As Apple begins a new year of operations, a media narrative is unfolding that Apple must ditch its reliance on premium hardware-- and particularly iPhone
I agree with that statement -- to a point.
Yes, The smart phone market as well as the laptop market has matured and smoothed over so that there simply isn't enough room for a standout chunk of hardware. Whatever Apple can build another manufacturer can match or even improve upon.
But a BIG FAT NO! -- because, in actuality, Apple has never relied on hardware -- despite the fact that is what everybody focuses on. When the new iPhone comes out everybody, including the media, ooohs and ahhs over it. But people buy iPhones because of what they do for them and how they do it -- and that comes primarily from the software, the integration, Apple's infrastructure and ecosystem. And, the same is true for MacBooks.
So, I agree that Apple will not survive relying strictly on its superior hardware. But, the point is meaningless because they never did! Yes, they have been and still are leaders in the hardware side, but that's not what sells iPhones or MacBooks. For example: How many would buy an iPhone running Android or a MacBook running Windows?
Of course Apple controlling/knowing the hardware confers two big advantages to Apple: 1) better quality control...it's easier to write better quality software when you know exactly what hardware it's running on, and 2) the ability to advance things faster...you can push forward on stuff like USB or whatever other technology you want to mention when you are making the hardware and software together P.S. All that said, Apple does need to keep the hardware competitive. But it's not the primary selling point.
Quite so. One of the reasons Apple was in trouble in the nineties is becuase the price/value equation got out of kilter, and became catastrophic once win95 was released. It was, and is, always worth paying a bit more for Apple products because the combination of hardware and software is so good. However, once the competition becomes good enough, price becomes more important. It reminds of that scene in PiratesofSiliconValley, where Jobs whines something along the lines of “but we’re better than you” to which Gates says “that doesn’t matter”.
Designr said: I think it's move to services is very wise but could be improved (it's fairly evident they don't quite "get" web-base technology like Google, Facebook and Amazon...even Microsoft do). But the iPhone business rapidly shrinking in a short time would have a profound impact
Apple doesn’t get web technology, you’re halarious... Apple doesn’t get lack of privacy and ethics like Google, Facebook, and Amazon... I fixed it for you, you’re welcome...
iPhone business rapidly shrinking? Please cite your facts...
No need for me to thank you. You didn't do me any favors. I was not specifically (or even generally referring to privacy issues). I was referring to implementation of various web services like iCloud as one example.
Second...I didn't say the iPhone business was rapidly shrinking. I said that that happening would be a big deal.
If Jupiter slipped its orbit and crashed into Earth... a big deal.
Of course Apple controlling/knowing the hardware confers two big advantages to Apple: 1) better quality control...it's easier to write better quality software when you know exactly what hardware it's running on, and 2) the ability to advance things faster...you can push forward on stuff like USB or whatever other technology you want to mention when you are making the hardware and software together P.S. All that said, Apple does need to keep the hardware competitive. But it's not the primary selling point.
Quite so. One of the reasons Apple was in trouble in the nineties is becuase the price/value equation got out of kilter, and became catastrophic once win95 was released. It was, and is, always worth paying a bit more for Apple products because the combination of hardware and software is so good. However, once the competition becomes good enough, price becomes more important. It reminds of that scene in PiratesofSiliconValley, where Jobs whines something along the lines of “but we’re better than you” to which Gates says “that doesn’t matter”.
Apple was in trouble mainly because they listened to the outside noise, by selling their OS to parasites, Apple is a hardware and a software company the last of the American computer companies that did both. (Commodore, Sun, SGI, Atari, Digital, some were great companies with interesting tech who let it go mainly due to a lack of imagination also imagine where Motorola, IBM and Intel would be if one of them had built smaller faster cpu's when Jobs came to them).
Designr said: I think it's move to services is very wise but could be improved (it's fairly evident they don't quite "get" web-base technology like Google, Facebook and Amazon...even Microsoft do). But the iPhone business rapidly shrinking in a short time would have a profound impact
Apple doesn’t get web technology, you’re halarious... Apple doesn’t get lack of privacy and ethics like Google, Facebook, and Amazon... I fixed it for you, you’re welcome...
iPhone business rapidly shrinking? Please cite your facts...
Not sure what web technology he is referring to but iCloud is a poor and expensive substitute to Google Drive. Ping, or whatever they call it, was no Facebook and thankfully retired. Did Designr saying they had better privacy than Apple?
iCloud being more expensive is fine if it's safe and secure unlike Goog's crap.
Ping was never meant to be a Facebook. People conveniently move the goalposts specifically for Apple.
The only one conveniently remembering anything is you forgetting the intent of your own comments. You wanted examples of poor web services from Apple and I just gave you two.
Of course Apple controlling/knowing the hardware confers two big advantages to Apple: 1) better quality control...it's easier to write better quality software when you know exactly what hardware it's running on, and 2) the ability to advance things faster...you can push forward on stuff like USB or whatever other technology you want to mention when you are making the hardware and software together P.S. All that said, Apple does need to keep the hardware competitive. But it's not the primary selling point.
Quite so. One of the reasons Apple was in trouble in the nineties is becuase the price/value equation got out of kilter, and became catastrophic once win95 was released. It was, and is, always worth paying a bit more for Apple products because the combination of hardware and software is so good. However, once the competition becomes good enough, price becomes more important. It reminds of that scene in PiratesofSiliconValley, where Jobs whines something along the lines of “but we’re better than you” to which Gates says “that doesn’t matter”.
Yeah, and I think this is a risk right now for Apple in phones. Apple is perfectly capable of delivering a profitable line of phones* from solid entry level to keep people in the Apple world.
*NOTE I'm not referring to just selling last year's models at lower prices. That's one strategy of course. And it might be a fine one. But there's an optics issue they might need to contend with.
Very true! But that point raises a series of Cost Accounting type issues: Perhaps the biggest is FIXED COSTS: A major cost of both iPhones and Macs is the non-hardware end (software & ecosystem). And the total cost of that is mostly fixed and doesn't change no matter how many or how few units they sell. For (exagerrated) example: If it cost $1M to develop iOS and Apple only sells only one iPhone the price would have to be north of $1M to make a profit. If they sell 1Million phones then that price drops to a dollar. So, Apple could increase profits by selling more (but cheaper) phones -- and the more they sell the cheaper they could sell them.
Another is COST AMORTIZATION: It costs a lot of money to tool up for a new hardware model -- a chip factory can run in excess of a $1Billion. So again, if they sell one iPhone it would have to be priced in excess of $1B to be profitable. But, the more they sell the lower price they can charge. So that encourages Apple to continue selling its older models rather than selling new ones that are cheaper.
Of course, while fundamentally true, those examples are grossly oversimplified. There are far more factors to weigh. But, fundamentally, they are true.
And, by the way, it is why all these continuing discussions on ai and elsewhere of "Apple's gross margin" are bullshit. Without knowing the volume as well as fixed and amortized costs, the gross margin is meaningless. A company selling a million units at 1% margin will make more than a company selling a handful at a 30% margin.
We here will never know the real answer. We can only hope that Apple has a great cost accountant advising Mr Cook.
Designr said: I think it's move to services is very wise but could be improved (it's fairly evident they don't quite "get" web-base technology like Google, Facebook and Amazon...even Microsoft do). But the iPhone business rapidly shrinking in a short time would have a profound impact
Apple doesn’t get web technology, you’re halarious... Apple doesn’t get lack of privacy and ethics like Google, Facebook, and Amazon... I fixed it for you, you’re welcome...
iPhone business rapidly shrinking? Please cite your facts...
No need for me to thank you. You didn't do me any favors. I was not specifically (or even generally referring to privacy issues). I was referring to implementation of various web services like iCloud as one example.
Second...I didn't say the iPhone business was rapidly shrinking. I said that that happening would be a big deal.
If Jupiter slipped its orbit and crashed into Earth... a big deal.
He said: "I didn't say the iPhone business was rapidly shrinking. I said that that happening would be a big deal."
And what he said is true. There was no need or justification for trashing it.
Of course Apple controlling/knowing the hardware confers two big advantages to Apple: 1) better quality control...it's easier to write better quality software when you know exactly what hardware it's running on, and 2) the ability to advance things faster...you can push forward on stuff like USB or whatever other technology you want to mention when you are making the hardware and software together P.S. All that said, Apple does need to keep the hardware competitive. But it's not the primary selling point.
Quite so. One of the reasons Apple was in trouble in the nineties is becuase the price/value equation got out of kilter, and became catastrophic once win95 was released. It was, and is, always worth paying a bit more for Apple products because the combination of hardware and software is so good. However, once the competition becomes good enough, price becomes more important. It reminds of that scene in PiratesofSiliconValley, where Jobs whines something along the lines of “but we’re better than you” to which Gates says “that doesn’t matter”.
Apple was in trouble mainly because they listened to the outside noise, by selling their OS to parasites, Apple is a hardware and a software company the last of the American computer companies that did both. (Commodore, Sun, SGI, Atari, Digital, some were great companies with interesting tech who let it go mainly due to a lack of imagination also imagine where Motorola, IBM and Intel would be if one of them had built smaller faster cpu's when Jobs came to them).
In the business world that is know as being vertically integrated. Instead of being broadbased they control all aspects of the product -- but they have a narrow focus on only that product (Admittedly "vertically integrated usually refers to production rather than product. But still, it pertains here)
And, that means that, without that broad distribution of multiple disparate products they are more reliant on a single product which increases their risk. If that single product falls off, they don't just decline, they close the doors. An analogy might be a highly levered company where, from a profit and loss perspective, everything is grossly exaggerated.
Take Atari - when their video game empire did well so did they, but when it folded, so did they. (They had tried to establish themselves in home computing but failed)
Excellent article. DED is the only tech journalist I am aware of who sees the reality amidst an ocean of fake news about Apple. Everyday I read stories explaining how Apple is doomed because it owns the worldwide smartphone market - both consumer and enterprise - with the highest priced and highest margin and highest corporate profit in the industry - and this will doom Apple, according to the expert journalists because apparently Apple makes such great products nobody will every need a new phone.
Thank you Daniel for a great piece explaining the reality and providing some needed relief to shareholders.
I will just slip these quotes into the mix about how Apple is where it Is today. Apple is a much, much bigger company now, but for someone who was a heavy Mac user at the time, there are many similarities between the managerial behaviour (as it seems from the outside) of the Apple of the early nineties and that of today:
What happened at Apple, to be honest, over the years was the goal used to be to make the best computers in the world. And that was goal one. Goal two, we got from Hewlett-Packard actually which was "we have to make a profit". Because if we don't make a profit we can't do goal one. So, yeah, I mean we enjoyed making a profit, but the purpose of making a profit was so we can make the best computers in the world. Along the way somewhere those two got reversed. The goal is to make a lot of money and well, if we have to make some good computers well ok we'll do that... 'cause we can make a lot of money doing that. And, it's very subtle. It's very subtle at first, but it turns out it's everything. That one little subtle flip... takes 5 years to see it, but that one little subtle flip in 5 years means everything.
Lastly, we're really big on making computers our friends can afford, and not all our friends are Larry Ellison. So, we've got to make computers that are really affordable and I think that's another place that Apple got really off-track and we are just driving that really hard.
No. I do not agree with you. Apple, even under jobs was about making the best overall machines.With the iPhone XS Max ,iPad Pro,iMac Pro, Apple Watch, AirPods Apple has shown that they are still making the best, by far. You may argue about price hikes, but iPhones now @ $450 can do 90% of what the XR & XS can do. Meanwhile the @ $330 iPad 10’ does 90% of what the iPad Pros can do. So I would argue Apple has stretched the iPhone & iPad lineup on both ends. The Mac is where I agree with your idea. That’s why Apple needs to make the Mac with their own chips.
A good article and follow up posts too! I don't believe Apple will last forever though ... just seems to be the way of things in the long run and probably healthy anyhow. The Ballad of Buster Scruggs (1st scene) ... "can't be top dog forever" comes to mind.
As I said on an article on ped30.com today (https://www.ped30.com/2019/02/24/iphone-replacement-rate-apple/), Apple’s share of the smartphone market measured by “market share” is about 15%, but Apple’s share of the smartphone market measured by “installed base” is twice that, and increasing.
And that doesn’t count peripherals like AirPods (where Apple is still struggling to match demand) and the Apple Watch (which is now both an accessory and a stand-alone device).
Designr said: I think it's move to services is very wise but could be improved (it's fairly evident they don't quite "get" web-base technology like Google, Facebook and Amazon...even Microsoft do). But the iPhone business rapidly shrinking in a short time would have a profound impact
Apple doesn’t get web technology, you’re halarious... Apple doesn’t get lack of privacy and ethics like Google, Facebook, and Amazon... I fixed it for you, you’re welcome...
iPhone business rapidly shrinking? Please cite your facts...
No need for me to thank you. You didn't do me any favors. I was not specifically (or even generally referring to privacy issues). I was referring to implementation of various web services like iCloud as one example.
Second...I didn't say the iPhone business was rapidly shrinking. I said that that happening would be a big deal.
If Jupiter slipped its orbit and crashed into Earth... a big deal.
I get it. You think it's a low probability. And it may be. But I suspect Motorola, Nokia and Blackberry all thought exactly the same thing.
I'm sure Motorola, Nokia and Blackberry thought the same thing. I vaguely recall reading something about the CEO of Blackberry (RIM at the time) making a statement about how the iPhone wouldn't be successful. Those companies were in a very different position to Apple though. While it's true nothing really lasts forever, Apple isn't reliant primarily on phones like these companies were.
Not sure if you actually read the article but it clearly states that Apple's Mac business is still going strong despite an overall decline in the PC market. If you look at Apple's other business areas (Mac, wearables, services etc...) they are about 50% of the iPhone business. Sure, if the iPhone imploded that would have an impact on those other business areas but Apple is not in the same place as companies like Motorola, Nokia and Blackberry. They are continuing to build their user base in a number of areas and are well positioned to be the company that creates the next big thing/platform.
As Apple begins a new year of operations, a media narrative is unfolding that Apple must ditch its reliance on premium hardware-- and particularly iPhone
I agree with that statement -- to a point.
Yes, The smart phone market as well as the laptop market has matured and smoothed over so that there simply isn't enough room for a standout chunk of hardware. Whatever Apple can build another manufacturer can match or even improve upon.
But a BIG FAT NO! -- because, in actuality, Apple has never relied on hardware -- despite the fact that is what everybody focuses on. When the new iPhone comes out everybody, including the media, ooohs and ahhs over it. But people buy iPhones because of what they do for them and how they do it -- and that comes primarily from the software, the integration, Apple's infrastructure and ecosystem. And, the same is true for MacBooks.
So, I agree that Apple will not survive relying strictly on its superior hardware. But, the point is meaningless because they never did! Yes, they have been and still are leaders in the hardware side, but that's not what sells iPhones or MacBooks. For example: How many would buy an iPhone running Android or a MacBook running Windows?
It ain't about the hardware and never was!
This.
People frequently refer to Apple as a "hardware company". It actually wouldn't be terribly unfair to refer to Apple as a software company that sells its software on great hardware. Put another way: Apple sells software with great packaging. ;-)
But the story has always been more complicated and subtle than even that. It's both/and not either/or. Apple is perhaps one of the best companies ever to build a very well fashioned combination of hardware and software. There was a time when Sony made great consumer electronics hardware. Even Motorola had its heyday with great phone hardware (RAZR) in the feature phone/flip phone era. But Apple is virtually unmatched in their skill in marrying software and hardware together.
Still, I think I agree with you, I primarily buy Macs or iPhones because of the OS. The hardware is generally very good...but it's the OS that seals the deal for me.
Of course Apple controlling/knowing the hardware confers two big advantages to Apple: 1) better quality control...it's easier to write better quality software when you know exactly what hardware it's running on, and 2) the ability to advance things faster...you can push forward on stuff like USB or whatever other technology you want to mention when you are making the hardware and software together.
P.S. All that said, Apple does need to keep the hardware competitive. But it's not the primary selling point.
"It actually wouldn't be terribly unfair to refer to Apple as a software company that sells its software on great hardware. Put another way: Apple sells software with great packaging."
Of course it wouldn't be unfair considering that Steve Jobs himself always considered Apple to be a software company
As Apple begins a new year of operations, a media narrative is unfolding that Apple must ditch its reliance on premium hardware-- and particularly iPhone
I agree with that statement -- to a point.
Yes, The smart phone market as well as the laptop market has matured and smoothed over so that there simply isn't enough room for a standout chunk of hardware. Whatever Apple can build another manufacturer can match or even improve upon.
But a BIG FAT NO! -- because, in actuality, Apple has never relied on hardware -- despite the fact that is what everybody focuses on. When the new iPhone comes out everybody, including the media, ooohs and ahhs over it. But people buy iPhones because of what they do for them and how they do it -- and that comes primarily from the software, the integration, Apple's infrastructure and ecosystem. And, the same is true for MacBooks.
So, I agree that Apple will not survive relying strictly on its superior hardware. But, the point is meaningless because they never did! Yes, they have been and still are leaders in the hardware side, but that's not what sells iPhones or MacBooks. For example: How many would buy an iPhone running Android or a MacBook running Windows?
It ain't about the hardware and never was!
This.
People frequently refer to Apple as a "hardware company". It actually wouldn't be terribly unfair to refer to Apple as a software company that sells its software on great hardware. Put another way: Apple sells software with great packaging. ;-)
But the story has always been more complicated and subtle than even that. It's both/and not either/or. Apple is perhaps one of the best companies ever to build a very well fashioned combination of hardware and software. There was a time when Sony made great consumer electronics hardware. Even Motorola had its heyday with great phone hardware (RAZR) in the feature phone/flip phone era. But Apple is virtually unmatched in their skill in marrying software and hardware together.
Still, I think I agree with you, I primarily buy Macs or iPhones because of the OS. The hardware is generally very good...but it's the OS that seals the deal for me.
Of course Apple controlling/knowing the hardware confers two big advantages to Apple: 1) better quality control...it's easier to write better quality software when you know exactly what hardware it's running on, and 2) the ability to advance things faster...you can push forward on stuff like USB or whatever other technology you want to mention when you are making the hardware and software together.
P.S. All that said, Apple does need to keep the hardware competitive. But it's not the primary selling point.
"It actually wouldn't be terribly unfair to refer to Apple as a software company that sells its software on great hardware. Put another way: Apple sells software with great packaging."
Of course it wouldn't be unfair considering that Steve Jobs himself always considered Apple to be a software company
Ahhh! So, the hardware that we all salivate over is just a vehicle to deliver the work that the software does. That makes sense. The software does the real work of giving us what we need - it's the difference between a Galaxy S10 and an iPhone X. The hardware simply enables it to happen.
If you come at it from that viewpoint everything Steve and Apple have done make sense. Steve meant every word he said in that video. Steve never blew smoke. If he said it, he meant it.
It also explains why they have farmed out the manufacture of almost all of their hardware and only take on those pieces that are needed (such as the CPU for the iPhone and Watch and soon the wireless modem as well). But the software is always done completely inhouse. Even the ecosystem: They started using AWS for their iCloud and, when that got insecure, they migrated it to Google and eventually bit the bullet and took it inhouse.
But the hardware? That gets farmed out as much as possible.
This article talks about Apple avoiding the mistakes Microsoft made in the past so it can stay ahead of the game and be prosperous, but completely ignores the fact that Apple wouldn't be around today if Microsoft hadn't infused $120 million into the company 20 years ago.
If you think Bill Gates did that out of the goodness of his heart I've got a bridge in Brooklyn for you to invest in. The $150 million stock buy was minor compared to the other major concession from Microsoft -- an agreement to provide five years of MS Office software for Mac OS -- massively important because those five years would encompass the transition to Rhapsody/OS X, which of course laid the foundation for Apple, Inc. Without that agreement, the project might well have failed.
In exchange, Gates got Jobs to drop Apple's long-running suit against Microsoft. If you think that was nothing, that Apple had no leverage and Microsoft was not exposed since they had won a couple of the early rounds, again, it's really a beautiful bridge...
[Note: Apple's agreement to support Internet Explorer for those five years was also a critical component of the deal for Microsoft as they fended off the threat from Netscape the author describes at the start of this article.]
In my humble opinion, Apple should start playing nice with Android on the software side. This creates additional sources of revenue other than putting a premium on hardware. You can still sell expensive flagship hardware, but you can also afford to release a 'budget phone' e.g iPhone SE which is priced competitively with those midrange Chinese phones.
1) Port iTunes to Android, music purchases on either platform can be carried over seamlessly.
2) Port iCloud to Android, offer a compelling package (free and subscription) for users to store their stuff, but more importantly, back up their phones so switching platforms is easy without needing to root or use a third-party software. This also applies to backup solutions within apps, for example, Whatsapp's chat history. Force/coerce Facebook Inc, which owns Whatsapp, to include both iCloud and Google Drive backup solutions for Whatsapp on all platforms.
3) Port Facetime to Android, you can kill Skype (became terrible after being acquired by Microsoft) and other half-baked video chat solutions offered by various chat apps. Google has tried for years to build its own video chat app (Hangouts, Duo, Allo): all were terrible and/or unpopular. This is Apple's chance.
4) Port some Apple productivity and video/photo editing apps over to Android.
5) Consider having a dedicated music recognition service which is not dependent on Siri. Don't let Shazam or Soundhound have all the market share. Sony had TrackID, Winamp had Gracenote but both services are dead now. Apple needs to leverage iTunes and AI for this.
6) Switch to USB-C across all Apple devices. Bring back Touch ID with an ultrasonic fingerprint reader similar to the one offered on the Samsung S10 (Snapdragon 855)
Do all these, but maintain Apple's hardware quality (not Android's silliness like Chinese phones with pop-up cameras, half-baked optical on-display fingerprint reader, crappy facial recognition, 8Gb or more RAM etc), while keeping iOS updates swift and older iPhones updated for 5 years. Apple will win converts, believe me.
Not too long ago, when Microsoft was still under Steve Ballmer, Microsoft kept insisting that Windows phones were 'better' for business and productivity because only they have the Office apps. Today, Windows Phone the platform is mostly dead, and Microsoft had ported its Office apps to Android. Most of Microsoft's revenue today is not due to platform exclusivity (i.e Windows).
Comments
But a BIG FAT NO! -- because, in actuality, Apple has never relied on hardware -- despite the fact that is what everybody focuses on. When the new iPhone comes out everybody, including the media, ooohs and ahhs over it. But people buy iPhones because of what they do for them and how they do it -- and that comes primarily from the software, the integration, Apple's infrastructure and ecosystem. And, the same is true for MacBooks.
So, I agree that Apple will not survive relying strictly on its superior hardware. But, the point is meaningless because they never did! Yes, they have been and still are leaders in the hardware side, but that's not what sells iPhones or MacBooks. For example: How many would buy an iPhone running Android or a MacBook running Windows?
It ain't about the hardware and never was!
It was, and is, always worth paying a bit more for Apple products because the combination of hardware and software is so good. However, once the competition becomes good enough, price becomes more important. It reminds of that scene in Pirates of Silicon Valley, where Jobs whines something along the lines of “but we’re better than you” to which Gates says “that doesn’t matter”.
Apple was in trouble mainly because they listened to the outside noise, by selling their OS to parasites, Apple is a hardware and a software company the last of the American computer companies that did both. (Commodore, Sun, SGI, Atari, Digital, some were great companies with interesting tech who let it go mainly due to a lack of imagination also imagine where Motorola, IBM and Intel would be if one of them had built smaller faster cpu's when Jobs came to them).
Perhaps the biggest is FIXED COSTS: A major cost of both iPhones and Macs is the non-hardware end (software & ecosystem). And the total cost of that is mostly fixed and doesn't change no matter how many or how few units they sell. For (exagerrated) example: If it cost $1M to develop iOS and Apple only sells only one iPhone the price would have to be north of $1M to make a profit. If they sell 1Million phones then that price drops to a dollar. So, Apple could increase profits by selling more (but cheaper) phones -- and the more they sell the cheaper they could sell them.
Another is COST AMORTIZATION: It costs a lot of money to tool up for a new hardware model -- a chip factory can run in excess of a $1Billion. So again, if they sell one iPhone it would have to be priced in excess of $1B to be profitable. But, the more they sell the lower price they can charge. So that encourages Apple to continue selling its older models rather than selling new ones that are cheaper.
Of course, while fundamentally true, those examples are grossly oversimplified. There are far more factors to weigh. But, fundamentally, they are true.
And, by the way, it is why all these continuing discussions on ai and elsewhere of "Apple's gross margin" are bullshit. Without knowing the volume as well as fixed and amortized costs, the gross margin is meaningless. A company selling a million units at 1% margin will make more than a company selling a handful at a 30% margin.
We here will never know the real answer. We can only hope that Apple has a great cost accountant advising Mr Cook.
"I didn't say the iPhone business was rapidly shrinking. I said that that happening would be a big deal."
And what he said is true. There was no need or justification for trashing it.
And, that means that, without that broad distribution of multiple disparate products they are more reliant on a single product which increases their risk. If that single product falls off, they don't just decline, they close the doors. An analogy might be a highly levered company where, from a profit and loss perspective, everything is grossly exaggerated.
Thank you Daniel for a great piece explaining the reality and providing some needed relief to shareholders.
You may argue about price hikes, but iPhones now @ $450 can do 90% of what the XR & XS can do. Meanwhile the @ $330 iPad 10’ does 90% of what the iPad Pros can do. So I would argue Apple has stretched the iPhone & iPad lineup on both ends. The Mac is where I agree with your idea. That’s why Apple needs to make the Mac with their own chips.
As I said on an article on ped30.com today (https://www.ped30.com/2019/02/24/iphone-replacement-rate-apple/), Apple’s share of the smartphone market measured by “market share” is about 15%, but Apple’s share of the smartphone market measured by “installed base” is twice that, and increasing.
And that doesn’t count peripherals like AirPods (where Apple is still struggling to match demand) and the Apple Watch (which is now both an accessory and a stand-alone device).
I'm sure Motorola, Nokia and Blackberry thought the same thing. I vaguely recall reading something about the CEO of Blackberry (RIM at the time) making a statement about how the iPhone wouldn't be successful. Those companies were in a very different position to Apple though. While it's true nothing really lasts forever, Apple isn't reliant primarily on phones like these companies were.
Not sure if you actually read the article but it clearly states that Apple's Mac business is still going strong despite an overall decline in the PC market. If you look at Apple's other business areas (Mac, wearables, services etc...) they are about 50% of the iPhone business. Sure, if the iPhone imploded that would have an impact on those other business areas but Apple is not in the same place as companies like Motorola, Nokia and Blackberry. They are continuing to build their user base in a number of areas and are well positioned to be the company that creates the next big thing/platform.
Of course it wouldn't be unfair considering that Steve Jobs himself always considered Apple to be a software company
It also explains why they have farmed out the manufacture of almost all of their hardware and only take on those pieces that are needed (such as the CPU for the iPhone and Watch and soon the wireless modem as well). But the software is always done completely inhouse. Even the ecosystem: They started using AWS for their iCloud and, when that got insecure, they migrated it to Google and eventually bit the bullet and took it inhouse.
But the hardware? That gets farmed out as much as possible.
In exchange, Gates got Jobs to drop Apple's long-running suit against Microsoft. If you think that was nothing, that Apple had no leverage and Microsoft was not exposed since they had won a couple of the early rounds, again, it's really a beautiful bridge...
[Note: Apple's agreement to support Internet Explorer for those five years was also a critical component of the deal for Microsoft as they fended off the threat from Netscape the author describes at the start of this article.]
1) Port iTunes to Android, music purchases on either platform can be carried over seamlessly.
2) Port iCloud to Android, offer a compelling package (free and subscription) for users to store their stuff, but more importantly, back up their phones so switching platforms is easy without needing to root or use a third-party software. This also applies to backup solutions within apps, for example, Whatsapp's chat history. Force/coerce Facebook Inc, which owns Whatsapp, to include both iCloud and Google Drive backup solutions for Whatsapp on all platforms.
3) Port Facetime to Android, you can kill Skype (became terrible after being acquired by Microsoft) and other half-baked video chat solutions offered by various chat apps. Google has tried for years to build its own video chat app (Hangouts, Duo, Allo): all were terrible and/or unpopular. This is Apple's chance.
4) Port some Apple productivity and video/photo editing apps over to Android.
5) Consider having a dedicated music recognition service which is not dependent on Siri. Don't let Shazam or Soundhound have all the market share. Sony had TrackID, Winamp had Gracenote but both services are dead now. Apple needs to leverage iTunes and AI for this.
6) Switch to USB-C across all Apple devices. Bring back Touch ID with an ultrasonic fingerprint reader similar to the one offered on the Samsung S10 (Snapdragon 855)
Do all these, but maintain Apple's hardware quality (not Android's silliness like Chinese phones with pop-up cameras, half-baked optical on-display fingerprint reader, crappy facial recognition, 8Gb or more RAM etc), while keeping iOS updates swift and older iPhones updated for 5 years. Apple will win converts, believe me.
Not too long ago, when Microsoft was still under Steve Ballmer, Microsoft kept insisting that Windows phones were 'better' for business and productivity because only they have the Office apps. Today, Windows Phone the platform is mostly dead, and Microsoft had ported its Office apps to Android. Most of Microsoft's revenue today is not due to platform exclusivity (i.e Windows).
1. Windows License
2. Office Suits
3. Cloud
all of the revenue comes just because there are 1 billion Windows PC installed base.
Now Apple also has more than 1 billion iOS/MacOS installed base, it can reap the benefits just like Microsoft.