That ability to create devices that “just work” and to make them more user friendly, cooler and better looking than any other company in the world has earned Apple three years at the top of Fortune’s Most Admired Companies. Where other companies create products consumers tell them they want, Apple creates products consumers only know they want once Apple produces them. It’s an amazing business model and they do it excellently.

My problem with Apple is mobile. Without question, Apple redefined the way consumers saw phones. By offering a phenomenally usable operating system with a beautiful user experience, Apple made the cell phone as cool as an iPod. By further, creating an iPhone ecosystem via the iPhone App Store, Apple converted the device from a phone to a multi-function device that allows its users to lead a life where everything they need to do can be done from the palm of their hand.

What Apple did was not new. Palm phones had long supported color icons, touchscreen input and rather small form factors. Nokia phones pre-2006 (when the iPhone debuted) offered smartphone style functionality, Wi-Fi, downloadable applications (I know because I built an app), the ability to surf the web and view video (if you had the right software). Blackberrys from RIM have long offered an exceptional communications platform. All of this existed prior to the launch of the iPhone. Apple’s contribution was bringing it all together in a phenomenally tantalizing package that just worked.

Putting a beautiful wrapper, however, on old technology is not novel. It is exactly that lack of novelty that has me questioning Apple’s recent actions in suing HTC for patent infringement in a thinly veiled attack on Google’s Android. Engadget provides a detailed explanation of the patents involved here.

Apple has not attacked HTC because it is a cell phone manufacturer who might (or might not) infringe on their patents. In fact, Apple has attacked HTC because they are at this moment the only phone manufacturer who 1) is relatively small; 2) makes devices whose capabilities, on many levels, rival those of the iPhone; 3) creates great devices that use Google’s Android.

Android is the mobile operating system many see as the iPhone’s greatest competitor. Nokia’s Symbian and RIM’s Blackberry OSes both have greater market share than the either the iPhone OS or Android but Android has been developed much in the same way the iPhone OS was — with phenomenal speed, tremendous attention to detail and a focus on both ease of use and being easy on the eyes. Combining the Android operating system with HTC’s hardware was a shot across Apple’s bow. Their response, however, has the potential to stop the mobile business in its tracks – leaving Apple as the only company capable of creating modern smartphones.

Apple’s immediate goal is to neuter Android and HTC before they can truly challenge their leadership position. This is not about patent infringement. The broad nature of many of Apple’s patents and their questionable applicability (as well as the likelihood that prior art can be demonstrated for some) indicate that Apple is going for a shot gun approach to take out the weakest gazelle in the herd. You can be sure that if Apple is successful that they will soon go after Nokia, RIM, Samsung, Sony, Motorola and other OS and hardware manufacturers. Apple clearly wants to own the mobile business all to itself in spite of other companies having long history of mobile accomplishments long before Apple got on the field. Their goal is to decimate all competitors in a way that relies not on consumers’ demand for their products but on questionable intellectual property awards. To my mind, that borders anti-competitive and is not in the spirit of how the marketplace should operate.

Let’s be clear. Apple should absolutely have the ability to protect their intellectual property. For example, the slide to unlock a phone patent seems valid to me. I don’t know who owns the patent for the zoom in / zoom out gesture on the iPhone but if that’s Apple, then that is absolutely protectable. To want to enforce patents on multitasking or using parsed data, however, is a stretch. (Perhaps the stretch is the USPTO even awarding such a patent.)

What I’d like is for Apple to not try to hobble the mobile business buy pursuing enforcement of questionable patents. I’m sure Motorola, Nokia, RIM and other companies have similar patents that could just as simply be applied to Apple. Instead, I’d like to see the companies press each other to innovate. I like the pressure the success of the iPhone has had on the rest of the mobile business. If not for Apple, we’d still be on 20MB calling plans and Palm would have the most advanced phones. And if Apple was in the business by itself, what we’d find is that we’d be stuck using a phone that only allowed us to download applications Apple liked and doing only things Apple approved of. We’d find that even Apple would slow down innovation if no one was nipping at its tail and, most of all, we’d find that the mobile business was a whole lot more boring — except for Apple.

Let’s not let Apple ruin the mobile business…

But, this brings me to another thing that bothers me about mobile carriers. Why are they in the phone selling business at all? Think about that iPhone for which you just paid $199. The PR spin is that the phone is so expensive that AT&T has to subsidize it. As a result, they have to lock you into a contract so they can recoup the losses they made subsidizing your phone. That may or may not be the total truth, however. What is never said is that the iPhone 3GS is estimated to cost Apple ~$179 to build. The unsubsidized price at AT&T is $599 (Apple sells it to AT&T, reportedly, for $399). That’s quite a hefty profit margin. Such margins are likely to make computer manufacturers and retailers very jealous since their margins are in the 10-20% range, if they’re lucky. The reality is the phone margins are artificially high. Manufacturers charge carriers more for phones than they would in a truly free market system because they know (and the carriers know) the carriers will make their money back on monthly fees for phone plans, text messaging and unlimited data. This is my own estimate but assuming even an optimistic 30% margin, the iPhone would likely go for around $235 if you could pick it up at your local electronics store and not have to worry about the carriers’ funny math.

To my mind, such cell phone antics both inhibits innovation and artificially stifles demand. Regardless of the phone I get, the two year contract makes it likely I won’t consider upgrading to another phone as long as I’m under contract. After all, why would I want to pay the unsubsidized (artificially high) price for a phone even if my current one is outdated and no longer suits my needs. I may want the brand new handy dandy phone, at the unsubsidized price of $600 it just wouldn’t make sense – not if I can wait a year until my contract is up and pay $200. Demand is squashed. If demand was higher, the mobile innovation curve would undoubtedly change for the better.

As far as I’m concerned, like your telephone provider, mobile carriers should only provide the connectivity on which the phones work. They should leave the devices and app stores to be managed by the free market which would put customers’ needs first. Carriers would protest that people expect them to assume responsibility for supporting their phones. Well, we expected AT&T to handle our phones when it was a monopoly, too. We got over it post-monopoly and became pretty used to buying phones and upgrading when the mood hit us. Let’s hope it doesn’t take government regulation to get the carriers to start acting in the best interests of consumers…

Disclaimer: I have service from both AT&T and Verizon and am generally satisfied with both – though I sometimes disagree with their business methods.

Let’s be honest, while the acquisition would have been great for Yahoo’s investors, it would have been bad for the Yahooligans and it would have been bad for all of the reasons that Microsoft needs Yahoo. Namely…

Microsoft’s largess and arrogance inhibits innovation – Microsoft is successful today because they’re the 800 pound gorilla to beat – not because they offer the best of anything. Here recently they either follow others (e.g. iPod followed by Zune) or acquire what they need (e.g. Avenue A / Razorfish). Little in the way of real innovation has come out of Redmond in the past 10 years and that’s largely because they don’t have to be scrappy. Windows Vista sucks and people still buy it, MS Office is overly bloated and yet we shell out our money to buy each new version as if we need the three new features offered in the latest version. Microsoft sells it and we buy it, so why should they innovate? Don’t believe me. Ask yourself how Windows Mobile is on v6 and still user experience epochs behind the iPhone interface. That unwillingness or inability to innovate is why, if Yahoo wants to sell, they need to find a better partner.

At 20 years old, the Internet is relatively young. Yes, it’s changed the way we communicate quite rapidly and lowered the barriers between us, but at the same time very few companies have figured out how to actually make money off of it. Yahoo has. Microsoft hasn’t. And a lot of that is due to innovation. Yahoo’s problem isn’t that they’re not innovative. Instead, it’s that they can’t figure out what to do with their innovations. I mean ten years later, PageFlakes and other companies are trying to build business models out of the whole My Yahoo concept we all loved back in the late 90s. The thing is that Yahoo still innovates that way, but for reasons unbeknownst to me, sits on things or doesn’t push them the way they could. The time for sitting on one’s hands is over. In this day, innovation is key and it will be crucial to their success.

Here’s the real honest truth for Yahoo – they need to stop competing with Google. Google owns the search engine marketing space. With the Doubleclick acquisition, they own a good bit of the display advertising space, too. So, what. From mobile to set-top boxes to movies-on-demand, there are numerous other arenas where Yahoo can bring its advertising experience to bear as they all become Internet dependent. Moreover, a company with Yahoo’s resources and knack for innovation should be able to look into the future and prepare for where everyone else is going to be 5 years from now.

To my mind, what Yahoo has always done best is figure out what we, the consumers, want and then given that to us. Its list of successes include Yahoo Mail, My Yahoo, Yahoo Messenger, Yahoo Music, HotJobs and Yahoo Local, to name a few. Most of us have used all of them at one point or another. Where Google focuses on utility, Yahoo’s focus has been on user experience. It needs to get back to that. All of this worrying about what Google does simply distracts their management from focusing on who Yahoo is and, quite frankly, whether it’s going to be around in another 20 years.

Have you ever noticed how when you’re driving on the highway right behind an 18-wheeler that you can’t see ahead of you at all. You don’t know what’s coming and all you can do is react to the moves the 18-wheeler makes. However, if you just move over one lane all of a sudden the view gets clear again (barring another 18-wheeler) and you can get a better feel for the road and make better-informed decisions about how you approach the road. Yahoo has reached that point where it’s time to change lanes and get from behind the 18-wheeler. It’s time for the Yahoo gang to let their hair down and go back to being Yahooligans and living up to the wild ideas and innovation that the word ‘Yahooligans’ suggests.