Apple Can’t Afford to Wait Until September

Another quarterback running the show from the sidelines. Ashraf Eassa:

Samsung’s next generation Galaxy S5 is the poster child for popular, large phones, but the competition from the likes of Motorola/Lenovo, HTC, LG, and others is intensifying.

Except the Samsung Galaxy S5 hasn’t been announced yet.

Apple is unlikely to be able to wait until September before it has to pretty aggressively cut prices on the iPhone 5s in order to maintain its market share at the high end.

Is there any indication (for example, sales figures) that Apple is losing market share in the premium segment?

Apple is going to need to “wow” consumers with a next generation iPhone in order to fend off the Android hordes from eating into its outsized portion of the smartphone industry’s profits.

Apple’s share of the smartphone industry’s profits have grown each year for five years, now nearing 90-percent.

Sigh.

Traffic Feud Slows Down Netflix

Larry Seltzer with more details on the Netflix-Verizon traffic feud.

Verizon argues to the WSJ that problems arise when a service puts out far more traffic than it receives, as would be expected of a streaming video service. Netflix recently announced that they have over 44 million members and it is clear that streaming video consumers a large percentage of Internet bandwidth.

So, who should pay for the disparity?

Verizon argues that such services should pay more to the companies that deliver their traffic. Netflix is arguing that ISPs should hook up to Netflix’s own CDN without any additional compensation. Both Netflix and ISPs argue to the WSJ over how efficient Netflix is at managing its own traffic.

This is tougher than it seems. Everyone pays someone to connect to the internet; either to receive traffic or to send traffic. If too much traffic hits one large network provider what can they do to protect their network and customers?

What Apple Knows That Samsung, Microsoft, And Google Do Not Know

Last week I read an article which pitted various tablets against the iPhone in a sort of battery life shootout. Which tablet won? Take a guess. Apple’s new iPad Air crushed the competition, with some Samsung models coming in dead last on both internet and video use tests.

What does that tell us about Apple?

Basically, battery life is one of those daily user experiences that Apple sweats over. Why? Because users want long battery life. One of my cubicle mates has a new MacBook Air which he uses when out of the office. It gets well over 12-hours on a charge.

With a little consideration for which apps get background processes and cellular usage, my iPhone’s battery lasts two full days (I’m not a gamer, though). Battery life is but one bullet point on a product feature page, but for Apple it’s an important one.

Here’s why.

Smartphone and tablet competitors need to differentiate their products from Apple’s iPhone and iPad. How? Usually, it’s a combination of lower price, and a larger, longer list of features.

For example, many smartphones have larger screens. The iPhone does not. So, those smartphones are advertised with a higher pixel density and screen resolution than an iPhone with Retina display. Forget the fact that the naked eye can’t tell the difference between an iPhone’s Retina display at 331ppi (pixels per inch) vs. say, new displays from Japan Display which weighs in at up to 543ppi.

Once a certain pixel density is reached, most smartphone users won’t be able to tell the difference, but all those extra and mostly useless pixels come with a negative side– they suck up battery juice.

It seems that Apple prefers to focus on features which are actually usable, rather than a list of features to make up a comparison chart. Apple knows that if the overall user experience is a good one, the company doesn’t need to play the tit-for-tat feature creep game.

Why doesn’t the iPhone or iPad have a replaceable battery? For most of us, there’s no need. For power users, there are plenty of add-on options. Why doesn’t the iPhone or iPad have an SD card slot or an option to add more memory? I may not be the typical average user, but I haven’t used an SD card for years. It’s just too easy to send files over the air these days. And, because Apple focused on making the iPhone’s camera the best on a smartphone, my Canon DSLR is gathering dust.

In the smartphone and tablet arena, Samsung, Microsoft, and to a certain extent, Google, play the traditional feature comparison game. Instead of creating a better user experience, each manufacturer adds more features to the list while cutting the price tag (to be lower than Apple). That results in products which cost less, yes, but don’t usually last as long, and often give the users a crummy experience, so, in turn, those manufacturers don’t sell as many products in the same category as Apple.

For the most part, Apple doesn’t play that crazy game, knowing that it’s a sure fire way to dig a company into a hole.

Love Stinks

Perfect for Valentine’s Day, Jason Perlow’s look at the worst mergers in technology industry history.

Valentine’s Day is here again, and love is in the air. Couples flirting, courting each other and forming relationships. And sometimes those relationships result in marriage.

In the tech world, much of the same types of things occur. And as with human relationships they also can end up in marriages — also known as corporate mergers. Mergers can result in the two parts being stronger than the whole, or they can end in utter disaster.

Love affair Spoiler Alert:

  • Caldera and SCO
  • Palm and HP
  • Oracle and Sun
  • AOL and Time Warner
  • HP and Compaq
  • Microsoft and Danger
  • Borland and Ashton-Tate
  • Novell and Unix
  • Google and Motorola

Apple and Samsung Fail to Reach Deal Over Patent Issues

Richard Padilla explains the obvious on the court ordered mediation between Apple and Samsung.

Cook met with Samsung mobile division chief J.K. Shin to discuss a possible settlement, but did not make any significant progress towards a deal.

Shocking, no?

The second patent infringement lawsuit between Apple and Samsung is set to begin on March 31, as Apple’s Chief of Worldwide Marketing Phil Schiller will be among the witnesses. Samsung will only have four patents claims to bring to the upcoming trial, as Judge Koh invalidated two of its patent claims last month.

Samsung on the ropes? No. Patent trial losses have had no impact on Samsung’s illegal activities. The courts are powerless and Apple becomes a victim. Again.

Apple’s Smartphone Monopoly

With tongue completely in cheek, Mac360‘s Ron McElfresh outlines Apple’s smartphone monopoly problem.

Only Samsung stands between federal government intervention and the breakup of Apple’s stranglehold on the smartphone industry’s profits. It’s a good thing Apple let Samsung copy the iPhone and iPad’s designs. Otherwise, with Samsung out of the picture, Apple would have all the industry’s profits.

Revealed: Apple Will Disrupt These Industries

Yours truly on where Apple is most obviously headed next. Industry Disruption 101:

Think wearable technology. Think healthcare devices. Think fitness devices. Think home.

Over the next couple of years Apple will march into a crowded field– fashion, fitness, and healthcare– and become the trend setter, a purveyor of devices for the fashion conscious, the health-minded, and the home. Within a few years of that, Apple is likely to own the lion’s share of the profits of those industries.

See? It’s déjà vu all over again.

Apple, Google, And Legalized Gambling

Based upon how well both Google and Amazon are doing in the stock market the past couple of years, I’ve determined that much of the investment community is rigged. Either that, or it’s a form of legalized gambling controlled by a mob of very rich people who only work to get themselves richer and to hell with everyone else.

Hear me out on this. Let’s look at Apple and Google. Apple’s stock, despite a profit to earnings ratio that is utterly and ridiculously low, has been mostly paralyzed for more than a year, despite Carl Icahn’s $4B purchase of AAPL and the influence that brings on the market.

Apple Stock - 2014-02-12

Apple is obviously a well run company and has been for many years, whether under co-founder Steve Jobs’ reign or that of current CEO Tim Cook. Every leg of Apple’s multi-legged business is solid. Mac, iPhone, iPad, Apple Stores, iTunes Mall. Everything makes money.

Additionally, Apple has a well-earned reputation for disrupting business unlike any other. The Mac disrupted the PC industry. The iPod disrupted the portable music industry. iTunes disrupted the entertainment and application industry. The iPhone disrupted the smartphone industry. The iPad disrupted both tablet and PC industries.

Alright, now compare that against Google and GOOG.

Google, despite spending tens of billions of dollars on research and development, and the ill advised purchase of a number of money-losing companies (which had to be jettisoned), all with a desire to disrupt, expand, and become diversified, looks more and more like Microsoft each day.

The search giant’s revenue and profit– well over 90-percent for each– comes from the same source it has always come from– advertising. Even in mobile advertising, for which Google has spent tens of billions of dollars on Motorola, patents, and Android, most of the revenue and profits come from Apple’s iOS devices.

Google is the ultimate one-trick pony company. Yet, the stock market thinks otherwise.

Google GOOG - 2014-02-12

Put a simpler way, Google is being rewarded for sizzle but no steak. Apple is being punished for delivering both sizzle and steak. Does that even make sense? Google does not have a reputation or a history of upending industry markets but is being rewarded as if it has. On the other hand, Apple, which has a stellar reputation for growth, revenue, profits, and industry market disruptions, is being punished because of what it is.

Very successful.

One can only conclude that the stock market as we know it is run by rich charlatans as their own personal gambling casino. Otherwise, investors are idiots.

Why Investors Love Google, Not Apple

Thomas H. Kee, Jr. on why Google tops Apple in the stock market.

Google has become the darling of tech investors of all types, from institutional investors and fund managers all the way down to mom and pop.

Why?

It’s well diversified, its business model is open source in many ways and it isn’t directly subject to the whims of fickle consumers like Apple is because what they provide comes in all sizes, shapes, and forms — not just in a few gadgets.

Let’s see, almost 90-percent of Google’s revenue and almost all of the profits are tied to… drum roll, please… advertising. How is that considered diversified in the face of Mac, iPhone, iPad, iTunes, Stores, et al at Apple?

Kee wanders into mumbo jumbo land for a few paragraphs but never really says anything beyond the ludicrous.

Apple ebbs and flows on the demand for iPhones, but Google is in much more than just the phone business.

Google’s ‘phone business’ is a tiny sliver of the company’s revenue and profits, the vast majority of which come from one line item: advertising. Personally, my view is that the stock market is little more than legalized gambling, often run by charlatans. How well a business is run (growth, revenue, profits, etc.) has little bearing on the stock price.

Apple’s R & D Expenses Since 1995

Yoni Heisler did the grunt work to graph Apple’s Research and Development expenses since 1995:

Apple R&D Expenses

What I would really like to see is a comparison of R & D expenses related to profits, and then compared to other companies that compete against Apple.

The real reason Macs never got in the enterprise

The always entertaining Ed Bott with six reasons why the Mac never made it in the enterprise.

Spoiler Alert!

  • Enterprises run on Windows
  • Macs are expensive, IT budgets are tight
  • Office is a second class citizen on Macs
  • Desktop PC isn’t dead
  • Macs won’t manage themselves
  • No long-term support from Apple

What about the post-PC era?

These days, of course, Apple’s efforts are focused on mobile devices. The iPad line outsold all Macs by a margin of better than five to one last quarter and is beginning to approach PC shipment levels. And Apple is quick to note that most enterprises are now allowing iPads inside the corporate network.

Apple’s iOS devices lead Android devices deployed in the enterprise by a two-to-one margin.

All That’s Truly Wrong With Apple TV

Ah, Apple TV. Where shall I begin? If ever there was an Apple product that doesn’t get much love but sells well anyway, it’s Apple TV. Only Apple knows for sure how many Apple TVs have been sold or are in use today, but it’s obvious the cute little device has a certain attractive anemia.

That means Apple TV does enough to be interesting but everyone can come up with ways to make it better. Too many of the channels on Apple TV require a cable TV account to view, so what’s the point? It’s not like you can cut the cable TV cord, so to speak, and watch the same thing on Apple TV while saving money every month.

Don’t get me started on the dearth of useful channels. Sure, Korean TV soap operas are all the rage these days, but that only highlights Apple’s TV problem. The latest Apple TV channel commemorates the 50th anniversary of The Beatles’ debut on the Ed Sullivan show. Talk about pandering to the baby boomer couch potato generation.

Of course, The Beatles channel highlights exactly why Apple TV is there, and why it doesn’t do much. The money trail. The Beatles channel links to music on the iTunes Music Store. Apple TV is there to sell music, TV shows, and movies. Again, only Apple knows how well it does what it does.

What else is wrong with Apple TV beyond the limited channel selection? Apps. Even Google has tossed out API’s so developers can create applications for their Apple TV wannabe, once called Google TV, but was such a hit that Google slashed the price and form factor and changed the name to Chromecast.

If you haven’t tried Chromecast, don’t bother. As anemic as Apple TV is, Chromecast is positively anorexic.

All Apple TV needs to make it great is content. Shamelessly on-demand content. And not just left overs that cable TV networks don’t want. Content. All of it. All TV shows going back forever. All movies. Even live streaming content. Content on demand.

Otherwise, put a DVR into Apple TV and let us record what we want from both the internet and cable TV (instead of paying the cable TV company by the month for the privilege of using their built-in DVR).

Sure, the cable TV networks wouldn’t like it, but it’s not like they care about their customers anyway.

What else is wrong with Apple TV? Besides content selection, the interface is simpleton simple and annoying slow to navigate from here to there. Give me a real iPhone and iPad app with Siri integration and let’s make Apple TV fun to use.

Where Does The Money Come From?

Ed Bott has a bunch of great graphs which show where Apple, Google, and Microsoft get most of their revenue. What’s missing is a similar graph which displays where the profits are. That would be more revealing.

Apple’s New Team

Mark Gurman has a look at Apple’s executives, old and new. The new team faces give Apple watchers an idea as to which product categories the company may move into soon.

In addition to the hundreds of skilled hardware and software engineers already at Apple, this group of recent hires shows that the company is planning to enter the wearable fitness and health device market in a major way. With Apple openly posting a job listing related to testing fitness and health devices… the question is no longer if Apple is building a smart watch, but it instead becomes when will Apple introduce the product?

Think health, fitness, and fashion.

Apple’s New Categories

Apple CEO Tim Cook in WSJ:

There will be new categories. We’re not ready to talk about it, but we’re working on some really great stuff.

As to spending big money on an acquisition:

We’ve looked at big companies. We have no problem spending 10 figures for the right company, for the right fit that’s in the best interest of Apple in the long-term. None. Zero.

Fraud At NBC

The real details on NBC’s fraudulent security issue at the Sochi Olympics from Robert Graham:

Yesterday NBC News ran a story claiming that if you bring your mobile phone or laptop to the Sochi Olympics, it’ll immediately be hacked the moment you turn it on. The story was fabricated.

I saw the story on NBC News. Shameful and as bad as Fox News.

Apple On Top: Is The U.S. Smartphone Market A Glimpse Of The Future (or, an anomaly)?

Another day, another graph which shows Apple’s iPhone taking a beating from Android in the worldwide smartphone market. Yet, there’s a graph and some tracking data research which shows Apple’s iPhone gaining marketshare against Android smartphones.

What’s going on?

Is the U.S. market simply an anomaly which deviates from the worldwide trend, or, based upon the iPhone’s dominance in Japan, a harbinger of things to come– a growing affluence which bodes well for Apple’s smartphone marketshare in the future?

ComScore, another of those research and tracking companies that follow the technology industry, says the iPhone owns about 42-percent of the U.S. smartphone market, while Android devices dropped to barely 50-percent. BlackBerry and Windows Phones make up much of the other category.

Interestingly, AT&T, Verizon, and Sprint, have reported in the past year that the iPhone was their number one selling smartphone, which means Samsung’s Galaxy line is in second place and falling behind? Falling behind?

What’s going on there?

In the U.S. and other affluent countries, Samsung is caught in a squeeze with pricing pressure from Apple as the premium brand above, and pricing pressure on similarly equipped Android smartphones below Samsung. The Samsung brand hasn’t been able to gain the same level of brand caché as Apple commands.

Worldwide, Android smartphones hold a huge lead over Apple’s premium iPhone, but that is not the case in many affluent nations. Over 70-percent of smartphones sold in Japan are iPhones.

Is the smartphone situation in the U.S. and Japan indicative of Apple’s future against the Android juggernaut? Perhaps. Not only is Apple famous for disrupting these industries– PCs, smartphones, tablets, music, apps, and retail stores, the company has also disrupted the cell phone industry.

In nations where the dominant cell phone carrier does not sell the iPhone but competing cell phone companies do, their growth and profits are often stymied. When the larger carriers begin to sell the iPhone, that sets off more competition, which results in lowering the customer’s initial barrier to entry for Apple’s premium priced iPhone.

Win. Win. Win.

For Apple, the cell phone carriers, and customers. For Apple’s competitors, not so much, as they’re required by growing competition to cut prices on products which already have slim gross margins. As China, India, and other populous nations with price conscious smartphone buyers, Apple initially looks to be too expensive, hence a lower marketshare. As those populations migrate to middle class, though, Apple, the premium brand with inherent caché begins to prosper, while cheaper Android device makers struggle to survive with ridiculously low product margins.

Apple Nostalgia

This isn’t a first for Apple, but it’s something mostly unseen during the second coming of Steve Jobs. A reflection of the past in the 1.24.14 television commercial, shot entirely using iPhones. Steve Jobs:

I think if you do something and it turns out pretty good, then you should go do something else wonderful, not dwell on it for too long. Just figure out what’s next.

Apple seems to be doing more looking back recently.

Gates Out, Nadella In, Gates In Again

Microsoft named insider Satya Nadella as CEO. Co-founder Bill Gates resigned as Chairman, but decided to stick around as Founder and Technology Advisor. You know, just in case.

More Copying From Korea

This time it’s not Samsung copying Apple, it’s North Korea. Martyn Williams:

If imitation is the sincerest form of flattery, might the folks in Cupertino be pleased when they see the latest version of North Korea’s home-grown operating system?

Version 3.0 of Red Star Linux presents users with a radical refresh of its desktop design, one that closely resembles Mac OS X. The new look replaces the Windows 7-like desktop that was used in version 2.0 of the software.

Is this kind of blatant copying something inherent in Korea (North or South)?

Example of Korean Copying OS X

Sigh.

Apple’s Invisible Product Pipeline Might Be More Visible Than Critics Think

Back in 2012, a few months after Steve Jobs died, newly crowned CEO Tim Cook told analysts that Apple had some amazing products in the pipeline. We waited until 2013 and Tim Cook said the same thing. Amazing products are coming. Now it’s 2014 and guess what? Tim Cook’s song is the same. Amazing products are coming.

Either Cook believes that products with modest upgrades constitute amazing products in the pipeline or he’s biding his time until the company’s inherent vision catches up with technological capability.

Apple hasn’t released a product roadmap and other than the Mac Pro, nothing really new and different since the iPad in 2010.

Are the products in Apple’s product pipeline for real?

The company that always seems to Think Different might be leaving clues. For example, Apple hired Angela Ahrendts, the famous Burberry’s chief, to run Apple’s retail stores. Think upscale retail. Apple hired Dr. Michael O’Reilly, former CMO and EVP of Medical Affairs at Masimo. Think health products. Former CEO of Yves Saint Laurent is now Apple’s VP of special projects. Think wearable devices. Apple also hired Ravi Narasimhan from a health sensor company, and Nancy Dougherty a highly touted engineer whose products include health monitoring equipment. Think medical devices.

It’s possible that all these hires are a smokescreen and Apple’s product pipeline is absolutely stark naked empty.

I don’t believe that for a New York minute.

Apple’s products fall into the affordable premium category, but are decidedly upscale from the riffraff of Samsung, Microsoft, Amazon, et al, so we should expect future products to be in the premium segment as well.

Wearable devices of all kinds come to mind, including the long awaited iWatch and iGlasses, but others like iMed could easily move Apple into the rapidly growing health products industry, a business segment where Apple can do what it does best– leveraged integration with other Apple products.

It doesn’t take much imagination to see that Apple’s future products are beginning to take shape. There’s visibility this year where there was only invisibility last year.

Google Plus Is Not Dead (yet)

From way back when, Dave Llorens says Google Plus is just all part of the company’s grand plan.

99% of the people in Silicon Valley I’ve talked to about this, including some very, very bright folks with quite a bit of money and clout, will tell you that Google Plus flopped. They have, in their own minds, written it off entirely. The remaining 1%, while willing to consider that it didn’t flop, are still so tepid that they refuse to stake any credibility on saying it will be successful (which I would measure as having the same level/range of active users as the other big social networks like Facebook, Twitter, LinkedIn, etc.). Articles written by that 1%, like this one, are all chock-full of “mights” and “maybes.”

Google force feeds Google Plus to users so ‘success’ of some sort is probably guaranteed, but the social component is hardly competitive with Facebook.

But I’m willing to stake my reputation on the following statement: If Google Plus doesn’t have a staggering number of active users by the end of 2013, you can all come over to my office and pie me in the face.

What’s your address, Dave?

Chromebook Month

ZDNet’s Kenn Hess is ready for a month-long trial using a Chromebook.

For the entire month of February, I’m going to use my Chromebook exclusively for everything** business and personal. My experiment’s hypothesis is, “Can I survive for one month with just a Chromebook?***”

Notice the heavy use of asterisks?

**Exception: My day job.
***No iPad, no Mac mini, no other PC.

Sounds like fun.

Reviews of various Chromebooks on Amazon are usually good, considering the price tags on the most popular models which range from $199 to $350. They’re much like tablets with a keyboard and limited apps.

Apple Store Body Odor

Rocco Pendola found an odd smell coming from Apple’s new store in Santa Monica.

I call it a “known issue” because I spoke to two Apple Store Santa Monica employees this week who confirmed, without hesitation, that the store, at times, does indeed stink. When I asked one employee about it, this employee chalked it up to “human beings.” Lots of them. Lingering and loitering.

The Apple Store I frequent the most is the flagship store on 5th Avenue. It smells like New York.