To give you an example of how that type of strategy fails one only has to look at the series of Law suits that AMD filed against Intel over the years. In the end it got them a short return to the black for about 3 three quarters and they still are not able to compete with Intel head-to-head in most areas except in the integrated graphics market where AMD enjoys a very healthy lead over Intel (thanks to the acquisition of ATi… which put them in their cash poor state to begin with).

Now Apple has a much bigger bank account that AMD ever had so they can afford to push on with the legal battle financially, but their fan base is beginning to change their perspective on the company and that can put their products in a bad light as well. I overheard a conversation between a group of teens at a Best Buy not all that long ago about the iPhone 4s and, of the five talking, the majority (that is four in this case) were against Apple because of the issues at the Foxconn plant (quality of the workplace suicides etc).

Both Apple and Foxconn recognize that these issues are a PR disaster and have rushed to “fix’ things at the plant and also to try and minimize the impact of the problem in the first place. For Apple being see as an evil or abusive company is a big blow them as they have worked very hard to create an aura of “we are the good guys” with their marketing and the way they present products. For Foxconn, if Apple pulls out and finds another manufacturing partner they stand to lose a huge amount of revenue. So their relationship is a very symbiotic one. Unfortunately it also puts a dent in the “Apple products are made better” mythos that Apple has worked so hard to create.

Apple is also at a loss because they no longer have Steve Jobs at the helm which was to many a huge part of their appeal. Steve Jobs was able to perpetuate the aura that whatever he touched turned to gold. Just look at Pixar after his investment. Now we have the arguably better business man in the form of Tim Cook, but Cook is not the same type of person and he has been taking Apple on a different road and one that many are not all that thrilled with (although the core Apple fan base will defend him quite aggressively). Since Tim Cook has come on board we have seen the veil of secrecy lift with leaks, pictures and even statements about future Apple products. This is something that never would have happened with Jobs in the top spot.

Even now we have Foxconn’s CEO trying to brag up the next iPhone well before Apple has even commented on it. Again with Job’s in charge this would never have happened. Fortunately for us it shows us something of Apple’s personality (and also just how intertwined Foxconn is in this). Terry Gou, Foxocnn’s CEO, is claiming that the next iPhone will put the “Galaxy S III to shame”. His reasoning is that Apple now has access to Sharp imaging technology (Foxconn owns 10% of Sharp now) which will give Apple a three year lead on Samsung. This seems a little optimistic as unless Foxconn and Apple move to block others from using this technology Samsung could simply buy the same displays from Sharp. However Gou’s next comment tells us that an exclusive agreement is probably in the works. Gou says that Sharp has an exclusive agreement with US-based Glass maker Corning will prevent Apple’s competitors from attaining the glass they need to make phones.

You have heard us talk about corporate personalities and here we are seeing the ugly side of the Apple/Foxconn one. They as a company are willing to do anything, no matter how anti-competitive it is to maintain their lead. This usually signals the end of true innovation and the slow march down into the rest of the pack. Microsoft is seeing that now as are other companies that once enjoyed market dominance. Just ask Intel about this one, you have to keep innovating or one day you will find yourself passed up by the crowd. This causes sales people to panic and do dumb things to maintain their hold on the market; which is exactly what we are seeing here. Exclusive agreements for technology for ludicrous amounts of money ARE anti-competitive and should be viewed by the consumer and the market as such.

The latest Macbook Pro has also upset some Apple fans as well. Despite its great display (Retina) its lack up upgradability and the extra expense of having any repair work done is seen as turning Apple devices into disposable products which, considering the price, is not a good move on Apple’s part.

Apple still has compelling products, but their “innovative” streak is starting to diminish. The mythology that they have created around their innovation and product superiority is also showing cracks around the edges and the market will respond.

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