expensive products if its operating system does not have the edge. If Android finally becomes the premiere mobile-developer platform, Apple Inc. (NASDAQ:AAPL) could have much to lose.

But as long as Apple maintains its app advantage over Android, it should have nothing to fear.

The article Apple Is Doomed Says Paul Krugman originally appeared on Fool.com and is written by Sam Mattera.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.