The Tech.pinions Podcast: Post Apple Earnings Observations

We are getting the Tech.pinions Podcast going again. Look for the Tech.pinions podcast on Saturdays.

Ben Bajarin, Bob O’Donnell, and Tim Bajarin get together to share thoughts on Apple’s earnings, what it means in the big picture, and discuss some of the issues facing the tablet market.

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Runtime: 26:19

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

42 thoughts on “The Tech.pinions Podcast: Post Apple Earnings Observations”

  1. This is the first TP podcast I have listened to in quite some time.

    On the podcast format:
    The length was just about right. Fewer topics/smaller length, make this a more bite size, easier for consumption. Gone are the long waits to hear the one topic I am interested in when doing a longer podcast with larger array of topics. I think this is the way to go.

    On the content: It seems we are finally getting in synch.

    iPhone:I have been saying from the first time the topic came up here that Apple should do a larger smartphone and it was only a question of When, not If, so sooner would be better than later. I was shot down by most saying Apple is doing just fine with one small phone. That really wasn’t an argument. The one handed argument was/is also oversold. That might make sense if people used smartphones, primarily as dialed voice communication devices, but they don’t. They use them as connected mini-computers. It is almost weird to see someone talking on a phone these days. People use there pocket mini computers with two hands and bigger screens are better in this scenario. Anyway this is no longer an argument because it is finally happening.

    iPad sales and Refresh: I have been saying for some time that iPad sales seemed to have saturated and flat-lined. It gets obscured a bit by lineup expansion and increasing roster of countries, but there was a huge initial growth spurt that quickly fizzled. I have argued before with John Kirk that he was too bullish on tablets. Tablet refresh is going to be a lot more like PCs. Once you have one that satisfies web surfing/ebook reading/media consumption, there is no big impetus to get a “better” one. Once you can consume these medias your need to upgrade is nil, perhaps even less than a traditional PC (there seem to be a lot less CPU intensive killer apps for tablet). Smartphones are completely different.

    Smartphones are the dream market, fat margins and high refresh. But it is an anomaly driven by unique business model. The subsidy model drives the refresh cycle in North America. People are blinded to true purchase cost by embedding the true cost in their cell plan, so they mostly see Free/Negligible cost upgrades every two years, and they take them.

    If there were no subsidy model, significantly less people would be buying $600+ phones every two years, and smartphone margins wouldn’t be so fat.

    1. Well, the iPhone’s continued success I believe clearly illustrates that Apple does not _need_ to do a larger phone and I firmly believe they can continue to do as well without ever doing a larger phone. As such the one-handed argument is not oversold, but hits the nail on the head. If it was over-sold, larger phones would have overshadowed the iPhone long ago (at least outside Donald Trump’s fantasy world). Everyone else went larger primarily because they didn’t have the imagination to differentiate their phones. It also helped them deal with battery life issues that Apple was clearly ahead of most of the industry on until the last couple of years.

      I don’t think the larger phone is as inevitable as you do. The question to me, and I believe Apple, is not “when” but two parts, “why” and “how”. I think the “why” for most of the western developed world, is at best niche (which is not intrinsically a bad thing. Lots of money can be made in niche markets). If I need a larger screen than my iPhone I have a multitude of devices to handle that. So I only need my phone to be what the iPhone offers. And personally, with one handed use _for me_, the 4″ is on the edge of too large. My thumb has pain with the 5 that I never had with the older iPhones. I am not trying to say that I am indicative of everyone, but I do think I am, anecdotally, an example.

      (Really, I am not an analysts, so I don’t have facts and figures stashed away from my own research. I only have what I’ve read and my own experiences. I am at _best_ an arm chair observer, so I admit and always operate with the assumption that I could easily be wrong).

      But there are many emerging markets that I believe Techpinions analysts when they say are one device markets. Apple as a premium brand and the notion of Apple selling to people purely as a status symbol aside (no small thing, especially in China), at that point the question is “how”. I believe Apple will not just make a larger iPhone. They will (as Tim and company say in the podcast) _design_ one, make decisions that will differ from the current iPhone line up and do a larger iPhone (if they actually ever _release_ such a beast) in a way no one else has, especially in light of how staunch they are about one-handed operation being such an important factor. I do think this “how” question is what has kept them away from a larger iPhone up to now, and could likely keep them out for at least another year. Just because they have one in the works, doesn’t mean they think it is ready to release, if ever.


      1. Apple’s own internal slides from the Samsung trial reveal their concerns. In a slide titled: “Consumers want what we don’t have”. It points out that growth is coming mainly from large phones at the high end, and low end phones below Apple price points:

        Apple generally targets the high end, and high end growth is coming from large phones. Apple would have to be run by complete idiots to continue to ignore this market segment.

        I had a job change in January, I am now commuting almost 2 hours day on public transit (first time in nearly 20 years for me). It is a sea of touch screen users, mostly using them 2-handed. Even iPhone users are using them 2-handed. People don’t text/update facebook one handed.

        1-handed use, is just one use case and IMO a diminishing one, since smartphones became more computer, and less voice phone. It was always a bit of defensive/specious reasoning IMO.

        1. About the slide, sure. That just shows me that they are being intelligent and not arrogant. That doesn’t mean they will release a product that is a direct response. I would be surprised if they did not have similar slides, presentations, or conversations about sub-$1k notebooks, pcs, and net books, or even iPods and iPads as well. At that point it is, as I said, why and how. If those two questions can’t be answered in a way that is within Apple’s sop, then when is answered as never.

          If Schiller(?) couldn’t have convinced Jobs of a viable “how” for the iPad Mini, it would never have seen the light of day.


          1. It is one thing for them to ignore the lower end, but for a company that makes it’s bread and butter on the high end, to ignore where most of the high end growth is coming from would be extreme folly.
            The counter arguments don’t look like much more than “Apple can do no wrong” rationalizing. “If Apple isn’t doing, Apple doesn’t need to do it.” Head blissfully below the sand.

            Sometimes the market shifts. Good companies recognize the shift early, and respond quickly. Ignoring the shift because they are still making lots of money, is how Nokia/RIM fell.

            Apple is in no danger, but their reaction to the market shift has been slow. They will respond with a larger phone, that I have no doubt on.

          2. I don’t think it is so much if Apple isn’t doing it, they don’t need to do it (for me, even if they did, I would still contend they don’t _need_ to, unless it manages to become more than, say a sliver of their sales, which I don’t see happening. I think you are hard pressed to say that >4″ phones are a market _shift_). I think it is more if Apple can’t do it well and in a way that makes sense to them, they simply won’t no matter how large the market potential and number of people who are buying what Apple doesn’t have.

            They’ve been pretty adamant that one handed use is primary for a smartphone, our opinions not withstanding. I don’t see that changing for the sake of addressing the >4″ market just for the sake of trying to make hay of that 91 million. If they do create something that doesn’t take into account one-handed use, then it will be in a way that abdicates the “phone” part of the equation.


          3. That 91 million unit “hay”, is practically all the high end growth by Apples own reckoning.

            Unless that trend reverses dramatically, Apple will be ceding more and more of the high end market to it competition by default, if they don’t participate.

            IMO this is another way disruption happens. Companies rationalize away what the competition is doing in a new segment, and allow the competition to dominate that segment, by not even participating.

            Ballmer laughing off the price of the iPhone, seems a lot like Apple rationalizing against big phones to me: Wasted time not recognizing important market changes.

            Apple was instrumental in turning the phone into more computer, than phone, they should recognize that with the shift in role, the preferred form factor may have shifted, or at the very least segmented.

            I am certain they get it now, and we will see a bigger screen iPhone, to better compete where the high end growth is occurring.

          4. Agreed. It’s unfortunate that certain industry hacks will see this as Apple following the competition. I don’t believe Cook cares what they think, nor should he. Eating a little crow never killed anyone.

            I would warn the Android folk that, if the market is genuinely waiting for larger phones, and Apple comes up with something brilliant, the only market they have left is cheap phones with low margins and no synergy or differentiation.

            We’re looking at the “growth” in the market, the delta. The base is still pretty darn large, and it’s almost completely owned by Apple.

            The profit Apple derives from their share of the 722M smartphones is more important than the 228M additional phones sold at very low margin. Apple’s concern is just being prudent.

          5. Relax there friend…
            I don’t think that my M8 or S5 are low margin (though I wish they were for the same stuff) or undifferentiated. They also work quite well with each other and my PC’s.
            Having said that, I’m certainly not offended. 😉

          6. What I think the slide doesn’t tell is that the >4″ in that number is the _driver_. Really, look. What high end alternatives to the iPhone are not >4″. This is circumstantial evidence. And I think that position is reflected in the large number of Android switchers counted in 5c and even smaller screen 4s numbers.

            And having >4″ phones has not actually _helped_ anyone but Samsung and maybe a regional OEM or two. Not Nokia, RIM/BBRY, Motorola, or HTC. Apple share has grown in the US. Again what neither Nokia nor RIM can show. That tells me the _need_ for a >4″ is not _that_ urgent. It is a large enough number to notice, examine, and analyze to understand what people are buying.

            So again, Apple’s concern is the “why” and then the “how”. Only when those two points are answered to indicate a _real_ need for >4″, will the next step be “when”.


          7. You’ve touched on a point most people seem to be ignoring, that sales of larger screen phones are not great at all. All the actual sales data I’ve been able to dig up points to the same conclusion, large screens are not selling in huge numbers. The idea that Apple has missed (or is ignoring) an enormous opportunity is nonsense. Large screen phones are a small part of the market and are only now becoming an opportunity worth looking at. I’m quite sure Apple understands this and has been exploring use cases and form factors for years. You’re exactly right, if it makes sense Apple will do it.

          8. Keep in mind that is a regional point. I’ve confirmed with you the sales of larger screens is small in the US but is growing in other key markets like China, where it is now over 40% of quarterly sales.

            The point of the big screen discussion in a region like the US, can’t be had without establishing the base point of how dominant Apple is in the US. So it would be expected sales of larger screens aren’t moving in high volumes when the dominant player does not offer one.

            This is a matter of timing. Smartphone owners have matured. They have owned several devices, so as they look to the next one, they know what they like, don’t, like and are interested in for their next device. The two single largest purchase drivers of late are continually camera and display. All data points about what consumers are interested, those two are at the top.

            Given the maturity of the market, it simply makes sense from a timing standpoint, that Apple make a larger screen device. They will have the 4″ and likely around a 5″ which seems like the sweet spot as far as larger goes.

            What makes this the most interesting is China where phones even larger than 5.5″ are growing fast in volume and to a point the norm. Apple cares about this region, obviously, so do they eventually do a regional larger phone only for China or is the 5″ their play and they believe that will suffice. I don’t know but China is a wild card that causes me to think Apple may break some of their traditional ways about doing things to succeed in this market.

          9. I must have forgotten that data point about China. That definitely speaks to the need in that region then. But still, it is not a missed opportunity. I like the idea of a larger screen iPhone, I could really use one, as big as I can get and still fit in my work pants pocket, so it could even be a six inch iPhone.

            On a bit of a tangent, a six inch iPhone would make me want a 13 or 15 inch iPad.

            I agree that China is a large enough market that Apple would do a product focused on it. Now all we have to do is wait for the stories about the huge failure of Apple’s six inch iPhone, because it only sells great in China and other markets that aren’t the US.

          10. How would we know how well a bigger iPhone sells, other than through rumors, Apple doesn’t break down model sales.

            Also why wouldn’t it sell well? Even if it isn’t the first choice for most iPhone users, there is probably a bit of pent up demand that would give it quite a bump on first year sales.

          11. The default analysis seems to be doom when it comes to Apple. Witness the coverage of the 5c (flop! failure!), and we do have a pretty good idea now that the 5c sold very well.

            I think a larger screen iPhone will sell quite well. I’ll buy one. But does it really matter what size screen is on the computers Apple sells? In some ways yes, but in many ways, no.

          12. I was thinking about this. The slide numbers are old (2012) and I have no idea of current numbers, let’s assume they are close enough (among other things). If Apple hits 20% of that number (I’m not a big believer in people who say things like “If only Apple would come out with a bigger phone I would buy it”. Some would, but I think most people only say things like that), that could be around around 12% of their iPhone sales. That is not a huge bump, but not insignificant. What we don’t know is how much of them would be new to iPhone numbers versus numbers of current iPhone owners moving to >4″.


          13. I think by the Fall of 2014 it is going to be a large enough number that Apple is interested, and especially given the regional differences in China. But to hear some of the analysts and commenters talk you’d get the idea that phablets have taken over the market and Apple has missed the opportunity and is now doomed. Which is of course nonsense. Larger screen phones are only now becoming an opportunity worth paying attention to.

          14. This has been well hashed out a number of times on many threads here, sales of large screen smartphones are really not huge. It has been mostly hype to this point. That said, there are good use cases for a larger screen and as computing power grows the market opportunity seems to be ripening. A larger screen iPhone (almost an iPad Nano) in the Fall feels right as far as timing goes. Apple hasn’t missed anything timing-wise when it comes to larger screen iPhones.

            I wouldn’t count the iPad out just yet either, sales are effectively level if you look at Q1 + Q2 in 2013 and 2014. And don’t forget, the iPad has been the fastest growing product Apple has ever created, beating the iPhone to every milestone so far. I’ll be interested to see where things are after 2015 fiscal Q1. I do think the iPad will shift to more of a slow burn, given the much longer upgrade cycle. I don’t need a new iPad for probably another year or two, which will be four years between purchases. But my iPad has replaced my MacBook Pro, I’ll definitely want another iPad when the time comes. I suspect I’m not alone.

          15. As an avid early adopter, I’m also unlikely to upgrade my iPads unless there’s a compelling reason. I use an iPad frequently as a replacement for my Mac’s.

            There are some areas where an iPad is far superior to a laptop…any type of reading, sketching, note taking or brainstorming. Would I replace my iPad if it were damaged? Yes, because those activities are important to me. When it’s possible to say that an iPad is a better e-mail machine than a laptop, many others will also consider it a necessity. For now, it’s still a luxury, or, should I say, it’s no more than an inconvenience to go back to your laptop to deal with e-mail and, because a physical keyboard is still preferable, better in too many cases.

            We still haven’t seen software that reinvents e-mail for tablets in a way that is BETTER. Pages, Numbers, Keynote make many things doable on an iPad. Changing the game requires that the iPad become a BETTER tool. I believe I picked up the expression “like an animal” from Dan Benjamin. Using a laptop for reading makes me feel like an animal; it’s so crude by comparison. I recently purchased a “PENCIL” to go with the “PAPER” app on the iPad and have been using it for sketching. It’s nowhere near as capable as my Wacom tablet and stylus, but I now feel like an animal when forced to seat myself in front of a laptop to sketch something. There’s such great freedom in being able to sketch anywhere. A Cintiq 24 HD Touch is a far superior tool, but my iPad is much more likely to be with me when I need it. My Wacom tablet is gathering dust right now.

            I was hoping that, somehow, Microsoft would find a way to make word processing BETTER with a tablet. Word on a laptop will always be better, until someone completely rethinks word processing.

            Once we start seeing apps that make these commonplace tasks BETTER on tablets, there will be much more interest in annual “refresh” rates.

            Developers have stopped pushing the envelope far too soon. Personally, I think we haven’t gone far enough with smartphone apps.

          16. To borrow and old phrase, that’s the “killer app” for tablets (and why I use a Note 12.2), the digitized stylus!
            I also use The Vaio Duo 13 and Surface Pro 2 for the same reasons. I can better sketch and add free form handwriting to communicate ideas and mark up documents. Writing a mathematical equation or chemical structure on anything else is indeed primitive. It would be great to see where this really goes. The iPad does lag in this most important area. Retail and software walled gardens don’t help either.

          17. “The iPad does lag in this most important area.”

            Yeah, it’s killing iPad. /s


          18. I hate to say it, but yes, there’s a reason why there are so many third-party keyboards and styli sold for iPad’s. Something is missing. That doesn’t make the iPad a consumption device, but it isn’t able to fully engage in many tasks due to those shortcomings. An “Apple Surface”-sized vacuum exists.

          19. A stylus is useful in some cases, but the point is it is not required. A hardware keyboard is also useful, but again not required. I suspect Apple has been exploring hybrid devices for some time. If anyone can get this right it is Apple, but there are good reasons the Surface failed. And could we all try to keep in mind that the iPad is just four years old? Apple can’t do everything at once.

            For now the iPad is well-served by the accessory market when it comes to various stylus and keyboard options. The problem with a stylus is when it is required to use the device, when software is too dependent on a piece of hardware, it becomes too static. A touchscreen device must be useful when it just the screen and our hands. Expanded capability via hardware is fine, but not if it degrades the elegance of the pure touch experience.

          20. “there’s a reason why there are so many third-party keyboards and styli sold for iPad’s.”

            I woud say the reason points to iPad’s strengths, not vacuum. That these are things third party developers can address goes to the point that Apple can’t do everything. Apple doesn’t need to make the iPad Surface-like. It already can be. If anything, Surface sales illustrate that being Surface-like isn’t a product. It is an addressable feature.


          21. Very good point, Joe. PC’s don’t “come with” Wacom tablets and styli either.

            Where I’m disappointed with Apple is that there isn’t a standard API for such devices when they are available. 98% of apps do not and should not require a stylus, but when there is a need, it should be planned for rather than a “bolt on.”

            Apple’s approach so far has been “Just use Bluetooth” but that means only certain apps can handle a particular pressure-sensitive stylus, and I can’t buy a 102-key Bluetooth keyboard and have all the keys with just any app.

            The wonderful thing about Windows has always been that Microsoft imposed a standard API for a number of hardware extensions. Since there are no “third party device drivers” for iOS, we end up with hardware that only works with certain apps. For example, my “Pencil” works well with the “Paper” app from 53, but the eraser is not seen as an eraser in any other app that I know about. That detail should be taken care of in the OS.

            @klahanas:disqus I hate to say it because Jobs heavily promoted that we should always use our fingers and we don’t need physical keyboards or styli. It’s sad that Jobs himself underestimated what an iPad, or even an iPhone, can do.

            Example: One client I consult has developed an iPad-based web server solution. Thanks to the flash storage and hearty CPU, it works pretty well, and you have a built-in UPS that lasts more than 24 hours if the power fails (screen turned off), but they needed to design their own MFi Gigabit Ethernet device and control it completely within their app. There’s no way to use the NIC for another unmodified app. With such exceptionally low power consumption, the iPad Air is an incredible small business server.

            I don’t think Apple thought big enough for these devices.

          22. Well said. There are many jobs-to-be-done that are far more elegant on an iPad. I think that trend will continue. It feels like a temporary plateau right now, a pause as we shift to more capability in both software and hardware.

            I’m not surprised Microsoft wasn’t able to deliver anything special, they simply aren’t very good at software, never have been.

            Personally I want a 17 inch iPad with a hardware keyboard case, but I think we’re a few years from that yet. For me the elegance lives in the touch, it’s just so nice to touch and manipulate things directly. I’ve said this before, my kids have always had iPads as their primary PC, and their fingers dance across the screen like magic, they are touch wizards. I would imagine Dan’s “like an animal” phrase applies when my kids have to use a mouse/pointer on a non-touch screen.

          23. “for a company that makes it’s bread and butter on the high end, to ignore where most of the high end growth is coming from would be extreme folly” – Defendor

            I don’t agree that the larger phone is where most of the high end growth is coming from. I do believe that Apple will put out a larger phone soon, so we’ll know the answer to that question by early next year.

          24. Is the point of the matter that those that want a larger iPhone can soon have one, and those that don’t can keep a current size? Does the ratio really matter to the consumer?

          25. I think the point of the matter is more, will Apple actually _release_ a larger iPhone, why or why not.


          26. Hey, I’m not a potential customer, so I don’t care for myself. If customers want it, Apple should release it. It’s Apple’s decision.
            I know that Apple is more accustomed to telling their customers what to want. It’s not always the case.

          27. “I know that Apple is more accustomed to telling their customers what to want.”

            Cynical nonsense.


          28. Always respectfully…

            Cynical? Yewbetcha! (No apologies to Sarah Palin)

            Rather than go through the whole litany of examples that get used against Apple, I’ll support my statement with examples Apple fans use in their favor.

            – Freedom from the tyranny of choice…
            – Curation is good because it ensures quality.
            – “Choice is an option, decision is a burden” -Falkirk
            – “The best products demonstrate choice rather than offering it. Wise choices made on your behalf before you were even aware of them. Good compromises, made so that you wouldn’t ever have to make bad ones.” – Falkirk

          29. “Always respectfully”

            Most of the time you are. But snarky comments like “I know that Apple is more accustomed to telling their customers what to want.” are dripping with derision and contempt, not just for Apple, but for their customers, as if no intelligent, free thinker could ever legitimately buy an Apple product. This is nonsense.

            As for your points, if I thought you were being rational and this would be a productive exchange, I would provide a rational response. But you’ve already dug in your heals about this and aren’t interested in reason any more. You are complaining about the decision process _everyone_ who sells or makes something for someone else to use has to go through, from pens to skyscrapers, even lighting for live performances. To a certain degree you are complaining that water is wet. At the _deepest_ levels is the debate of free will and to what extent it is an illusion. That debate isn’t decided, either.


          30. If I’ve offended YOU personally, I apologize.

            Contempt towards Apple accepted and acknowledged. Still, I answer with facts, peppered with sarcasm.

            It’s been often said and quoted “Apple gives their customers what they want, before they know they want it”. That alone fully supports my statement. It’s as wet as water. I also mostly a positive statement. Where IMO Apple falls short is in giving (some) of their customers what they want. There are other facts I can go into, but this has been belabored too far already.

    2. Thanks. It is the first one we have done in a long time. 🙂

      We intend to keep these short and sweet and focused on a particular topic. I agree this format is the way to go.

  2. Fabulous podcast in terms of content. Big pat on the back for all three of you.

    About the production values:
    1. I don’t know what your workflow is, but you should be recording locally at all three locations so that when you have bandwidth issues it’s not present in the final package. I believe Rogue Amoeba has a splitter app for OS X, and I bet you can find dozens of similar apps for Windows, that will let you use Skype and still record locally.
    2. Guys…turn off your phone ringers/buzzers/twizzers. It’s amateurish. If someone’s giving a presentation and it isn’t important enough that they silence their phone, do you respect them?
    3. Use some type of IM to coordinate so that you don’t speak over each other. Example: Typing H on a blank line means that your hand is up and you have something to say. X means never mind or hand down.
    4. I think you need to splurge a few hundred and get quality microphones. Go for a Blue Yeti. They’re under $100.

    This is beginning to sound like my original comments about the site. You have an embarrassment of riches in talent and great content. Oh that you would ante up a smidgen more effort and cross the line from good to genuinely awesome.

    I’m thrilled that you’re doing this podcast series. I have so much respect for the Bajarin father and son team, and Bob has become one of my heroes. I strongly hope that this effort thrives and that, one day in the not too distant future, Mr. Wildstrom will be well enough to join you.

    I know the podcasts aren’t behind the paywall, but that $50 subscription fee is nothing compared to the value you’ve added to the industry, or that TechPinions has given me in return.

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