Tulip Farmer

Platform wars: 'A bunch of dead bodies'

October 1, 2010: 8:21 AM ET

An analysis of mobile phones as software platforms says there can be only one big winner

Source: Appcelerator

An engineer and investor who call himself Tulip Farmer -- surely not his real name -- posted a provocative piece on Seeking Alpha Friday that looks at the smartphone wars as a battle to be the dominant software platform.

A platform, as Farmer defines it, is a device or service that customers buy primarily because they want the third party applications (emphasis his) that run on it.

In the two examples he offers -- IBM's (IBM) mainframe in 1960s and Microsoft's (MSFT) MS-DOS in the early 1980s -- one platform emerged with the lion's share of the market and the others either failed or were pushed into niche markets.

"Platforms have network effects and economies of scale," Farmer writes. "Software developers want customers so they focus their development on the platforms with the most users. Users want applications so they buy the device with the most software developers. Development is hard work and every additional device a developer needs to support is a big investment, so they try to minimize the number they develop for. Because of this effect, there is usually one big winner in a platform war, one or two much smaller survivors in niche markets, and a bunch of dead bodies."

So who does he think will be the big winner in smartphones? He's hedging his bets, going long on Apple (AAPL) and Google (GOOG) and short on Microsoft, Research in Motion (RIMM) and Nokia (NOK).


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