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Electronics Manufacturing – M528

Apple’s Unique Partnerships

Apple like to do business their own way. This has lead to some very unique relationships, specifically with Cingular, Apple’s new mobile phone partner, Intel, who now supply Apple’s processors, and Microsoft, with whom Apple have had a long relationship.

AT&T

Apple initially need a single service provider for the iPhone to enable implementation of key features.

They way most new phones are born follows a well established route: The wireless service provider comes up with a large requirement document and the handset makers make the handsets (Bubley, D. 2007).

That is not how the iPhone was born. The problem with the service provider coming up with the requirements is that they concentrate on what they can sell, not on what is best for the customer. An example of this is the lack of mobile handsets with WiFi built in. If a user could connect to the Internet for free via a wireless hot-spot then they wont be paying the service provider for a data connection.

The iPhone was created to fulfill the users needs. For example, it has a new (to mobile phones) way of accessing voicemail that Apple have dubbed “Visual Voicemail”. It is essentially a random access voicemail. A wireless service provider can’t charge much, if anything, for this sort of feature, but it is one of the things that separated the iPhone from any other phone, it is key to the ease-of-use design.

Apple therefor need to work in partnership with a service provider to create the environment in which their services, like Visual Voicemail, will work.

AT&T’s Cingular is America’s largest wireless service provider, and so makes for the best choice for Apple.

Since Apple can only sell the iPhone through one service provider, then it makes sense to go for the biggest, the one with the most subscribers. With a 26% US market share (Chetan Sharma Consulting) and 56 million subscribers (Grossman, L. 2007), Cingular are the current market leaders, roughly joint with Verizon.
Cingular also have world wide interests could benefit Apple. They operate their network throughout the world and have many mobile phone networks, including a new licensee in India and deals with European networks. AT&T are also buying a stake in one of Europe's larger networks: Telecom Italia (AT&T).

Cingular get a huge increase in free publicity that the iPhone generates - the Apple halo effect.

Cingular had, within a couple months of the iPhone’s announcement, over one million people ask to be notified by email when the iPhone was available (Mihailescu, V. 2007).

Apple will likely maintain close links with Cingular, at least until the other operators and handset manufactures offer similar features, and when Apple has a firm grasp of this new market.

Intel

Apple were disappointed with IBM’s processor development.

Back in 2005 Apple’s relationship with it’s long-time processor manufacture IBM started to crumble. Apple’s small percentage of IBM’s sales made IBM loose interest and they concentrated on advanced processors for the latest generation of games consoles (Apple Inc, n. d.).

With no further high spec G5 processors planned and their huge power requirements, Apple needed a new partner.
The introduction of Intel’s processors helps customers compare products more easily.

Apple decided that the best future was in x86 processors, and that meant Intel or AMD. Intel was chosen over AMD because of supply fears similar to IBM and because Intel had been courting Apple for a few years (Apple Inc, n. d.).

Partnering up with Intel has some additional benefits than just good processors. For the first time, an Apple Macintosh can be compared quite directly with a Windows PC in terms of hardware specification.

There in no ‘Intel Inside’ advertising with Apple. Instead, Intel are using the Apple brand to try and get away from the ‘Wintel” moniker.

Most companies that purchase Intel processors buy in to Intel’s ‘Intel Inside’ marketing scheme. This involves stickers on computers and TV advertising clips. For this, the company will get a slightly discounted rate on the processors it buys (Hesseldahl, A. 2005).

Apple have yet to use such an advertising campaign, and it is likely that they never will. The Apple brand is much stronger than the Intel brand, and so Intel hope to use the new partnership to bolster their position.

Intel and Apple are also likely to develop things together in the future. Apple TV is an example of integrating Intel hardware into things other than a computer. Although how much Intel Apple collaboration went on in this product is unknown, it is an indication that the two companies are likely to work on these new technologies.

Microsoft

Microsoft and Apple have a lot of competitive history together, but this now strengthens their current relationship.

Apple and Microsoft have a very long and colourful history. There is even a TV movie about them (Pirates of Silicon Valley, 1999). In simplistic terms, Microsoft took what they had learnt from Apple and created Windows, and sold that using a very different business model, where the operating system was separate from the hardware.

Microsoft had great success with their approach and soon out sold Apple. Apple unsuccessfully sued Microsoft for use of some of the things they had got from Apple (Wiki).

In 1997 Apple made a deal with Microsoft, where Microsoft would invest $150 million into Apple stocks and agree to produce Microsoft Office for the Macintosh for five years (Wiki). This kind of software deal is very rare, but it helped Apple get back on its feet.

Now, Microsoft and Apple’s relationship is much smoother. The still competition, with OS X going against Vista and the iPod going against Zune, but it is not quite as hostile as it once was.

Going into the future, it is likely that Microsoft will start to concentrate its efforts on web based applications, like its Microsoft Office Live. These will bring the two companies closer together, as Apples market share steadily increases (techwack) Microsoft will want to sell its Office services to Apple customers.

Apple clearly have some unique relationships with their partners. They have re-written the mobile phone market rules already, without releasing a handset, with Cingular. The have a very good relationship with Intel and a stead partnership with Microsoft.



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