You can't see the forest through the trees. Profits or not, if you are selling less units from market share loss, you are making less money (than you would have).
What I am watching is, Apple has always (seemed) to not value market share as a primary goal and has been very profitable as a niche. But now that Steve is gone, will they now more aggressively pursue market share (lost opportunity in my opinion) and go for the whole enchilada? Why not?
I'm disappointed and frustrated to see they are fiddling while Rome is burning. Hello??? The clock is ticking.
They may be too late to offer a bigger iPhone screen (IMHO that's why they are losing share). That may stop the hemorrhaging though and may prevent them being marginalized like Windows did to Mac in the 80's and 90s.
They better move fast and not with "marginal" improvements. Momentum is changing quickly. Public perception is King and it is changing too. They CAN change momentum, but they better do it fast.
Profits or not, if you are selling less units from market share loss, you are making less money (than you would have).
What I am watching is, Apple has always (seemed) to not value market share as a primary goal and has been very profitable as a niche. But now that Steve is gone, will they now more aggressively pursue market share (lost opportunity in my opinion) and go for the whole enchilada? Why not?
I'm disappointed and frustrated to see they are fiddling while Rome is burning. Hello??? The clock is ticking.
They may be too late to offer a bigger iPhone screen (IMHO that's why they are losing share). That may stop the hemorrhaging though and may prevent them being marginalized like Windows did to Mac in the 80's and 90s.
They better move fast and not with "marginal" improvements. Momentum is changing quickly. Public perception is King and it is changing too. They CAN change momentum, but they better do it fast.
After waiting 9 years to make a first post that's a spectacularly dismal effort. Aside from the simple observation that the results from Samsung show this not to be the case, how can the amount of money made (profit) be independent of profit?
I actually think thatrjc999 makes a lot of great points - but I think they're missing the bigger picture about Apple.
1- Comparing Apple to the vertical UNIX players of old (SGI, DEC, Sun, HP, etc) before they were commoditized by Linux/x86
None of these companies played in the consumer market. They built specialty hardware to solve specific scientific, business, visualization problems. Things like 3d hardware acceleration and 64 bit architectures were far beyond the practical needs of the home computer user. On the other hand, Apple's current competitors are often building more powerful hardware. There is a completely different dynamic taking place.
The razor-thin margins enjoyed by consumers in the PC era was due to the open specification of the PC architecture (allowing for commoditization) and one OS to rule it all. Make no mistake, plenty of margins were made in the PC era. By Microsoft.
2- Microeconomics 101, all products go to zero margin, eventually.
No. This is does not work for products that can be differentiated. How long have hand bags been around? Hundreds of years, with plenty of competition. Yet somehow there are $50,000 Hermès bags being sold today. How about something as simple as sugar water? Why do we continue to pay more for Coca-Cola compared to the no-name store brands?
Something else I should note is Apple's insane economies of scale. Consider the possibility that Apple can profitably manufacture and sell products equal or lower MSRP than competitors who are near 0% margin.
3- Developers moving to Android after "maxing out" iOS.
First of all, this implies that apps will generally come out first for iOS to test whether they'll be successful in the first place. This makes the iOS ecosystem a breeding ground for new, innovative apps.
I run an app business. I didn't bother with Android until, as you said, my app was proven to succeed on iOS. It took me over one year to reach that point.
4- Apple does not do R&D.
You're focusing a lot on purely science and hardware based R&D, of which Apple does plenty. Just look at their patent library for a hint of what they're doing in terms of semiconductors, display technologies, battery technologies, low-power consumption computing, etc.
What you're missing is the work and expertise Apple does in human computer interaction. This is Apple's trump card. Things like bouncing, simulated inertia scrolling seem so obvious after the fact, don't they? Thing is, they're not obvious at all before they were ever conceived. It takes a great deal of reseach in human psychology, capacitive multitouch research, and other topics of human computer interaction to come up with this stuff.
You can go ahead and dismiss this type of research as not "real science" but this stance will do you a great disservice in understanding why Apple went from near bankruptcy to becoming the largest market cap on the planet.
Ha ha, you take one college introductory econ course and you think you can explain everything. The basic model of competitive markets you are using assumes certain things that aren't true in the smartphone and tablet markets. Things like no barriers to entry, homogenous products, etc. But most relevant to the discussion is static technology. If technology is static and there are no barriers to entry and one firm's product is a perfect substitute for another's than sure prices drive down to marginal cost. But we're talking about something like the market for construction sand here.
You can sustain pricing above marginal cost for extended periods in the tech industry. Just ask Microsoft to show you their financials for Windows.
Hedge fund managers are trying to beat the market and therefore looking for growth companies. Apple as a growth company has slowed making it less attractive to hedge funds. That doesn't mean they are expecting Apple to whither away over the next few years, just that its not what they are looking for. On the other hand, with its increasing dividend and stock repurchasing plans, apple us becoming more attractive to longer term investors.
I read the following comment by a reader called Googler in a phone arena article about problem of build quality of the new Nexus 7. It made me laugh. Because it reminds me about the comments to every new Windows OS when it comes out. The comments all praise it is more reliable. For Apple users this is a completely different. I frequently see people still using iPhone 3GS or iPad 2. You know their answers if you are truly an Apple user yourself.
"Couple of hours here and I'm fully impressed. I have the old one as well and it's no comparison. Not only is the newer one amazingly fast, the screen is beautiful and the build quality is really solid. The battery was round 50% out of the box so I haven't charged it fully to test how 4.3 performs. Probably load the same Netflix movie on both tomorrow and do a side by side test to see how the battery holds up.
And 4.3 says Jelly Bean in the settings, it's not Key Lime Pie. And as for performance, if anyone says this thing lags, they are nothing but trolls, this is the smoothest I've seen Android yet.
I'm sure Apple pays more for components than Samsung in the BOM listed since Apple buys them from Samsung and Samsung mfg them for cheaper than what they sell them to Apple for. Plus the Apple aluminum case isn't cheap to fabricate.
The iSuppli figures build in higher component costs for iPad than for Samsung along that reasoning.
However, while Samsung (and anyone else in its position) would love to charge Apple much more than its own costs, the profits of System LSI and its memory and LCD units indicate that it runs pretty lean. Also, economies of scale are pretty powerful.
Samsung might be making its own parts, but if it can only ship 7 million of its own tablets at very minimal profit vs. Apple selling at least twice as many, its going to take that business. Particularly since Apple is the only customer that can show up with several billion and offer a stable contract price for a guaranteed huge volume of ongoing sales. Turn down that deal and your factory sits idle or operates under capacity, and that would result in far greater costs than holding out for a higher component price could deliver.
So despite the iSuppli prediction last year that Samsung would be making higher margins, the reality is that Samsung has very little to show for its tablet sales, while Apple is making billions of dollars directly, and from related sales like iTunes, AppleCare, etc.
Two of the three shown are 4.3 inch "tablets". The amazing thing is how little desire I have to own one of these no-name Android tablets even at less than $50. They will likely never get an OS upgrade. They don't even have the Google Play store. By allowing these questionable products into the market it greatly reduces confidence in the entire Android tablet platform. The entire product line from these $50 tablets to Google's Nexus 7 are just different shades of crap.
The Nexus 7 should be able to be a tablet that is almost a year old; however, specs are not everything. I for one think the form factor of the Nexus 7 is horrendous. the 16x10 ratio is great for watching a video, but not a good experience for web browsing or many apps. I like the 16x9 for the phone because it is primarily a one handed device so taller and skinnier makes sense, but a tablet isn't a one handed device and the same form factor doesn't make sense. The iPad mini wins on the user experience front in a big way. It is small enough and light weight enough to be easily portable, but gives a form factor that is still useful. As for the screen resolution, when I use my mini I don't really notice anything bad about the screen. If I put it side by side with my wife's iPad 4 the difference is easy to notice, but when in use the screen functions just fine.
Also useful to note that Google's decisions on the new Nexus 7 are not just additive but subtractive. The retina-like screen certainly is a nice feature, but it also means that the new model gets just (via WSJ review) 6 hrs of battery, or less than 60% of the iPad mini. That's a reversal, because the first one promised (at least) greater battery than the mini (and still didn't sell the way Google expected).
The Nexus 7 has also suffered through a year of defective software that frequently rendered it unusable, even to techy reviewers who had the spare time to try fixes over and over. While Google has now addressed one major, central problem in the new model's software, it's hard to erase a reputation, particularly among mainstream users who don't follow tech news on a daily basis.
If you buy a Ford and have a terrible lemon experience with it, you don't spend the rest of your life trying to make excuses for Ford. You spend the rest of your days with a negative impression of the brand that is hard to erase because you're that much less likely to even give Ford a chance again.
It's "can't see the forest for the trees" not through. The forest isn't through the trees. The forest is the trees. And you're looking at a close up view of bark.
It all seems very interesting, however... I have yet to hear one hedge fund manager say that Apple has some sort of advantage over other smartphone companies. In fact, they claim the reason why they all dumped Apple is because Apple seems weak and vulnerable as a company. Most claim that the competition is too great for Apple to overcome and any cheap Android smartphone is just as good as a high-end iPhone. I've heard them repeat this mantra over and over again. Now they're claiming that Apple's market cap is far too high and that the company has reached its limit so the share price will not rise much higher than it is now. The hedge fund managers believe that Apple should have been able to crush its rivals but missed its chance and now it's too late. Wall Street never considers things such as high-quality or customer service being worth anything and only bulk sales matters. Bulk sales matters because it's the chief factor behind gaining market share.
I'm not trying to dispute Dediu's numbers as he seems to work very hard at what he does. I'm only saying his view of Apple is almost the exact opposite of how Wall Street and the tech industry at large, views Apple. I don't really understand the discrepancy of Apple's valuation on Wall Street to the reality of profits and margins, but I certainly know that the discrepancy does exist. Apple is not valued as a Tesla, Netflix or LinkedIn-style company. Not even close. Dediu puts a lot of emphasis on the iOS ecosystem and services as being some sort of deep and strong moat. The hedge fund managers say the iOS moat is extremely shallow and pretty much ineffective. So, who should I believe? I would think the big money guys would be the ones to know the best or are they really just too stupid to understand what Apple has because they're minds are too simplistic.
I realize that Apple is again the most valuable company by market cap even after an absolutely horrible nine months or so and Apple has supposedly been written off as a top tech company by nearly everyone. I honestly can't explain it but it just seems as though something isn't adding up. It isn't likely that a company is failing with a more than $400 billion market cap and $145 billion in reserve cash. So many things I read and hear just don't make a lot of sense.
One thing I don't like about those hedge fund managers is that they usually favor companies that make cheap, low-quality products and I don't get that at all. Why would they want to push that sort of stuff on consumers. I'm sure they're only out to make quick money and don't care about the consequences of their choices. The SEC really needs to regulate hedge funds to keep them in check.
Never bet on hunches based on simple thinking over the analysis of a guy who brings data to the table. Asymco has regularly depicted models that turn out to be correct and inline with observable facts.
The hedge funds are the same people who couldn't decide if Apple was worth $700 billion or $380 billion within the space of ~six months, after similarly betting against Apple back and forth in 2008 (insanely doubling and halving Apple's market cap) with similar reasoning of "macroeconomic can't compete" blustering that in retrospect was clearly wrong.
Their speculative efforts to move cash in and out of Apple securities is based on shell game numerology. They are not investing in fundamentals. They are highbrow check kiters.
Also useful to note that Google's decisions on the new Nexus 7 are not just additive but subtractive. The retina-like screen certainly is a nice feature, but it also means that the new model gets just (via WSJ review) 6 hrs of battery, or less than 60% of the iPad mini. That's a reversal, because the first one promised (at least) greater battery than the mini (and still didn't sell the way Google expected).
The Nexus 7 has also suffered through a year of defective software that frequently rendered it unusable, even to techy reviewers who had the spare time to try fixes over and over. While Google has now addressed one major, central problem in the new model's software, it's hard to erase a reputation, particularly among mainstream users who don't follow tech news on a daily basis.
If you buy a Ford and have a terrible lemon experience with it, you don't spend the rest of your life trying to make excuses for Ford. You spend the rest of your days with a negative impression of the brand that is hard to erase because you're that much less likely to even give Ford a chance again.
Do we know how well the first Nexus 7 sold over the last year? I'm just curious.
I don't recall hearing anything from Google... nor do I remember seeing ASUS in the list of top 5 tablet manufacturers.
Or maybe they're lumped into "Other" ?
My point is... we spent a lot of time talking about the first Nexus 7... and it seems to be starting again with the new model. I was just wondering if the Nexus 7 is actually worthy of all this talk.
There was talk that the original Nexus 7 was the "iPad mini killer"
Don't you have to outsell the iPad mini first? And then get people to stop buying the iPad mini altogether in order to kill it?
Profits or not, if you are selling less units from market share loss, you are making less money (than you would have).
What I am watching is, Apple has always (seemed) to not value market share as a primary goal and has been very profitable as a niche. But now that Steve is gone, will they now more aggressively pursue market share (lost opportunity in my opinion) and go for the whole enchilada? Why not?
I'm disappointed and frustrated to see they are fiddling while Rome is burning. Hello??? The clock is ticking.
They may be too late to offer a bigger iPhone screen (IMHO that's why they are losing share). That may stop the hemorrhaging though and may prevent them being marginalized like Windows did to Mac in the 80's and 90s.
They better move fast and not with "marginal" improvements. Momentum is changing quickly. Public perception is King and it is changing too. They CAN change momentum, but they better do it fast.
It's easy to say Apple "needs more market share," but what about everyone else: does Samsung? Does Amazon, Microsoft, Google Nexus Motorola? Why does just Apple "need market share"? Quite obviously, everyone wants as big of a share of the market as possible, including Apple. The questions is: how?
Samsung's focus on market share uber alles (shared by Google and Android in general) is not beating Apple's focus on making products people want. You can look at it as if Apple "lost market share" on the iPad as tons of android devices ship, but the reality is that Samsung was in the tablet market first, rapidly lost its lead to iPad, and is now only winning back worthless share that isn't generating profits.
It's critical to see the market as not just how much inventory companies can create, but how many devices they can sell.
Additionally, the "market" for tablets is not one huge equivalent commodity bin where consumers pick between identical devices. People interested in iPads (consumers, education, enterprise) are buying iPads and not considering any of these low end tablets at all. People who want $35 tablets were never in the "market" to buy an iPad. You are making the logical leap that any tablet shipped is a lost sale for Apple. That's not remotely true.
Throwing tablets sales all together and smirking at Apple for "only" selling 14 million iPads at a sustainable profit while Samsung increases its inventory of Galaxy Tabs by 7 million and is forced to give them away, and Microsoft builds up an inventory of millions of Surfaces it is losing a billion on at fire sale, and as everyone else ships tablets that nobody wants -- that's not one market with "share" accorded equally in proportion to shipments.
It was a very different situation in the early/mid 1990s when Apple itself was sitting on huge inventories of Performas nobody wanted and not making enough PowerBooks that people did want, while the rest of the industry was making a functional profit selling low cost, lower end PCs that people actually did buy and use, creating a powerful alternative platform that eventually ate up most of the differentiating value Apple could offer with the Mac. Completely different!
Every Windows PC sold was essentially a lost Mac opportunity, if (!) Apple had been able to develop a low end Mac of similar value. Remember that Apple actually maintained a large share of notebooks for years. Meanwhile, there weren't fractions of the Windows platform stuck in the past. Virtually any PC could run Win16, and when Win32 was delivered, it was a software upgrade to run that too. Android is not progressively updating its installed base.
Had Google built Android into a good enough platform for apps and driven Android tablets into the enterprise while Apple just sold iPads to schools and artists, we might have seen another Windows Emprise played out by Google's Android. But Google didn't do that. It has no business standing with Android anything, its consumer platform is weak and doesn't even run games that well, and the time is up for Google because Samsung is taking over Android with its own Hub ads, IAP, and proprietary APIs designed to convert Android into its own proprietary platform. This year!
Samsung might become an iOS threat, but so far, it hasn't shown much software and platform competency. In any case, even if it can pull off slitting Google's Android throat and shake down the body for some change, it is still far behind Apple in building an ecosystem, and after doing to Google what it tried to do to Apple, I'm thinking the Android community is not going to be very receptive about continuing to volunteer as Samsung's free labor, any more than Apple could sit back and ask a bunch of volunteers to maintain OS X and iOS for it at no cost.
They may be too late to offer a bigger iPhone screen (IMHO that's why they are losing share). That may stop the hemorrhaging though and may prevent them being marginalized like Windows did to Mac in the 80's and 90s..
They are losing share because the market is expanding faster. An increase of iPhones yoy is not hemmoraging.
While I do thing Apple will release a 5", it isn't imperative they do so.
For 20 years people shipped PCs with razor thin margins and almost no one made money except for Dell/HP/IBM selling into the enterprise market. You can keep pushing the narrative that profit == success, but eventually computing platforms get commoditized. There used to be a number of successful, vertically integrated Unix vendors, in fact, more vertically integrated than Apple, because they actually made their own CPUs, motherboards, storage, everything. They all got crushed by "unprofitable" Linux.
Microeconomics 101, the long run in a competitive market is for prices to trend towards marginal cost. The writing is on the wall and Wall Street knows it. It's absurd the way people cheerlead overpaying super-high margins to Apple, who then doesn't even reinvest the profits back into innovation, but is sitting on the cash, distributing it to investors, or buying back stock. This might sound great for investors, but it doesn't sound good for consumers.
Is this really what you want, to pay a 39% margin? Do you want into a car dealership and negotiate with the sales agent to pay MSRP or above?
Competition is supposed to drive down prices, if you're deliberating cheering for one company to win everything and set monopoly prices, you're a moron.
First post! I think you are the moron, as long as Apple produces a first class OS on the desktop or in mobile they control their fate, Moron!
The way I look at it, every year, PC capabilities went up, and prices stayed the same or got lower. You can talk all you want about Microsoft's margins, but Microsoft was selling Windows for less than 10% of the cost of a PC. The massive progress in GPUs and CPUs was the result of hyper-competition in the PC market and the legacy of that was billions plowed into semiconductor processes that Apple is now benefitting from, standing on the shoulders of all of that progress. The PowerVR GPUs in Ax chips are derived from desktop GPUs that went up against the heavy hitters of NVidia and ATI and failed, and so they pivoted to mobile where the tile-based-deferred-renderer architecture works much better from an efficiency standpoint.
If you walked into a PC shop in the 90s or early 00s, you'd see the same bewildering array of name and no-name PCs, from big brands and from uber-cheap Asian manufacturers. They'd all have roughly similar specs, and they'd all be dirt cheap, and they'd all be obsolete in a few months or a year. What's happening in Android is no different than what happened with the PC.
The PC got commodified and vendors could only compete on price and specs. You see the same with Android, except they're also trying to "skin" things to differentiate, which Microsoft limited or prohibited for Windows.
But the fruits are already here. The Nexus 7 2 destroys the iPad Mini. Way way better screen. More powerful. Cheaper. The only thing the iPads have going for them are the existing IOS apps market. Honestly, if there was no iOS native apps, and all you had was a Web browser, iPad would be in deep trouble. Sooner or later the App Store's advantages in content will be eroded.
It's pretty simple. Apple has little competitive differentiation when it comes to hardware technology. Everything they use is bought and licensed from the same Asian manufacturers -- screens, ARM cores, GPUs, sensors, et al. They have only two defenses against the pressures to commoditize: 1) iOS and 2) try to sue competitors.
As Microsoft proved in the 90s, path dependency in operating systems is a powerful factor in maintaining market share. The first mover advantage and existing apps provide powerful consumer incentives to "opt in" to where the greatest number of apps are. Remember how people used to whine about buying a Mac because it couldn't run their favorite Windows application? Apple had to fight tremendously against that to convince people they could find alternatives on OSX.
Now Apple is in the boat that Microsoft was. A familiar whine is people discussing Android is "I can't find my app on Google Play", and Google will have to continue to work to showing there are indeed alternatives.
What the downfall of Microsoft has shown is that, although it is difficult to unseat competitor with a large software ecosystem, it can be done.
The reality is, mobile computing is going to be commoditized just like PCs were, just like TVs were, just like cars were. It is unstoppable.
Competition is supposed to drive down prices, if you're deliberating cheering for one company to win everything and set monopoly prices, you're a moron.
I would say the moron is the one who doesn't understand the words he uses - like 'monopoly'.
Apple offers a superior product that people are willing to pay a premium for. That's what competition is about. If and when someone else offers a product that people want as much as they want idevices, then the competition will bring the price down. Until then, you should be complaining that none of your Googledroid devices are good enough to provide competition for Apple.
Comments
Us old timers have seen this before.
You can't see the forest through the trees.
Profits or not, if you are selling less units from market share loss, you are making less money (than you would have).
What I am watching is, Apple has always (seemed) to not value market share as a primary goal and has been very profitable as a niche. But now that Steve is gone, will they now more aggressively pursue market share (lost opportunity in my opinion) and go for the whole enchilada? Why not?
I'm disappointed and frustrated to see they are fiddling while Rome is burning. Hello??? The clock is ticking.
They may be too late to offer a bigger iPhone screen (IMHO that's why they are losing share). That may stop the hemorrhaging though and may prevent them being marginalized like Windows did to Mac in the 80's and 90s.
They better move fast and not with "marginal" improvements. Momentum is changing quickly. Public perception is King and it is changing too. They CAN change momentum, but they better do it fast.
Quote:
Originally Posted by 8thman
Dan,
Us old timers have seen this before.
You can't see the forest through the trees.
Profits or not, if you are selling less units from market share loss, you are making less money (than you would have).
What I am watching is, Apple has always (seemed) to not value market share as a primary goal and has been very profitable as a niche. But now that Steve is gone, will they now more aggressively pursue market share (lost opportunity in my opinion) and go for the whole enchilada? Why not?
I'm disappointed and frustrated to see they are fiddling while Rome is burning. Hello??? The clock is ticking.
They may be too late to offer a bigger iPhone screen (IMHO that's why they are losing share). That may stop the hemorrhaging though and may prevent them being marginalized like Windows did to Mac in the 80's and 90s.
They better move fast and not with "marginal" improvements. Momentum is changing quickly. Public perception is King and it is changing too. They CAN change momentum, but they better do it fast.
After waiting 9 years to make a first post that's a spectacularly dismal effort. Aside from the simple observation that the results from Samsung show this not to be the case, how can the amount of money made (profit) be independent of profit?
I actually think that rjc999 makes a lot of great points - but I think they're missing the bigger picture about Apple.
1- Comparing Apple to the vertical UNIX players of old (SGI, DEC, Sun, HP, etc) before they were commoditized by Linux/x86
None of these companies played in the consumer market. They built specialty hardware to solve specific scientific, business, visualization problems. Things like 3d hardware acceleration and 64 bit architectures were far beyond the practical needs of the home computer user. On the other hand, Apple's current competitors are often building more powerful hardware. There is a completely different dynamic taking place.
The razor-thin margins enjoyed by consumers in the PC era was due to the open specification of the PC architecture (allowing for commoditization) and one OS to rule it all. Make no mistake, plenty of margins were made in the PC era. By Microsoft.
2- Microeconomics 101, all products go to zero margin, eventually.
No. This is does not work for products that can be differentiated. How long have hand bags been around? Hundreds of years, with plenty of competition. Yet somehow there are $50,000 Hermès bags being sold today. How about something as simple as sugar water? Why do we continue to pay more for Coca-Cola compared to the no-name store brands?
Something else I should note is Apple's insane economies of scale. Consider the possibility that Apple can profitably manufacture and sell products equal or lower MSRP than competitors who are near 0% margin.
3- Developers moving to Android after "maxing out" iOS.
First of all, this implies that apps will generally come out first for iOS to test whether they'll be successful in the first place. This makes the iOS ecosystem a breeding ground for new, innovative apps.
I run an app business. I didn't bother with Android until, as you said, my app was proven to succeed on iOS. It took me over one year to reach that point.
4- Apple does not do R&D.
You're focusing a lot on purely science and hardware based R&D, of which Apple does plenty. Just look at their patent library for a hint of what they're doing in terms of semiconductors, display technologies, battery technologies, low-power consumption computing, etc.
What you're missing is the work and expertise Apple does in human computer interaction. This is Apple's trump card. Things like bouncing, simulated inertia scrolling seem so obvious after the fact, don't they? Thing is, they're not obvious at all before they were ever conceived. It takes a great deal of reseach in human psychology, capacitive multitouch research, and other topics of human computer interaction to come up with this stuff.
You can go ahead and dismiss this type of research as not "real science" but this stance will do you a great disservice in understanding why Apple went from near bankruptcy to becoming the largest market cap on the planet.
Hedge fund managers are trying to beat the market and therefore looking for growth companies. Apple as a growth company has slowed making it less attractive to hedge funds. That doesn't mean they are expecting Apple to whither away over the next few years, just that its not what they are looking for. On the other hand, with its increasing dividend and stock repurchasing plans, apple us becoming more attractive to longer term investors.
I read the following comment by a reader called Googler in a phone arena article about problem of build quality of the new Nexus 7. It made me laugh. Because it reminds me about the comments to every new Windows OS when it comes out. The comments all praise it is more reliable. For Apple users this is a completely different. I frequently see people still using iPhone 3GS or iPad 2. You know their answers if you are truly an Apple user yourself.
"Couple of hours here and I'm fully impressed. I have the old one as well and it's no comparison. Not only is the newer one amazingly fast, the screen is beautiful and the build quality is really solid. The battery was round 50% out of the box so I haven't charged it fully to test how 4.3 performs. Probably load the same Netflix movie on both tomorrow and do a side by side test to see how the battery holds up.
And 4.3 says Jelly Bean in the settings, it's not Key Lime Pie. And as for performance, if anyone says this thing lags, they are nothing but trolls, this is the smoothest I've seen Android yet.
First impression, impressed."
Quote:
Originally Posted by drblank
I'm sure Apple pays more for components than Samsung in the BOM listed since Apple buys them from Samsung and Samsung mfg them for cheaper than what they sell them to Apple for. Plus the Apple aluminum case isn't cheap to fabricate.
The iSuppli figures build in higher component costs for iPad than for Samsung along that reasoning.
However, while Samsung (and anyone else in its position) would love to charge Apple much more than its own costs, the profits of System LSI and its memory and LCD units indicate that it runs pretty lean. Also, economies of scale are pretty powerful.
Samsung might be making its own parts, but if it can only ship 7 million of its own tablets at very minimal profit vs. Apple selling at least twice as many, its going to take that business. Particularly since Apple is the only customer that can show up with several billion and offer a stable contract price for a guaranteed huge volume of ongoing sales. Turn down that deal and your factory sits idle or operates under capacity, and that would result in far greater costs than holding out for a higher component price could deliver.
So despite the iSuppli prediction last year that Samsung would be making higher margins, the reality is that Samsung has very little to show for its tablet sales, while Apple is making billions of dollars directly, and from related sales like iTunes, AppleCare, etc.
http://www.walmart.com/search/search-ng.do?ic=16_0&Find=Find&search_query=android tablet&Find=Find&search_constraint=0
Two of the three shown are 4.3 inch "tablets". The amazing thing is how little desire I have to own one of these no-name Android tablets even at less than $50. They will likely never get an OS upgrade. They don't even have the Google Play store. By allowing these questionable products into the market it greatly reduces confidence in the entire Android tablet platform. The entire product line from these $50 tablets to Google's Nexus 7 are just different shades of crap.
Quote:
Originally Posted by ndirishfan1975
The Nexus 7 should be able to be a tablet that is almost a year old; however, specs are not everything. I for one think the form factor of the Nexus 7 is horrendous. the 16x10 ratio is great for watching a video, but not a good experience for web browsing or many apps. I like the 16x9 for the phone because it is primarily a one handed device so taller and skinnier makes sense, but a tablet isn't a one handed device and the same form factor doesn't make sense. The iPad mini wins on the user experience front in a big way. It is small enough and light weight enough to be easily portable, but gives a form factor that is still useful. As for the screen resolution, when I use my mini I don't really notice anything bad about the screen. If I put it side by side with my wife's iPad 4 the difference is easy to notice, but when in use the screen functions just fine.
Also useful to note that Google's decisions on the new Nexus 7 are not just additive but subtractive. The retina-like screen certainly is a nice feature, but it also means that the new model gets just (via WSJ review) 6 hrs of battery, or less than 60% of the iPad mini. That's a reversal, because the first one promised (at least) greater battery than the mini (and still didn't sell the way Google expected).
The Nexus 7 has also suffered through a year of defective software that frequently rendered it unusable, even to techy reviewers who had the spare time to try fixes over and over. While Google has now addressed one major, central problem in the new model's software, it's hard to erase a reputation, particularly among mainstream users who don't follow tech news on a daily basis.
If you buy a Ford and have a terrible lemon experience with it, you don't spend the rest of your life trying to make excuses for Ford. You spend the rest of your days with a negative impression of the brand that is hard to erase because you're that much less likely to even give Ford a chance again.
It's "can't see the forest for the trees" not through. The forest isn't through the trees. The forest is the trees. And you're looking at a close up view of bark.
Quote:
Originally Posted by Constable Odo
It all seems very interesting, however... I have yet to hear one hedge fund manager say that Apple has some sort of advantage over other smartphone companies. In fact, they claim the reason why they all dumped Apple is because Apple seems weak and vulnerable as a company. Most claim that the competition is too great for Apple to overcome and any cheap Android smartphone is just as good as a high-end iPhone. I've heard them repeat this mantra over and over again. Now they're claiming that Apple's market cap is far too high and that the company has reached its limit so the share price will not rise much higher than it is now. The hedge fund managers believe that Apple should have been able to crush its rivals but missed its chance and now it's too late. Wall Street never considers things such as high-quality or customer service being worth anything and only bulk sales matters. Bulk sales matters because it's the chief factor behind gaining market share.
I'm not trying to dispute Dediu's numbers as he seems to work very hard at what he does. I'm only saying his view of Apple is almost the exact opposite of how Wall Street and the tech industry at large, views Apple. I don't really understand the discrepancy of Apple's valuation on Wall Street to the reality of profits and margins, but I certainly know that the discrepancy does exist. Apple is not valued as a Tesla, Netflix or LinkedIn-style company. Not even close. Dediu puts a lot of emphasis on the iOS ecosystem and services as being some sort of deep and strong moat. The hedge fund managers say the iOS moat is extremely shallow and pretty much ineffective. So, who should I believe? I would think the big money guys would be the ones to know the best or are they really just too stupid to understand what Apple has because they're minds are too simplistic.
I realize that Apple is again the most valuable company by market cap even after an absolutely horrible nine months or so and Apple has supposedly been written off as a top tech company by nearly everyone. I honestly can't explain it but it just seems as though something isn't adding up. It isn't likely that a company is failing with a more than $400 billion market cap and $145 billion in reserve cash. So many things I read and hear just don't make a lot of sense.
One thing I don't like about those hedge fund managers is that they usually favor companies that make cheap, low-quality products and I don't get that at all. Why would they want to push that sort of stuff on consumers. I'm sure they're only out to make quick money and don't care about the consequences of their choices. The SEC really needs to regulate hedge funds to keep them in check.
Never bet on hunches based on simple thinking over the analysis of a guy who brings data to the table. Asymco has regularly depicted models that turn out to be correct and inline with observable facts.
The hedge funds are the same people who couldn't decide if Apple was worth $700 billion or $380 billion within the space of ~six months, after similarly betting against Apple back and forth in 2008 (insanely doubling and halving Apple's market cap) with similar reasoning of "macroeconomic can't compete" blustering that in retrospect was clearly wrong.
Their speculative efforts to move cash in and out of Apple securities is based on shell game numerology. They are not investing in fundamentals. They are highbrow check kiters.
Do we know how well the first Nexus 7 sold over the last year? I'm just curious.
I don't recall hearing anything from Google... nor do I remember seeing ASUS in the list of top 5 tablet manufacturers.
Or maybe they're lumped into "Other" ?
My point is... we spent a lot of time talking about the first Nexus 7... and it seems to be starting again with the new model. I was just wondering if the Nexus 7 is actually worthy of all this talk.
There was talk that the original Nexus 7 was the "iPad mini killer"
Don't you have to outsell the iPad mini first? And then get people to stop buying the iPad mini altogether in order to kill it?
Yeah that didn't happen.
Maybe the Nexus 7 is a "Kindle Fire killer"
Quote:
Originally Posted by 8thman
Dan,
Us old timers have seen this before.
You can't see the forest through the trees.
Profits or not, if you are selling less units from market share loss, you are making less money (than you would have).
What I am watching is, Apple has always (seemed) to not value market share as a primary goal and has been very profitable as a niche. But now that Steve is gone, will they now more aggressively pursue market share (lost opportunity in my opinion) and go for the whole enchilada? Why not?
I'm disappointed and frustrated to see they are fiddling while Rome is burning. Hello??? The clock is ticking.
They may be too late to offer a bigger iPhone screen (IMHO that's why they are losing share). That may stop the hemorrhaging though and may prevent them being marginalized like Windows did to Mac in the 80's and 90s.
They better move fast and not with "marginal" improvements. Momentum is changing quickly. Public perception is King and it is changing too. They CAN change momentum, but they better do it fast.
It's easy to say Apple "needs more market share," but what about everyone else: does Samsung? Does Amazon, Microsoft, Google Nexus Motorola? Why does just Apple "need market share"? Quite obviously, everyone wants as big of a share of the market as possible, including Apple. The questions is: how?
Samsung's focus on market share uber alles (shared by Google and Android in general) is not beating Apple's focus on making products people want. You can look at it as if Apple "lost market share" on the iPad as tons of android devices ship, but the reality is that Samsung was in the tablet market first, rapidly lost its lead to iPad, and is now only winning back worthless share that isn't generating profits.
It's critical to see the market as not just how much inventory companies can create, but how many devices they can sell.
Additionally, the "market" for tablets is not one huge equivalent commodity bin where consumers pick between identical devices. People interested in iPads (consumers, education, enterprise) are buying iPads and not considering any of these low end tablets at all. People who want $35 tablets were never in the "market" to buy an iPad. You are making the logical leap that any tablet shipped is a lost sale for Apple. That's not remotely true.
Throwing tablets sales all together and smirking at Apple for "only" selling 14 million iPads at a sustainable profit while Samsung increases its inventory of Galaxy Tabs by 7 million and is forced to give them away, and Microsoft builds up an inventory of millions of Surfaces it is losing a billion on at fire sale, and as everyone else ships tablets that nobody wants -- that's not one market with "share" accorded equally in proportion to shipments.
It was a very different situation in the early/mid 1990s when Apple itself was sitting on huge inventories of Performas nobody wanted and not making enough PowerBooks that people did want, while the rest of the industry was making a functional profit selling low cost, lower end PCs that people actually did buy and use, creating a powerful alternative platform that eventually ate up most of the differentiating value Apple could offer with the Mac. Completely different!
Every Windows PC sold was essentially a lost Mac opportunity, if (!) Apple had been able to develop a low end Mac of similar value. Remember that Apple actually maintained a large share of notebooks for years. Meanwhile, there weren't fractions of the Windows platform stuck in the past. Virtually any PC could run Win16, and when Win32 was delivered, it was a software upgrade to run that too. Android is not progressively updating its installed base.
Had Google built Android into a good enough platform for apps and driven Android tablets into the enterprise while Apple just sold iPads to schools and artists, we might have seen another Windows Emprise played out by Google's Android. But Google didn't do that. It has no business standing with Android anything, its consumer platform is weak and doesn't even run games that well, and the time is up for Google because Samsung is taking over Android with its own Hub ads, IAP, and proprietary APIs designed to convert Android into its own proprietary platform. This year!
Samsung might become an iOS threat, but so far, it hasn't shown much software and platform competency. In any case, even if it can pull off slitting Google's Android throat and shake down the body for some change, it is still far behind Apple in building an ecosystem, and after doing to Google what it tried to do to Apple, I'm thinking the Android community is not going to be very receptive about continuing to volunteer as Samsung's free labor, any more than Apple could sit back and ask a bunch of volunteers to maintain OS X and iOS for it at no cost.
Great to see a lot of thoughtful replies to this article!
They are losing share because the market is expanding faster. An increase of iPhones yoy is not hemmoraging.
While I do thing Apple will release a 5", it isn't imperative they do so.
Quote:
Originally Posted by Corrections
Great to see a lot of thoughtful replies to this article!
Good to see you participating too. Nice article, by the way.
Quote:
Originally Posted by rjc999
For 20 years people shipped PCs with razor thin margins and almost no one made money except for Dell/HP/IBM selling into the enterprise market. You can keep pushing the narrative that profit == success, but eventually computing platforms get commoditized. There used to be a number of successful, vertically integrated Unix vendors, in fact, more vertically integrated than Apple, because they actually made their own CPUs, motherboards, storage, everything. They all got crushed by "unprofitable" Linux.
Microeconomics 101, the long run in a competitive market is for prices to trend towards marginal cost. The writing is on the wall and Wall Street knows it. It's absurd the way people cheerlead overpaying super-high margins to Apple, who then doesn't even reinvest the profits back into innovation, but is sitting on the cash, distributing it to investors, or buying back stock. This might sound great for investors, but it doesn't sound good for consumers.
Is this really what you want, to pay a 39% margin? Do you want into a car dealership and negotiate with the sales agent to pay MSRP or above?
Competition is supposed to drive down prices, if you're deliberating cheering for one company to win everything and set monopoly prices, you're a moron.
First post! I think you are the moron, as long as Apple produces a first class OS on the desktop or in mobile they control their fate, Moron!
Quote:
Originally Posted by rjc999
The way I look at it, every year, PC capabilities went up, and prices stayed the same or got lower. You can talk all you want about Microsoft's margins, but Microsoft was selling Windows for less than 10% of the cost of a PC. The massive progress in GPUs and CPUs was the result of hyper-competition in the PC market and the legacy of that was billions plowed into semiconductor processes that Apple is now benefitting from, standing on the shoulders of all of that progress. The PowerVR GPUs in Ax chips are derived from desktop GPUs that went up against the heavy hitters of NVidia and ATI and failed, and so they pivoted to mobile where the tile-based-deferred-renderer architecture works much better from an efficiency standpoint.
If you walked into a PC shop in the 90s or early 00s, you'd see the same bewildering array of name and no-name PCs, from big brands and from uber-cheap Asian manufacturers. They'd all have roughly similar specs, and they'd all be dirt cheap, and they'd all be obsolete in a few months or a year. What's happening in Android is no different than what happened with the PC.
The PC got commodified and vendors could only compete on price and specs. You see the same with Android, except they're also trying to "skin" things to differentiate, which Microsoft limited or prohibited for Windows.
But the fruits are already here. The Nexus 7 2 destroys the iPad Mini. Way way better screen. More powerful. Cheaper. The only thing the iPads have going for them are the existing IOS apps market. Honestly, if there was no iOS native apps, and all you had was a Web browser, iPad would be in deep trouble. Sooner or later the App Store's advantages in content will be eroded.
It's pretty simple. Apple has little competitive differentiation when it comes to hardware technology. Everything they use is bought and licensed from the same Asian manufacturers -- screens, ARM cores, GPUs, sensors, et al. They have only two defenses against the pressures to commoditize: 1) iOS and 2) try to sue competitors.
As Microsoft proved in the 90s, path dependency in operating systems is a powerful factor in maintaining market share. The first mover advantage and existing apps provide powerful consumer incentives to "opt in" to where the greatest number of apps are. Remember how people used to whine about buying a Mac because it couldn't run their favorite Windows application? Apple had to fight tremendously against that to convince people they could find alternatives on OSX.
Now Apple is in the boat that Microsoft was. A familiar whine is people discussing Android is "I can't find my app on Google Play", and Google will have to continue to work to showing there are indeed alternatives.
What the downfall of Microsoft has shown is that, although it is difficult to unseat competitor with a large software ecosystem, it can be done.
The reality is, mobile computing is going to be commoditized just like PCs were, just like TVs were, just like cars were. It is unstoppable.
Give up!
Quote:
Originally Posted by rjc999
Apple is a buyer. They buy the fruits of the raw R&D done by other players, and design a pleasant case to fit it into.
Well everyone has their niche. The important part is to do it well. Apple integrates hardware and software beautifully.
Why should a master carpenter grow his own trees? Jack of all trades master of none is not in the Apple culture.
I would say the moron is the one who doesn't understand the words he uses - like 'monopoly'.
Apple offers a superior product that people are willing to pay a premium for. That's what competition is about. If and when someone else offers a product that people want as much as they want idevices, then the competition will bring the price down. Until then, you should be complaining that none of your Googledroid devices are good enough to provide competition for Apple.