Apple, Google, Techpinions, Yahoo

Techpinions Insiders post on Mozilla, Google and Apple

Going forward, while I’ll continue to post regularly here, I’ll also be contributing increasingly to the Techpinions Insiders service, which is a subscription-based offering that complements the publicly-available content on Techpinions. Right now it’s $5 per month, and subscribers get lots of extra content for that $5. I highly recommend subscribing.

My first post for the service is a quick take on the news from yesterday that Mozilla is switching its default search engine for Firefox from Google to Yahoo, ending a long-standing relationship. I examine the key data around both search engine and browser market share, as well as the changing economics of Google’s search business, and I also talk about Apple’s slow and subtle move away from Google for search. I encourage you to go take a look (individual pieces may be read for a micropayment of 25 cents).

Oh, and I also have my regular weekly post on Techpinions today, which is about the various lenses through which one can see Google, and the implications.

BlackBerry, Quick Thoughts

Quick thoughts: BlackBerry’s announcements

BlackBerry yesterday made a series of announcements around its enterprise software and services strategy and roadmap, and I was able to attend both the event itself and some analyst-only sessions under NDA afterwards. I obviously can’t share the afternoon’s content, but from what we learned in the morning and from other insights I gained yesterday, I wanted to update my recent takes (here and here) on BlackBerry a little.

Focus on regulated industries, ambitions beyond

I’ve praised BlackBerry for their focus on the regulated industries when it comes to devices, because it shows how realistic BlackBerry is being about its prospects in the enterprise today. Especially in the US and other mature markets, BlackBerry is unlikely to sell devices other than in the public sector and other highly regulated industries. However, as I’ve said before, BlackBerry’s future lies in building a business that’s not directly tied to its dwindling device installed base and in going beyond these regulated industries to other businesses.

BlackBerry shared results from a survey yesterday about enterprises’ concerns about security and risk. There were no new findings here and lots of old themes: a vague sense of unease about the management of mobile devices and potential risks their use in the enterprise pose. BlackBerry is hammering away at worn themes here, but it’s hoping that broader awareness of the growing security risks in the enterprise will eventually pay off for them. There’s an element of scaremongering here, and the real challenge will be convincing enterprises beyond the regulated industries that there’s a real threat in mobile security that (a) requires going beyond the standard basic protections available in major operating systems and management systems today and (b) requires a BlackBerry solution rather than one from a competitor.

Fleshing out the cross-platform story

A big part of that story, in turn, has to be fleshing out the cross-platform story BlackBerry has been trying to tell since the announcement of BES 10. The vision has always been there, but it hasn’t been clear why a company would choose BlackBerry to manage non-BlackBerry devices. BES 12 is part of the answer to that, as it finally provides a unified approach to managing all devices, but the Samsung deal is the first concrete step in fleshing out the cross-platform vision. That’s because it’s the first step towards crafting truly optimized solutions built around a very popular device category in the enterprise rather than just focusing on standard APIs and tools. Samsung KNOX hasn’t been a great success yet, and its contribution to Android’s efforts and the BlackBerry partnership are both signs of its weakness and need to gain momentum. But on BlackBerry’s side, it’s also an admission that the generic approach hasn’t resonated, and something more targeted may be needed. There’s more coming as part of the Android for Work initiative too.

Multiple tiers now available on BlackBerry

CEO John Chen started the day’s sessions by talking about BlackBerry’s end-to-end solution for secure mobile communication and productivity. He made much of the multi-layered approach, starting with chips and firmware, the OS, the applications, the BES and the NOC. This is the top tier of the secure solutions BlackBerry offers. But it now arguably offers two other tiers as well: Samsung KNOX as part of the BES and NOC system, and other devices managed through a BES on a more generic basis. This creates a slight awkward situation where BlackBerry devices managed by the BES are the gold standard, with KNOX/BES devices a second tier (silver?) and others a third. I asked BlackBerry executives about this, and specifically how they imagined enterprises using each of these tiers within their companies, and they said they see companies using multiple tiers for different kinds of users based on their security and risk profiles. That makes a certain amount of sense, but the top tier has always been more or less exclusive to BlackBerry: the question is whether it can make inroads in the middle and bottom tiers, which is where the vast majority of devices in use are today.

Selling productivity against the big guys is tough

BlackBerry’s other big story is selling a suite of communications, collaboration and productivity solutions, with its content storage and syncing solutions such as Blend, BBM Meetings announced yesterday, and so on. It believes it’s created the best mobile-first solution for these things and points to the lack of full feature sets on the mobile versions of Lync, Adobe Connect and other similar products. That’s a fascinating value proposition, but I see two major problems with it. Firstly, the others will catch up fast: for example, Microsoft’s rebranding of Lync as Skype for Business is likely to come with an expanded feature set on mobile devices in the near future. Secondly, BlackBerry isn’t known for these things, and once again the challenge will be selling these new products and services beyond the traditional BlackBerry base. With a direct sales force of only a couple of hundred, BlackBerry will be heavily reliant on its indirect sales teams, many of whom also sell competing products. Why will channel partners sell these solutions when awareness is lower, preference for others is stronger, and many companies already have relationships with competitors?

Short-term growth prospects are all in enterprise software

BlackBerry is very aware of the two peaks problem I talked about in an earlier piece – that is, that its traditional business, which was directly tied to its device base, is in decline, and it needs significant new revenues to slow the decline and eventually get back to growth. The company has in the past talked about three potential new sources of revenue: enterprise software and services, BBM and the Internet of Things. However, of these, only enterprise software and services is going to generate any significant amount of revenue in the near term. The company’s target for BBM is $100 million by next financial year, whereas the target for enterprise software and services is $500 million, a doubling year on year. The company’s Internet of Things efforts, meanwhile, are too nascent even to warrant a public revenue target in the near term. That puts a heck of a lot of weight on the enterprise software and service activities, and the success of BES 12 in particular since so much else is dependent on that. The company’s management seems to be extremely realistic about its prospects overall, but this is one area where their goal seems like it’ll be a real stretch.

Overall, I remain somewhat positive on BlackBerry’s short-term prospects: they’ve reduced costs and cash burn to the point where there’s no longer an immediate danger of going under, and revenues are starting to stabilize. The question continues to be whether these new businesses can grow, and importantly grow independently of the device base, sufficiently in the coming years to return the company to significant growth. The next year or so will give us a really good sense of whether that’s possible or not.

AT&T, Cable companies, Cablevision, Carriers, CenturyLink, Charter, Comcast, Communications, Content, Cord-cutting, CST, DirecTV, DISH, Earnings, Growth, Presentations, Q3 2014, TV, Verizon, Video

US cable, satellite and telco provider review for Q3 2014

As a counterpoint to the US wireless market trends deck I published last week, today I’m making available a review of some of the major operational metrics and revenue trends for the largest publicly-held cable, satellite and wireline telecoms providers in the US market. This deck focuses on pay TV, broadband and voice telephony services, and shows growth on an annual and quarterly basis as well as total revenues and revenues per user for these services. Some of the key messages are:

  • TV subscribers aren’t shrinking – if looked at annually, to overcome the inherent cyclicality in the market, subscribers are actually growing very slightly
  • Broadband is still growing rapidly, adding several million subscribers each year
  • Voice is shrinking fast, though the rate of decline has slowed recently, as decent cable growth fails to offset the rapid shrinkage among the telcos
  • Pay TV is around a $100 billion a year market, and shows no sign of shrinking despite the shift in viewing habits towards DVR, VoD and online consumption.

I’ve embedded the deck below. You can also see it directly on SlideShare here, where you can find the code to embed it elsewhere or download it as a PDF. As with the wireless trends deck, the data behind these slides is available as a paid service from Jackdaw Research. Please contact me if you are interested in this option.

AT&T, Presentations, Q3 2014, Slides, Sprint, T-Mobile, Tracfone, Verizon, Wireless

Q3 2014 US Wireless Trends Deck

Last week, FierceWireless published my brief analysis of some key trends in the US wireless market in Q3 2014, along with exclusive early access to the slide deck I do each quarter. As of this morning, the deck is now available on Slideshare for viewing, embedding and downloading (as a PDF). I’ve embedded it below for easy access, but feel free to share it and download it as you see fit.


The data behind the deck is available in Excel or Numbers format as a paid product from Jackdaw Research, on either a one-off basis or an annual subscription. Please contact me if you are interested in either of these options. I hope you find these useful. Equivalent decks for the past two quarters may be found (along with some other decks) on my Slideshare page.

Business models, Microsoft, Office, Quick Thoughts

Quick Thoughts: Microsoft’s Office moves

Microsoft today made a series of announcements relating to Office running on platforms other than Windows:

  • Individual Office apps for iPhone are now available, mirroring those launched on the iPad earlier this year
  • Office will be coming to Android, starting with a limited beta/preview next week and full versions next year
  • All the versions of Office on iOS and Android will shift the dividing line between free and paid-for functionality significantly.

My initial reaction to the news was summarized in 140 characters in this tweet:

I wanted to expand on those ideas just a bit.

What the announcement says about Android

The announcement is most telling about Microsoft and its evolving strategy for Office, but it’s also illuminating about Android. Note that Microsoft announced Office for iPad in March and it became available essentially immediately for anyone running the latest version of the operating system. No delay, no beta label, just instant availability. But for Android, Microsoft is adopting a very different model, with a preview period with a limited number of beta testers and general availability coming months later. Why? Well, this is the same old story we’ve heard for years now: the fragmentation of the Android base, although we’re not even talking about Android smartphones. Go to the signup page for the Office for Android tablet preview and you’ll see that you have to specify the make and model of the tablet you want to try it on, and that’s the key here: developing complex software such as Office for Android is enormously more complex than on iOS, and especially if you want to achieve full feature parity across devices and platforms.

What the announcement says about Microsoft

The rest of the announcement is incredibly important in what it says about Microsoft and its strategy for Office. First, the context: Microsoft launched Office for iPad in March and says it’s seen 40 million downloads of the three apps since then. But the full functionality of the apps has only been available to Office 365 subscribers, and it’s added less than three million Home and Personal subscribers since then, at roughly the same pace as it added subscribers earlier.  People have been very interested in the apps, but most haven’t been willing to pay for the full functionality (or already had access to it through existing Home or Business subscriptions).

Why is that? Well, think about the kind of Office-related work you might want to do on an iPad. It likely isn’t writing the next great American novel, preparing the slides for your TED talk or working with pivot tables in Excel. It’s fixing a typo in a Word document, updating a cell in an Excel spreadsheet or inserting an extra slide in PowerPoint. Is that functionality worth $70-100 a year for most users? Likely not. Arguably, Microsoft drew the line between what was free and what wasn’t in the wrong place here, for obvious reasons: full Office functionality has always cost a lot, and there’s never been a version of Office available for free, so it was just following its long-standing pattern. But the way people use Office on tablets will be different from the way they use it on PCs, and Microsoft seems to be recognizing that. As such, it’s shifting the dividing line between free and not-free in favor of providing more functionality for free.

But I think there may be at least two other reasons for this move to provide more functionality for free. Firstly, Microsoft’s Consumer Office business is dwarfed by its Commercial Office business: last financial year, total Office System revenue was just over $24 billion according to Microsoft’s 10-K, but Consumer Office revenue was only around $3 billion over the same period. The vast majority of Office comes from businesses, who can now buy per-user licenses for their employees allowing them to use Office across multiple devices. At some point, Microsoft may decide that allowing consumers (whether acting in their personal lives or as employees) to use at least some functionality for free on some devices is a price worth paying to cement the position of Office as the productivity tool of choice for businesses, who pay most of the bills.

Lastly, Office has long suffered from the fact that it over-serves most users’ needs considerably, and the price charged for Office reflects 100% of the features whereas many users only use a small percentage. One of the attractions of Google Docs and other Office alternatives both for consumers and for businesses is that they allow users to accomplish many of the more basic tasks for free or for a much lower price. Microsoft should be considering a bifurcation of the Office product into at least two alternative versions: a more basic one with limited functionality offered for free or at least a lower cost, and a fully-featured one offered at the traditional price points. Perhaps it sees the new tablet and smartphone apps as an opportunity to experiment with just such a model.

What’s in and what’s out with the free version?

One other interesting thing to look at is what’s in and out of the free version. According to Microsoft’s blog post, these are some of the features that will be exclusive to the paid version:

advanced editing and collaboration capabilities, unlimited OneDrive storage, Dropbox integration and a number of other benefits.

It’s interesting that both of the recently-announced storage enhancements are exclusive to the paid version: Dropbox integration and unlimited OneDrive storage. The latter has a real cost associated with it, so it makes sense that it’s reserved for the paid version, but it’s intriguing to see a partner feature exclusive to the paid version too. I’ve pasted a screenshot from the iPad app that summarizes the premium features. I think there’s a risk that the dividing line feels arbitrary, but this list looks like it makes sense. It’s also interesting to see that Microsoft still requires the user to log in with a Microsoft account for the new functionality, even though a paid Office 365 subscription is no longer necessary.

Office premium features

Earnings, Q3 2014, Samsung, Smartphones

Thoughts on Samsung’s Q3 2014 earnings

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Note for new readers: this post is part of a series on major tech companies’ earnings for calendar Q3 2014. 

I’m going to link here quickly to two of my past posts on Samsung as they provide useful context which I don’t want to revisit in this post:

  • Is Samsung’s Exceptionalism Coming to an End? – on Techpinions. This post focused on the fact that Samsung had always seemed an exception to my rules for success in tech, and it seemed inevitable that its reign would sometime come to an end.
  • Thoughts on Samsung’s Q2 2014 earnings (and its future) – on this blog. In this post I talked about Samsung’s margins as being unusual for a pure consumer electronics business, and how those margins were likely to revert to the mean eventually because of Samsung’s lack of differentiation. (This is also the most-read of any post on this site since its inception a year ago)

All past analysis on Samsung on this blog can be seen here. My analysis tends to focus on Samsung’s mobile business specifically – other than a brief mention of chips, I won’t cover Samsung Electronics’ other businesses (air conditioning, TVs, refrigerators and display panels, among other things).

Plunging growth numbers

It’s worth starting with a quick financial review, to make sure we’re all on the same page. The relevant business unit from a mobile point of view is “IM”, or IT and Mobile communications. This includes PCs and tablets as well as smartphones, but it’s the lowest-level division where Samsung reports both revenues and profits, so it’s the one we’ll focus on here. However, it does report revenues for the Mobile segment specifically, so we’ll start there. First, revenue growth:

Screenshot 2014-10-30 13.51.42

As you can see, year on year revenue growth has plummeted from positive 90% in Q1 2012 to negative 30% this past quarter. The decline over the past year is alarmingly linear, and one wonders how much worse things can get before that decline levels off. Continue reading →

Advertising, Earnings, Q3 2014, Twitter

Thoughts on Twitter earnings for Q3 2014

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Note to new readers: this is part of a series on major tech companies’ Q3 2014 earnings. I do similar analysis each quarter for certain companies. Previous pieces on Twitter may be found here. 

Last quarter I talked a little about the challenge of Twitter’s user growth, and what I uncovered as its renewed emphasis on logged-out users (a theme Dick Costolo had first talked about three years ago and to which he has now returned). I and others have talked about Twitter’s different user groups and on yesterday’s earnings call Costolo explicitly spoke about three concentric circles (he actually said eccentric, but I’m fairly certain he meant concentric) representing Twitter’s users. That’s something I’ll return to below. There will be three major points to this analysis:

  • Twitter has given us metrics to measure its growth and potential, but it keeps backing away from or hedging on these without providing better ones
  • Twitter’s core user growth has slowed in recent quarters, and though it wants us to think about a broader group of users, this broader group is both ill-defined and much harder to monetize
  • Twitter is very successfully managing the same transition to mobile advertising as Facebook, but it’s not yet clear how sustainable this business will be for either company.

Twitter’s metrics aren’t telling a good story

The three main metrics Twitter has established for tracking its progress are:

  • User growth: as measured by growth in monthly active users (MAUs)
  • Engagement: as measured by timeline views per MAU
  • Monetization: as measured by ad revenue per thousand timeline views.

These three may be seen as levers, or multipliers, for growth. To the extent that all three are improving, they should drive faster and faster growth for the company, as each change in the first is magnified or multiplied by growth in the second, which in turn is magnified or multiplied by the third. The challenge is that of these three metrics, only one is heading in the right direction, and that’s ad revenue per thousand timeline views:

Ad revenue per 1000 timeline views

As you can see, international monetization continues to lag significantly behind US monetization, which is a function both of Twitter’s underdeveloped overseas sales channels for ads and the lower ad spend in every other market around the world. But both sets of numbers are moving in the right direction, and in the case of US revenues very rapidly so. I’ll come back to the drivers for this growth later, but this is the single best sign about Twitter’s business: it’s able to monetize what usage there is better and better, and this in turn has driven strong overall growth in ad revenues (in thousands of dollars):

Twitter ad revenue

The challenge is that this growth is strongly tied to direct sales, which is an expensive proposition in its own right. Even as some of Twitter’s other cost lines have shrunk as a percentage of revenue, sales and marketing costs are rising over time: Continue reading →

Amazon, Earnings, Q3 2014

Amazon and the cost of growth

Note to new readers: This is part of a series on major tech companies’ Q3 2014 earnings. Prior analysis on Amazon can be seen here.

Last quarter I did a pretty deep dive on Amazon and many of its financial metrics, and specifically addressed the question of how sustainable its business is, and whether it’s really realistic to expect it to be able to turn on the “profit spigot” at some point in the future. This quarter I’m taking a simpler, more focused approach on the cost of growth, the pursuit of which is the core reason Amazon is losing money.

Hiring at a fierce rate

Amazon’s hiring new employees at a fierce rate. This is one of the two primary costs of having a very logistics-heavy business, and the key driver behind Amazon’s investments in robotics. But for now the company still needs lots and lots of people to staff fulfillment centers around the world. Here’s are several charts showing statistics related to the number of employees:

Number of Employees

As you can see, the growth is enormously rapid. I pointed out yesterday in a tweet that Amazon hired more than twice as many employees just in the past quarter than Facebook has employees overall. They’re obviously very different businesses, but this just highlights quite how people- and infrastructure-intensive Amazon’s business is. Amazon has now reached a rate of 40,000 net new employees per year, which is astonishing when you consider it only employed 40,000 in total back in 2011: Year on year employee growth

The other thing about Amazon which is different from many of its major competitors is that the kind of people who make up the employee ranks are very different. At Amazon they’re generally far less skilled and therefore much cheaper to employ, which means that it can afford to drive far less revenue per employee than companies such as Apple, Microsoft and Google, which employ a much more expensive mix of employees: Continue reading →

Earnings, Microsoft, Microsoft Earnings, Q3 2014

Thoughts on Microsoft’s Q3 2014 earnings

Note to new readers: I use calendar rather than fiscal quarters for easier comparability between companies’ results. As such, I use Q3 2014 universally to refer to the period ending September 2014, even though some companies (in this case Microsoft) use a different reporting calendar). All the charts and analysis below use calendar rather than Microsoft fiscal quarters. This is part of a series on major tech companies’ Q3 2014 earnings. Prior analysis on Microsoft can be seen here. 

There are four sections in this post – click below to jump to each of them:

Consumer hardware performing surprisingly well

One of the most surprising things about today’s earnings was that the consumer hardware businesses, which are important to Microsoft’s strategy but have performed poorly, all got a bit of a boost this quarter. Xbox, Surface and Lumia devices all had strong year on year growth:

Lumia device sales Surface revenue Xbox unit salesAll three device categories saw record results, in fact – Lumia sales and Surface revenue were both the highest they’ve ever been, while Xbox unit sales were the highest they’ve ever been outside the seasonally much higher fourth calendar quarter. Now, we have to put all this in context: both Lumia and Surface sales are dwarfed by the respective markets in which they compete. But on a relative basis, the company continues to see growth in both categories, and the Xbox year on year growth was solid too.

Now, much has been made of the fact that Microsoft reported a positive gross margin for the first time for the Surface as well. Long-time readers will now that I have teased estimated gross margin numbers out of Microsoft’s SEC filings for the past few quarters, so I thought I’d provide an update on the same basis. Here’s the chart including this quarter’s numbers:

Surface financials

As you can see, the number does indeed seem to be positive this quarter on the basis of my analysis, at a little under $100 million. That’s a gross margin of around 9%, which is not earth-shattering and in fact about half the gross margin of the phone business at Microsoft. But it’s progress, as with the growth numbers above. There’s a long way to go to get to the kind of gross margins that would lead to true profitability once marketing and other costs are factored in. How many Surface devices did Microsoft sell in the quarter? Well, they won’t say, but given the new version starts at $800, it’s entirely possible that the company sold a million or fewer Surface tablets in total, and likely well under a million Surface Pro 3s in their first full quarter on sale. It sold about ten times as many Lumia devices, and about 40-50 times as many mobile phones, just for comparison’s sake. Continue reading →

Apple, Earnings, iPad, iPhone, Mac, Q3 2014

Thoughts on Apple Q3 2014 earnings

Note for new readers: I stick to calendar quarters in analyzing earnings, because it makes cross-company comparisons easier. As such, all references to “Q3 2014” refer to the quarter ending September 2014, not Apple’s fiscal Q3 2014. Once again, this post is part of a series on major tech companies’ earnings (this is the second for the current round of earnings; analysis of Q1 2014 earnings can be found here, and for Q2 2014 can be found here). 

iPad plus Mac is the number to watch

Lots of attention was paid by both Apple and commentators this quarter to both the iPad and Mac numbers, but the key is increasingly to look at the combined results of these two segments, both in unit shipment and revenue terms. For a while there, as the Mac started to shrink, iPad growth offset that decline, but the two have now switched places. Nonetheless, year on year, the two combined continue to operate within a very narrow range:

Mac plus iPad revenues Mac plus iPad shipments

ASPs continue to tell an interesting story

Given the near demise of the iPod, and the declining average selling price (ASP) of the iPad, the iPhone and Mac are actually the best two products for Apple to be selling. Interestingly, they’re also the two products which are most likely to experience substitutional effects with the iPad. Note the ASP trends in the chart below, which shows trailing 4-quarter ASPs to smooth the quarter-to-quarter fluctuations:

Apple ASPs

The iPhone ASP continues to hold up remarkably well, staying within $10 of $600 for the last five quarters, though rather lower than the $640 or so it regularly hit earlier. With the launch of the iPhone 6 Plus it’s likely that ASPs will trend somewhat higher over the next couple of quarters, and this quarter’s ASP was $42 higher than last quarter’s, partly for that reason.

Who’s buying iPads?

I’ve done some analysis previously on iPad replacement cycles and theorized that we’re due for faster sales over the next few quarters as the many iPads sold 2-4 years ago become due for upgrades. I thought I’d revisit some of those numbers in the context of what we heard today to answer the question of who’s buying iPads. Tim Cook has now given several data points as to the percentage of iPad buyers who were first time buyers, and it’s interesting to look at what that data signifies. Using that data, I’ve put together estimates of the breakdown between new buyers and upgrade buyers of iPads, as shown below:

iPad Buyers By Source

If these numbers are correct, they appear to show two trends:

  • The number of people buying upgrades to existing iPads is rising slowly in a cyclical pattern, as would be expected with a growing installed base (I’ll come back to this below)
  • The number of people buying new iPads has been extremely cyclical too, but appears to have slowed somewhat over recent quarters. Though the Q4 peak last year was higher than the one the year before, every quarter since has been off the year-earlier quarter by some margin. Though Tim Cook rightly points out that the market isn’t saturated, the number of new buyers does seem to be falling somewhat.

Let’s look at that upgrade number in the context of the installed base (the caveat here is that we’re working with two sets of estimated data now). My guess is that the percentage of the existing iPad base that upgrades in any given quarter is around 3%, with a higher number in Q4, both because it’s a big buying quarter anyway and because as a result it’s the anniversary of many earlier purchases. I think the rate in those quarters likely spikes to around 4.5%. On that basis, as the base continues to grow by a few million every quarter, if the upgrade rate holds steady, the number of iPads sold to existing owners will continue to grow steadily too. The big question then becomes whether Apple can turn around the new buyers number with the new iPads it launched last week, and the lower prices on older iPads. I suspect it will and we’ll see a really big fourth quarter, perhaps the first in a year that’s higher than the year-ago quarter.

Apple Watch buried among Other Products

One of the more interesting tidbits on the earnings call was not a financial data point in its own right, but an indicator of future reporting changes. Namely, that the Apple Watch will be reported under Other Products along with both the existing Accessories business (including Beats) and the iPod business, which was formerly reported separately but is becoming so small as to be no longer worthwhile reporting in its own right. It’s worth looking at the history of other Apple products here for a precedent:

  • The iPod launched in October 2001, and in the next earnings release Apple reported the number of shipments, but didn’t break the product out in its Data Summary with its Mac shipment and revenue data until two years after launch, in October 2003. The company continued to provide occasional iPod shipment numbers in the interim, however.
  • The iPhone and iPad both received immediate status as segments in their own right immediately after launch, with a full revenue and shipment breakdown (though in both cases muddied by the fact that other related revenue was lumped in with device sales revenue for a time).

What does it signify that Apple won’t report Apple Watch shipments and revenue in full detail from the outset? I think two things:

  • Apple is exhibiting caution ahead of what is in some ways its most unpredictable new product category in many years, since the iPod. Apple as a company has many times more customers today than it did then, but the Apple Watch is as big a departure from its current product line as the iPod was in its time, and it’s inherently difficult to predict how many it will sell. As such, the lack of reporting in the short term may reflect an abundance of caution about breaking out a nascent category.
  • Apple’s leadership alluded to this on the earnings call, but the Apple Watch will also have a far more diverse set of price points than any of its other products, ranging from $349 to several thousand dollars, and as such the average selling price will be a huge clue as to which models are selling in a way that it has never been for the iPhone, iPad or even the Mac. As such, Apple is keeping this commercially sensitive data out of competitors’ hands, at least for the time being.

However, all that said, within two years of the launch of the iPod Apple was providing a detailed breakout of both shipments and revenues, and I’d very much expect that if the Apple Watch sells at all well we’ll get (a) ad-hoc reporting of key metrics such as shipments right from the start as with the iPod and (b) a full breakout at such a time as the Apple Watch becomes significant enough as a revenue generator to warrant its own segment. With an ASP that’s likely to be in the same ballpark as the iPad or higher, it will only have to sell a few million to become material to Apple’s earnings overall, and I would expect that to happen within the first few quarters. It will be hard for Apple to keep these numbers buried out of sight for very long.

I’ll likely do another post or two this week as I continue digging through the numbers, so that’s it for now.