I agree with one thing: sustaining high profit margins is difficult. But where Denninger goes wrong is in assuming that competitors can easily or quickly copy what Apple is doing. His argument is no different than the dire predictions for the iPod a decade ago. Yes, Apple’s hardware margins are extraordinary. But Apple is an extraordinary company. They have an unparalleled retail presence, a top-shelf brand, and a loyal, large, and growing customer base. They write and design their own entire software stack, have incredible third-party developer support, and, by selling very large quantities of a relatively small number of hardware products, attain astounding economies of scale.
I’m not saying Apple’s continued success is assured. But there’s no sense in an argument based on the supposition that Apple is in any way a typical hardware maker.
[It is always easier to throw rocks.]
Source: Daring Fireball