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Apple CEO Steve Jobs speaks during an Apple Special event to unveil the new iPad 2 at the Yerba Buena Center for the Arts on March 2, 2011 in San Francisco, California. Apple unveiled the iPad 2 as the successor to its popular tablet, the iPad.

Justin Sullivan/Getty Images

Steve Jobs, contrary to the beliefs of the more fanatical members of the Apple tribe, does not actually walk on water. He cannot part the seas or cure leprosy with one magical wave of an iPhone.

His brilliance as a businessman is beyond doubt. Apple did not climb out of financial distress in the 1990s to become the world's most valuable technology business-a market cap of $330 billion (all currency in U.S. dollars) and counting-by accident. But Jobs's phenomenal winning streak should not obscure the fact that he is capable of mistakes, that the Jobs philosophy led Apple into one of the single worst business decisions of the past quarter-century, and that the company could stumble again. If so, hubris will be the cause. Long-term investors, beware of this stock.

Before the risible bootlickers in the Steve Jobs cult decide to pelt the windows of The Globe and Mail with their now-devalued original iPads, let me be clear about one thing: I am not arguing about Apple's technological competence. The company has sold about 300 million iPods because it makes the best digital music player known to man. The iPad, the second iteration of which is now being rolled out in Canada to the usual hype, looks like it will be a commercial success. Apple's phones and laptops are famously easy to use.

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The Jobs Way emphasizes good design and simplicity, and it has wrought some of the world's best consumer electronics (though usually at a higher price than Apple's competitors). Alas, the best technology doesn't always win. Exhibit A is Apple itself, which introduced the leading-edge Macintosh in 1984. Within a decade, the company had been left for dead. In desperation, it put itself up for sale.

How that happened is worth retelling. Apple-driven by Jobs's control-freak doctrine even after he left in 1985-declined to license its operating system to outside computer and software makers, as Microsoft did. When Microsoft narrowed the gap by introducing its Windows software for PCs, Apple's we'll-do-it-alone attitude became an epic blunder.

The competition among PC makers gave rise to a virtuous circle: As the quality of their Windows-based machines improved, their market share soared. Software developers concentrated more on applications for PCs, rather than for Macs. Even today, Macs represent only about 10% of U.S. personal computer sales.

In what amounted to a premature obituary for Apple, in 1996, Wall Street Journal tech guru Walt Mossberg said the company was "blinded by arrogance," and had "contemptuously underestimated competitors." The next year, Jobs went back to Apple.

It's a myth that the return of the Prodigal Geek triggered an instant reversal in fortune. In 1997, as the tech industry was soaring, Apple lost more than $1 billion. The iMac gave the company a brief lift, but by the early 2000s, Mac sales had flatlined again. Apple was no longer bleeding, but it still wasn't very profitable.

What saved Apple over the next few years was not Jobs, but the rampant theft of music online-and the failure of a fat-and-complacent Microsoft to conjure up a device and music service to compete with the iPod and iTunes. The music industry jumped aboard the iTunes phenomenon, in the belief that getting a few dimes from Apple was better than getting nothing from music pirates. Even then, it wasn't until 2005 that Apple earned a $1-billion profit. This year, profit is expected to crack $20 billion.

So why worry? Beyond the scary unanimity about Apple on Wall Street-51 buy recommendations and zero sells, according to a Bloomberg survey of 55 analysts-Microsoft-style arrogance is creeping in. You can hear it in Jobs's snide dismissals of the competition ("We've now passed RIM, and I don't see them catching up with us"). You can see it in the iron-fisted way Apple deals with suppliers, such as app developers. Apple's new subscription plan that denies publishers basic information about who is subscribing to iPad versions of their products has got the attention of U.S. antitrust watchdogs.

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Some companies, such as the Rhapsody music service, say that Apple's grab of 30% of revenue paid by subscribers who sign up for online services through its App Store will make dealing through the platform uneconomic. Other developers have said that, rather than embrace Apple's handcuffs, they'll focus on developing applications for less greedy competitors. Sound familiar?

As for those alternatives-or "copycats," as Jobs derisively calls makers of competing tablets-they are little companies like Motorola, Samsung and LG. They have a few things in common with the PC makers of the 1990s. They don't need gross profit margins of 35% to be happy. They gladly work with third parties to drive down prices. Most importantly, they have allied themselves with a software giant-not Microsoft, but Google and its Android system that runs phones and tablets.

There are already more Android phones than iPhones. Android tablets, which barely existed six months ago, captured about 20% of the market in the fourth quarter. As choice goes up, prices and margins will go down.

Apple is unassailable? Yeah, sure. That's what people used to say about Microsoft, too.

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