3 reasons Microsoft's Surface is no joke

Many have scoffed at the idea that Redmond's tablet will succeed. But there are three crucial reasons to take the effort seriously. By Don Sears

FORTUNE -- Do not underestimate Microsoft's Surface tablet move. Its gambit to design and build its own hardware is a bold play to develop a thriving ecosystem of new products. It is centered on Microsoft's dominant property: the operating system. Monday's flashy Surface launch may have felt like an Apple event with its bright, pastel-colored keyboard, slick introductory videos and breathless hyping from little-known engineers. But, in fact, Microsoft's play is anything but Apple-like. The company is clearly trying to make tablets into hybrid PC-mobile devices, something its California rival has said is a bad idea. We don't yet know all of Surface's details -- battery life, pricing, official release dates are all to-be-determined for instance. But here are three important reasons Microsoft's Surface is likely to be anything but dead on arrival:

Microsoft (MSFT) has had success in the consumer market with the Xbox and most recently with the Kinect motion-control devices. The Xbox has become a household name with major brand extensions as an entertainment device. Microsoft disrupted gaming, and it can disrupt hardware.

Microsoft has serious engineering chops. Josh Topolosky, Editor-in-Chief of The Verge and not exactly a fanboy, was blown away by a visit to Microsoft's R&D in 2011. He wrote of that visit: "[MS] showed me a project … which would allow you to create a virtual window from one room to another, utilizing a variety of display, motion sensing, and 3D technologies… dubbed … the 'magic wall.' It was nuts. It was awesome. It was ambitious. The whole time, all I could think was: where has Microsoft been hiding guys like this?"

On 25 Jun ‘12, Mon, at 17:26:27, a visitor from tide537.microsoft.com, IP Address 131.107.0.107, was running Windows 7 — not Windows 8.

That's not even anecdotal evidence for anything. It's ONE (1) person, using Windows 7. Is that representative of the rest at Tech Ed?

With millions of people already using Windows 8 (including me), and I'm pretty sure many thousands of MS employees themselves, that would be a lot more representative of what's really going on, instead of the single user that was picked out with your graphic. One user, or MS employee?, still is NOT representative of what MS is doing.

It's simple logic: 1 is not greater than many.

Now, you had to get ridiculous in order to try to make your point, as worthless as it is. FYI, Surface is not available to the general public yet, and neither I nor anybody else outside of MS has one to evaluate it. But, Windows 8, which is the most critical component of the Surface, is already out for use and for judgment by millions of people, and thus far, it hasn't failed me, and in fact, it performs faster and contains a few more features that Windows 7 didn't. I don't like the ugly colors for the tiles, but, I can live with that, since, the rest of the system contains a lot more value. However, the hardware for the surface, already exists, and in fact, MS has a few samples of the machines at their introduction. Guess you missed that, but, look it up. The CPU and the rest of the hardware is not hard to come by, and, even the rest of MS's OEMs might be able to slap together a competitive product using the same components, with which to compete with Microsoft.

Look, if you need to win your point in order so that you can continue to live your life, fully content, then, I'll be glad to take the graphic as proof positive that, MS is being hypocritical. ;)

You must be new to this world, since, major corporations, expand through purchases and/or mergers. Microsoft does it, Apple does it, Google does it, IBM does it, as well as many others.

Only in Microsoft's case, especially with the browser, it was a reaction to getting caught with their pants down. Only about a year earlier Gates was saying the Internet was a fad, the future was in services like MSN. Then the Internet took off under Netscape and Mosaic, and Microsoft saw their dominance slipping away. In order to quickly join the Internet bandwagon, Microsoft had to license a browser.

Microsoft's success in operating systems was because of IBM getting caught with their pants down, missing the home computer revolution. They made some hardware, but needed an operating system. Gary Kildall wasn't playing ball, so along comes Bill Gates who says he has one (he didn't). He quickly licensed a blatant clone of Kildall's work and showed it to IBM.

On the other hand, Microsoft spends more in research and development than Google or Apple, and, thus, end up with a lot more products and services than the other two combined.

Both of them spend a lot of money on pure R&D, not actually intended to hit the street as a product (although the tech sometimes works its way into products). It is admirable, for sure, in the spirit of Xerox PARC. Apple does R&D targeted at making products.

Apple is very far behind Microsoft in the number of products and services they offer

One of the reasons Apple is so profitable. Apple keeps it simple, makes it easy for the consumer to make a choice. Want OS X? Just one version, plus a server pack (used to be separate). There are six different versions of Windows 7, four of which you are likely to see in the US. There are six versions of Server 2008 R2 (plus one more for Itanium). Take Apple vs. any Windows notebook OEM. The Apple choices are far less confusing.

Perhaps Apple and Google need to start doing more R&D, and start being more creative.

Apple's creativity goes into products, and Apple obviously does enough R&D to turn out successful high-end products. Microsoft's creativity, where it exists, just kind of diffuses, sometimes landing on a product here and there if they're lucky. As I said before, no management vision.

The rest of your comments, are sour grapes, but, the one about Apple being creative, is laughable.

Apple has, basically, 3 products, and all of them are basically the same, just in forms from small to medium to larger. That’s the iPhone and iPad and Macs. Whatever else they have, like iOS and iCloud, is just for support of those 3 products. That’s not diversification and that doesn’t require that much in R&D, which will come back to bite them hard in the ass once the competition gets their acts together and start eating into whatever part of the mobile market Apple still has. And in fact, that has already started to happen, with Android tablets starting to make their moves, and the Surface tablets becoming the first real threat to Apple in the last 4 years.

Without diversification, Apple is doomed, although, right now, they’re riding the wave of popularity with their iPhones and iPads. But, like I said, that’s changing, and Apple had better start diversifying soon, or they’ll become another RIM.

MS does a lot of R&D, and just like any other corporation with a lot of that, some of the research will become hits, some will fail, and some will remain on the sidelines until the proper time. That’s what the original “Surface” (not the tablet) was about, and, though that still hasn’t come to market in a big way, it’s still in the development stages, even if it has met some real uses as it is right now.

When it comes to products and services, Microsoft is many times bigger, and in a market with so many uncertainties, and so much competition, I would put my money on the more highly diversified company, and not on the one which is riding a wave of popularity and fanaticism and hype, and basically, resting on its laurels.

The rest of your comments, are sour grapes, but, the one about Apple being creative, is laughable.

First, I must commend you for being the rare person who uses "sour grapes" correctly, if I understand your intent. Doesn't make you correct though.

Apple has, basically, 3 products, and all of them are basically the same, just in forms from small to medium to larger. That’s the iPhone and iPad and Macs.

That's three product lines. But you think that way, then Asus makes two products: computers and tablets. Of course, Apple also makes the iPod and Apple TV.

That’s not diversification and that doesn’t require that much in R&D

Lovely buzzword there. Diversification for the sake of diversification is dumb.

Most companies will spend their R&D on a large spread of products and produce a lot of mediocrity. Apple spends their R&D on a small line of highly focused, high-quality, high-end products. Their attention to detail is far beyond anything any other OEM does, and it usually makes the products great.

In short, Apple doesn't product a lot of crap, throw it at the market, and see what sticks. Apple designs stuff that will succeed.

hich will come back to bite them hard in the ass once the competition gets their acts together and start eating into whatever part of the mobile market Apple still has

We've watched the pattern for years: Apple makes something, others produce initially crappy copies, eventually others produce decent copies, but by then Apple has produced the next generation that they need to copy. Wash, rinse, repeat.

True, Apple may actually fall behind on individual features, but usually there's a plan in place before we even realized the deficiency. For example, turn-by-turn navigation. Turns out iOS doesn't have it because Apple uses the Google mapping API, and it forbids using it for turn-by-turn navigation. But Apple started quietly buying mapping companies back in 2009, before Google released navigation for Android. So Google's service was a stop-gap, until Apple can do it right (and by all reports, navigation in iOS 6 is awesome).

That's one thing about Apple, they usually don't release something until they can do it right. No Vista here, no first-generation XBox, both of which weren't just random problems that can hit anyone, but reflected the mismanagement of those products' development.

even if it has met some real uses as it is right now

Reporters were allowed a dog and pony show, no real use. Everything right now must be taken as a press release. No reviews labeled as "hands-on" can be trusted.

I would put my money on the more highly diversified company, and not on the one which is riding a wave of popularity and fanaticism and hype, and basically, resting on its laurels.

I would take company focused on making products that are highly profitable from day one, not the one that floundered for ten years trying to produce profit on a decent product. I'm not sure if Microsoft has even paid off the XBox division's loss leader yet. That billion dollar charge due to shoddy design sure pushed back the profit timetable.

And resting on laurels? Hmmm, iPhone comes out, turns the industry upside down. Every generation is far better, producing more features that the competition has to copy. Nobody ever produces an ultrabook that people like, then Apple comes along and reinvents the market, copies follow. iPad then comes out, reinventing yet another market, copiers rush in. When they get close, Apple ups the ante with that Retina display. And now the notebooks have it (AnandTech, not an Apple cheerleader, says "Apple is pushing the limits of the hardware we have available today, far beyond what any other OEM has done."). Yeah, that's resting on your laurels.

Tell me when Microsoft brings chip design in-house. Right now IBM, Intel and AMD design everything that Microsoft products run on. Apple doesn't have that dependency for the portables. How's that for "diversification"? Apple doesn't have to hope someone makes a chip to their specs. If they need twice the GPU power for their Retina display, they design it into their SoC and ship it off to be fabbed. That's flexibility, rapid turnaround.

Now that's not to say Apple hasn't made mistakes. Their first shot at a phone was done in line with the way the rest of the industry did it -- the Motorola ROKR. What a piece of junk. Apple ditched the standard way of doing things (where the telcos have a big say in every aspect of hardware and software) and produced the iPhone. AT&T didn't even see a complete one until the day the rest of the world did. Now everyone follows. The hockey puck mouse sucked. The Cube, while an engineering marvel, completely missed any potential market. The XServe and XServe RAID were great products, but Apple failed to find large markets for them (IMHO mainly because Apple doesn't have the corporate support infrastructure of the likes of HP and Dell that you need behind server sales). And of course the Mac Pro, which hasn't received any attention from Apple in two years. At one time it was the best value for a workstation. Not anymore.

Apple still has the one product, in different forms, those being the iPhone and iPad and Macs, with the Macs being slightly different, but, not really different from other PCs, except for the OS inside.

Apple doesn’t really do research, since, what they have now, is what they had 10 years ago, with the iPod. The did create a product which became popular, that being the iPod, and everything else, is an off-shoot from the iPod. With the iPod, they lucked into a product which they took and modified to put a phone in it, and called it the “iPhone”. Then, they took the iPhone, and created an enlarged version, and called in an “iPad”. And, besides the Macs, that’s their basic lineup of products. The iPod is on the way out, and in a couple of years, it will be put to pasture. Then, they’ll be left with iPhones and iPads, and perhaps the Macs.

That kind of lineup doesn’t require R&D, and enhancements do not require that much in research, and thus, they save in their meager R&D department. Thus, it’s a very stale company, with virtually no product diversification.

Whereas Microsoft has many times the products and services, and most of them making money for them. And, they still have “new” products and services coming out, unlike Apple, which is still a three pony show.

Surface will put an end to the popularity of the iPad, and they’ll be left with the iPhone as their mainstay, but, even there, Android is beginning to take over; and, when Microsoft, with Windows 8, gets their act together, the iPhone will become an iFailure. ;)

But, keep dreaming; and don’t wake up, because, reality is something which you apparently don’t understand.

No, Apple has FOUR main product lines: iPhone, iPad, iPod and Macs (Apple TV is successful, but Apple considers it more of a side project). Furthermore, the laptops, desktops and workstation serve very different markets, and are very different product lines. So according to you, Microsoft sells one product -- XBox?

Apple doesn’t really do research, since, what they have now, is what they had 10 years ago, with the iPod.

What are you smoking? You must be trolling.

With the iPod, they lucked into a product which they took and modified to put a phone in it, and called it the “iPhone”. Then, they took the iPhone, and created an enlarged version, and called in an “iPad”.

You have no idea of the history. Apple originally set out to make the iPad in the early 2000s, but the level of technology wasn't there and it stayed in R&D. However, around 2005 Apple realized that R&D so far could make a good phone. Enter the iPhone, unlike any other product ever produced by Apple, ZERO relation to any iPod, which had always used proprietary PortalPlayer chips and custom embedded player firmware by Pixo. In contrast, the iPhone had a general purpose ARM chip and a customized version of OS X.

Oh, you're thinking the iPod Touch? That came out after the iPhone, basically an iPhone minus the phone stuff and camera.

Then, they took the iPhone, and created an enlarged version, and called in an “iPad”

Noting the history above, the iPhone was actually a small iPad. When the technology was finally there, Apple produced that iPad they'd been wanting to do for almost ten years. Also note that aside from the basic front-screen pattern (black border, one button), the iPad looked nothing like the iPhone of the time.

Then, they’ll be left with iPhones and iPads, and perhaps the Macs.

And whatever other product they come out with that everybody will be trying to copy. Just because you don't have vision doesn't mean they don't. Just look at the pattern over the last dozen years. Even Apple fanatics can rarely get it right. Before the iPhone announcement, all of the predictive mock-ups looked like iPod-phones, nothing like the iPhone.

Even the rumored tablet mockups showed the same stale thinking of the rest of the industry.

That would just be a re-do of what Microsoft already tried and failed. But yet again Apple surprised by going in a whole different direction. Expect surprises again.

That kind of lineup doesn’t require R&D, and enhancements do not require that much in research, and thus, they save in their meager R&D department.

Hardware-wise, the current iPhone has no relation whatsoever to the original iPhone. It is a completely different product. Even the OS is vastly different. Now instead of an off-the-shelf SoC, it has an Apple-designed SoC. Nah, no R&D needed for that. Apple has actually had to R&D manufacturing techniques and technologies in order to produce their products. Apple even partners financially with suppliers like Foxconn to get their manufacturing facilities up to speed to be able to produce Apple products. Meanwhile, the others like Microsoft just take what the facilities can give, no R&D necessary.

Microsoft didn't even R&D the chip for the XBox 360. That was an Apple/IBM/Motorola invention, further developed by IBM and Sony jointly to create the Cell processor for the PS3. IBM just took three of the Power Processing Elements from the Cell, put them on a die, and sold it to Microsoft as the Xenon CPU before the Cell was even finished.

Surface will put an end to the popularity of the iPad

So what number is this in the line of failed "iPad Killers" produced in the last couple years?

Android is beginning to take over; and, when Microsoft, with Windows 8, gets their act together, the iPhone will become an iFailure. ;)

Android marketshare recently slipped. Of course the funny thing about this is you are describing the combined sales of the kings of the mobile industry: Samsung, HTC, Motorola, LG, Pantech, Kyocera and Sony. OH HORRORS, all of them together managed to surpass one company that just started making phones five years ago. Imagine I start a car company, and in five years I have gobbled up a third of domestic sales vs. all other car makers. That would be considered an unqualified, unprecedented success. But somehow Apple haters see only that Android has a higher market share.

And your claim of "this is when Microsoft will take over" was also said of Windows 7. We saw how that turned out, with high-end Windows being given away because they sucked so bad. I'll believe it when I see it.

But, keep dreaming; and don’t wake up, because, reality is something which you apparently don’t understand.

So says the person who doesn't even know the history of the products.

To crunch it all down for you: Apple doesn't spend less than what Microsoft spends because they're not developing anything. They spend less because they're not spending their money on things that won't become successful products. Flat-out, ever dollar Apple spends on R&D creates more far more of an increase in revenue than every dollar Microsoft spends. The difference was so obvious a few years ago that Microsoft shareholders started revolting over what they saw as a waste of money.

No matter how much you want to spin about Apple’s products, they’re still, basically, the same product in different size packages.

And, no matter how much you want to applaud Apple’s research, they haven’t really done anything spectacular, other than the iPod, which gave birth to the rest of their mobile gadgets.

And, they’re still not doing R&D, since, they’re feeling safe riding the popularity of their current set of mobile gadgets. They can claim their doing R&D, but, when what they produce is more of the same, then you know they’re lying.

Apple TV is a big failure, and it’s going to continue being one. Apple is gunning for some of the market that Microsoft owns with the XBox. But, what Apple has produced, is the same kind of failure that Google has produced, which means NONE to very little.

And, people are getting wiser as time goes on, and they’re beginning to drop the iPod, and iPod sales will be virtually gone within 2 years, since, the iPhone is basically the same, with a phone “attached”. Then, people are also catching on to the fact that, the iPhone is virtually the same technology as the iPad, and work just about the same, with the same OS, just with different size screens. The iPad is no longer the wiz-bang technology of two years ago, and the little bit of upgrades that are done every six months, are meant to create another sales cycle, where, a lot of the same people who already own iPads, will feel the need to not be caught with “outdated” technology and will “have to” purchase the “latest and greatest” that Apple has to offer.

Technology is more than just the hardware, and Microsoft has understood that from the beginning, and their research is conducted with for hardware and software, and though, like any other company, they’ve had their failures, they’ve also had huge successes, like XBox and Windows and Office software, and now, the Surface tablets. With Windows 8, and the supporting hardware from Microsoft and it’s partner companies, the Apple gadgetry will be left looking like last centuries “has-been” technology.

In a year or two, you’ll begin to notice how, Apple really has been standing still in technology, even as people swoon at the “latest and greatest” minor additions to their “old and tired” technology. Yes, the the tech world, 2 and 3 year old technology, is outdated, and Apple hasn’t been offering anything new, and Google and Microsoft are about to eat Apple’s lunch, and in about 2 years time, the Apple market cap will begin reflecting the reality that, Apple is not really keeping up and not really “innovating”.

Remember this post next year and in two years, because, what is really happening is not as you see it, and Apple will begin to drop in market cap, and in sales.

No matter how much you want to spin about Apple’s products, they’re still, basically, the same product in different size packages.

And somehow, Ford has survived making only one thing, according to your definition.

And, no matter how much you want to applaud Apple’s research, they haven’t really done anything spectacular, other than the iPod, which gave birth to the rest of their mobile gadgets.

Yep, you were absolutely ignorant of the history. The iPod wasn't much to applaud for Apple R&D. The basics were designed by an outsider, the brains being bought from outsiders. The only thing Apple did was design the case and work with Pixo to make the UI intuitive.

Then, people are also catching on to the fact that, the iPhone is virtually the same technology as the iPad, and work just about the same, with the same OS, just with different size screens.

Funny, that is exactly the same winning combination that Microsoft is trying to copy with Windows 8 tablets and phones. You seem to think Microsoft is somehow going to jump ahead, yet how can they whey they are just following what Apple already did a couple years ago?

You always hear that Apple has a low R&D budget, but that's usually because it's discussed as a percentage of revenue. Well, unlike most companies, Apple has an extremely high return on the R&D investment. It's still $2 billion a year spent in R&D, but Apple is so insanely profitable that number looks low.

So, go ahead and invest in the company that pours a good percentage of income into R&D, getting little in return. Maybe you'll get as pissed off as those other Microsoft shareholders. I'll go for the company that wisely spends its R&D money to make products that people buy.

Technology is more than just the hardware, and Microsoft has understood that from the beginning, and their research is conducted with for hardware and software

That's something Microsoft only realized relatively recently, mainly being a software company. Apple has been doing combined hardware/software solutions since the beginning.

they’ve also had huge successes, like XBox and Windows and Office software, and now, the Surface tablets.

Uh, dude, the Surface isn't even being manufactured yet. How can you say it's a success based on some presentations and PR releases? A lot of people thought the Zune would be a success too. I mean, it had power, new abilities, larger screen, wi-fi, and it was backed by Microsoft.

Yes, the the tech world, 2 and 3 year old technology, is outdated, and Apple hasn’t been offering anything new

In that case, nobody's been offering anything new. All computer and phone manufacturers just put in faster chips and more memory.

Back in reality, Apple advances fast, always with newer products. The iPad now looks little like the first iPad, in hardware or software, and that was only two years ago.

Apple market cap will begin reflecting the reality that, Apple is not really keeping up and not really “innovating”.

That's what people were saying, then the iPhone came out. Then they started saying it again, then the iPad came out. Quit projecting your lack of vision.

Stop it!!!

And, pay attention to the facts!

What’s most interesting to me is how Apple’s R&D spending as a percentage of overall sales ranks among the industry heavyweights. While $758 million is a lot of money, it’s lags behind the $2.3 billion Microsoft spent on research and development during the same quarter, and Google’s $1.3 billion.

How Apple gets away with lower R&D spending

http://gigaom.com/apple/how-apple-gets-away-with-lower-rd-spending/

While the conclusion in that article is nonsense, the graph points exactly at what Apple's problem will be, which is, it doesn't spend to innovate and create new products or services. It's goal is to maintain, and come out with slight improvements to each of its products, which, up to now, has worked for Apple, because, the rest of he tech competitors too a while to catch up, in the mobile area.

When it comes to everything else, Apple looks like a mouse next to the elephant that is Microsoft.

Besides MS now being a competitor to Apple in the mobile arena, Apple is tiny in the OS arena, and in gaming, and in search engines (Apple has none), Office software (MS is thinking of writing (or releasing) Office for the iPad), in server software, in the browser market, in web presence, where MS has a huge web site, and one of the biggest e-mail applications in the world, if not the biggest, and Skype and, in reality, hundreds of other applications for development and productivity.

Apple still has the 3 "sub-products", with supporting software. Other than that, they're ridiculously outranked when it comes to the number of products and services. That lack of diversification will come back to bite Apple very hard. It's just a matter of a couple of years, and, they'll be back where they were before the iPod rescued them from extinction.

Now, stop being in denial, and stop being such a fanboy. I agree that, the iGadgets are nicely designed, and nicely functional for the limited capabilities they were designed for, but, Apple is being left behind by both, Microsoft and Google, but, the Apple faithful are just too blind to notice the tsunami that is coming at Apple.

If they don't wish to spend on R&D, then they better hurry up and purchase some other companies which will make them more diversified. Until then, Apple is headed for a very bad and quick downfall.

Remember this discussion, because, in a year or two, Apple won't be flying so high, and they could turn out to be the next Palm or RIM.

While the conclusion in that article is nonsense

The conclusion is spot-on. Business articles have been written about how Apple still acts like a startup in many ways. They run a tight ship, not wasting money on things like pure research (which Microsoft does a lot of).

It's goal is to maintain, and come out with slight improvements to each of its products

Slight? The iPhone 4 was a completely different piece of hardware than the iPhone 3GS, new case, new brains, new screen, etc. In general, companies with successful product lines do tend to upgrade them over the years. Even the current XBox hardware-wise is quite different than the original even though it has to keep the same performance specs (they actually introduced wait states in the latest SoC to mimic the FSB latency of the original).

Besides MS now being a competitor to Apple in the mobile arena

And you say pay attention to facts? They have been competitors since the iPhone came out against Windows Mobile, which had a US smartphone marketshare of 40+% at the time. You probably don't remember the two being in competition because the iPhone caused that marketshare to drop like a rock, down to 15% within two years. Then the combined iPhone and Android pushed it into the realm of "Other" in three more years. Microsoft tried to come back with Windows 7 and the Kin, and failed miserably, even with the help of Nokia.

Apple is tiny in the OS arena, and in gaming, and in search engines (Apple has none), Office software (MS is thinking of writing (or releasing) Office for the iPad), in server software, in the browser market, in web presence, where MS has a huge web site, and one of the biggest e-mail applications in the world, if not the biggest, and Skype and, in reality, hundreds of other applications for development and productivity.

So, Microsoft is diversified into multiple areas, most of which don't make much money. Good for them, big tail to support with little return. They're branching out into more areas where they have no idea how to make a profit. And that's what this is about, profit, return on investment, not a big checklist of things you're involved with.

Microsoft has bought many companies with no apparent return, over a hundred total in the last 20 years. Buying for the sake of buying mostly, diversification for the sake of diversification? And where has that gotten them? A flat stock price, relatively mediocre profit margins. WebTV was an attempt at diversification, almost half a billion dollars wasted, and Danger made a billion wasted. Others were smart and strengthened product lines, like buying Bungie and Rare to ensure top titles for the XBox. This is the kind of thing Apple would do, making sure product lines are strong and not vulnerable to outside influences.

Meanwhile, Apple has bought 30. Let's see some I remember: Bought out Next, the source of the wildly successful OS X that has seen millions of people switch from Windows to it, and really they bought Steve Jobs who made them the most profitable company in the world. They had to buy out Power Computing to end the clones (a brilliant move that brought Apple back from the dead). They bought some semiconductor businesses and a stake in others, which has turned a huge profit in the iDevices. They bought lots of software companies whose products fed directly into profitable Apple software like Final Cut Pro, iTunes and iOS. And of course those mapping companies bought to break free of Google's service. And Apple's going down-chain too, buying a flash memory company. You probably didn't know it, but one of the secrets to Apple's success is extremely tight control of the supply chain.

Apple still has the 3 "sub-products", with supporting software. Other than that, they're ridiculously outranked when it comes to the number of products and services.

Those are simply markets that Apple does not choose to play in. Just because others have, doesn't mean Apple has to. For example, Apple doesn't play in the low-profit area of sub-$500 computers, and that's a good thing. Should Apple duplicate the money-losing Bing search engine? I remember not long ago Bing was losing a BILLION dollars a QUARTER. Apple doesn't like to lose money, even as a loss-leader. Apple likes to make products that turn a profit from day one.

If they don't wish to spend on R&D, then they better hurry up and purchase some other companies which will make them more diversified.

They're already spending billions on R&D. It is obviously enough to ensure current products don't become stale (Mac Pro excepted), and to ensure new products can be produced.

As far as buying companies, sure, maybe Apple should buy Pepsi. They can afford it. Doesn't mean it is a good fit with Apple's current business and culture, but hey, it's diversification for the sake of diversification. But as noted above, Apple has been strategically buying companies, over $800 million in chip companies in the last few years alone. Apple also has a big stake in Imagination Technologies, the leading designer of graphics chips for mobiles, and spent at least $400 million on mapping.

Remember this discussion, because, in a year or two, Apple won't be flying so high, and they could turn out to be the next Palm or RIM.

Apple destroyed Palm and RIM by doing exactly what they're doing now. Apple mostly destroyed the netbook market with the iPad. And you want them to change this winning strategy to fulfill an MBA buzzword?

It is two different philosophies: Play in everything and see what sticks, what turns a profit or not. Or, create a small range of highly-developed, highly-targeted products that will turn a profit. Obviously, the former has not served Microsoft's stock well over the last decade or so. Obviously, the latter has served Apple very well.

You have yet to give any evidence or make any reasonable argument as to why Apple's winning strategy should suddenly cease to work.

You are still in denial and not paying attention to the markets. Apple IS being successful, right now. They are still selling their iGadgets like crazy, and making loads of money. It's an enviable position to be in. But, that's not the future. Apple, like I said, is riding high on their current success, and with their CURRENT offerings. Apple is standing still, even while making loads of money. That is a dangerous position to be in when the competition is working harder in research and development. Innovation is not about producing a big hit every time research is done; that would be unreasonable expectations for any company or even any individual. Apple is using what they have, and improving those SAME THINGS. They are not branching out, and they're not conduction research into anything new. In fact, the latest rumors are about an Apple TV, with iOS inside. That would be using current tech to port it to a bigger form factor. Nothing new, just bigger.

I noticed how you latched on to the conclusion in the article, which is basically the same lame conclusion you have reached, and it's not a conclusion which looks at the effects of the inaction for future growth. You never even mentioned the graph, which does show Apple to be, basically, sleeping when it comes to R&D. In fact, the R&D department for Apple, is the rest of the industry, whereby, Apple takes some other company's innovation, and tries to "innovate it" into their own products. Most people call that "copying" of the technology, and not innovation, but, the Apple fanatics think of it as innovation, like you've been doing.

Like I said, keep this discussion in mind, because, in a year or two, you'll see exactly what I'm talking about, when Apple starts its downhill slide.

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