If Cook is ever going to run the company, he's going to have to learn the Jobsian art of saying very very little. He's already said too much. Does he imply that Apple products have been only for the rich up until now? If so I strongly disagree. Me and my friends are some of the least wealthy people I know, while still having jobs in a major city. We all have Apple gear, and we don't consider the money spent on it "disposable". I think he's falling prey to the negative rhetoric by defending that which requires no explanation. Jobs wold have said it differently, if at all.
Apple products cost more because they are better. period. If they make a lower priced product, it will be inferior, purposefully so. Maybe not in quality (certainly not), but in features and performance.
The truth is you don't know what Steve J would've said. That's the bottom line.
I have no problem paying the bucks upfront for the hardware- I simply object to paying a minimum of $80 every month. A fully-featured iPhone with a Tracfone-like plan would be the ultimate in my book. I can wish...
Less expensive phone. Universal SIM. Dual-mode radios. Carriers bidding for iPhone service. I still think this leads to the possibility of an Apple MVNO service for the iPhone. I realize that this is seemingly at odds with the statement that "the company is also said to be looking to expand its carrier partnerships" but maybe that expansion deals with the bidding process.
On another note, it is good to see that Apple recognizes that hanging on to all that cash is not delivering much value to the company or its shareholders. Prepaying for components is an excellent use of the money although it will probably just increase future gross margins and free cash flow due to discounts afforded Apple. I still think they have plans for a major play.
I was always hoping that there were planning a massively important buyout of something. When they are more worldwide and have a lot more people using macs and most importantly, mac services.
How does a carrier like Verizon cost? Or Sprint? Or making their own countrywide network? Is this crazy talk? Probably. But people have been asking for a while about this mountain of cash, maybe they just genuinely can't find ways to wisely invest the money in some buyout or technology or infrastructure grab. Probably that is the most likely option but I'd really like to think Steve and Tim are talking to each and saying, once we hit a 100 billion then the plan will go ahead. Our own worldwide satellite network or some such stupidly over the top but very fun plan.
Well, I think the price difference between an iPhone 4 and an iPod touch clearly shows that the iPhone is for those with disposable income and looser wallets and the iPod touch is for the more budget-minded customer.
Well, gee. I would have thought that the iPhone was for people who wanted to make phone calls on their device and the iPod Touch was for people who didn't.
Now I get an idea of why Apple is hoarding all those billions. This is the sort of problem which cannot be tackled in a simple way. To ensure a cheap upfront cost and cheap monthly price, while still offering a decent product to customers is something that would hurt the established players big time.
The only way Apple can pull this off would be if they can do something extremely disruptive. For instance, Apple needs to become an MVNO. It needs to buy bulk minutes and data from existing operators. Alternately, Apple needs to move to a radical path, buy huge amounts of data only, and create a phone that can use voice over data. While conceptually same as VoIP, it could be technologically different.
Apple could buy this data from multiple operators, and get it cheaper by offering to prepay. Their hurdle rate is just 1% - which is what they earn on their billions. If prepaying earns them a discount of 10%, that is a massive improvement on their hurdle rate.
This could also be a play similar to what Google did in the 700MHz spectrum auction. Apple need not *actually* do this. They just need to be willing to spend several billion dollars to do this, and just that might be enough to spur existing operators to mend their ways. Remember, if one major player does things totally differently and better for customers, other players have no option but to follow - whether they like it or not.
As an example, if AT&T did what's done in Germany, and clearly indicated the level of subsidy, how much you pay each month towards repaying it, for how long, and offered cheaper plans for phones no longer on subsidy, Verizon would have no option but to do this as well. Like the revolutions in the Arab world, all revolutions tend to have cascading effect. Nothing might have changed for decades, but the moment something gives, the flood is unstoppable.
I think the simplest option for Apple is to make a cheaper iPhone, and offer it to any operator who is willing to adhere to Apple's terms of service. It will not be locked to a single carrier - it will be locked OUT of the few carriers that don't agree to Apple's terms. The phone itself would be cheap, so that customers can buy the phone at full price without any subsidy - and still not be pinched. The customer can pick any carrier of his choice worldwide, provided the carrier has agreed to Apple's terms. This process can be manageable from iTunes, so Apple can maintain a list of carriers on a central server, and can change that list centrally, without each phone having to be changed.
Apple is the one player with the financial clout, market clout, and most importantly, the attitude to pull off this kind of change. Google's business model with Android just does not allow it to do such things. Other Android licensees have zero clout. RIM had clout in the past, but not the same anymore. And definitely nowhere near Apple's financial clout.
I was always hoping that there were planning a massively important buyout of something. When they are more worldwide and have a lot more people using macs and most importantly, mac services.
How does a carrier like Verizon cost? Or Sprint? Or making their own countrywide network? Is this crazy talk? Probably. But people have been asking for a while about this mountain of cash, maybe they just genuinely can't find ways to wisely invest the money in some buyout or technology or infrastructure grab. Probably that is the most likely option but I'd really like to think Steve and Tim are talking to each and saying, once we hit a 100 billion then the plan will go ahead. Our own worldwide satellite network or some such stupidly over the top but very fun plan.
I'm okay with them sitting on the cash as long as they have some specific ambition in sight. I would hate to see them buying up companies willy-nilly without regard for the task of integrating employees with a different work culture and the larger the company you buy, the more likely this is a problem.
I do think that an Apple-branded MVNO might be a real possibility and would create an ongoing revenue stream. Add some new services not yet thought of and it could be a real winner.
Apple could buy Warner Music Group and/or EMI (which are both on the market) to secure music content. The obvious disadvantage is that it makes Apple a competitor for other content partners and it is a very different business with a different corporate culture. I would not say this is impossible but it is rather unlikely.
Another possibility is providing new data services which require more data centers to be built globally. I think this is more likely as Apple could use smaller acquisitions to buy IP and talent to move forward more quickly than starting from scratch.
Building on the last thought, Apple could start a global Apple-branded MVNO offering unique services. This would put them in competition with their existing carriers so it carries quite a bit of risk but the carriers might be induced to cooperate when Apple dangles huge amounts of cash in front of them. However, the carriers hate the idea of being reduced to a "dumb pipe". I think Apple might like to do this but I am not sure how feasible it is.
Well, gee. I would have thought that the iPhone was for people who wanted to make phone calls on their device and the iPod Touch was for people who didn't.
The iPhone is for those who are willing to spend extra for two things:
(1) to avoid having to carry a second device, ie, an iPod touch on top of a cheap phone
(2) to have internet access everywhere
If you have WiFi at home and at work and compute in a car (where you should not be using the internet while driving), an iPod touch can give you lot of what an iPhone offers.
Don't know how many folks caught Tim Cook's Freudian slip at the AGM when he said " the iPhone 4 was a great phone .... is a great phone". He's clearly been playing with some new toys...
Well, no. The iPhone 3 GS is ?519 (post-taxes) in Europe and probably $450 in the US (pre-taxes), the cell phone provider is just giving you a $400 loan, to be re-paid over two years.
In Germany, some providers go as far and state the loan part explicitly on your bill. Thus, I paid ?10/month for a data modem contract + 5?/month to re-pay the loan (for getting the modem at a reduced price) and after two years, the loan was re-paid and I did not have to pay the ?5/month extra anymore. Forcing the carriers to be explicit about the loan re-payment part of the monthly bill and forcing them to limit the time period over which the loan was re-paid would make the cell phone business much more open and more competitive.
Geez. Carriers with enough integrity (or a government mandate) that prevents them from collecting on a debt in perpetuity. Be nice to see that here in the US.
I'm not rich, yet I have an iPhone 4 and Macbook Pro.
Apple products aren't only for "the rich" already. They're well within typical middle class obtainability. Heck, most of my friends who have iPhones and Macs aren't rich either.
I'm not rich, yet I have an iPhone 4 and Macbook Pro.
Apple products aren't only for "the rich" already. They're well within typical middle class obtainability. Heck, most of my friends who have iPhones and Macs aren't rich either.
But they are not affordable to many in the BRIC countries or Africa. These are places where Nokia currently does well with feature phones. If Apple could come to market with something better than what is currently offered in these places, there is a lot of money to be made, just in smaller increments.
Apple could buy Warner Music Group and/or EMI (which are both on the market) to secure music content. The obvious disadvantage is that it makes Apple a competitor for other content partners and it is a very different business with a different corporate culture. I would not say this is impossible but it is rather unlikely.
Another possibility is providing new data services which require more data centers to be built globally. I think this is more likely as Apple could use smaller acquisitions to buy IP and talent to move forward more quickly than starting from scratch.
Building on the last thought, Apple could start a global Apple-branded MVNO offering unique services. This would put them in competition with their existing carriers so it carries quite a bit of risk but the carriers might be induced to cooperate when Apple dangles huge amounts of cash in front of them. However, the carriers hate the idea of being reduced to a "dumb pipe". I think Apple might like to do this but I am not sure how feasible it is.
All three are low-margin, highly competitive, going-sideways businesses.
I'd be shocked if Apple go into any of them. The stock would sink like a stone if they did.
I finally pulled the trigger on a pre-paid Android smartphone last week, and now there's talk of a cheap / pre-paid iPhone? Well, they'll have to get it down to $25 a month to get me really upset, I guess. Otherwise, I'm good with my unlimited data plan and 300 minutes.
Same here. Virgin Mobile. LG Optimus V ($130), unlimited text and data and 300 minutes for $25 a month. No contracts, no weird hidden fees.
I do have to say after living with Android and Google's 'ecosystem' for a while, it's a bit of a letdown from what I've been used to with iOS. Not enough of a letdown to justify $75 a month, however. There's a big opportunity for Apple here, especially in the youth market. If Sprint can afford to do what they are doing with Virgin and Boost without cannibalizing their contract business, there's a huge opportunity for other carriers to do the same. A midrange no-contract iPhone (ala 3GS) would be a big hit.
"Apple doesn't want its products to be "just for the rich""
Don't you think he might just be talking about the iPad? Because remember when Apple changed the price of the iPhone from $599 to $199 when they introduced the iPhone 3G? I think they're going to do the same when they introduce the 2nd iPad. Just a thought.
It's the phone, not the network. I've been saying it for years. I've gone through verizon and AT&T for more than a decade and never had serious issues with either.
Then the iphone comes along and people start blaming the network but never give a thought to the phone.
Funny how it appears to be only users in America yet the same phone is sold worldwide without similar complaints
Until AT&T detects that you are using an iPhone and sends you a SMS telling you they have already added a data plan for you.... how nice.
That would be illegal and reversible... Unless the SIM you bought has that in the terms in conditions. If the latter I guess you should do a better job reading the fine print
All three are low-margin, highly competitive, going-sideways businesses.
I'd be shocked if Apple go into any of them. The stock would sink like a stone if they did.
Buying a music business would be more about control than margin, very similar to Comcast's purchase of NBC-Universal. Apple owning even EMI (the smallest of the majors) would force every other label with intentions of offering more than their own catalog online to reciprocate with iTunes.
I am not sure that it makes sense in terms of margins or corporate culture issues but it is something that Apple might consider.
As far as Apple becoming an MVNO, the numbers I find don't point to such a low-margin business.
This report is from 2005:
Quote:
Consequently, most MVNOs enjoy a relatively low break-even level of 20-50,000 subscribers even with relatively low ARPU (USD 20-25 per month) and gross margin levels (30-35%). The break-even profile for a range of ARPU, margin and start-up capex scenarios is summarised in the diagram below
The following is from a presentation from a telecom consulting company specializing in MVNOs so its numbers are likely optimistic. It appears to be from 2010 (it includes some numbers through the end of 2009). It states that a company operating as a "Full MVNO" (which is what Apple would likely do) can expect EBITDA margins of 20-25%. Capex is also extremely low.
One thing which stands out is that, in a saturated market, the MNO's subscriber acquisition cost drops substantially which is to be expected since the MVNO is basically waving cash in front of the MNO. Another benefit is that the MNO's EBITDA margin actually increases. [Page 8]
Both of these provide some interesting background for someone wanting to learn more about MVNOs.
The MVNO business looks to me like something Apple might pursue. Apple already has a billing relationship with a huge number of customers and expanding it to deal with phone service is really not a stretch. And I am certain that Apple could conjure up some interesting value-added services that take advantage of its phones which would put Apple in a unique position amongst MVNOs. And, amazingly, the pushback from MNOs looks like it might be less than I originally imagined.
Comments
If Cook is ever going to run the company, he's going to have to learn the Jobsian art of saying very very little. He's already said too much. Does he imply that Apple products have been only for the rich up until now? If so I strongly disagree. Me and my friends are some of the least wealthy people I know, while still having jobs in a major city. We all have Apple gear, and we don't consider the money spent on it "disposable". I think he's falling prey to the negative rhetoric by defending that which requires no explanation. Jobs wold have said it differently, if at all.
Apple products cost more because they are better. period. If they make a lower priced product, it will be inferior, purposefully so. Maybe not in quality (certainly not), but in features and performance.
The truth is you don't know what Steve J would've said. That's the bottom line.
Less expensive phone. Universal SIM. Dual-mode radios. Carriers bidding for iPhone service. I still think this leads to the possibility of an Apple MVNO service for the iPhone. I realize that this is seemingly at odds with the statement that "the company is also said to be looking to expand its carrier partnerships" but maybe that expansion deals with the bidding process.
On another note, it is good to see that Apple recognizes that hanging on to all that cash is not delivering much value to the company or its shareholders. Prepaying for components is an excellent use of the money although it will probably just increase future gross margins and free cash flow due to discounts afforded Apple. I still think they have plans for a major play.
I was always hoping that there were planning a massively important buyout of something. When they are more worldwide and have a lot more people using macs and most importantly, mac services.
How does a carrier like Verizon cost? Or Sprint? Or making their own countrywide network? Is this crazy talk? Probably. But people have been asking for a while about this mountain of cash, maybe they just genuinely can't find ways to wisely invest the money in some buyout or technology or infrastructure grab. Probably that is the most likely option but I'd really like to think Steve and Tim are talking to each and saying, once we hit a 100 billion then the plan will go ahead. Our own worldwide satellite network or some such stupidly over the top but very fun plan.
Well, I think the price difference between an iPhone 4 and an iPod touch clearly shows that the iPhone is for those with disposable income and looser wallets and the iPod touch is for the more budget-minded customer.
Well, gee. I would have thought that the iPhone was for people who wanted to make phone calls on their device and the iPod Touch was for people who didn't.
Go figure.
The only way Apple can pull this off would be if they can do something extremely disruptive. For instance, Apple needs to become an MVNO. It needs to buy bulk minutes and data from existing operators. Alternately, Apple needs to move to a radical path, buy huge amounts of data only, and create a phone that can use voice over data. While conceptually same as VoIP, it could be technologically different.
Apple could buy this data from multiple operators, and get it cheaper by offering to prepay. Their hurdle rate is just 1% - which is what they earn on their billions. If prepaying earns them a discount of 10%, that is a massive improvement on their hurdle rate.
This could also be a play similar to what Google did in the 700MHz spectrum auction. Apple need not *actually* do this. They just need to be willing to spend several billion dollars to do this, and just that might be enough to spur existing operators to mend their ways. Remember, if one major player does things totally differently and better for customers, other players have no option but to follow - whether they like it or not.
As an example, if AT&T did what's done in Germany, and clearly indicated the level of subsidy, how much you pay each month towards repaying it, for how long, and offered cheaper plans for phones no longer on subsidy, Verizon would have no option but to do this as well. Like the revolutions in the Arab world, all revolutions tend to have cascading effect. Nothing might have changed for decades, but the moment something gives, the flood is unstoppable.
I think the simplest option for Apple is to make a cheaper iPhone, and offer it to any operator who is willing to adhere to Apple's terms of service. It will not be locked to a single carrier - it will be locked OUT of the few carriers that don't agree to Apple's terms. The phone itself would be cheap, so that customers can buy the phone at full price without any subsidy - and still not be pinched. The customer can pick any carrier of his choice worldwide, provided the carrier has agreed to Apple's terms. This process can be manageable from iTunes, so Apple can maintain a list of carriers on a central server, and can change that list centrally, without each phone having to be changed.
Apple is the one player with the financial clout, market clout, and most importantly, the attitude to pull off this kind of change. Google's business model with Android just does not allow it to do such things. Other Android licensees have zero clout. RIM had clout in the past, but not the same anymore. And definitely nowhere near Apple's financial clout.
I was always hoping that there were planning a massively important buyout of something. When they are more worldwide and have a lot more people using macs and most importantly, mac services.
How does a carrier like Verizon cost? Or Sprint? Or making their own countrywide network? Is this crazy talk? Probably. But people have been asking for a while about this mountain of cash, maybe they just genuinely can't find ways to wisely invest the money in some buyout or technology or infrastructure grab. Probably that is the most likely option but I'd really like to think Steve and Tim are talking to each and saying, once we hit a 100 billion then the plan will go ahead. Our own worldwide satellite network or some such stupidly over the top but very fun plan.
I'm okay with them sitting on the cash as long as they have some specific ambition in sight. I would hate to see them buying up companies willy-nilly without regard for the task of integrating employees with a different work culture and the larger the company you buy, the more likely this is a problem.
I do think that an Apple-branded MVNO might be a real possibility and would create an ongoing revenue stream. Add some new services not yet thought of and it could be a real winner.
I agree. Any suggestions for them?
I've tried to get discussion started on this without much success in this thread:
http://forums.appleinsider.com/showthread.php?t=117102
A few things come to mind for me.
Apple could buy Warner Music Group and/or EMI (which are both on the market) to secure music content. The obvious disadvantage is that it makes Apple a competitor for other content partners and it is a very different business with a different corporate culture. I would not say this is impossible but it is rather unlikely.
Another possibility is providing new data services which require more data centers to be built globally. I think this is more likely as Apple could use smaller acquisitions to buy IP and talent to move forward more quickly than starting from scratch.
Building on the last thought, Apple could start a global Apple-branded MVNO offering unique services. This would put them in competition with their existing carriers so it carries quite a bit of risk but the carriers might be induced to cooperate when Apple dangles huge amounts of cash in front of them. However, the carriers hate the idea of being reduced to a "dumb pipe". I think Apple might like to do this but I am not sure how feasible it is.
Well, gee. I would have thought that the iPhone was for people who wanted to make phone calls on their device and the iPod Touch was for people who didn't.
The iPhone is for those who are willing to spend extra for two things:
(1) to avoid having to carry a second device, ie, an iPod touch on top of a cheap phone
(2) to have internet access everywhere
If you have WiFi at home and at work and compute in a car (where you should not be using the internet while driving), an iPod touch can give you lot of what an iPhone offers.
Well, no. The iPhone 3 GS is ?519 (post-taxes) in Europe and probably $450 in the US (pre-taxes), the cell phone provider is just giving you a $400 loan, to be re-paid over two years.
In Germany, some providers go as far and state the loan part explicitly on your bill. Thus, I paid ?10/month for a data modem contract + 5?/month to re-pay the loan (for getting the modem at a reduced price) and after two years, the loan was re-paid and I did not have to pay the ?5/month extra anymore. Forcing the carriers to be explicit about the loan re-payment part of the monthly bill and forcing them to limit the time period over which the loan was re-paid would make the cell phone business much more open and more competitive.
Geez. Carriers with enough integrity (or a government mandate) that prevents them from collecting on a debt in perpetuity. Be nice to see that here in the US.
Apple products aren't only for "the rich" already. They're well within typical middle class obtainability. Heck, most of my friends who have iPhones and Macs aren't rich either.
I'm not rich, yet I have an iPhone 4 and Macbook Pro.
You might not be rich but you also are not cheap.
I'm not rich, yet I have an iPhone 4 and Macbook Pro.
Apple products aren't only for "the rich" already. They're well within typical middle class obtainability. Heck, most of my friends who have iPhones and Macs aren't rich either.
But they are not affordable to many in the BRIC countries or Africa. These are places where Nokia currently does well with feature phones. If Apple could come to market with something better than what is currently offered in these places, there is a lot of money to be made, just in smaller increments.
I've tried to get discussion started on this without much success in this thread:
http://forums.appleinsider.com/showthread.php?t=117102
A few things come to mind for me.
Apple could buy Warner Music Group and/or EMI (which are both on the market) to secure music content. The obvious disadvantage is that it makes Apple a competitor for other content partners and it is a very different business with a different corporate culture. I would not say this is impossible but it is rather unlikely.
Another possibility is providing new data services which require more data centers to be built globally. I think this is more likely as Apple could use smaller acquisitions to buy IP and talent to move forward more quickly than starting from scratch.
Building on the last thought, Apple could start a global Apple-branded MVNO offering unique services. This would put them in competition with their existing carriers so it carries quite a bit of risk but the carriers might be induced to cooperate when Apple dangles huge amounts of cash in front of them. However, the carriers hate the idea of being reduced to a "dumb pipe". I think Apple might like to do this but I am not sure how feasible it is.
All three are low-margin, highly competitive, going-sideways businesses.
I'd be shocked if Apple go into any of them. The stock would sink like a stone if they did.
I finally pulled the trigger on a pre-paid Android smartphone last week, and now there's talk of a cheap / pre-paid iPhone? Well, they'll have to get it down to $25 a month to get me really upset, I guess. Otherwise, I'm good with my unlimited data plan and 300 minutes.
Same here. Virgin Mobile. LG Optimus V ($130), unlimited text and data and 300 minutes for $25 a month. No contracts, no weird hidden fees.
I do have to say after living with Android and Google's 'ecosystem' for a while, it's a bit of a letdown from what I've been used to with iOS. Not enough of a letdown to justify $75 a month, however. There's a big opportunity for Apple here, especially in the youth market. If Sprint can afford to do what they are doing with Virgin and Boost without cannibalizing their contract business, there's a huge opportunity for other carriers to do the same. A midrange no-contract iPhone (ala 3GS) would be a big hit.
Don't you think he might just be talking about the iPad? Because remember when Apple changed the price of the iPhone from $599 to $199 when they introduced the iPhone 3G? I think they're going to do the same when they introduce the 2nd iPad. Just a thought.
It's the phone, not the network. I've been saying it for years. I've gone through verizon and AT&T for more than a decade and never had serious issues with either.
Then the iphone comes along and people start blaming the network but never give a thought to the phone.
Funny how it appears to be only users in America yet the same phone is sold worldwide without similar complaints
Until AT&T detects that you are using an iPhone and sends you a SMS telling you they have already added a data plan for you.... how nice.
That would be illegal and reversible... Unless the SIM you bought has that in the terms in conditions. If the latter I guess you should do a better job reading the fine print
All three are low-margin, highly competitive, going-sideways businesses.
I'd be shocked if Apple go into any of them. The stock would sink like a stone if they did.
Buying a music business would be more about control than margin, very similar to Comcast's purchase of NBC-Universal. Apple owning even EMI (the smallest of the majors) would force every other label with intentions of offering more than their own catalog online to reciprocate with iTunes.
I am not sure that it makes sense in terms of margins or corporate culture issues but it is something that Apple might consider.
As far as Apple becoming an MVNO, the numbers I find don't point to such a low-margin business.
This report is from 2005:
Consequently, most MVNOs enjoy a relatively low break-even level of 20-50,000 subscribers even with relatively low ARPU (USD 20-25 per month) and gross margin levels (30-35%). The break-even profile for a range of ARPU, margin and start-up capex scenarios is summarised in the diagram below
http://www.indexpartners.co.uk/PDF/growth.pdf - Page 5
The following is from a presentation from a telecom consulting company specializing in MVNOs so its numbers are likely optimistic. It appears to be from 2010 (it includes some numbers through the end of 2009). It states that a company operating as a "Full MVNO" (which is what Apple would likely do) can expect EBITDA margins of 20-25%. Capex is also extremely low.
http://www.thecom.co.il/files/wordoc...Essentials.pdf - Page 15
One thing which stands out is that, in a saturated market, the MNO's subscriber acquisition cost drops substantially which is to be expected since the MVNO is basically waving cash in front of the MNO. Another benefit is that the MNO's EBITDA margin actually increases. [Page 8]
Both of these provide some interesting background for someone wanting to learn more about MVNOs.
The MVNO business looks to me like something Apple might pursue. Apple already has a billing relationship with a huge number of customers and expanding it to deal with phone service is really not a stretch. And I am certain that Apple could conjure up some interesting value-added services that take advantage of its phones which would put Apple in a unique position amongst MVNOs. And, amazingly, the pushback from MNOs looks like it might be less than I originally imagined.