Short answer: Google is respecting the historic "grain" of the industry.

The computing industry has historically been horizontally rather than vertically integrated since the decline of Big Iron IBM mainframes. Apple has been an outlier. In the PC world, the market organized itself around chip, motherboard, assembler, OS and application layers with the very first IBM PC and MS-DOS.

You could say Bill Gates created this structure, but not really. Microsoft and Apple offered the market a vertically and horizontally integrated pair of choices, and the market chose horizontal.

Since then, horizontal has ruled. There are fundamental reasons having to do with openness of architectures, more mix 'n match options leading to more options in the marketplace (higher diversity, a good thing when a market is trying to find the right "formula" in chaotic times).

Which brings us to: has Apple's recent rise changed this in any way?

I don't believe so. PCs still outnumber Macs.

In the smartphone and tablet market, Apple grabbed an early lead (as it did in desktop computers 30 years ago), but again, the fundamental DNA of this market appears to be horizontal.

Apple may end up as the biggest single player in all these markets (desktop, laptop, tablet and phone), but it will likely still be smaller than an absolute majority. 51%+ of the market will still go to the aggregate of horizontally organized players.

Google had two options when it decided to enter the game. Own a horizontal layer of the cake (i.e., what is now the Android/Chrome OS thrust), or a big slice of the whole cake. It also had to consider its own DNA as primarily a horizontal player in its established markets (Web... where it mainly owns the search layer, and is uncompetitive in other layers of various Web value stacks).

The latter option puts it into competition with everybody and seems fundamentally limited to a minority share. The former option appears to have the potential for near monopoly state (think Google itself in search and Microsoft in MS-Office).

I don't quite agree with those who think Android is merely an elaborate defensive measure to own the locus of new searches. Google is, and should be, more ambitious than that. Right now, they are of course shoring up the defense lines and placing a few things in favorable positions for most directions the market could take.

There is a final twist to the tale. Industries tend to have both a fundamental horizontal or vertical grain, but this rarely dominates an industry completely or permanently. Instead you get some sort of slow cycle between more horizontal and more vertical, with neither type ever vanishing.

I think Apple is fundamentally over-valued right now. This industry is fundamentally more horizontal than vertical. Give it a couple more generations of tablet devices, and we'll see a repeat of the early eighties, when the fast follower (the MS-DOS PC) overtook the first-mover, the Mac.

Back then, it turned out that the OS layer was the most important layer to own, and Microsoft owned that. Android is basically betting that history will repeat itself in a fairly straightforward way. This may be a mistake. The app/app-store layer may be the critical one.

Sure, right now there is the problem of too many Android flavors that Google is attempting to rein in, and Amazon's troubles attempting to be the iTunes for the Android market, but these will sort themselves out (Amazon, by the way, has vertical tendencies, and may try to break into devices... this question is actually far more interesting with respect to Amazon than with respect to Google. Their future is far less predictable than Google's in this game).