VC Roger McNamee slams Android's 'profitless prosperity'
"The threat to Apple is that they forget their power and success comes from selling hardware. If Android gets too much unit volume, it's a mistake," McNamee says.
When it comes to Apple's iOS versus Google's Android, there aren't many fence sitters. Roger McNamee, an investor who's been analyzing the output of Silicon Valley for 30 years, thinks Android is the "equivalent of having a motor scooter at the Indianapolis 500."
McNamee, who began his career by turning out big returns at T. Rowe Price Science and Technology Fund, and then started Silver Lake Partners, a private equity firm, and venture capital firm Elevation Partners, is troubled by what Google has done to encourage Android's "profitless prosperity."
"I watch what they have done with Android, and I'm flabbergasted because their market share in units is so high, but look at the profit share," McNamee told Bloomberg TV. "Apple's profit share is like 75 or 80 percent because Android has been managed essentially to make it a profitless prosperity. Right now, if Google is not careful, Android will be Samsung or Samsung will be Android." Customers buy Android devices because they are cheaper, not because there is any brand loyalty to the platform, he concluded.
McNamee also criticized Samsung, which dominates the market for Android smartphones, outselling the iPhone by 6-to-1 in recent months.
"Samsung could be what Apple is, but for whatever reason they don't do the value-added to the platform to make the product as useful as Apple," he said. "I am no Apple fanboy, but the notion that Samsung is equivalent to Apple is silly -- Apple's app ecosystem and way everything works together makes it a radically better product...and I think that is an objectively true statement."
Despite his not-a-fanboy disclaimer, McNamee added that the company's strategy is "close to perfect," and said he admired the recent moves Apple CEO Tim Cook has made. He also praised Apple as a large company that can "innovate and transform and rebuild whole markets."
Here's McNamee's appearance today on Bloomberg TV:
"What's really sad is how many companies have given up trying to innovate," he said, pointing to Apple and its latest parade of iPods, iPhones, and iPads.
Apple is increasingly dependent just on software for the retention...because the hardware is not that cool, not blow-away cool the way that the iPhone 4 was. I look at Apple as a shareholder, it's an amazing thing -- there is nothing competitive with them at all today, but they are already, so quick after Steve died, doing the things you expect a dumb monopolist to do.
McNamee maintained that firing "a ton" of Apple retail employees was a mistake, but it turns out the company was just cutting back on employees' work hours.
In his recent Bloomberg TV appearance, McNamee described Apple's weak point. "The threat to Apple is that they forget that their power and success comes from selling hardware. If Android gets too much unit volume, it's a mistake," he said. His advice to Apple, which he said basically engineered a next-generation web with its iOS platform and app ecosystem, is to have "everybody do everything on their hardware." It's unlikely that Google, Amazon, Microsoft, Samsung, or even Apple will heed his advice.
IDC reported last month that during the third quarter,. Apple's iOS came in second with 14.9 percent share. During the same period in 2011, Android's share was 57.5 percent, compared with a 13.8 percent ownership share for iOS.
Here's McNamee's September 19 appearance on Bloomberg TV: