iphone – Page 2 – Tech.pinions

Peering Inside The Apple Rumors Prism

Steve Jobs fully understood the value in surprise, the wonder of magic, and the awe a beautiful, functional, highly personal computing device can evoke when unwrapped for the very first time. Rumors, particularly a stream of unceasing rumors of all kinds, tend to sully this ideal.

Not much can be done about it, unfortunately. Not only because Jobs is now gone but because Apple is far, far bigger than it has ever been. The company now comprises ten of thousands of employees, a massive retail chain, strategic partnerships with nearly every big name in media, relationships with automakers and contractors by the score. The Apple ecosystems spans nearly half a billion active users, a global supply chain that touches 4 million workers, hundreds of suppliers, and 18 worldwide final assembly plants. Leaks and rumors are inevitable.

In addition to leaks, there may be story plants, trial balloons, media spin, hurt feelings from those let go, false leads from those gunning for a promotion, snapshots from an anonymous line worker in China, misdirections from a savvy executive and slip ups by trusted employees. Given the scope of today’s Apple, shutting down the rumor-media industrial complex is simply not possible.

The end result of all of this?

We don’t know what we don’t know and we aren’t always sure what we do know. To be sure, all the rumors and all the talk may help whet our appetite for the next great Apple product. It can also lead to far too many brain cells preoccupied with even the most ridiculous Apple tales.

For example…iRing. Yes, leading Apple sites have written about and thoroughly dissected the very real possibility of a computerized ring, forged by Apple, which could be, it is presumed, a means to support digital payments, possibly serve as a remote control for the wearer’s music collection, and all manner of other nonsensical functions.

This will not happen. There will be no iRing. None. If for no other reason than should Apple even dare release such a product, every sneer, every cutting remark made by any and every Apple hater everywhere since the beginning of time would instantly be made whole. I can barely write the word ‘iRing’ without laughing.

I am certain, however, that talk of an iRing will persist.

The Apple Rumor Prism

Like it or not, expect no end to the Apple rumors and tall tales that emerge from the amorphous flotsam the media periodically feasts upon. This is all exacerbated by the fact Apple PR, whom I have been in contact with on many occasions, nearly always refuses to comment on any rumor. Realistically, they have little other choice.

Which begs the question: Is there a way to pre-determine the veracity of a Apple rumor?

(Wait for it…)

No.

The best we have so far are a few very well connected Apple writers, such as Jim Dalrymple, who can deliver a yay or nay but only at certain times and only for certain rumors. With Apple, rumors are like weeds, and no one person can stomp down all of them.

For example, thanks to the ongoing court battles with Samsung, we recently learned Apple has been rather concerned over the sales growth of large display smartphones, which it does not yet offer.

Surprise! Days later, we are treated to pictures of new iPhone molds suggesting a larger iPhone! Is this a plant from Apple? A false lead? Or some kid in Taiwan not very good with Photoshop? We don’t know. Worse, we tend to latch onto any data point, such as it is, that confirms our biases or affirms our hopes.

What then, is the best means of determining if a rumor is even merely likely when Apple refuses to say and the best Apple sources can’t (yet) verify? I focus on what I do know with a high degree of certainty and run the latest rumor through that prism. This may lead to some dead ends or errors, but it typically keeps me on the right trail.

I know with a high degree of certainty that…

Tim Cook is firmly in charge of Apple
Jony Ive is firmly in charge of the look and feel of Apple products — all of it, inside and out
Tim Cook has essentially removed Jony Ive from the bowels of the Apple design labs and made him a quite respectable SVP, which almost certainly means Ive won’t be as intimately involved with each and every product, manufacturing process and innovative material going forward
Cook’s big name hires have been in retail and branding, though he’s also hired veterans from the fitness and medical devices industry
Apple works on products and prototypes for years before it believes everything is just right for launch
iPhone margins are massive and counter to the direction of the marketplace
Apple cannot go down market ¹
Apple is comfortable with offering seemingly confusing choices for consumers (e.g. iPad Mini RD vs iPad 2 vs iPad 3, I think)
Core Apple products such as the iPhone, iPad and the Mac are typically replaced by users every 1-5 years, and many of these are not junked but rather re-sold by the original customer or a third party
Apple possesses a near religious fealty to the notion of continuous product improvement
Optimizing and innovating all hardware in pursuit of product improvement — and product margins — is hardwired into the company’s DNA
Apple’s relationships with IT decision makers and procurement personnel in government, the enterprise and businesses with more than 20 employees is woefully lacking
Apple is worth more than $450 billion and is sitting on approximately $160 billion in cash and equivalents

These guide me whenever I dare pick apart an Apple rumor or chase down the latest crazy Apple tale.

Caution: these ‘knowns’ are not equal!

The majority of Apple’s revenues come from the iPhone. The addressable market for the iPhone is radically larger than the market for any other extant Apple product. Each fact from above, even if entirely true in isolation, is not inviolable should it ever even potentially bring harm to iPhone sales and iPhone margins.

The Apple Rumor Mill

Running rumors though this iPhone prism serves as my handy guide in understanding if a rumor has legitimacy or not.

For example:

An iWatch should almost certainly integrate with (and be made most useful by) the iPhone. An iWatch will likely demand a keen sense of style, luxury branding and retail sales savvy. Given what I know, iWatch rumors are absolutely within the bounds of certainty.

An Apple television would not be appreciably enhanced by the iPhone. Televisions are kept in use far longer than five years. There’s little to justify this rumor, no matter its persistence.

A line of wearables or ‘smart’ accessories that all tie back to the iPhone? Absolutely. These enhance the iPhone’s value and should extend iPhone sales.

That Apple has to do anything this month, this quarter, this fiscal year to ensure its success? Complete nonsense.

A revolutionary new product that just might “disrupt” the iPhone? No. Repeat after me: No. For Apple to even consider disrupting its golden iPhone goose would not only be foolish but darn close to a dereliction of duty. Buttressing this is another fact: there is nothing on the horizon, nothing at all, even remotely ready to replace the iPhone (or any high end smartphone). Nothing. Not Google Glass. Not Oculus Rift. Nothing. We are in the early days of the smartphone market. Do not make me repeat myself.

Within a week of reading this, probably sooner, you will hear yet another rumor about Apple. Before considering it, pro or con, first make sure you run it through your list of knowns. Most of the time, you will immediately recognize the rumor as utter nonsense. On rare occasions however and no matter the source, you will stumble upon a rumor more true than not.

Such is life for those that follow Apple Inc and the hundreds of millions who love its products. The true story of Apple does not begin or end at product launch. Those are merely two data points in an ongoing and very rewarding chase.

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^{1. [Feel free to counter my claim Apple cannot go down market. Remember, however, even the ‘cheap’ iPhone, the iPhone 5c, is one of the most expensive on the market, and note also the major Apple retail hires come from luxury brand companies.]↩}

Better For The World? Apple Or Google?

Arguably, Apple and Google are the largest, richest, most powerful, most influential technology companies on the planet. Across many markets their products, services and technologies directly compete with one another. Yet, in countless endeavors, each benefits the other, enabling both to earn more, reach more, do more, grow ever larger, their creations touching nearly all of us.

Which begs the question: which company creates more good in this world? Apple or Google?

Unknowable?

I think the question a valid one. Despite their many similarities, the companies have profoundly divergent strategies when it comes to the development, release and spread of technology. Seeking the answer to this question might help us better understand how we should construct future tech companies, offer insights into what we should value most and whose methods we should help foster.

Pay To Play

As both Apple and Google continue to extend their reach deeper into our lives, the more obvious differences between the two begin to peel away. Once, Apple was hardware and Google was software. Now, both are mobile devices, cloud computing, entertainment, maps, apps, payments, productivity, music, messaging and — even if poorly — social media. We have to look deeper.

Start with pricing. Apple, whose products no one is required to purchase, is regularly blasted for ‘premium’ pricing. Google, whose products are mostly free, generates no such acrimony.

Is it better to demand customers pay for a product, to enter into a covenant where value is promised at a specific price, as Apple requires? Or is offering services for free the superior model? Certainly free seems better, but the price of free in today’s world is constant advertising, payment of which is continuous mining of our personal data. Does the Google way — pulling off tiny pieces of ourselves, bit by bit, moment by moment, and then selling these off to an unknowable coterie of people and businesses — better serve humanity?

I want to be in favor of free, but in its current form, the price of free seems too steep for me. For the rest of the world, I think in pricing Google trumps Apple, whether I wish it so or not.

No Product Before Its Time

Another core difference: product development and release.

Is it better to release products only when they are ready, as Apple does, or as soon as they reach sanctioned beta stage, as Google does, allowing anyone to experiment with their creation, make it better, expand its reach? Again, this seems to favor Google.

While we wait for the next insanely great product from Apple, a hyperfast-moving Google is — right now — helping us understand the pitfalls and benefits of driverless cars. Google Glass is forcing us to consider our views on personal privacy in public spaces and it must be acknowledged, pushing the technical boundaries and design limits of wearable technologies.

Google is meeting with city leaders, exploring methods to offer cheaper, radically faster broadband. They are unleashing ‘balloons‘ to bring the Internet to all points of the world. Push, push, push, now, now, now. The Google Way seems more right for our world.

Meanwhile, Apple…what, exactly? An iWatch likely few can afford once its finally released?

Tim Cook recently tweeted:

“Remembering Steve on his birthday: ‘Details matter, it’s worth waiting to get it right.'”

Is this true? Is this best for the 7+ billion of us on the planet? To wait?

Consider Android. Android is now the most widely used operating system in the world in part because Google unleashed it, for free, even while its business model remained in flux, and without waiting for agreement from potential stakeholders like Java’s Oracle. Nor was it perfect, by any stretch. Our gain.

We are rapidly connecting with one another, linking to astoundingly low-cost information resources whose total value is nearly incalculable, thanks in large part to this essentially free, freely available and extraordinarily robust mobile operating system. Humanity has been aided by Android, clearly.

Step back. Did Apple’s deliberate plodding make all this possible?

Look at an Android device pre-iPhone: it is an evolutionary dead-end. Think of all the apps, services, knowledge, entertainment and productivity we garner from all the phones that came only after Apple and the iPhone cleared the way. Consider the rather glaring limitations of Android, pre-iPhone. Had Apple launched iPhone before it was ready, before all the “details” were just right, the entire smartphone industry, now over a billion users strong, may have taken a completely different path – and died on the vine.

Might the same thing happen in wearables — likely the next iteration of the ongoing personal computing revolution? As wearable technologies abound in type and quantity, we await Apple’s entry.

Yet it may be wearables can only achieve their fullest potential for improving our health, our fitness, our connectedness to our minds and bodies only after the details are exactly right. That is, only after Apple clears a broad, lasting path just as they did with Mac (PCs), iPhone (smartphones), and iPad (tablets).

We have significant evidence Apple’s entry into a category has disproportionately, even radically re-shaped all that came before and all that follows. Perhaps we are better served in our analysis if instead of viewing Apple as sitting atop the ‘high end’ or ‘premium’ segment of a market, we acknowledge their products as a sort of official start, or a big bang of a new product category, unleashing and enabling the full potential of such technologies.

Thus, it may be that Apple better serves humanity even as their products are viewed by many as the tools of the wealthy. Apple made possible the very revolutions Google has seized upon. I think when it comes to the development, creation and release of products, Apple does humanity better.

Origin Myths

While I harbor suspicions regarding some of Google’s actions, I deeply admire their speed and scale, along with their willingness to try, to fail, to push. Google’s fast, expansive focus seems much more aligned with our nature and certainly more aligned with our times. Google’s beliefs include:

fast is better than slow
democracy on the web works, and
great just isn’t good enough

Thanks in part to such beliefs we most likely will have faster broadband, more bandwidth, radically cheaper smartphones connecting the world, tablets everywhere, a nearly infinitely scalable and mobile-optimized real-time web, all manner of affordable information and content, search, driverless cars, and whatever else Google is cooking up in its labs or scouting for acquisition.

That’s a substantial list.

It took Google for us to have YouTube, free maps, real-time-anywhere search, and the ability to live our lives within a fully digital realm. Yes, this comes at the creeping and rising cost of advertising everywhere and aggressively lobbied laws that do not necessarily favor our privacy interests. Almost seems fair.

Apple’s mission, by contrast, is shockingly prosaic:

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

That’s it? No move fast and break things? No do no evil? Not even a computer in every purse?

In vision and purpose, I say Google bests Apple.

I suspect that despite their overlapping business interests, core differences between the companies are inextricably linked back to their founding — the mad, beautiful and deceptively detailed vision of computing borne inside the mind of Steve Jobs, versus the youthful, audacious and limitless grandiosity of Page and Brin.

Apple and Google are a mere five miles from one another, yet the difference in their work and world views appears an impassable chasm. I do not know who does more for humanity. I am greatly proud, nonetheless, that these two giants of innovation are American-born, American-led, and are both, separately and together, creating a better world.

But Apple Is For Old People! Where iWatch And Apple Have The Last Laugh.

Anybody still recall when Apple’s chief competitors went about mocking the company for being, well, technology designed for older people? Those attacks came to an abrupt end in large part because Apple kept on printing money. I suspect, however, there is a second reason: iWatch.

iWatch may be the perfect personal computer for boomers, seniors and the elderly, yet Apple’s competitors, desperate to prove they are cool, have only now clued into the importance of this demographic. If at all.

Yes, the Apple iWatch does not exist. Rumors abound nonetheless, most insisting either that Apple iWatch will be the greatest computing revolution ever, or the latest batch of prognostication, an odd sort of tamping down of expectations, as if we should prepare ourselves to be disappointed.

Spoiler alert: neither of these groups knows.

We do know, however, that there is a massive, untapped market for an Apple iWatch: older people.

Consider that a device roughly as we imagine the iWatch to be, can at this very moment, serve as a tracking beacon, a camera, a heart monitor, an exercise monitor, pulse oximeter, a voice-based notification service – “time to take your pills” – a non-invasive glucose monitor, and a possibly a method of alerting the wearer to an impending heart attack.

All of which would be extremely valuable not simply to fitness freaks, but to baby boomers, seniors, elderly — certainly anyone over 60.

Bonus spoiler alert: there are a lot of older people. They positively abound in core Apple markets, including China, Japan and the United States.

The Bleeding Edge

Change comes fast to technology. The irony here is that the next insanely great market for computing tech, wearable devices, may reside within the demographic long considered furthest from the bleeding edge: older folks.

About time.

But first, a trip down memory lane.

“Apple is for old people.”

This glib statement has been a surprisingly persistent refrain from the media ever since the rapid mass market ascendency of the iPhone. Over the past 24 months, a “brand perception measurement” firm noted that Apple’s “biggest fans” hail from the older end of the spectrum. Bloomberg was happy to repeat this gospel: “Older people use iPhones, younger people use Samsungs.”

HTC — remember them? — mocked Apple back in 2011:

iPhones are not that cool anymore. We here are using iPhones, but our kids don’t find them that cool anymore.

Samsung famously mocked iPhone’s appeal to the older crowd in a series of blistering televised attacks:

Not wanting to feel left out, Microsoft joined in on the action, wondering if the mean old lady was nonetheless (wink wink) too young to have an iPhone:

As a way to limit Apple’s growth, this line of attack has simply not worked. Indeed, I think this mocking of Apple – and by extension, all their older users – will come back to haunt the perpetrators. As this Digital Trends analysis reminds us:

Older consumers tend to have more disposable income and be less price sensitive than young consumers.

In addition, older people, happy and content with their iPhones and iPads, may offer Apple a sly path into the enterprise:

Having a positive perception among older consumers can also have indirect benefits to Apple’s business, since older users are more likely to be able to influence purchasing and technology policies and purchasing at schools, businesses, and enterprises.

The technorati continue to miss the big picture: whether or not “old people” are a natural Apple customer, we keep making more of them. Lots more. Just in the US, we will have 55 million people age 65 and over by the end of the decade. China is already approaching 200 million people aged 60 and older. This number is growing — fast.

What’s Old Is New Again

Note the graphs below documenting the aging of Japan and China, in particular. These aging populations will require innovate support, services and technologies to meet their unique needs.

Breaks down like this: More older people, living longer, possibly living alone, and with a greater need for health (and health monitoring) services. Think of the massive potential of an iWatch or similar device for this group.

Thus, while Apple is aggressively pushing into China, I suspect there is far more at stake than sales of iPhone. As Bloomberg noted last year:

More than two decades of record economic growth turned the Chinese into the world’s top consumers of cars and smartphones.

Yes, yes, smartphones. And yet, that very same Bloomberg report noted:

As the almost 200 million population of over-60s more than doubles in the next 40 years…

Forget talk about Apple building a “phablet” because China consumers will demand it. I can’t help but think an iWatch is the most logical product for Apple to build for China (and beyond). An affordable tracking device that monitors pulse, breathing, glucose, offers reminders, its data instantly synched to the cloud, accessible by health authorities, shareable with children or caregivers, could prove invaluable.

Again, it’s not just in China.

The US is similarly gaining extraordinary numbers of older people, as this PBS report noted:

(Starting in 2011) the first of the estimated 79 million Americans born between 1946 and 1964 will turn 65 years old this year, at a rate of 10,000 a day. (emphasis added)

It gets better — if you’re Apple and if you’re working on an iWatch:

The number of people enrolled in Medicare will grow from 47 million in 2010 to roughly 80 million when the last of the baby boomers turns 65 in about two decades, while enrollment in Social Security is expected to rise from 44 million to some 73 million. At the same time, the ratio of workers paying taxes to support the programs to beneficiaries will drop.

Our healthcare industry, and our seniors, are going to be tasked to do more with less. Something like an iWatch, priced under $500, say, could prove a rather innovative means to save money on health testing, monitoring and possibly even visits to the doctor.

The Case For iWatch

It may seem like smartphones are everywhere, but even in the US the latest data shows that less than 20% of people over 65 have a smartphone. Likely, they find little need. But an iWatch, as imagined, could prove to be a near-necessity. Ask yourself: who is best equipped, anywhere in the world, to build a highly functional, reasonably affordable, startlingly intuitive, wearable personal computing device? My money’s on Apple.

Almost a year ago, CEO Tim Cook said “I think the wrist is interesting. I’m wearing this (Nike Fuelband) on my wrist…it’s somewhat natural. But as I said before, I think for something to work here, you first have to convince people it’s so incredible that they want to wear it.”

I do not know if Apple has reached that “incredible” stage yet, nor when they might. But a device that older people can legitimately operate and will use, offering valuable and personalized health data, could prove to be yet another massive market for the company.

I predict the iWatch will usher in a entirely new personal computing paradigm, flipping the early adopter/late adopter convention on its head. For the next phase of computing, build first for the old, that’s the bleeding edge, then let the technology drift out to the rest of the market in due time.

Trying To Understand How The iPhone 5c Failed

Failure is fascinating. Failure highlights our limits, our strengths, our mortality. My ‘explorations in failure’ will this week examine the iPhone 5c. At the very moment Apple was about to slice deep into the Android behemoth, offer the world a glorious low-cost iPhone, it fell flat on its face.

How could this happen?

I don’t have all the answers, of course, but I think there is much to divine by piecing together the iPhone 5c detritus.

The scale of Apple, its global supply chain, massive retail footprint, market valuation, the popularity of its computing devices, these all reveal a company that rarely makes mistakes. Apple’s iPhone 5c has been a striking failure, however, selling far fewer devices than Apple expected, likely dampening overall iPhone sales, and, if well-placed rumors are correct, very soon to be no longer of this world.

It all began, of course, with so much promise. The iPhone 5c — aka the “cheap iPhone” — was, we were convinced, going to be the aggressively priced new iPhone, ready to dismantle Android throughout the developing world, possibly beyond. It would (quickly) add tens of millions, ultimately hundreds of millions of new users into the Apple/iOS ecosystem.

This was not to be. As Tim Cook stated during the company’s most recent earnings call, 5c demand “turned out to be different than we thought.” While Apple sold an astounding 51 million iPhones total in the last quarter, Cook admitted that “our North American business contracted somewhat year over year.” Cook placed the blame squarely on the iPhone 5c by bravely reminding us that Apple “actually sold more iPhone 5s’s than we projected.”

Here’s the bottom-line: not only did iPhone 5c fail to sell in the numbers Cook calculated, the company suffered unnecessary expenses and pinched revenues by wrongly estimating the 5c/5s sales mix.

In a rather harsh assessment to the 5c’s poor showing, USA Today noted that Tim Cook refused to address the device by name. The publication went on to state that:

Sales of Apple’s iPhone 5c have been so disappointing that the consumer technology giant will likely cut the price of the device soon or even scrap the model altogether.

Count me among those that doubt iPhone 5c will reach its first birthday.

After all, the iPhone 5c, as it presently exists, is frankly inexplicable. It’s one of the highest-priced smartphones on the market, nearly as pricey as the 5s, yet with shockingly lesser hardware and camera features. Oh, and it doesn’t have the same look as the iconic iPhone 5s.

Go on – do your best sales job with that.

How did Apple so badly misread the market? In fact, there are several reasons.

Failure 1. Losing the Narrative

The most obvious failing of the iPhone 5c may be in how badly Apple lost control of the narrative. Remember the build-up of buzz before the original iPad? A full touchscreen tablet, built on iOS! The only downside, it was going to cost about $1,000.

We happily got that wrong. iPad turned out to be Apple’s most reasonably priced personal computer ever.

The 5c was the reverse of this. For example, as speculated in Daring Fireball: “(Apple’s) three pricing tiers for the next year would be a new iPhone 5S at the high end, today’s iPhone 5 in the mid-range, and the new 5C at the low end.”

Sadly, no. Worse for Apple was that we all believed the rumors. Not simply because of their persistence, no, but from the fact that the market was so obviously ready for that awesome low-end device that we were convinced Apple was capable of delivering.

Perhaps we should not have convinced ourselves. As I have said here many times: it is extremely hard for any company to shift gears and go down-market, or, for that matter, to reverse its low-price strategy and go up-market. Apple is no different. All corporations have unique strengths, unique brands, unique positions within the larger marketplace. With the 5c, we learned this the hard way. Nonetheless, Apple PR must do a better job of controlling the narrative of its upcoming products.

Failure 2. Anti-Apple design

A second failure is that the iPhone 5c altered the familiar design cues of the highly popular iPhone line. The 5c is “unapologetically” plastic and offered in several bold colors. This is the Nokia design template — and they’ve been doing it far longer than Apple. Apple offered up absolutely nothing new.

This is not to suggest the design is bad. I actually prefer the look and feel of the 5c. Not surprisingly, my go-to device is a Lumia 1520, with its bright yellow casing made of sturdy polycarbonate. The iPhone 5s feels much too light, much too fragile for my taste. Whether others feel the same is not the issue, however. Rather, the world knows at a glance what an iPhone is, and the 5c forks from this.

Unless Jony Ive and Apple are set to unleash myriad models of iPhone in numerous shapes, colors and price-points, iPod-like, then the 5c design stands out for all the wrong reasons. If you want the world to know you have an iPhone, the 5c states this with a whisper, if at all.

Failure 3. Devaluing Hardware

The most egregious, most confounding failure of the 5c, and the one I think will haunt Apple, is that the 5c effectively declares to all the world that one or all iPhones are radically overpriced. I am at a loss to understand how Apple allowed this to happen.

There is a measly $100 suggested retail price difference between the iPhone 5c and the iPhone 5s. For that extra $100, the iPhone 5s buyer receives the following additional hardware, services and benefits:

A7
M7
TouchID sensor
Lighter weight
True Tone flash and larger 8 MP sensor
Slo-mo video
Enhanced imaging features

Explain this: A 16gig 5c retails for $549. A 16gig 5s retails for $649. Why?

We know what that extra $100 gets us, and it’s awesome. What are we getting for that first $549? I now have no idea. The very existence of the 5c, priced so high, calls into question the entire pricing scheme for all of iPhone. Either the 5c is priced way too high or the 5s way too low. With the 5c, Apple has brought pricing to the forefront, and in a bad way.

Putting a positive spin on the 5c’s failure, Tim Cook stated that:

“I think the 5s, people are really intrigued with Touch ID. It’s a major feature that has excited people. And I think that associated with the other things that are unique to the 5s, got the 5s to have a significant amount more attention and a higher mix of sales.”

In this case, I think it would have been better had he not spoken.

The 5c was passed over because people want Touch ID? Where are these people? I watch iPhone 5s users on a daily basis and TouchID is of scant importance to them, and certainly not the primary deciding factor between 5c and 5s.

There is simply no justification for either the 5c’s price or the 5s’s price, maybe both. Which is it, Apple? Why even allow this question to be raised?

Failure 4. Peeking behind the iCloud curtain

A final concern, one pointed out to me by reader iDawg, is that Apple may have intended to legitimately price the 5c at the mid- or low-end, but were prevented from doing so, possibly just before launch, because their services — Siri, iCloud, streaming media, data synching, etc. — weren’t yet ready to support a massive influx of new users.

“The real reason Apple doesn’t sell more phones: fear of choking Siri (and online services) to death.”

Thus, as the 5c neared completion, this theory goes, it became apparent that Apple’s various services weren’t ready to effectively meet the anticipated numbers of new users. Raising the price, and thus limiting demand was the only realistic option to prevent every user, not just 5c users, from rage-inducing crashes and failures. This is a bit hard for me to fathom, though if true, ought to place Eddy Cue on the hot seat.

5c We Hardly Knew You

As I wrote a mere fortnight after its release, Steve Jobs would never have approved the 5c. I stand by that assertion. Jobs had a near-religious fealty to focus and function, and the end result was hardware honed to near-perfect clarity. The 5c, on the other hand, is muddied, the result of varied and competing interests. The 5c doesn’t know who it is nor who it is for.

Let’s count the ways the 5c fights with itself and with what Apple is best at:

An alternative design which denotes newness and low-price versus the iPhone design is iconic and beloved
Lots of new Apple customers versus we must provide the best service to all our customers
A low-cost device versus we must protect our margins
We can make a great smartphone at any price versus we focus on the premium market

Is the iPhone 5c Apple’s canary in the coal mine? A telltale sign of near-term headwinds and divergent internal factions? Possibly, though given the company’s track record, I’m inclined to think of this as a minor self-inflicted wound, like how Disney spent far too much on that movie, John Carter.

That said, the failure of iPhone 5c is well-earned. This was not a case of technology before its time. Rather, of botched execution and that rare placement of profits before customers. Apple’s leadership, Tim Cook and Jony Ive, in particular, blew this one. That’s the most troubling aspect of all this. Tim Cook has scaled Apple to once-unimaginable heights. The iPhone 5c, however, reminds us that no company and no CEO has a perfect batting average.

Surprise! Apple Execs Use The Mac Anniversary To Dis Microsoft.

When Apple executives speak to the press, pay attention. They may dodge. They may fail to disclose some facts, overemphasize others. But, and this is critical, Apple executives who speak on the record always reveal what they are thinking.

Surprise. Apple executives think a great deal about Microsoft.

Mostly, they think Microsoft has got it completely wrong. In this case, however, I hope it is Apple that is proven wrong.

Last week, Macworld scored a very rare interview with key Apple executives. The men spoke on the occasion of the Mac’s 30th anniversary. That the Mac (in its many forms) is thirty is a truly laudable achievement. For so long, the Mac was marginalized. So much so, in fact, that Steve Jobs had no choice but to turn to the iPod. No more. Today, Mac survives and by the great metric of profits, even thrives.

Which is why I find it so odd that in granting their interview, the Apple executives spoke so little about the Mac’s rather inspiring tale and instead directed jab after jab toward Microsoft’s unified OS strategy.

This, dear reader, is what we call a tell.

Hardware Trumps All Else

From Macworld’s brief interview, consider the many times Apple execs suggest that the current Windows strategy is all wrong:

“It’s obvious and easy enough to slap a touchscreen on a piece of hardware, but is that a good experience? We believe, no.”

“We don’t waste time thinking, ‘But it should be one [interface]!’ How do you make these [operating systems] merge together?’ What a waste of energy that would be.”

“To say [OS X and iOS] should be the same, independent of their purpose? Let’s just converge, for the sake of convergence? [It’s] absolutely a non goal ”

“You don’t want to say the Mac became less good at being a Mac because someone tried to turn it into iOS.”

“There’s a natural form factor that drives the optimal experience for each of those things. And I think what we are focused on is delivering the tailored, optimal experience for those kinds of ways that you work, without trying to take a one-size-fits-all solution to it.”

Tim Cook appeared on ABC in large part to talk about the Mac at 30. The company created a splashy new landing page at Apple.com to celebrate thirty years of Macintosh. Apple execs spoke to the press as part of the Mac’s celebration. Yet, Apple’s conversation continues to come back to that central theme: Microsoft is doing it wrong.

What gives?

Partly, it’s because no matter how rich Apple is now, old grudges never fully heal. It’s also representative of the fact that, at least in part, Apple is smart enough to let sales direct strategy. Consider that for the last quarter, Apple will sell about 50 million iPhones, 25 million iPads, and probably less than 5 million Macs. There is simply no incentive for the company to even suggest a Mac OSX – iOS convergence.

I hope they are wrong.

Many Modes. Many Devices. One Interface.

I want my various “computers” — defined here as at least my smartphone, tablet, desktop, laptop, wearable watch, television and even car dashboard — to essentially operate as similarly as possible, preferably with a unified user interface and application set across all.

Yes, my many computers are for different tasks and will be used at different times, in different settings. I will want to use a keyboard and mouse for some activities, touch for others, my voice for still others. That said, I want all my devices to have a UI that looks and feels and functions similarly. Even more, I want a singular user experience across all devices and across all modes of interaction. Thus, Mac knows my touch and my voice exactly as iPhone. My iPad screen and Mac screen are essentially swappable.

It’s troubling to me that the world’s biggest computer company can’t seem to make this work. When I hear Apple execs mocking Microsoft’s UI strategy I think it’s an opportunity lost.

Apple Limitations

Apple has survived and prospered because of its rather profound understanding of the opportunities presented by its own limitations. Whereas Google is almost infinitely scalable, there are hard limits on what Apple can do. Thus, their relentless multi-decade focus on maximizing the potential of a fully integrated hardware-software-services ecosystem. The result is the world’s best smartphone, best tablet, best laptop.

It’s no longer enough. As data shifts to the cloud, hardware becomes increasingly de-constructed. Desktop, laptop, smartphone, tablet, an assortment of wearables, connected cars, connected homes and on and on. I want the very best of each of these. I also want each of these to operate with the same essential template.

Perhaps I can’t have that, now now, maybe not ever. But it bothers me that it is Apple which seems so determined to accept multiple OSes across multiple form factors. Here’s a case, frankly, where I hope Microsoft wins.

How The Tablet Made An Ass Of The PC

[pullquote]If you can’t explain it to a six year old, you don’t understand it yourself. ~ Einstein[/pullquote]

Many tech watchers STILL don’t understand what a “disruptive innovation” is. I’m no Einstein, but I’m going to try to explain it in terms that even a six year old could understand (and with pretty pictures too!).

A disruptive innovation is:

an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology.

If that still doesn’t resonate with you, that’s okay, because we’ve just begun and…

Perplexity is the beginning of knowledge. ~ Khalil Gibran

(Author’s Note: For the sake of simplicity, I’ll be using the term “PC” to describe both Notebook and Desktop computers, i.e, any computer with an attached keyboard.)

The Analogy

[pullquote]If the King’s English was good enough for Jesus, it’s good enough for me! ~ Ma Ferguson, former governor of Texas[/pullquote]

The new often disrupts the old, which is somewhat akin to saying that the new often makes an ass out of the old, which brings us to my analogy:

The PC is like an Elephant and the Tablet is like an Ass (in the biblical sense).

I’ll bet you didn’t see that one coming.

WHEN THERE WERE ONLY ELEPHANTS (PCs)

[pullquote]The absence of alternatives clears the mind marvelously. ~ Henry Kissinger[/pullquote]

Suspend belief for a moment and imagine that the PC is an Elephant and that the Tablet is an Ass. (That wasn’t so hard, now was it?) Imagine further that you lived in a land where the only pack animals were Elephants.

If you only have one tool, then that is the tool that you will use for most every task. If you only have one pack animal, i.e., the Elephant, then that is the pack animal that you will use for most every task. (Similarly, if you only have one type of computer, i.e., the PC, then that is the computer that you will use for most every computing task.)

ENTER THE ASS (Tablets)

Now imagine that the Ass (Tablet) is introduced into your Elephant-only (PC-only) ecosystem. If you were a purveyor of Elephants (PCs), would you feel threatened? Would you even care?

Of course not.

An Ass can carry goods. So can an Elephant.
An Ass can give people rides. So can an Elephant.
An Ass can pull a cart. So can an Elephant.

ANYTHING AN ASS (TABLET) CAN DO, AN ELEPHANT (PC) CAN DO BETTER.

There is nothing that an Ass (Tablet) can do that an Elephant (PC) cannot do and do better. Not only that, but an Elephant (PC) can do many things that an Ass simply cannot do at all.

— An Elephant (PC) is far more powerful than an Ass (Tablet).

— An Elephant (PC) can pull tree stumps and clear forests. Try doing that on your Ass (Tablet).

— An Elephant (PC) comes with special options like a built-in trunk. All you get with a Donkey (Tablet) is a bare Ass.

— An Elephant (PC) is so big, it can make its own shade.

— An Elephant (PC) is self-cleaning. (Let’s face facts — sometimes Donkeys stink).

— An Elephant (PC) can carry heavy loads and add additional storage.

— An Elephant (PC) will figuratively — and literally — go to war for you.

In other words, the owners and purveyors of Elephants (PCs) would never have any fear of the Ass (Tablet). They would, instead, mock it. They would treat it with disdain and consider it beneath contempt.

So why on earth would anyone ever consider using an Ass (Tablet) instead of an Elephant (PC)?

Reader Alert: This is the part where we try to understand why disruption occurs.

[pullquote]Q: What’s that gooey stuff between an elephant’s toes?
A: Slow running people.[/pullquote]

An Ass is:

Cheaper to buy;
Cheaper to feed;
Easier to stable;
Easier to train;
Easier to discipline;
Easier to pack; and
Easier to ride.

In other words, an Ass (Tablet) does most everything you use an Elephant (PC) for and does it cheaper and easier too.

The Four Stages Of Disruption

STAGE 1: OVER SERVING

[pullquote]The speed of a runaway horse counts for nothing. ~ Jean Cocteau[/pullquote]

The problem starts when the Elephant (PC) begins to over serve its customer’s needs. The consumer only needs and uses a smidgen of the Elephant’s (PC’s) many and mighty powers. A feature means NOTHING to the end user if it isn’t useful. In fact, it’s a burden, both in added price and complexity.

STAGE 2: INTRODUCTION OF A DISRUPTIVE PRODUCT

At first glance, the Ass (Tablet) SEEMS to be far inferior to the Elephant (PC) but, in reality, the Ass has several disruptive advantages — including lower price and lower complexity — over the Elephant (PC).

The Elephant (PC) can do everything that an Ass (Tablet) can do but an Ass (Tablet) can do everything that the consumer wants and needs to do and it can do it easier and cheaper too.

STAGE 3: OVERCOMING THE “DEAL BREAKER” WITH THE 4% SOLUTION

“But, but, but,” you say, “there are some tasks that the Ass (Tablet) simply CAN NOT do and that ONLY an Elephant (PC) can do. That’s a deal breaker!

True enough.

However, it turns out that if 96% of consumers only need the power of the Elephant (PC) 4% of the time, then they will find a work-around that allows them to get by with the cheaper and easier to use Ass (Tablet). That’s the 4% solution ((Why 4%? It’s the Pareto Principle (80/20 rule), redux. It’s 20% of the remaining 20%.)) .

For example, if you only need to use an Elephant once in a great while, you can simply borrow one from a neighbor, or rent one, or get by with the aging one that you already own.

[pullquote]I owe my success to having listened respectfully to the very best advice, and then going away and doing the exact opposite. ~ G. K. Chesterton[/pullquote]

This is highly counter-intuitive, yet crucial to the understanding of disruption. The Ass (Tablet) doesn’t need to be all things to all people. It only needs to be most things to most people.

STAGE 4: THE TRICKLE TURNS INTO A FLOOD

Over served customers — gradually at first, then more and more rapidly — gravitate to the seemingly inferior solution that:

1) Best meets their needs;
2) Is cheaper; and
3) Is easier.

The customers leak away from the incumbent — whether it be an Elephant or a PC — until the incumbent is left high and dry, serving only the 4%; the “power users”; who truly do need the added power — and the added cost and complexity — that the incumbent’s product provides.

Conclusion

[pullquote]The obvious is that which is never seen until someone expresses it simply. ~ Khalil Gibran[/pullquote]

The reason people don’t see disruption coming is because they compare one product to another when they should, instead, be comparing the needs of the consumer to the product that best serves those needs.

If you compare an Elephant (PC) to an Ass (Tablet), there is no question that the Elephant (PC) is superior. But that’s missing the point entirely. Because if you compare the task at hand – say, riding into town, or sending an email – to the available tools, then the lowly Ass (Tablet) kicks the Elephant’s (PC’s) keister ever time.

The Next Steve Jobs Will Destroy Apple

Apple is the biggest tech company in the world, worth at least $100 billion more than either Microsoft or Google. Apple has over 350 million active users. Within a few short years, I suspect a billion people will be using Apple computers every single day.

How did this happen? Thus: Steve Jobs proved us all wrong.

In so many ways, ways we now take for granted, ways that Google and Microsoft are rapidly trying to copy, it was Jobs who showed us the way — even as we all were convinced of his wrongness. Jobs proved us wrong not just on technical matters, but on profound aspects of both technology and business.

A few examples of Steve Jobs proving us all wrong:

Building a global retail chain
Requiring customers to pay for content
Demanding high-margins for hardware
Choosing margin share over market share
Emphasizing design over commoditization
Building a touchscreen-only line of computers
Banishing pornography

All of these were business decisions that went against the accepted order. All were correct.

In this same way, Jobs taught us — for we did not initially believe — that:

The big money resides at the top of the pyramid
Walled gardens and well-controlled APIs are the future of the web
Existing standards and popular features are of almost no consequence
There is more money in consumer computing than the enterprise
Set prices, clearly stated, benefit buyer and seller
The web — websites, web pages, web standards — is less important than apps
More users, more developers, more content providers directly benefit from a closed ecosystem than an open one

And here we are today, following decades of Jobs wandering the wilderness, steadfastly implementing the many and varied pieces of his mad grand vision.

Now, developers choose Apple first, others second (if at all). Apple towers above Microsoft. Apple isn’t just the biggest computing company, it may also be the world’s biggest, most popular, most profitable gaming company. Symbian, BlackBerry, Palm, Motorola and Windows Phone have been crushed by iPhone. Dell has gone private. HP remains MIA. Jobsian tremors are still being felt across multiple industries as content, data, apps and services all collapse inside the iPhone — or its copiers.

In what turned out to be one of his very last shareholder letters, Microsoft CEO Steve Ballmer spoke with language clearly influenced by Jobs:

“We will continue to work with a vast ecosystem of partners to deliver a broad spectrum of Windows PCs, tablets and phones. We do this because our customers want great choices and we believe there is no way one size suits over 1.3 billion Windows users around the world. There will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface. In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services. This means as we, with our partners, develop new Windows devices we’ll build in services people want. Further, as we develop and update our consumer services, we’ll do so in ways that take full advantage of hardware advances, that complement one another and that unify all the devices people use daily. So right out of the box, a customer will get a stunning device that is connected to unique communications, productivity and entertainment services from Microsoft as well as access to great services and applications from our partners and developers around the world.”

And, breathe…

Understand, I do not come here to mock Ballmer. Nor should the Apple faithful: Tim Cook is probably more like Ballmer than Jobs, after all. Besides, Ballmer did far too much to benefit the company he so dearly loved. And yet, in that single paragraph above, where Ballmer references billions of users, seamless experiences, delight, the integration of hardware and software, sounding so much like Steve Jobs, he grounds everything in the obvious, and the near-term. Contained within that same single paragraph Ballmer specifically mentions…Windows, PCs, tablets, phones, Windows, Xbox, Surface, Windows, Microsoft, partners, partners, partners, partners, and developers.

Ballmer’s statement is the beatification of the current product set, the glorification of the existing order, and fully aligned with the rational. This is not surprising. It’s nearly impossible to not be rational. Certainly this is true if you are the CEO of a publicly traded company.

Steve Jobs was not rational. His vision of the future was not dependent upon existing products, existing form factors, partners, developers, nor the established wisdom.

I lived through the years when Microsoft absolutely controlled the direction of personal computing. I was there for the rise of Google — and its destruction of the value of content and user privacy. I would not have dared believe that the radical visions of Steve Jobs would so thoroughly flourish in this world. It’s all so profoundly non-rational.

Steve Jobs was firm in his vision, proudly revolutionary, shrewd enough to avoid the trappings of both success and failure, and fully prepared to prove all of us completely wrong, no matter how long it took.

I am sorry for ever having doubted him.

All of which is prologue to the obvious: Apple is today’s monolith. All must acknowledge, possibly fear, every move Apple makes, each market it enters. We hang on the company’s every word, spin tales from its silence, and have grown comfortable in the knowledge that, as is the new natural order of things, Apple will succeed with each new release, each blessed launch.

Which is prologue to the less obvious: The next Steve Jobs, when she or he finally arrives, will have Apple squarely in their sites. Then blow it to bits.

The Mobile Wave

1) We all know that sales of smartphones and tablets are are growing fast, however…

2) Those sales are growing even faster than we may realize, and…

3) The implications of this new wave of computing devices is going to be enormous; is going to impact us sooner than we anticipate, and…

4) We have to make ready or it will pass us by or, more likely, sweep our current way of conducting our businesses away.

Part 1: The Exhibits In Evidence

The iPhone & iPad Lit A Fuse Under The Rocket That Is Post-PC

— Most of the growth in mobile computing has come in just the last three years. ((This year we will sell around 300 million PCs and laptops while we will also sell just over 300 million tablets. By the end of 2015, we will be selling less than 300 million PCs and laptops and will be selling well over 350 million tablets. In fact, some market researchers think that by 2017 we could be selling 500 million tablets a year around the world. This makes tablets a serious growth market. While I state that the tablet journey has gone on for well over 20 years, its accelerated growth has come in just the last three years. ~ Tim Bajarin (@Bajarin)))

After only being in existence for 5 years, the iPhone is the second best selling product of all time – the 1st is the Rubik’s Cube. ~ UberFacts (@UberFacts)

I believe that the iPhone and iPad is to mobile computing what the Model-T was to cars.

The above chart, from Horace Dediu of Asymco, shows the growth of the car industry before and after the introduction of the Model-T. There were literally hundreds of car makers who, in the twenty years prior to the introduction of the Model-T, were all trying create THE car that would make the fledgling auto industry viable and profitable. As it turned out, it wasn’t so much the car itself, but a new method of cheaply mass manufacturing cars in quantity, that proved to be the key to unlocking the value that lay the car industry.

Similarly, while the iPhone was a brilliant achievement in itself, it wasn’t until the next year, when Apple introduced what was later to be known as iOS, along with the App Store, that the modern Smartphone was truly born. The combination of the iPhone, iOS and the App Store were the modern day equivalent to the procedure for mass producing the Model-T. The Model-T cracked the problem of production. The App Store cracked the problem of mobile software distribution. Both changed their respective worlds, forever. ((Don’t allow yourself to be distracted by parochialism. Nowadays, Apple isn’t happening to mobile. The future is happening to mobile.))

BLACK FRIDAY

— As you read the follow data concerning mobile, keep in mind that Black Friday sales were DOWN this year.

— However, online shopping was UP.

— And sales of electronics were up; sales of mobile devices were up, Up, UP; and sales of tablets, in particular, were out-of-sight.

MOBILE PHONES

— Apple has 500,000 iPhone 5Ss being made every day, its highest ever output.

1.7bn mobile phones (feature phones and smartphones) were sold in 2012 alone – 3.2bn people use a mobile phone worldwide – Smartphones gain quickly as phones are replaced every 18 to 24 months. ~ Jean-Louis Gassée

TABLET SALES

— eBay reported selling one iPad per SECOND as of midnight on Black Friday.

— iPad Mini the top seller at Walmart.

— Apple products were 22% of Target’s sales on Black Friday.

Source: Mobile Is Eating The World, Benedict Evans

TABLET PROJECTIONS

— Estimating tablet sales increase of 38% from Q4 2012. ~ Ben Bajarin (@BenBajarin)

— Worldwide sales of tablets and PCs are going to be very close this Q4. ~ Ben Bajarin (@BenBajarin)

To chart how quickly the market is shifting to tablets, consider that in February 2013, Canalys noted that tablets accounted for only one-third of all personal computers shipped. For all of 2013, Canalys had predicting originally predicted that tablets will account for 37% of all PCs shipped, with some 182.5 million tablets out of a total 493.1 million units, although today it is revising that up to 40%. ~ Techcrunch

(Author’s Note: Ben Bajarin did all the research and hard work necessary to create the above chart, yet was kind enough to allow me “steal” the fruits of his labor. Thank you, Ben.)

Tablet sales will probably overtake TV sales in the next few quarters. Getting internet video onto the TV itself might not matter. ~ Benedict Evans (@BenedictEvans)

Stop! You might want to re-read the above. Tablet sales might overtake TELEVISION sales in the next few quarters!

Amazing.

PERSONAL COMPUTERS (PCs)

From talking with many friends and family over the holidays there was one tech product I heard no one say they were buying – a PC. ~ Ben Bajarin (@BenBajarin)

(Author’s Pet Peeve: Tablets are not “cannabalizing” PC’s. Sharks don’t “cannabalize” fish, they devour them. Tablets are not “cannabalizing” PC’s, they’re eating them up.)

Interesting to hear more and more consumers tell us they are self aware of the fact that the PC is overkill for their main use cases. ~ Ben Bajarin (@BenBajarin)

I think there’s effectively going to be a consumer strike for q4 for PCs. Only if you completely need one would you buy. ~ Charles Arthur (@charlesarthur)

Source: Mobile Is Eating The World, Benedict Evans

The global iOS & Android install base is about to pass PCs ~ Benedict Evans (@BenedictEvans)

— Some say that PC sales are going to decline by 10%…

— Some say more than 10%…

— Some are predicting that PCs are going to decline further than projected, and…

— Some say that as ugly as those forecasts look, reality is going to be worse.

Part 2: The near-term — not the far-term — implications of Mobile Computing are enormous

IF YOU CAN’T TAKE THE HEAT, EXPECT TO GET FIRED OUT OF THE KITCHEN

In 2013 the Tech CEO Bodycount ((Courtesy of Horace Dediu (@asymco))) included Microsoft, BlackBerry, Acer, Nokia with HTC teetering on the brink. And that’s just in 2013.

ONLINE MEDIA CONSUMPTION

Rule of thumb: iTunes accounts are growing at the rate of 100 million every six months. ~ Horace Dediu (@asymco)

Mobile Is The Only Media That Is Growing – TV, Print, Radio Are All Shrinking ~ Aravind S (@aravinds)

Source: Horace Dediu of Asymco

ONLINE TRAFFIC

Take a good hard look at the mobile broadband is growing and wired broadband is tapering off.

Source: Horace Dediu of Asymco

ONLINE SHOPPING

The online shopping “Pie” is getting bigger.

Online holiday shopping (desktop and mobile) in the U.S. was up 14.5% from last year.

You spent $1.2 billion shopping online on Black Friday. ~ Arik Hesseldahl

MOBILE ONLINE SHOPPING

Mobile is becoming a bigger portion of the bigger pie.

— “As of 9AM mobile accounted for 40.9% of online sales and iOS for 83% of those mobile sales.” ~ Horace Dediu (@asymco)

— iOS Devices Drive more than $543 Million, Android $148 Million in Online Sales on Dual-Billion Dollar Days ~ Adobe

It’s entirely possible and even probable that next year less than half of the online holiday shopping traffic in the US will come from PCs. Put another way, next year less than half of users will hire a PC for the job of online shopping. ~ Horace Dediu (@asymco)

MULTIPLE MOBILE v. SHARED PC

Per 100 people there are 96 mobile subscriptions and 42 households with a PC. ~ Ben Bajarin (@BenBajarin)

How is that possible?

Well, mobile devices are personal. Each person uses their own phone, they don’t share it with family members. A family, for example, may share a single PC at home, but each family member may own their own phone and even their own tablet, too.

(M)ost homes in developed markets have one PC or laptop. By 2016, these same homes will have about three tablets each… ~ Tim Bajarin

(I)t’s pretty clear that the tablet is on track to become the most pervasive personal computer the market has ever seen. The tablet has literally redefined what a personal computer is to people all over the world. ~ Tim Bajarin

Part 3: The Sea Change

Just two more points. And if you remember nothing else from this article, remember these two things:

1) The SCALE of the mobile computing revolution is larger than we think; and

2) Mobile computing is our PREFERRED way of computing.

This represents a true sea change in computing.

SCALE

Source: Mobile Is Eating The World, Benedict Evans

I spend half my time trying to get people to grasp the scale of mobile and the other half trying to grasp it myself. ~ Benedict Evans (@BenedictEvans)

MOBILE COMPUTING IS OUR PREFERRED WAY OF COMPUTING

IBM Digital Analytics Benchmark has published, for the fourth year in a row, US online shopping traffic data with a split between mobile and fixed online traffic. It reveals a pattern of consumer behavior which is quite startling: people seem to prefer to shop using mobile devices. ~ Horace Dediu, Asymco

(Emphasis added)

When people are away from home or office, they choose the phone. When people have a choice between a phone, a tablet and a PC, they choose the tablet. The traditional PC has become the last choice, not the preferred choice, for the majority of computer users.

Part 4: It’s Not Enough To Predict The Rain; We Have To Build The Ark

To see what is in front of one’s nose needs a constant struggle. – George Orwell

CHANGE

The entire understanding of a PC has changed and the term needs to be re-defined. ~ Ben Bajarin (@BenBajarin)

Constantly impressed by how much iPads have helped simplify computing for those previously overwhelmed by it. ~ Lessien (@Lessien)

Getting computing devices in the hands of the masses is the goal of the next 20 years. ~ Ben Bajarin (@BenBajarin)

RESISTANCE TO CHANGE

There were these two cows, chatting over the fence between their fields.The first cow said, “I tell you, this mad-cow-disease is really pretty scary. They say it is spreading fast; I heard it hit some cows down on the Johnson Farm.”

The other cow replies, “I ain’t worried, it don’t affect us ducks.”

If you don’t think that mobile computing is coming for you and your business, you’re either mad or you’re a dumb duck. Either way, you’re in big trouble.

“Change is not made without inconvenience, even from worse to better.” ~ Richard Hooker

One of the things that happens in organizations as well as with people is that they settle into ways of looking at the world and become satisfied with things and the world changes and keeps evolving and new potential arises but these people who are settled in don’t see it. That’s what gives start-up companies their greatest advantage. The sedentary point of view is that of most large companies. ~ Steve Jobs

“People don’t resist change. They resist being changed.” ~ Peter M. Senge

Change is coming and it’s coming a lot faster than we think. We can ride the wave, or we can get swept away. The choice is ours.

An Open Letter To App Developers

The smartphone has quickly become our primary interface to the world. The app has become our primary interface to the smartphone. Apps matter. Therefore, app developers matter. Unfortunately, too many apps, too many app developers, likely in pursuit of riches that shall never come, continue to offer copycat apps, apps poorly designed, apps that value ads over users.

I want to help. I know apps, good and bad. I was analyzing the “smartphone wars” back when most tech blogs were still talking Mac vs PC. I have used most major smartphone platforms, at length. This includes Palm and BlackBerry, Windows Phone, iOS and Android, Symbian, Asha and, yes, Meego.

I offer the following rules and declarations in the interest of creating more and better apps for everyone.

The world does not need another weather app.
By 2015, at the latest, I expect Windows Phone will garner at least a 20% share of all new smartphone sales. Create apps for this platform.
It’s absolutely appropriate to ask me to rate your app. Once. If I choose not to, accept this — and never ask me again.
Life is much easier when I can sign in to an app using my Facebook credentials.
Never — not ever — should you request anything beyond my Facebook credentials, however. Do not ask to post my purchase of your app to my Facebook page, do not ask for my location unless there is a clear and present and ongoing user benefit. Do not ever ask me, and especially never require me, to tell you my Facebook friends.
You have 3 seconds, tops. If I cannot fully immerse myself within the wonder and scope of your app in 3 seconds or less, then your app gets abandoned.
Care about your app icon. It really does matter.
Apple does not care about you. Apple provides you, for now, with the single greatest platform for monetizing your app. But do not believe they are your partner. They are the world’s largest (tech) company and do not like to share. iWork, iPhoto, Garage Band, Weather, Maps and more are just the start. Should a new app opportunity arise, possibly one you helped create, Apple will not hesitate to move in. Be ready to out-innovate, pivot, or die.
We take our smartphones with us everywhere. For many, they are the first thing we see at the start of a new day, the last thing we see before going to sleep. This is a tremendous opportunity. At perhaps no time in human history has a single tool been used so fully throughout the day, everyday, for work and play, by child, teen, adult and senior, all over the world. Take pride in your work.
You deserve to be paid. Of the hundreds of apps I have purchased, minimum, I have never once thought that I would rather choose the app with ads over paying $1, sometimes more, for an ad-free app. Even large display smartphones have relatively small screens. Cluttering it up with an ad, ever, is annoying. Worse, it’s a clear intrusion upon my privacy and a waste of time. I never click on a mobile/in-app ad. I can assure you that my time and my privacy are worth far more to me than my ad view is to you.
Users deserve a second chance. Apple, especially, should offer an app trial period. Yes, even for a 99 cent app. Should they ever agree, these rules become even more important.
Apps must be optimized for the platform and device. Always. Smartphone, tablet, laptop, desktop. I subscribe to several web services (e.g. MyNetDiary, New York Times). The smartphone app version may look similar to the website, but must be optimized for the device itself (e.g. iPhone). There are no excuses for failing this.
Touch, pinch, swipe. The touch interface is a beautiful thing. Yet, I have absolutely no use for apps, Clear, for example, or Tweetbot, that insist upon a needlessly expansive variety of gestures to access its data and features. This is nothing more than too many fonts on a Word doc.
Almost every single app I have purchased over the past 18 months I discovered from a Twitter follower or a Facebook ad. Nowhere else. Not Apple genius. Not Google search. Not any app-focused website. You should know this.
Specials are viral. I find out about your app on Twitter, for example, and learn it’s half-priced for today only, I am both extremely likely to buy and to tweet my purchase to others.
Apps are like sperm. Only the first survive. If I have a decent grocery list app, say, there is an extremely good chance your far better, newer grocer list app will be irrelevant to me. Similarly, an app not on the ‘home’ screen is likely not long for this world. No advice, merely an acknowledgement. Your work is hard.
Hold the line. Google has taught us that other’s information should be accessible, for free. Apple has taught us that hardware, not software, should be paid for. I don’t really know how you can succeed in this environment. But I hope you do. Most of you do great work.
You get one chance only to ask if I want to connect with my friends. I should not have to repeat this. Ask once, then accept my ‘no’.
I have a lot of friends. I know a lot of people. When you show me people I know or may know or should know and ask me to connect with them via your app, you make me feel nearly as dirty as you are.
Never scan my contacts. Never ask to scan my contacts. It is a betrayal. This is why I can’t have LinkedIn on my phone.

As the world goes mobile, connecting everyone and everything, focused, functional and highly usable apps will serve as the entry point to all the world’s data, resources, people and content. The humble app, then, is a rather noble device. Treat it and its users with all due respect.

Godspeed.

Truth And Lies About Apple

I regularly provide analysis of the computing market, trends inside Silicon Valley, the current state of the smartphone wars. This week, I offer instead my observations on Apple. Starting now…

The persistent view among analysts that Apple can (magically) go down market, whenever they want, is, in my view, utter nonsense. It’s the same as suggesting Burberry, for example, can be WalMart. Apple is high-end, high-margin, brand and image focused, and companies cannot magically transform their market approach. To remake their products, their hardware, to radically expand customer service and to effectively give up the lead role in their global retail footprint — all necessary to go down-market — would make Apple no longer Apple.

To those that point to the iPod as some sort of proof that Apple can go down market, even that is wrong. The iPod was (always) a high-end flash drive with minimal computing capabilities.

That Google continues to develop and support services optimized for iPhone is all you need to know about those who scream that IPHONE IS DOOMED. They are either ignorant or they are lying to you. Why do you continue to reward them with your attention?

Google’s biggest mistake was wildly overpaying for Motorola, which continues to be a noose around the company. The second biggest mistake, however, was saddling iPhone users — for years — with an inferior version of Google Maps. I am not the only one that now uses Apple Maps almost exclusively. I suspect they have learned their lesson, the hard way.

In the most recent Apple patent trial, Phil Schiller stated that “almost everyone” at Apple works on iPhones, not Mac. This is true. It’s also remarkable. The iPhone was an unexpected blessing for Apple, raining down more in profits than anyone ever imagined it could. But, Apple’s management team still doesn’t get the credit they deserve for effectively re-making Apple, once the Mac company, into the iPhone company.

The next iPhone will be just like the new Nokia Lumia 1520. Large display. Unapologetically plastic. Colorful. 20mp camera.

Apple will be forced to develop a “phablet” because the market wants larger display devices. For most, a phablet is simply a better alternative to buying both a smartphone and a tablet. This is especially true for Apple, with its over-priced iPad line. Steve Jobs intended iPad to rest in sort of that middle ground between laptop and smartphone. A great idea for those who can afford three devices. The vast majority of the world cannot.

iOS 7 is beautiful. There is a core design flaw, however. The world is eagerly embracing the visual web — Pinterest, Snapchat, the new Twitter. In an increasingly mobile, real-time existence, visuals convey a great deal of information in an instant. iOS 7 runs counter to this trend. Note that your iOS 7 device insists on using text even where visuals would obviously work better, such as when telling you the current weather. Jony Ive’s legend is no doubt secure, but I expect iOS will quickly evolve to incorporate more visual elements. Form should follow function and most of the time the market wins.

With Rockstar, Apple becomes a patent troll. Rockstar is absolutely no different from Lodsys. That said, there is absolutely validity to Jobs’ thermonuclear war. There was nothing available like the iPhone or like the iPad until the iPhone and iPad. Intellectual property and design should be protected and compensated. On this, I fully stand behind Apple.

I have covered the smartphone wars as long, as diligently as anyone on the planet. Nonetheless, despite the growth of iPhone and the global smartphone market in general, I never thought it would be easier for me to buy more and better software for Apple products than Microsoft products.

Nintendo is hurting. Sony is hurting. We recently discovered that Xbox may not even be a money-maker for Microsoft. The premiere gaming company in the world is…Apple? I know, shocking. At least for those of us who grew up on PCs and game consoles.

The new iWork is so bad primarily because of Apple’s insistence on a ‘one-size-fits-all’ software strategy, forcing the product to be the same on a smartphone, a tablet and a laptop. This will always fail. Giving it away won’t change how bad it is. The only question now is, how long before Apple abandons this silly notion and gives us a productivity suite that works well?

As bad as the new iWork is, Apple does not get the credit it deserves as a software company. iTunes may not be on every desktop, but its close. iOS is now on hundreds of millions of smartphones and tablets. Mavericks is on millions of laptops. Apple’s global software presence is approaching Microsoft’s. This was even recently unthinkable. Even more, Apple’s software is on a larger array of usable devices — tablet, phone, laptop, desktop, set top — and built for multiple modes: touch, keyboard and voice. Remarkable achievement.

Every tech blogger I read, and I think I read them all, is a poor stock analyst. Please do not buy or sell stock, whether $AAPL, $AMZN, $GOOG or other, based on what a tech blogger says. Ever. They are cheerleaders. Save your money.

The next Apple app revolution will be…email.

Email, that boring, dated, derided yet almost universal tool, used — with great reluctance — for personal and professional reasons, is on the cusp of a revolution. At least, I hope so. Here’s an example of what I think Apple will do — what I think only Apple can do. Use the Open Table app, for example, to make a restaurant reservation. Now imagine that the reservation confirmation email you receive contains visually appealing, pre-embedded Yelp reviews of the chef’s best dishes, a PassBook coupon, Facebook credits, Foursquare check-in rewards, your friends list for those having dinner with you, and Apple Maps directions to the restaurant. This is all contained within the email. All secure because each ‘chunk’ of personalized app data is run only through Apple servers. Speed, simplicity, convenience, enhanced benefits. Think Google Now, only on steroids, because Apple will allow its massive app ecosystem to take part. Delivering it all through iOS Mail servers is a nice little knife in Google’s side, as well. That’s my vision, at least.

I look forward to your comments on what you think is true and what you think are lies.

Next week: Truth and lies about Silicon Valley

Finding God In Our Smartphones

“Out of clutter, find simplicity. From discord, find harmony.”
– Albert Einstein

Smartphones have changed our world. Wearables will change our selves. Together, these amazing devices represent some of humankind’s greatest work, integrating the absolute leading edge of technical prowess, computer engineering, manufacturing skill and materials science. I wonder also if they are bringing us closer to God.

I confess, I do not know the answer.

Silicon Valley is about money, not faith. Real-time, not eternity. Change, not permanence. The worship that occurs here is typically at the altar of wealth, intellect, and luck; a place where residents proudly wear their atheism on their sleeves, and where the obviously religious are, if not looked down upon, then viewed the way far too many view obese people — broken, not quite fully evolved.

The spirit finds a way.

At the intersection of smartphones and wearables is a locus of desire to know ourselves, improve ourselves, celebrate ourselves. And yet, through these devices we are reminded how fully connected we are to one another, and soon, to all things. This strikes me as a form of grace.

At first glance, this notion seems incongruous. With smartphones and wearables, we post in real-time what we ate, how much we weigh. We tweet our passing thoughts on all manner of topics. We update our Facebook page to sanction our latest pleasure or most recent transient annoyance. We take pictures of our self, then another, then another, and display them all for the world to see. We actively seek the affirmation of nearby friends and faraway strangers, asking them to affirm our actions, no matter how small or fleeting.

We may all be, in this age of miracle and wonder, at our most vain.

Nonetheless, that fire hose of data gushing from these personal computing devices lays bare our very human failings, our strivings and our mortality. What comes after that? At the time of our greatest technical and intellectual advancement, do we merely expose ourselves as insufferably common, or are we (unknowingly) unlocking the fullest truth of ourselves?

The very tools used to elevate our physical and intellectual selves, helping us to be the very best we can be, may ultimately serve to remind us that without a equal focus on the spiritual, it’s all for naught.

Consider that with smartphones, that which was once physical is now digital. Apps, tweets, music, movies, these are abstractions made real. We are contented with their ephemeral realness. Our very best technology, then, may be edging us closer — shaman-like — to bridging the physical and the virtual, and possibly to accepting the spiritual.

Our most advanced personal technologies are not merely uplifting, but guiding. We track everything, or soon will. In the morning our devices will remind us to eat right, to walk 10,000 steps. In the evening they will ask us if we gave due attention to our children, our spouse and our dreams. The daily rituals of monitoring what we do and how we improve may in fact help us find our way onto a narrow, possibly righteous path to goodness.

Yes, we can instantly access all manner of fetishism, violence, pornography, but also the greatest of humanity — and one another. The fragments of humanity, good and bad, are embedded within our technology, and resident inside our iPhones and Fitbits. Humans seek, we care, we dream, we sense there is far more beyond our self, our neighbors, even our world. This is true even if, at least in this infant stage of our meta connectivity, we initially turn such powers upon ourselves.

With smartphone in hand, we are connected to nearly everyone, from anywhere, at any time, and never truly alone. Wearable computer bracelet strapped tightly against our skin, the truth of our self is brightly flashed before our eyes, including our mortality. These devices will change us.

Which may not lead us to God but certainly should lead us all to be better.

It’s Tough Competing With the iPhone

Understanding what is happening in smartphones is all a matter of perspective. It is easy to get caught up in the OS market share statistics and lose sight of the big picture.

comScore has recently updated their MobiLens and Mobile Metrix, data for US smartphone subscribers in August 2013. Many in the media picked up the point that iOS gained on Android during the month. While this is true, it has actually been going on for almost a year now. In November, 2012, Android peaked in the US at just over 53% share. Since then it has slowly declined. During that same time iOS has been slowly growing.

That is, of course, all very interesting and important to know as we try to get a picture of what is happening with smartphones in the US. When we look at browser share between iOS and Android in the US we see a very different picture.

–US Mobile browser share by type from NetMarketShare

In this picture, the iPhone leads all other platforms in web usage. Android is steadily gaining and that is an important takeaway. But as much as we like to generally compare iOS to Android, the uninformed mistakingly compare apples to oranges in doing so. The iPhone, at this point of time, is not competing against the entirety of the Android offerings in the US. The iPhone does not compete with the low-end, extremely low-cost, Android devices offered free by carriers or on pre-pay plans from retailers, which is why comparing the iPhone to the entirety of Android is a mistake. Rather, to get a holistic picture of what is happening, we must compare the iPhone to similarly priced products. More specifically we must compare the iPhone’s market share to that of other vendors’ products at the same price points. When we do that, we get a clearer picture.

Below is the iPhone’s share against other devices costing greater than $400 wholesale (or offered at $99-$199 subsidized). This chart is based on sell through estimates that I am extremely confident about.

As you can see, the iPhone dominates the premium segment of the market. These estimates are prior to the launch of the iPhone 5c and iPhone 5s. For that reason, I specifically included devices as low as $400, even though the wholesale cost of the iPhone 5c is an estimated $549. I added that price point because I’m convinced that the iPhone 5c will continue to take share from devices — even those devices in the $400 wholesale range — which are generally priced at free by the carriers. I’m also convinced that this will happen in regions beyond the US, as well.

If I were to include only devices which cost more than $500 wholesale or priced at $99 to $199 on contract, the iPhone’s share would jump to well over 70%. As you can see, the iPhone outsells Samsung’s devices at nearly a 3-1 ratio and other devices at a ratio of 5-1 or higher.

Based on all the data I am seeing from demand and sales trends, it is hard not to conclude that iOS will overtake Android in the US in the near future – possibly as soon as the end of the calendar year. But perhaps the most important thing about the iPhone’s share in the premium devices sector is that other competitors have only been able to made weak inroads against it. Samsung, for example, has been spending hundreds of millions of dollars in US-based marketing, yet their share of the premium market has peaked and been trending downward on weaker-than-expected sales in 2013.

All of this is specific to the US. The US market is key for many reasons, not least of which because its one of the most profitable. I am, however, keeping a keen eye on Europe and Asia as well.

The key question in my mind for the US, or other regions for that matter, is whether anyone can legitimately compete with Apple in premium. I think we will observe that Apple can legitimately compete with others in the middle of the market. But whether anyone can challenge Apple’s dominance in the high end is yet to be seen.

Do Android Or Windows Phone Have Any Hope Of Defeating iPhone?

No.

Neither Android nor Windows Phone, apart or in concert, have any hope of defeating iPhone. None. For the foreseeable future, iPhone will remain the world’s most popular, most profitable smartphone by a wide margin. The best apps, the first apps, the most popular accessories, the lion’s share of the industry’s profits all will belong to iPhone.

Indeed, I think the gap in profits and mindshare will only widen from this point forward. The iPhone is simply too good, Apple too rich, iPhone hardware too advanced, the iOS ecosystem too robust, integration across devices and platforms too seamless, retail footprint too large, customer satisfaction too high.

Mobile First

iPhone’s dominance is also partly the result of the right strategic bets. Apple has successfully re-positioned itself as a mobile first entity. Android and Windows Phone not only lag behind iPhone from a financial, technical and platform perspective, their masters — Google and Microsoft — still underestimate just how profoundly mobile will remake computing, work, play, commerce, interactions, our lives. Their smartphones suffer accordingly.

Google, which makes nearly all its money from (stationary) web advertising, continues to focus its efforts on getting more users on the web more of the time. Wise, but not enough. As I have previously shown, the person-to-web relationship is no longer central to the connected user. With smartphones, apps and services such as AirDrop and iBeacons, for example, we will witness a radical jump in person-to-person, person-to-group and device-to-device interactions that bypass the web entirely, never once to cross a Google server or gateway.

Likewise, Microsoft is still designed for a world where the “desktop” is at the center of an ever-expanding sphere of computing devices and services. This is fail. As Ben Bajarin has shown, it is smartphones, not PCs that will serve as the hub of our mobile, social and highly connected lives.

Apple’s iPhone is simply too far ahead of the competition everywhere that matters.

But, there remain opportunities — very big ones, in fact.

As I have written in the past, do not be misled by those who insist that Apple can magically go down-market whenever they wish. This is false. Apple’s skill set, cost structure, corporate expertise and branding all prevent this. Thus, Windows Phone and Android vendors can fight it out over the low-price, low-profit market.

There are several additional paths to take. These can all benefit from non-Apple innovation.

Form Factor

Apple now controls the most robust developer platform for personal computing. No one on the planet foresaw this happening, not even Steve Jobs who initially radically underestimated both the disruptive power of the app and the near-limitless potential of the iPhone.

Therein lies the opportunity.

Apple is now beholden to its developer community. The iPad and then the iPad Mini, the iPhone and then the iPhone 5, all have very specific display sizes in large part because these work best for the nearly million apps available. You may pine for an iPhone “Note” but the fact is Apple cannot offer us a wide array of display sizes because this would harm the performance and presentation of existing apps.

Android and Windows Phone should therefore radically expand their efforts and develop devices that embrace all manner of display size and form factors (e.g. these massive Microsoft ‘tablets’). The upcoming “bendable” LG smartphone and the extremely popular large-display Samsung devices reveal the potential of this market.

Similarly, iOS cannot well support physical keyboards. Mobile devices with physical keyboards — including, yes, the Surface — will remain in high demand for years to come.

The Integration of Things

The shockingly rapid transition from iOS 6 to iOS 7 only hints at the potential power of Apple’s platform. With hundreds of millions already on iOS 7, app developers, payments platforms, makers of accessories and hardware companies all know that building for iOS, unlike all other platforms, is a near guarantee that their service or device will function properly and have access to the most lucrative market.

There is another path, however, one which Apple may simply be unable to support: everything else in our lives.

I want my smartphone to serve as my identity, my credit card, my house key, car key, to manage my heating and cooling, monitor my home when I am not there, control my washer and dryer, serve as my television remote, connect with my medical devices (e.g. blood pressure monitor), track my dogs, offer me instant access to the subway and thousands of other activities.

Given the obvious limits on Apple’s marketshare and hardware development, Android and Windows Phone need to position themselves as the go-to platform for the Internet of Things. Apple and its hardware partners cannot be everywhere.

Government Intervention

Smartphones connect us with content, with the web, with one another, and with an ever-expanding array of devices and services. They are the center of our lives. Not the PC, as Microsoft envisioned. Not the web, as Google still believes. The smartphone is the last thing we see at night, the first thing we see in the morning. The odds of some new tech marginalizing smartphones any time over the next decade, say, are extremely remote.

A far more likely pitfall for Apple’s iPhone is government intervention.

No matter your political bent, the long history of government from at least the beginnings of recorded history clearly reveal that wherever there is a great deal of money, government will be there.

Apple has a great deal of money.

Expect new rules on how this money is taxed, how it may be spent, and a bevy of new and potentially inexplicable regulations on what Apple must do to satisfy each nation’s (or region’s) many and varied constituencies. Also expect nations to directly and indirectly limit Apple’s sales in favor of national entities.

How such intervention might impact Apple and iPhone is simply unknowable at this point. I nonetheless expect ongoing and potentially significant government intrusion upon Apple’s business, at least from China and the European Union, possibly even the US.

I suspect that government intrusion, more than the marketplace, more than any new technologies, more even than industry collusion, will impact Apple’s and iPhone’s continued success the most over this next decade.

Apple’s 5C Invasion Strategy

All the speculation around the iPhone 5C was that it was designed to be Apple’s product to infiltrate the lower tiers of the market and begin to take share from Android.

You may or may not know that in several markets like the US, Japan, and parts of Europe, the iPhone dominates the premium section of the iPhone market. This market makes up roughly 10-15% of the global smartphone market. Obviously Android dominates the other and much larger sections of the smartphone market. So the speculation around the 5C was that it was designed to help extend Apple’s product line beyond the 10-15% of the high-end segment. So does the 5C do this? I believe the answer is yes but it is not clear exactly by how much.

I know that is a foggy answer but this is a complex problem. If you study Apple like I do you know that what matters to Apple is not just market share but the right market share. Apple wants customers that add value to their ecosystem. Meaning that they spend money on apps, media, accessories, etc. The ultra-low-end part of the market does not do this. The larger middle-tier of the market does this to a degree. The market that Apple currently dominates does do this and in large volumes.

Apple has brought a current generation iPhone line-up in the 5C at lower-costs than previous current generation iPhones. This is why in the US market the lowest-priced iPhone with a new two year contract is $99. Now in many other markets Apple does not set the price of the phone. The carrier buys the phone then prices it at whatever they want. So this means a carrier in other parts of the world can buy the iPhone 5C then charge any price they want. They can make it free, $49, $69, etc.

So to answer the question we need to anticipate the value of the iPhone to a carrier by way of driving data services. If you follow the iPhone’s market share by way of web consumption (data) then you will know it is the undisputed leader when it comes to driving data usage on carrier networks. This is a big deal and I believe that carriers in markets outside the US understand this value and will price the 5C aggressively in order to attract the more valuable customers to their network.

So what about China?

This is the big wildcard. Apple for the first time included China as a launch day country. This is significant and the Chinese customers will appreciate this in that is shows them Apple is not treating them like second class citizens. Of course to really tackle China Apple needs to have China Mobile as a distributor.

This deal is inevitable in my opinion, especially since the new iPhones support TD-LTE which is the standard for China Mobile network. Cost aside, my firms forecast and from many others I saw, anticipated that a China Mobile deal alone could lead to 3-5% extra market share in China for the iPhone.

Is the cost high for the iPhone 5C in China? Yes, but keep in mind that all imports suffer a massive import tax. This will always keep the cost of iPhones higher than any local brands in China. This fact alone complicates the competitive landscape in China more than many realize.

All of that being said, I’ll say this about what Apple announced today. In light of the competition, they have never been up against an actual iPhone lineup. Competitors have been competing against only one current generation phone. Yes Apple offered legacy devices in the market but I can’t overstate the importance to new buyers and upgrades on current generation devices. This holiday will be the first time that Apple’s competitors will be going up this strong of a current generation iPhone lineup. With that I will add that Apple’s brand and marketing should not be underestimated by the competition.

Many of my analyst colleagues doubt that Apple’s moves today take them beyond the 10-15% they currently own. I disagree. Colors will be of interest to many segments of the market. The gold iPhone will be a huge hit in China due to what the color represents. Pair that with the project Red case and the Chinese will go crazy.

I’m not going to project or forecast what amount of extra share Apple can garner from the new lineup. But I will not be surprised if this takes them beyond the 10-15% and into the 20% if not higher. I certainly believe that in markets where the iPhone is priced even just 100-200 dollars more than a competing mid-tier Android device that the iPhone will fair well. In fact in all but pre-pay markets we estimate the iPhone to take share from the 350-400 dollar mid-tier Android devices.

There are number of data points we are tracking to validate this. Google Play app store revenue in Japan for example as well as the sales figures of Samsung and others in key regions. Lastly, we estimate that by the end of the year iOS will have gained enough ground on Android to now have more than 50% us market share.

Did Apple Fail Us? Maybe. Did Apple Just Stab Microsoft In The Heart? Definitely.

Ambition is the last refuge of failure.
– Oscar Wilde

Apple held its much-anticipated iPhone launch event last week. The company offered up iOS 7, iPhone 5c, 5s, iTunes Radio, a “motion” chip, a 64-bit processor and several more goodies. The “one more thing,” however, turned out to be the reaction of the world. Neither awe, nor disappointment, really. Rather, a collective shrug of the shoulders.

It was plainly clear that the company missed the mark.

Except, this is not really true — at least, it’s not the full truth. The full truth is thus: we misread Apple at least as much as they misread us.

The Undiscovered Country

Anyone who labels the iPhone 5c as a “mid-tier” device does not understand the meaning of the term. The baseline version costs an incredulous $549 — not counting criminally high-margin bumpers. And this is the “low cost” iPhone we were all expecting?

Apple followers, Apple bloggers, and industry analysts were nearly universal in expecting a budget-priced iPhone. We were all wrong. Why?

Few companies plant and manage leaks as craftily as Apple. It was not “leaks” that caused us to expect a low-cost device. Indeed, that a few of the most well-connected Apple insiders started backtracking from this sentiment a week or so before launch was the leak.

The reason everyone was expecting a low-cost iPhone was because the entire world understands that now is the time for such a device. Great smartphones can be had for $200 – $400 all over the world. Apple’s competitors — Android, essentially — offer a slew of great devices with good hardware, great apps, great camera and great screen for under $400.

There is no excuse for Apple to not offer us a similarly priced similarly great device. It’s not about margins or greed. The company literally has more money than it knows what to do with.

The reason the bloggers, followers and analysts were all wrong, however, stems from a rather profound misunderstanding of Apple.

Apple cannot go down-market.

Asking Apple to go down market is like asking Microsoft to no longer charge for software. It runs counter to their history, their strategy, their culture and skill set, their strengths, their leadership and how they recruit, reward and incentivize their staff.

To go down market would likely require Apple to alter device specs — which would badly upset much-needed developers. To go down market would require Apple to outsource more of its production. It would require more deals with more carriers and retail outlets, offering them more leeway on pricing. It might require using other’s processors, other’s batteries, ramping up global manufacturing and sales capacity. Apple has close to zero experience with these. You can’t simply magically alter who you are. It’s hard enough just to try and buy your way into transformation.

Think Mercedes’ disastrous acquisition of Chrysler.

The faithful may argue that Apple refuses to chase market share. Or that Apple refuses to make lesser-quality products. Fine. But the fact is now plainer than ever before. There are companies in this world that can — right now — make awesome smartphones for under $400. Apple is not one of them.

Apple failed to deliver the low-cost iPhone we all were certain was coming. Yes, they failed us. But, it was our failure to expect from them something they simply cannot do.

The Next Generation

What Apple can do, of course, is make amazing mobile computing devices — the very best in the world. The iPhone 5s may be the best smartphone anyone can buy at any price. Not that you should.

A week after launch and I simply cannot get over the fact that the iPhone 5s is, uncharacteristically for Apple, less than the sum of its parts.

Apple had the perfect opportunity to offer the world an iPhone that featured radical improvements in camera specs, radical improvements in Siri, radical improvements in iCloud, and at least significant improvements in battery life. Instead, Apple tossed in a 64-bit (A7) chip, a “motion co-processor,” and a fingerprint scanner. How does any of this help you, the paying customer, here and now?

While the A7 chip will almost certainly improve device responsiveness and should enhance operation of the camera, the full value of the iPhone 5s may not be realized for possibly a year or more, as developers and industry partners catch up. Why pay for the privilege of being a beta user?

By the time you have wearable devices that make the M7 relevant to you, and by the time most games and apps take full advantage of the A7, will you even own your iPhone 5s? Possibly not. For most users, a 1-2 year lifespan is all their smartphone ever achieves. Then it’s on to the newest device. This was a missed opportunity.

The Wrath of Jobs

Apple may not have given us what we wanted, not really, not now, but they have nonetheless created a device that puts Microsoft on notice. This cannot be overstated. Indeed, I contend the biggest story to come out of last week’s Apple launch, and which almost no one is discussing, is the breadth of the assault Apple is readying for the enterprise, Microsoft’s final stronghold.

Free iWork — with secure cloud included.
The very best smartphone (and tablet).
A secure ecosystem that welcomes enterprise-class apps.
Working fingerprint identification.
An M7 motion chip can both support and foster the healthcare, logistics and wearable computer industries.
“Desktop class architecture” inside mobile devices. Yes, Apple gleefully reiterated the world “desktop.”
True end-to-end ownership of the hardware and software, delivering the best reliability, customer support and security.
The premier software developer community and the very best, most accessible, most secure software distribution platform. Yes, these all belong to Apple.

The PC is a relic of the 20th century. The smartphone is the computer. No one, still, is even close to Apple in this regard.

The Final Frontier

Techpinions analyst, John Kirk, noted that “Apple is quietly putting together the foundation for the next five to ten years. People seldom pay attention when foundations are being laid.”

I agree. Despite periodic missteps, Apple is relentlessly marching forward. Sadly, most of the world will never know.

I’ve long contended that Apple’s end game is thus: Siri (voice) + TouchID (fingerprint) + iCloud makes every Apple screen everywhere instantly available to you and fully personalized for you. That is as awesome as it is audacious. I’ve long hoped, however, that Apple could make this a reality for every screen, every user. This is a pipe dream, I’m afraid, and that’s never been more obvious.

Apple is designed to create amazing computing devices — just not for the vast majority of the world. That’s not really a failure, but it is unfortunate.

The Apple A7 – A is for Ambition

A great deal of articles have come out trying to sour Apple’s A7 processor and the fact that they have moved their ARM architecture from 32-bit to 64-bit. The narrative claims that there are no tangible benefits to make the move from 32-bit to 64-bit in mobile devices today.

Much of the narrative is rooted in a desktop perspective with regard to 64-bit architectures. Folks were quick to point out unless the iPhone has 4gb of memory that 64-bit will be useless. Those folks are using a desktop computing mindset to 64-bit not a mobile one. iOS for example is extremely memory efficient as are the apps that run on it.

This kind of thinking also discounts Apple’s vertical approach from the Soc, to the hardware, and the software. Because they control the OS they can “tune” or “optimize” the software to maximize efficiently every bit of the core they designed. Apple needs only to design the A7 for one purpose–iOS. Therefore, they can focus in on optimization for performance gains in all areas they feel are important.

Now, while we can certainly make the case that Apple could have achieved many performance gains by staying 32-bit we need to understand the context of how they would have achieved that.

Throw More Cores At It

If you study trends in the semiconductor industry you know that more area of the chip is being dedicated to graphics. It is almost as if the GPU is becoming more important than the CPU. But that is a discussion for another time.

Apple could have effectively accomplished performance gains of some magnitude simply by designing a quad-core version of the A7. Apple is yet to design a quad-core SoC and this would have given them performance gains. However, it would have come at a power cost. More cores require more power. Now there are very good and power efficient quad-core ARM processors available today from Qualcomm and Nvidia. But by moving to 64-bit and staying dual-core, Apple has effectively delivered equal to and perhaps better performance than competitors running quad-core chipsets with a dual-core solution.

So where will this matter? Battery life is the biggest beneficiary in the short term. Every task that utilizes the CPU or the GPU will happen faster allowing the CPU to return to a low-power state much faster.

Many will claim that consumers don’t care about specs. And this is true in most regions. However, there is a group that cares very much about specs, a group that is very important to Apple–developers.

Never Before Seen

One of my favorite lines when talking with developers is: “you can never have enough performance.” I hear this exact line so often you would think it is their motto.

Recently, I heard a wise man say: “Performance doesn’t matter. Until you don’t have enough of it.”

The key to understanding the value of the A7 being 64-bit is what developers will do with it.

We saw a great example from the team at Epic Games at the Apple event Tuesday. While showing off the preview for their upcoming game Infinity Blade III they made an important observation. They pointed out that they could keep “turning on features” they wanted to use in the game. Games like Infinity Blade use engines built around the graphics libraries. Many of the features encompassed in the graphics libraries can’t be used if the CPU or GPU can’t support it. When this happens developers just turn off features. When game developers are provided with more performance they take advantage of it and their applications and the experience with those applications benefit.

We will look back in a few months when we see extremely talented and creative developers take advantage of the A7’s performance and create classes of applications never seen or possible before on mobile devices.

Pundits and the media may look at the A7 being 64-bit and say big deal. However, developers who make a living creating best in class software to push the future of mobile computing forward will look at the A7 being 64-bit and say BIG DEAL!

Foundation For the Future

By going to 64-bit now it sets Apple up for greater performance gains utilizing the architecture for their future. This years gains are 2X with better power efficiency. Next years will be 2X or greater with even better power efficiency and so forth. Each generation delivering better performance-per-watt. Within this context it is easier to understand the “why now” angle to the A7 being 64-bit.

Apple certainly could have kept riding the 32-bit curve and just added cores and optimization with each new process node. But by going 64-bit now, it means they have more grand ambitions to push the envelope in what is possible computationally with their smartphones, tablets, and perhaps more much sooner than expected.

The iPhone will benefit from this, as I pointed out, with battery gains and new classes of applications (particular those that are graphically or computationally complex) but the real winner with this move will be the iPad.

I am, of course, speculating but I think it is reasonable to assume that the next iPad will run the 64-bit A7. Bringing a true desktop class processor to the iPad has the potential to change the game dramatically in terms of how the iPad is used and the types of applications possible on it.

And of course, this move will fuel the fire that Apple may have intentions of bringing the A7 to ‘some’ Mac products.

If you are interested in a much deeper dive on this new ARMv8 64-bit architecture, I recommend this article written by David Kanter.((if you do read the article pay attention in particular to the sections on register states, memory, and virtual addressing)) I found something he wrote in the conclusion of interest.

“In some respects though, the more significant changes came not from adding features, but removing them.”

Sounds kind of familiar.

Reviewing Apple’s iPhone Event

I am providing you with a copulation of answers to several questions raised… ~ Marion Barry

The recent Apple iPhone event raised so very, many questions. Let’s touch on a few of them and see where we stand today.

Don’t sweat the petty things and don’t pet the sweaty things. ~ George Carlin

Apple TV

BREAKING NEWS: Piper Jaffray analyst Gene Munster on suicide watch following conclusion of Apple event with no sign of Apple television ((It’s an in-joke. If you don’t get the reference, just laugh hysterically anyway, then move on.)). ~ Peter Cohen (@flargh)

Sniping & Backstabbing

Personally, I could have done without the sniping and backstabbing done by Apple’s competitors. Apple does it too, so I’m not taking a “holier-than-thou” stance. I just think that it’s bad policy. But no matter what I think, it’s not going to stop any time soon.

Here are some examples of competitor’s mocking ads for those of you who like that sort of thing.

People who like this sort of thing will find this the sort of thing they like. ~ Abraham Lincoln

iPods

Not. One. Word.

Wow.

iPhone Buyback

Not mentioned at the event, but recently announced and implemented. I’m intrigued.

Phone buybacks, trade-ins and resales were already a big business but now Apple’s stepping in too. What effect will Apple’s participation have on the secondary markets? Worth keeping an eye on.

Apple’s Free iWork Just iScrewed Microsoft

Q: Where are an elephant’s genitals?
A: On his foot.
Q: Why do you say an elephant’s genitals are on his foot?
A: Because if he steps on you, you’re screwed.

Apple just stepped on Microsoft. Hard.

I don’t hear anyone talking about this and I’m not sure why.

Google has been attempting to undercut Microsoft Windows with Chrome for the desktop and Android in mobile. Apple has always subsidized its OS sales, but recently, they have begun to bundle their OS with their hardware for free.

(I)t’s not just Android that has made the OS layer non-monetizable. ~ Ben Thompson (@monkbent)

Google also attacked Microsoft’s other cash cow, Office, with free versions of Google Docs. Now Apple joins the attack by bundling iWorks into every new iPod Touch, iPhone and iPad.

Further, Apple already announced that iWork in the Cloud would be free and work cross-platform.

The problem for Microsoft (is) that you can’t charge for software anymore. ~ Horace Dediu (@asymco)

iWork being free could be truly disruptive to Office (especially ) if Apple were to make it free or pre-installed on all new Macs. ~ ßen ßajarin

Microsoft has an unequalled gift of squeezing big mistakes into small opportunities. ((With apologies to Henry James.))

Colors

PATIENT: Doctor doctor, I keep painting myself gold .
DOCTOR: Don’t worry it’s just a gilt complex.

I refuse to argue over matters of taste. Let the market decide.

In matters of style, swim with the current; in matters of principle, stand like a rock. ~ Thomas Jefferson

iOS 7

Lots of controversy here. Some hate iOS 7. Some love it. Some say its going to upset Apple’s client base. Some say it’s going to reinvigorate Apple’s client base.

Only time will tell…

…and that time starts on Wednesday, September 18, 2013.

Carriers

Perhaps the biggest news for the iPhone came from outside the Apple event when reports indicated that Japan’s largest carrier (DoCoMo) and the world’s largest carrier (China Mobile) would be selling the iPhone this Fall.

Huge.

Literally and figuratively huge.

Something that people don’t seem willing to understand: Apple could have a deal with any carrier at any time they chose. But they choose to make deals only on their terms. Does that policy mean that they sell less phones? You bet. Does that policy mean that they make more money and sell only to the most engaged customers? You bet.

Apple’s low market share is not by accident, it’s by design.

M7 Chip

People say that Apple’s new M7 motion sensor is only potential…

…but that potential is huge.

People say that Apple isn’t innovating…

…but those people are dead wrong.

Apple is quietly putting together the foundation for the next five to ten years. People seldom pay attention when foundations are being laid…

…but they should.

Let’s wait just a bit and see what Apple hath wrought.

A7 Chip

How big is the new A7 chip for Apple? Well, let’s start with the fact that all of the differentiation between the iPhone 5C and 5S is built upon it:

— Faster and more powerful
— Camera features
— Fingerprint scanning

All of these benefits are made possible by the A7.

And future uses? Who knows?

But one thing to keep in mind. The incredible horsepower of the A7 is not so much targeted at consumers as it is targeted at developers.

With the A7 chip, Apple appears to be playing to their strengths. And it’s hard to know how quickly (or how slowly) the competition will catch up. ((No competitors are even close to bringing 64 bit to market and even for some platforms like Android which is focused on the low end non-spec smartphones it may not even make sense.))

Fingerprints, Privacy, Payments And The End Of NFC (We Hardly Knew Ye)

This topic deserves its own article, so let me briefly say this:

— Remember when people criticized Apple for not hopping on the NFC bandwagon fast enough? Yeah, forget about all of that.

Illustration of of Apple’s market power: it has effectively killed NFC despite Android supporting it. ~ Benedict Evans (@BenedictEvans)

— Remember when people said that Apple wasn’t innovative? Yeah, forget about all of that, too.

It seems Apple will skip NFC just like they skipped blue ray. ~ JF Martin (@jfmartin67)

— Remember when people said that Apple was doomed? Yeah, you forget about that one, too.

Having built a ‘secure element’ into the 5S…what else might Apple do with it? ~ BenedictEvans

Ah, now THERE is a grand question, indeed.

Seven Hundred Million iOS Devices

iOS is niche or going away?

Get over yourself.

iOS is 700 million strong and growing every day. iOS will reach a billion customers by 2014.

An iPhone 4S (2 year old phone) is only worth $50 less in good condition than the Samsung Galaxy S4 (4 month old phone) on Gazelle. ~ Abdel Ibrahim (@abdophoto)

Gazelle is not an analyst or a pundit or a fan boy. They want to make money. Their estimate of what they can re-sell hardware for is about as objective an appraisal as one can get. It’s set by the market. And so long as the market values Apple’s iPhones as premium products, then Apple’s iPhones ARE premium products.

Apple’s Unreasonable Pricing Strategy

Again, a topic for a full article. Let me just say this. The iPhone 5C is Apple doubling down on their current pricing strategy.

Apple’s iPhone event was a confident declaration that iPhones are worth paying for. ~ Ben Thompson (@monkbent)

Much more to follow in later articles.

Differentiation

One of my concerns was whether Apple would be able to sufficiently differentiate the iPhone 5C from the 5S. Would they be able to make the iPhone 5S $200 more valuable than the iPhone 5C without resorting to crippling the 5C?

It turns out that Apple only had to differentiate the phone by $100 since they inserted the iPhone 5C in the mid-level, rather than the low level, price bracket.

And did they meet their burden? Easily.

— Better A7 processor;
— Better camera features; and
— Fingerprint scanner and security system.

As an aside, I have to admire Apple’s marketing strategy. They created three differentiators between the iPhone 5C and iPhone 5S, all of which can be explained in a single sentence.

By way of comparison, go to a Microsoft store and ask the salesperson the difference between Windows 8 RT and Windows 8; or the difference between the Surface and any one of the notebook or hybrid computer models made by Microsoft’s (dwindling) hardware partners.

See what I mean?

Flagship v. Premium

Another topic that deserves another article. Let me boil it down to this:

The iPhone 5 was both Apple’s Flagship and Premium model. The iPhone 5S is Apple’s new premium iPhone. The iPhone 5C is Apple’s new Flagship iPhone.

Take a look at apple.com today and note which new iPhone appears first: the 5C, not the 5S” ~ Horace Dediu (@asymco)

Posit: yesterday Apple cut the price of the iPhone by $100, at same margin, and made it cooler. Also launched entirely new high-end phone ~ Benedict Evans (@BenedictEvans)

People are just not getting it. Apple has just reduced the price of their “Flagship” – the iPhone 5c – to $99 subsidized, $549 unsubsidized. Apple is going to sell a TON of these mid-level phones. This is by design.

Much, much more in later articles.

Jony Ive

The difference that Jony [Ive] has made, not only at Apple but in the world, is huge… If I had to pick a spiritual partner at Apple, it’s Jony. ~ Steve Jobs

Jony Ive is the real deal, Apple’s true visionary.

Fast Company says that over the entire course of Ive’s leadership, only five designers have ever left Ive’s team with only two actually quitting, the other three simply died.

An incredible tribute to an incredibly gifted man and one of Apple’s greatest assets. So long as Jony Ive is with Apple, Apple won’t have to worry about that “vision thing.”

Innovation

When I hear people say that Apple isn’t innovative anymore, I have to do a reality check. Are those people living on the same planet that I am?

— MacBook Air
— iOS 7
— Mac Pro
— A7
— iPhone 5S

Taken together, the Mac Pro mentality and the A7 direction are terribly exciting. ~ Rene Ritchie (@reneritchie)

Agreed. The charge that Apple isn’t “innovative” would be laughable if it weren’t for the fact that so many people seem to take it seriously.

Critics who claim that Apple is not innovative may look like idiots and talk like idiots but don’t let that fool you: They really are idiots. ((With apologies to Groucho Marx.))

Critic’s Free Advice Worth Every Penney

The long knives are out for Apple. Critics are literally calling Apple “clueless” ((FRED WILSON: “The C in 5C does not mean ‘cheap’ as I had hoped. It means clueless, as in clueless about how the vast majority of new smartphone users are paying for their phones.”))

Leading candidate for Stupid Comment of the Day from Jony Evans at ComputerWorld: “Apple may have “hit its BlackBerry moment.” ~ Shawn King (@ShawnKing)

I don’t know about that, Shawn – the competition for stupidest comment is mighty fierce.

A critic is a person who rocks the boat and then claims that they are the only one capable of saving the ship.

Pshaw.

“The critic leaves at curtain fall
To find, in starting to review it,
He scarcely saw the play at all
For starting to review it.”

― E.B. White

Measure not the work until the day’s out and the labor done. ~ Elizabeth Barrett Browning

I have studied the wisdom of many (critics) and many cats. The wisdom of cats is infinitely superior. ~ Hippolyte Taine

Apple’s been doing pretty well on its own by ignoring the critics’ advice. Let’s wait and see how this all plays out before we jump to any premature conclusions. And let’s hope against hope, that Warren Buffet got it right when he said:

If a business does well, the stock eventually follows. ~ Warren Buffett

Understanding The iPhone Pricing and Segmentation

In my mind, the key to yesterday is to understand how the iPhone is segmenting and the role the pricing structure plays on the segmentation.

Everyone, including myself, was convinced that Apple was going to be more aggressive with the pricing of the iPhone 5c. Now, looking back, it should be obvious that Apple has not really changed much in the way of their strategy. They did fragment the iPhone line as many expected. They did introduce a ‘new’ product at slightly lower price point. But they did not do what many thought, which was hit a price point that fully targets more unsubsidized and pre-paid markets.

That being said, there is more to the pricing strategy than meets the eye.

Understanding the Segmentation

Over the last few years, Apple has sold a current generation iPhone along side several last years models at discounted prices. From looking at the sales announcements from many carriers, we know that later generation iPhones sell extremely well. Verizon even reported that half of their iPhone activations were non-LTE, meaning the 4S. This just goes to show you the strength, even in the US, of devices at the $99 subsidized price range.

Outside of the US, and in many areas of Europe, the price of handsets vary much more than they do in the US. Carriers can acquire the devices at their wholesale prices and offer them at whatever cost they want to acquire new customers. In the US we see Walmart do this from time to time with the price of the iPhone 5. Walmart just recently dropped the price to $98 of the iPhone 5 with a 2-year contract. They can do this because of the cost structure deal they have to carry the device and incentives on contracts. Couple that with the fact that people don’t go to Walmart just to buy iPhones and you can see how they can make up some perceived cost losses with additional items bought in store.

For many carriers the iPhone does a similar job on their network that it does for Walmart in stores. Carriers hire the iPhone to drive up their average revenue per user. The iPhone is the undisputed leader for network operators in driving ARPU. The iPhone 5c gives them some leverage to be creative with their pricing of the device in order to acquire new customers and drive higher ARPU than they could before with the premium iPhone model.

Take a look at the chart below and the iOS share of web traffic in specific countries.

This demonstrates the good job the iPhone does in driving premium data services. In regions still trying to drive LTE users and monetize the massive investments they have in network infrastructure, the iPhone is the best product for the job.

Looking at the lineup, I will not be surprised if the iPhone 5c becomes the larger share of iPhone sales. Thus Apple has created a phone for everyone, or at least most, and a premium phone to aspire for. This is segmentation at its best.

Economies of Scale

One other element to watch with the 5c is whether the price may come down as manufacturing economies of scale allow. Since the casing is using a process much less complex in the finishing and machining than the 5 and 5s, it may allow for economies of scale to allow for better pricing.

This of course may not be evident in anything other than the carriers ability to be creative with the pricing. It will be interesting to see if the pricing carriers have with the iPhone are the same in six months time or less.

Overall Apple’s competition has never been up against a current generation product line. They have been up against a single new iPhone in two different colors. Previously Apple had two current generation iPhone choices for consumers. Now they have eight.

I’ve always said that it took an army of Android devices to compete with Apple. Now Apple is creating it’s own army. I do have to imagine competitors are a little nervous.

Advancing the iPhone

Apple may have done more today to pave the way for the iPhone’s future than any past event. What was announced today was more than a set of new products but a new foundation for the future. First off, this is the first time Apple has shifted from its tried and true model of one new iPhone a year. Second, this is the first time in a while that they killed off last years iPhone and replaced it with a new one.

There were more interesting things to write and analyze than fits in one article so I’d like to focus on a few foundational aspects of today’s events.

Next Generation

You can’t look at the iPhone 5s and not objectively agree that it is an amazingly designed phone. Aesthetically it stands out from the competition marvelously. But the technology inside the iPhone is truly next generation.

The biggest surprise for me was the announcement that the new A7 processor in the iPhone 5s is the world’s first 64 bit processor in a smart phone. We heard this rumor early on but I dismissed it thinking it would be too soon to move to 64 bit. Apple, however, believes it is the right time.

1 billion transistors. That is truly remarkable. I’m not going to go into the depths of 64 bit architectures but I’ll make a few points on why this is a big deal.

First, 64 bit will dramatically increase the performance of more intensive and demanding applications. Things like audio and video encoding/decoding and any graphically intense applications including games and other visually complex applications. I talked to several prominent developers in the crowd who were extremely excited about the possibilities with 64 bit computing in mobile devices.

What makes this move to 64 bit all the more interesting is the software. iOS 7 is the world’s first 64 bit mobile operating system. The key to 64 bit processors is to have software which is written to take advantage of it. Here again is where we see Apple’s vertical advantage kick in. They control the hardware, design the SoC, and control the software. All these things have led them to create the world’s most advanced processor and operating system. But it is not just about Apple.

Apple likes to do things that give developers a distinct advantage for their apps on iOS. 64 bit will do just that and I am excited to see how developers can take advantage of the A7 and create the most amazing smartphone applications ever created.

The A7 being 64 bit, and potentially the results it yields in terms of third party software, gives Apple a distinct time advantage over competitors. No competitors are even close to bringing 64 bit to market and even for some platforms like Android which is focused on the low end non-spec smartphones it may not even make sense.

The iPhone is a Wearable Computer?

Apple also showed its prowess in developing co-processors or dedicated companion cores designed for low-power efficiency for dedicated tasks. Their latest one, the M7, is designed as a motion co-processor that tracks movement and is optimized for contextual awareness. They have an API called core motion that has the potential to create a new class of health and fitness apps.

Several things are interesting about this. First of all this could enable a new class of health and fitness hardware as well. Yes new apps can be built to register and track motion of the phone itself. However, by using the API, perhaps we will see new wearable hardware combined with this more robust software to create new health and fitness solutions. One could assume that the more wearable devices we have tracking relevant data the more accurate it can be.

Second, Apple is giving developers the tools to begin to take advantage of assets in their ecosystem to start developing new health and fitness apps. We speculate that Apple may someday create a dedicated wearable and this API and the M7 could be laying the foundation for conditioning developers for that future.

Security

The fingerprint sensor is a true innovation. I have sensed the secure devices trend for some time. With regards to Apple, this is significant since business continues to be a growth area for the iPhone and iPad. The innovations they are doing around security will only help their case in the enterprise and even into more places like government.

Here again Apple’s vertical advantage shines through. By owning the hardware, the SoC, and the software they are able to securely protect the person’s fingerprint data into a secure enclave, which is a dedicated secure area of the CPU that is blocked off from the OS and designed to keep fingerprint data locked directly to the hardware securely and safely. [pullquote]Instead of one-click purchases, we are now on the cusp of one-touch purchases.
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The key will be to watch how this advances. This will be a new way of thinking about their devices and security and I imagine Apple will take baby steps in advancing this technology. Right now you can use the fingerprint scanner to log-in to the iPhone as well as use it to make a purchase through iTunes. Over time perhaps the capability will extend to purchases with third party apps as well.

Instead of one click-purchases, we are now on the cusp of one-touch purchases.

Free Productivity

Lastly, making iWork free with all new iOS 7 devices does several interesting things. For one, it may keep Microsoft at bay. Even though Office is offered on iOS it requires a subscription to Office 365. This is not an issue for those who have an enterprise license but it is for consumers. By giving iWork away for free consumers now have a solid Office alternative with their mobile devices.

The most interesting thing this does is it drives more iCloud loyalty. If consumers start using iWork and documents in the cloud, instead of something like Office, Apple has the potential to create more ecosystem loyalty as consumers build up size-able amount of “productivity” data stored on Apple’s cloud.

Strategically this one is interesting.

Conclusion

From my observations I noted a few firsts. I’ll end with these.

Firsts
– First dual-tone LED flash
– First 64 bit mobile CPU
– First 64 bit mobile operating system
– First $99 with contract new iPhone model
– First mobile phone with a fingerprint scanner (that actually works)
– First time Apple releases two new iPhones

Windows Phone And Android Hate

“Bitterness is like cancer. It eats upon the host. But anger is like fire. It burns it all clean.”
― Maya Angelou

I want Windows Phone to succeed. More than that, I want Android to fail. I hate Android.

There, I said it. Yes, I am a market analyst, detached, and I have absolutely no stake in the success or failure, rise or fall, of either Microsoft or Google, $MSFT or $GOOG, or Apple, for that matter. I simply do not like Android. I refuse to hide this fact.

I think Android is a pale, poorly executed imitation of Apple’s iOS. I have real concerns about the ethics of Google’s ex-CEO as he simultaneously served on Apple’s board. Google’s scale and de facto search monopoly allow it to undercut competition and stifle innovation in local-mobile services. That’s no good. I can’t stand the way they use terms like “open” the way fast food chains label yesterday’s hamburgers as “fresh.”

Nor can I ignore their duplicitous stance on patents.

Most of all, I am suspicious of Google Android’s business model, which is built upon the capture, store, sift and sell of an ever-increasing amount of my increasingly personal information, all of which is then bundled and sold off to countless unknown people and businesses.

With Google search, Google Maps, Google Android, Google Wallet, Google Play, Google Chrome and Google+, Google knows where we are, what we are buying, who we are with, what led us to that purchase — and has documentary evidence of it.

Forever.

I don’t want this.

As everything goes digital and as everything digital collapses inside the shimmering smartphone screen, I see no justification for anyone cheering on Android.

I am not fueled by animus, however. I want the new Microsoft – Nokia to succeed because the world benefits if Windows Phone becomes a viable third alternative to iPhone and Android.

A Great Disturbance In The Force

Yes, I think Apple currently makes the best smartphone and operates the best smartphone platform. But, for sundry reasons Apple will not and cannot stop the global spread of Android. Should Apple release, as is widely expected, a low-cost global iPhone “C”, and if rumors of deals with DoCoMo and China Mobile are all true, it’s still likely that the very best Apple will achieve — ever — is well under 30% of the global smartphone market. Likely, 25% is their ceiling. I don’t want Google to own 75% of the smartphone market as I believe this would be harmful to innovation and a long-term threat to personal privacy norms.

Where Apple will not succeed, Microsoft now can. Pushing Ballmer aside and acquiring Nokia suggests an acceptance of the new world they must now compete in. No, it will not be easy to take on Android. It is unlikely they will succeed. Still, the company that once seemed like the Evil Empire is now more like an aging Annakin Skywalker — and our last, best hope to slay the Emperor.

There are many arrows in Microsoft’s quiver: Windows 8 + Nokia design + Skype + Bing + Office + Outlook + Nokia imaging + Windows Media — plus security and server tools for businesses of all sizes. Microsoft with Nokia also has the necessary global footprint. Taking on Android is not a suicide mission.

The Circle Is Now Complete

The greatest barrier to success, however, is that Microsoft remains of a world that no longer exists. Smartphones represent a transformative shift in computing – like mainframes to Minis and Minis to PCs. Companies optimized for PCs are, I believe, more likely as not to fail in this new age. Of course, Google is also optimized for PCs. That’s where nearly all its revenues come from, still.

Nokia, however, is optimized for mobile if not quite for this new age of smartphones. Moreover, they possess still another strength that Google does not: the user is also the customer.

This is critical — and little understood by most mobile industry pundits. Smartphones are with us all the time. They are in our hand when we awake and when we fall asleep. They are our most personal objects, containing our most private data, and the thing we touch more even than our own children. Carriers and IT units may be major channels for smartphone sales but unlike with PCs, the user will be the ultimate arbiter. These devices are simply too personal to allow others to decide what we choose.

Nokia possesses yet another strength, and one not well understood in the United States. The company truly knows how to make quality devices at amazingly low prices.

The pre-Microsoft Nokia lent me various “Asha” phones to test: the dual-SIM Asha 310, and the cute, colorful and long-lasting Asha 501. I also tested the Nokia 105 feature phone. I was legitimately struck by the functionality and usability of each of these phones, particularly on a per-dollar basis. I would not buy any of them — which means I cannot recommend them. That said, these phones can be had for $25 – $100, a truly amazing feat of engineering, design and manufacturing. In many parts of the world, most do not have the luxury of turning their back on a sub-$100 device like I can.

Analysts that confidently predict Android will forever dominate the smartphone wars on cost alone have likely never used a very-low-cost Nokia device. Similarly, those analysts that are convinced that Android will win because Google offers its services and applications for free badly under-estimate the value of functionality, reliability and security that is built into Microsoft’s software.

The Force Is Strong With This One

Microsoft and Nokia can deliver this to the world:

Low-cost, secure, functional smartphones that seamlessly integrate across multiple devices (e.g. smartphones, PCs and game console), that satisfy end users and businesses alike, that can incorporate Yammer, Skype, Xbox, Outlook and Office, and which provide a hedge against the overwhelming force that is Google Android. That is a powerful combination.

Admittedly, the numbers at present are not terribly good, as this recent Kantar market survey reveals.

Despite its current meager share, the Windows Phone platform is growing. Moreover, the smartphone market itself is only in its early days. Analysts who suggest otherwise are dead wrong. The vast majority of the world does not have a smartphone yet — though almost certainly will within the next few years. In addition, smartphones are becoming more used and more useful for all users with every passing day — for work, school, play, home, life. “Free” and ad-driven business models like Android may ultimately fail to satisfy the requirements users demand for these truly critical devices. What is critical in your life that you don’t expect to pay for?

I Sense Something. A Presence I’ve Not Felt Since…

When Microsoft effectively acquired Nokia, the company made no secret of their intent:

To accelerate its share and profits in phones. To create a first-rate Microsoft phone experience for its users. To prevent Google and Apple from foreclosing app innovation, integration, distribution and economics.

I am hoping they succeed. It is within them to do so. Their fatal flaw, it seems to me, is do they have enough faith in themselves to do what is right, to achieve what I contend is possible, and build for the future, not the present? After all, the reason Ballmer was so successful and yet ultimately failed is that he chased the easy money, valued Windows profits above all else, and refused to acknowledge the potential for complete market disruption.

Nokia is likewise guilty of this. In a recent interview, Frank Nuovo — once the Jony Ive of Nokia — told the Australian Financial Review that Apple, not Nokia, re-invented the mobile market despite Nokia’s massive head start, because “all of our user testing pointed to the fact that no-one wanted touch phones.”

And yet now all of us have one.

The world can change, and quickly.

As can you. It’s time to let go of your anger. All has been burned clean. Begun the Smartphone War has. Microsoft is now on our side. May the force be with them.

Microsoft Buying Nokia A Great Move. But iPhone And iOS 7 Are Already Set To Remake Mobile Computing Once Again.

Do not be misled. Microsoft purchasing (the best of) Nokia — at firesale prices — is a brilliant move. Nokia + Skype + Bing + Office + Outlook + Nokia Maps + Nokia imaging. That is a very powerful proposition.

Apple, however, remains at least one step ahead, and iPhone continues destroying and disrupting all in its path. The mostly wise and semi-literal sacking of Steve Ballmer is but the latest casualty of the iPhone. There will be more.

In less than a decade, Apple’s iPhone has fundamentally altered computing, connectivity, work, play — and industry after industry. Its impact simply cannot be overstated.

Bet you didn’t see that coming.

Ballmer was absolutely not alone, of course, in failing to realize early on that iPhone was the personal computing equivalent of gun powder. Fact is, excepting Steve Jobs and Larry Page, nearly all in the computing industry whiffed on the iPhone’s game-changing potential — until it was much too late. Even the beleaguered Apple faithful, whom cheered when the iPhone was first launched, and aggressively downplayed the device’s initial glaring shortcomings, perceived it as little more than a touchscreen iPod with calling capabilities. They, like the CEOs of tech’s biggest, baddest companies, simply could not fathom how this little device with nearly no buttons, no software and no keyboard would soon re-construct our future, re-make Silicon Valley and devour content like some technological black hole, everything collapsing inside its glowing screen.

Now, we know better. Well, most of us. Far too many remain stubbornly clueless. Despite controlling the most used, most engaging mobile platform on the planet, despite the ongoing turmoil inside the Android camp — and, frankly, I still question Google’s long-term commitment to Android — we are treated to such nonsense as Fred Wilson’s “fear” that Android will obliterate iPhone and iOS.

Hard to take such unthinking proclamations serious. The iPhone is just getting started.

The iPhone Second Wave

Apple has an astounding 600 million users on the same version of the same operating system. This is more than anyone else. Given the global thirst for smartphones, it’s hard not to see this number reaching at least 1 billion in under two years. That ensures at least a decade of self-sustainability. There is more to come, however, much more. I believe the value of each individual iPhone, old and new, is on the cusp of a sizable increase in value and utility.

This is the most under-reported story about the iPhone

iPhones connect us to apps, to the cloud, to the web, to our content. The unstated genius of the iOS 7 operating system, however, is that our iPhones will increasingly connect to each other. This represents yet another fundamental computing shift.

iPhone to web (or cloud) was merely the first implementation of iPhone. Soon, it will be iPhone-to-iPhone-to-iPhone.

With iOS 7, Apple is rolling out AirDrop, which supports proximal one-to-one and one-to-many sharing of apps, web content, photos and other services. The new iOS will also leverage iBeacons, allowing us to connect our iPhone with (Apple-approved) wearables and intelligent accessories.

The value of these interactions is not derived from the web, but device to device, location to person.

In other words, Apple is on the cusp of having a billion users on the same platform, their computers always in hand, everywhere they go, connected to each other in physical proximity, not via the web, not via the public switched network, but iPhone to iPhone. I can only begin to fathom the unprecedented innovations we will quickly witness in location-based social sharing, gaming, and commerce.

Only Apple Can Do This

No one else has this. No one has ever even had this potential.

Yes, Android phones are far more prevalent. Yes, Google does a far better job of connecting us to all that the world wide web offers. But, only Apple will be able to connect us en masse to one another, device to device.

Think of three modes of connectivity. All are vital, all are valuable.

Apple does the very best job of connecting user with device — via the most intuitive operating system and a richer, simpler ecosystem.
Android does a better job of connecting users (and their devices) to the real-time and increasingly personalized richness of the world wide web.
The third path is entirely new: connecting device to device for all manner of sharing of content, data, money, photos and whatever else clever app developers invent.

Again, this is something only Apple can deliver. Hundreds of millions of devices, nearly all on the same version of the same OS, similar hardware, same modes of connectivity, same (Apple-based) standards, same simple method of sharing, same payments and distribution platform.

It will take years for Microsoft-Nokia, or Samsung or even Google-Motorola to catch up with, if they ever can.

My advice: Do not once again underestimate iPhone’s impact. It’s just getting started.

The Myth of an iPhone Killer [Updated with added chart]

The resiliency of the iPhone in not just the US but global markets as well is truly a marvel. As we will see in some of the charts below, against all odds Apple’s iPhone market share remains steady.

I’ve long argued that vendors in the Android ecosystem compete more with each other than with Apple. One can take a perspective that says a consumer who buys an Android phone is a lost customer to Apple, at least for the time being. In the case of the ultra low-end and cheap phone market, those customers are likely simply not Apple’s target. They may be when they are ready, if they ever get so far as to value the things Apple creates. In the case of the premium market for devices like the S4, HTC One, etc., we notice that these devices seem to take share from each other more than Apple–especially in the US.

I don’t think many realize how dominant the iPhone is in the US among premium handset market share. Getting these specific statistics (iPhone 4s, 5) share of premium sales is tough but from inside sources I’m told that by quarter the iPhone US share of premium can go between 60-75%. The key take away is that the iPhone is the dominant sales device in the premium segment of the handset market.

Even knowing that, myself and many would agree that looking at usage of the devices is the key metric. People can buy lower end and even premium Android devices all they want but if they are not being used as smartphones, or creating value to the carrier, then we wonder if we should even count them.

Below is a look at the share of platform usage in the US.

As you can see, even when new premium Android devices are launched in the US there appears to be no significant impact to the iPhone. Perhaps even more interestingly is the dip in iOS usage share during the “droid franchise” peak. Then as we can see when the iPhone came to Verizon it gained share back. The key losers over this time period was clearly RIM.

Now if we turn our eyes to the global vendor market share, we see similar patterns. For obvious reasons, the iPhones share of the global smartphone install base is much lower than the US but what we see is that its piece of the pie stays relatively the same size.

Notice for example that Android’s gains are not making the iPhone’s share of the pie look like RIM’s, Bada’s, or Symbians. Meaning declining. Android is gaining, yes, but the iPhones share is not decreasing like the others.

Now to look at what the opportunity looks like going forward I want to show a much bigger global handset vendor picture.

When looking at this image there are several things to note. First is that the iPhone’s share again remains relatively constant. It is not shrinking dramatically like other vendors but keeps its slice of the pie relatively static. However, look at the global rise of “others” in this chart. These are largely white box label vendors flying off the shelves in China. The size of the “others” pie is even larger in China than local brands like Huawei and ZTE. Others is the real growth opporunity as we see customers refine their interests and look to go with more established brands than white box makers.

I can show charts all day of global vendor sales and in no chart will you see iPhone’s share of the pie shrink rather you see it maintain. Obviously, what we will watch going forward is for the share of the pie to grow, likely at the expense of “others” to begin with. The point to take away in all of this is simply that there is no such thing as an iPhone killer, even though many assume there is.

How Apple Could Lead the Next Big Tech Trend–Security As A Service

Security is a hot topic in many countries at the moment. And it is going to be a hot topic for the foreseeable future, perhaps for reasons you may not even know yet. It is fascinating to listen to water cooler conversations from folks on the topic. Security, or a lack-there-of, is quickly becoming top of mind for many human beings and rightly so. The question that I think is interesting in all of this discussion is the role technology can play around the topic of security. More importantly, what can technology companies do with regard to security.

Computers come in all shapes and sizes these days. Some go in our pocket, some go in our bags, some sit in our desks and others in large cooled warehouses. Soon we will even have computers that we wear on our person. What comes with this new era of ‘personal electronics’ is new levels of intimacy with our devices. Our smart phones are very personal and more importantly heavily personalized. They contain quite a lot of data about us and are gathering more each and every day. We use them to communicate, participate in commerce, gather information, etc. As I look out at the markets I study and the technologies orienting themselves to serve them, I am becoming increasingly convinced that the idea of security and, more specifically the idea of security as a service, is about to get a lot of attention. And given Apple’s leadership role on a lot of digital things, I expect Apple to lead the charge in next generation of personal digital security too.

An Embedded and Integrated Experience

There are several reasons I think Apple will move the goal posts as it relates to security. The first is related to their acquisition of AuthenTec in 2012. We had been tracking AuthenTec at the time and they had many of the leading solutions for mobile security and biometric sensor technology. AuthenTec also conveniently holds the vast majority of patents in many key areas related to this type of security.

The second reason, which is why Apple bought AuthenTec rather than license the technology, is because Apple is a highly vertically oriented company. Meaning they own and control all the essential elements for them to create the Apple centric experience.

By owning all the key components from designing the system-on-chip, to the hardware and software security layers, the operating system, the hardware itself, and the underlying cloud framework, Apple is uniquely positioned to create a security solution unlike many others.

Security as a Service

Traditionally we think of security as a feature. I’m proposing we think of it as a service. This would include a set of features, when combined and continually implemented, it will be embedded into the fabric of the computing experience.

Earlier this year, in an article for MacWorld, Rich Mogull wrote a great piece. In this article he made many astute observations and comments. This one in particular:

Despite a rocky start, Apple now applies its impressive design sensibilities to security, playing the game its own way and in the process changing our expectations for security and technology.

Apple can afford to play the game their own way since they are the most vertically oriented personal electronics manufacturer on the planet. This will let them do things like bind elements of device security to their processor designs. This follows Intel’s logic with their purchase of McAfee to create new generations of secure silicon adding new levels of encryption to local data. Apple being in control of their hardware and software also would allow them to offer customers the ability to do a thumb scan or image recognition before engaging in a transaction, manage all our passwords in the cloud, etc, and ultimately give us more control of our own digital identity and security.

No Trivial Problem

What I find fascinating about what Apple and others in the industry moving in this direction is not only how complex this problem is but also how risky it is. On device security is one thing but securing data between the device and others as well as the cloud gets even more complex. But I’d argue that tightly integrated solutions stand the best chance to deliver.

Security is a big deal and any company touting the benefits of security as a service has just put a target on their back. But, that doesn’t change the fact that it is important and necessary for companies providing solutions to the consumer market to address this issue. That is what makes this discussion incredibly strategic to Apple as well as others. [pullquote]It is a battle field their core perceived competitor has no interest in playing on[/pullquote]

Security as a service could become a key differentiator for Apple products and a driving reason to choose Apple products over others. But even more interestingly, their competition (Google) doesn’t care about security. It is a battle field their core perceived competitor has no interest in playing on. And that makes it all the more important.

I’m not going to go speculate on how this is going to play out. I just feel the trend bubbling up in a way that makes me believe more security centric solutions are coming and it will be made a big deal. What’s more, only a few companies seem like they have it in their interests to offer this service to their customers as a part of the holistic computing experience.

Who’s The Gorilla And 8 More Questions About the iPhone 5C

Question #1: Is The iPhone 5C coming?

Sure looks that way. The rumors have grown so loud that they’ve become deafening. Let me put it this way: If the iPhone 5C is NOT announced on September 10th at the upcoming Apple event, it will be the non-announcment heard ’round the tech world.

There’s nothing in this world more instinctively abhorrent to me than finding myself in agreement with my fellow-humans. ~ Malcolm Muggeridge

Question #2: Why The Change In Apple’s Strategy And Why Now?

It’s hard to say who gets criticized the most, the successful person, or the failure but it’s mighty close. ~ Joe Moore

Apple definitely considered doing a mid-range phone years and years ago. They opted, instead, to continue manufacturing their one-year and two-year old phones and sell them at lower price points. That strategy has been successful, but it also may have run its course. For a good read on this topic, I commend you to Rene Ritchie’s article entitled: “Why iPhone 4C didn’t make sense but iPhone 5C just might.”

The hardest thing to learn in life is which bridge to cross and which to burn. ~ David Russell

Question #3: How Will Apple’s Corporate Philosophy Shape Their Decisions On The iPhone 5C?

Do what you feel in your heart to be right – for you’ll be criticized anyway. ~ Eleanor Roosevelt

When thinking about the iPhone 5C, we need to keep in mind that Apple is unique. First, Apple has always been about making the best, not the most. ((Tim Cook: “For us, winning has never been about making the most. Arguably we make the best PC, we don’t make the most. We make the best music player, we wound up making the most. We make the best tablet, we make the most. We make the best phone, we don’t make the most phones.”)) Second, Apple is not afraid of cannibalizing their own products. Third, Apple believes in simplicity — less, but better. Fourth, Apple’s strength is in its ecosystem. Any tactical decision that diminishes the cohesion of Apple’s ecosystem would be strategically counter-productive.

The man who follows a crowd will never be followed by a crowd. ~ R. S. Donnell

Question #4: Is Apple Introducing the iPhone 5C In Order To Standardize Their Technology?

Absolutely.

Logic merely enables one to be wrong with authority. ~ Doctor Who

This is definitely one of the most compelling reasons for the move to the iPhone 5C. It will allow Apple to simultaneously retire the iPhone 4 and 4S and move its new customer base to the newer iPhone screen size and to the newer iPhone Lightning power cords. This is not the only reason for the move to the iPhone 5C, and it may not be the primary reason for the move, but it is entirely consistent with Apple’s doctrine of simplifying their product lines and consolidating their ecosystem.

Question #5: Is Apple Doomed If It Doesn’t Add More Market Share?

Get a grip.

Apple’s market share is bigger than BMW’s or Mercedes’ or Porsche’s in the automotive market. What’s wrong with being BMW or Mercedes? [2004] ~ Steve Jobs

— The iPhone is America’s most profitable product.
— Apple Computers, iPads and iPhones were just named the top three brands of 2013.
— Apple easily out-profits both Microsoft and Google.

Rule Number 1: Never lose money. Rule Number 2: Never forget rule Number 1. ~ Warren Buffett

If Apple is doomed, then what does that say about the respective state of their rivals?

Profit is one of the nine reasons to be in business. The other eight are unimportant. ~ John Kirk

Apple is doing just fine. Turns out that selling a differentiated premium product is a sustainable business model. Who knew? ((Ben Thompson: It turns out there are two sustainable positions in an industry (and to be clear, this isn’t exactly rocket science. Again, business school…). The low cost leader – Samsung – and the highly differentiated one. See, Apple already did “transform the industry with a revolutionary design.” And while Android has made significant gains on the hardware, software, and even ecosystem fronts, the overall package offered by Apple is still highly differentiated. The evidence bears this out: Apple charges the highest prices for phones, happily subsidized by carriers (especially in the US), because customers will change carriers to get the iPhone. This results in by far the highest margins in the industry with only a small portion of the overall volume.)) (Most every knowledgeable business observer, that’s who.)

We learn from history that we do not learn from history. ~ Georg Wilhelm Friedrich Hegel

Those who do not know their history insist that history is about to repeat itself – that Android is about to become the next all-encompassing Windows monopoly. But if you know your business history, then you know that Windows was an aberration, not a precedent; the exception to the rule, not the rule.

We’re seeing history repeat itself all right. Just not the history most have mis-remembered.

“History is a very good teacher, but (it) has very few students.” ~ Wael El-Manzalawy

Question #6: But Didn’t Steve Jobs Say That Apple Needed Market Share, Not Profits?

“What ruined Apple was not growth … They got very greedy … Instead of following the original trajectory of the original vision, which was to make the thing an appliance and get this out there to as many people as possible … they went for profits. They made outlandish profits for about four years. What this cost them was their future. What they should have been doing is making rational profits and going for market share.” – Steve Jobs, 1995

Whenever Apple’s market share comes up, so does the above Steve Jobs quote. But when you’re re-reading that quote, keep these things in mind.

First, Steve Jobs was still running Apple when the current iPhone pricing policies were set. It’s unlikely that he forgot his own advice.

Second, the iPhone has been gaining market share in key global markets.

Third, pricing to gain market share simply for the sake of market share is a chump’s game.

Apple already has 65 percent of the mobile phone profits with only 6 percent of the market share. How much more profit share can Apple reasonably hope to acquire?

Fourth, Steve Jobs wasn’t talking about ALL market share, he was talking about acquiring the RIGHT market share. Some customer’s are simply not worth having.

The question is one of price elasticity: How much more profit, if any, will Apple garner by lowering the price of their phone? ((“Price elasticity” seems to be way beyond the pay grade of most pundits and analysts who follow the mobile sector, but what it essentially means is that when the price of something goes down, sales almost always go up, but the rate of that sales increase depends upon the price elasticity of the product. In other words, dropping prices may increase sales but the increased sales may result in disproportionately larger or smaller profits. Unless we truly understand the price elasticity of the iPhone, we really shouldn’t be calling for Apple to drop its iPhone prices.)) And will the market share that they acquire be desirable?

Question #7: Is Pricing The Key To The iPhone 5C?

No.

(The price of the iPhone 5C) is the only thing that deserves analysis ~ Horace Dediu

I respectfully disagree.

The success of the iPhone 5C depends upon valued differentiation. The key is not to make the phone cheaper, it is to make it more valuable EVEN THOUGH IT IS CHEAPER. (Perhaps Apple should call it the iPhone 5 “V” instead of the iPhone 5 “C”.)

Many companies foolishly try to differentiate their products by price. This is always a mistake. If the lower priced item is more valuable than its price, then it cannibalizes its premium sibling. If the lower price is achieved by crippling the value of the product, then poor sales and user dissatisfaction ensue. (See, for example, Windows RT).

The key is to differentiate without disabling the product. You want to create a product that is, yes, lower priced, but the lower price is merely the icing on the cake. The “cake” is that the lower priced product is actually MORE VALUABLE to its intended audience than its premium priced cousin.

Take for example the iPod Nano and the iPad Mini. In both cases, they were lower priced than their premium siblings. But in both cases, the features that the products were missing (size, for example) actually ENHANCED their value to their target audience. Apple needs to do the same with the iPhone 5C.

A satisfied customer is the best business strategy of all. ~ Michael LeBoeuf

Question #8: How Will Apple Differentiate The iPhone 5C From the iPhone 5S?

I don’t know.

I used to be indecisive but now I am not quite sure. ~ Tommy Cooper

— They could do it by making the phone only work in certain geographic locations, like China.

China is a big country, inhabited by many Chinese. ~ Charles de Gaulle, former president of France

I don’t think that’s likely.

— They could do it via specs: lower memory, storage, processor, no LTE antennas, no NFC, no Siri…

…no way. This is crippling the product, not enhancing it. The new iPhone 5C will certainly have lower specs, but those lower specs – as with the iPod Nano and the iPad Mini – should be consistent with the job the product is being asked to do. Artificial differentiation should be avoided at all costs (see what I did there?).

People want economy and they will pay any price to get it. ~ Lee Iacocca

Apple’s goal is to CONSOLIDATE their ecosystem, not fragment it. ((Tim Cook: “And I would just add to that, because we are not fragmented like our competition, we can update an iOS with a major release and a substantial percentage of our customers will update to the – to our latest offer. We’ve made that very elegant and very easy. Also because the usage for iOS is so much higher, when we integrate things well, people use them a lot more and so just those concepts by itself are huge advantages from a customer experience point of view and from a more of the metrics that you’re thinking about point of view.”)) Nothing should be “missing” from the iPhone 5C that will be “missed” by any of its intended audience.

Power is not revealed by striking hard or often, but by striking true. ~ Honoré de Balzac

Question #9: Who’s The Gorilla?

Competing in the market is like wrestling a gorilla. You don’t quit when you’re tired, you quit when the gorilla is tired. The question is, who’s the gorilla in the smart phone space – Apple or Apple’s competitors?

Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. ~ Peter Drucker

We may find out who the Gorilla is on September 10th.

I Love The App Store. I Hate The App Store. I Love The App Store. I Hate The App Store.

Apple’s App Store is a bloated, visually appealing, industry-shifting revolution. Forget tales of Google Glass, the Internet of Things or talk of HTML5. The App Store — the home of the humble app — has only just begun to completely re-make computing, user interface and hardware design.

The App Store has permanently altered the fortunes of iPhone, which has permanently altered the fortunes of Apple, which has upended the personal computing industry yet again. The App Store binds Apple products with one another and with every user.

I both love and hate it.

The App Revolution

I love the App Store, first and foremost, because I am so in awe of it. For those of us who lived through the dark times, when Microsoft ruled over all, it wasn’t even imaginable that it could ever be easier to have more and better and cheaper software available for Apple products than Microsoft products, no matter how far into the future we dared look.

Thanks to the unerring vision of Steve Jobs, we now barely give this once-unfathomable reality a second thought.

We have nearly a million apps to choose from: well-designed, tightly-focused, highly intuitive software programs constructed for all manner of activities, and offered at amazingly affordable prices. From my iPhone or iPad, with a few swipes of my finger, I find, review, buy, download. Takes maybe ten seconds.

Again, this is all once-unfathomable.

Apps that make my work more productive, my free moments more fun, my decisions better informed. Apps that connect me with my friends, my colleagues, and my self. I know with absolute confidence that every single app I purchase will work just fine on my iDevice. It just works.

But, damn, I can also hate the App Store.

Attention App Store Shoppers

More than half a decade in and Apple insists upon offering search options that wouldn’t pass muster on the world wide web in the 1990s. Given Apple’s loathing of Google, I fear a remotely workable solution may be years off. The “genius” service is a joke. Unless, of course, Apple actually believes that because I have purchased the Weather Channel app that I want half a dozen other weather apps on my phone.

There is no trial period, no money back option. Reviews are a jumbled mess, and I never know if an angry review is over the very latest release of an app, or from year’s past. If there are methods to filter an app quest – from the phone – I have yet to discover any. Nor are there any usable methods of ‘bookmarking’ an app for later reference, as Apple apparently believes that every app purchase is an impulse buy; now or never.

Plus, my God, forget the flat vs skeuomorphism debate. Who do we need to get fired so Apple will stop with the whole 99 cents nonsense?

And speaking of firing people, how is it even possible that there is still almost no social integration with the App Store? Whose app reviews should I most trust? Which of my friends have recently purchased what apps? I’m at a baseball game, which apps are most popular with this crowd? Which of the “hot” apps are just right for me? I will never know. Fact is, they are “hot” at this particular moment in time because Apple’s user base is downloading them right now, for inexplicable reasons. By this logic, my favorite cereal is the unbranded Cheerios sold at WalMart.

I am hopeful, however. As I wrote a few months ago, the upcoming iPhone (5+) AirDrop feature could enable one-to-one and one-to-group sharing of apps and other content. This would be a great way to trial an app, and a clever workaround to Apple’s failed search and recommendation functions.

Billions And Billions Served

The smartphone is how we connect to the world. The app is how we connect to the smartphone. Apple’s App Store leads the way, and has from the beginning. Yet for all the App Store has done, for all it has wrought, Apple can do better. Much, much better.

Apps are software and services, deconstructed. The App Store, however, is the reverse. This strikes me as a disaster waiting to happen.

For more than a generation, Windows dominated the personal computing landscape. It was an intensely popular, global standard — and a hideous, ungainly mess. Until it became largely irrelevant. Windows worked for everyone yet was optimized for no one. Apple is now in a similar position with its App Store (and iTunes). The company has hundreds of millions of users, soon a billion, spread across iPhone 4, 4S, 5 and next, iPhone 5S, 5C and beyond. Plus, multiple iterations of iPad. Is it even possible to please — to delight — so large a user base? I’m not so sure.

Yes, Apple controls both hardware and software, unlike Microsoft. But, doing right by a billion people may simply be a hopeless endeavor, even for Apple. See also: Facebook.

The App Store helped Apple achieve what I once thought impossible. All I’m asking for now is that Apple do so again.