Category Archives: Apple

Apple, iPhone, iPhone 6, iPhone 6 Plus, Smartphones

Apple closes another window for competitors

This is the first of what will likely be several pieces from me over the course of this week on Apple’s big announcements, both here and in my weekly Techpinions column. This one focuses on the iPhone specifically.

Apple has always provided windows of opportunity for competitors

In the in-depth Apple profile I wrote for clients a couple of months ago, I said the following:

Apple competes very effectively in the market segments it targets, but deliberately limits the segments of the markets it competes in.

As a corollary to that, one of my first recommendations to Apple’s competitors was:

Play where Apple isn’t. The easiest approach to take is to play where Apple chooses not to. Early in this report, we discuss Apple’s focused approach and the ways in which it limits its own addressable market through its focus on premium devices, a small number of devices, and a relatively controlled approach to customization. Competitors should play up their differences and focus on those markets where Apple doesn’t play, or doesn’t play effectively. Very few companies can go up against Apple in its target markets and win.

What’s been fascinating about Apple’s history with the iPhone is the ways in which it has deliberately held back features or functionality in either hardware or software which competitors offer. In the process, it’s provided a series of windows of opportunity for competitors to differentiate on that basis, and to hammer Apple for it in their advertising. The chart below shows a number of these features and the windows of opportunity Apple has allowed competitors to offer them without competition. In each case, the starting point is when major competitors began to offer the feature, and the ending point is when Apple began offering it, either in iPhone hardware or in iOS. (To be sure, some of these were far more useful and meaningful differentiators than others).Apple windows of opportunityIn some cases, the window has been very small, lasting just a year or so. Such was the case with the initial iPhone’s lack of 3G, push email and third party apps. But other windows have lasted much longer, such as the absence of widgets. But in all these cases, Apple has been content to allow competitors free rein in these areas while it either didn’t consider the feature important or wanted to wait until it could get it right. Continue reading →

Apple, Privacy, Security, Techpinions

Techpinions post: Five thoughts on privacy and security

My post today on Techpinions is on privacy and security, and was sparked by what’s been widely called the “iCloud hack” since the news broke at the weekend. Since we know little about the mechanics of the hack so far, I’ve held off commenting on the specifics, but instead shared five more general thoughts on privacy and security:

  • If Apple really is at fault, it needs to remedy the situation fast
  • The impact to Apple will be very limited
  • Privacy attacks are very targeted
  • The difference between careless and deliberate privacy invasions
  • Users are always the weak point in security.

Feel free to head over there to read the piece in full, and as always feel free to join the comments section – it’s always a good place for vibrant discussions on the issues.

Apple, iPhone, Phablets

Quick Thoughts: on iPhone sizes

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Now that it’s official that Apple will be holding an event on September 9th, speculation has turned once again to exactly what size the various iPhones Apple might launch will be. Much of the debate so far has focused on whether there will be one or two new sizes: 4.7 inches seems to be a universal certainty, but there’s some debate over whether or not we’ll see a 5.5-inch phablet-style iPhone. My Techpinions colleague Ben Bajarin has a great, skeptical, take on the prospects for such a device.

I’m not quite as skeptical as Ben, but I’m also not totally gung-ho about the phablet category. It’s particularly dangerous to extrapolate demand for iPhones at different screen sizes from Android purchasing behavior, for two main reasons:

  • iPhone and Android users behave very differently, in a whole variety of ways: Android users spend less on devices and apps, spend less time in apps, download fewer apps, are more likely to live in emerging markets and in Asia, and so on and so forth. They’re simply very different user bases, and there’s no particular reason to believe they’ll behave the same way when it comes to screen sizes when their behavior is so different in every other way.
  • Secondly, and perhaps more importantly, it’s very easy to reverse cause and effect with screen sizes in the Android world. Many people seem to assume that, because most premium Android devices are larger than 4.5 inches, that must be what people want. But the reality is that it’s almost impossible to buy a premium Android device with a screen smaller than 4.5 inches. So, the question becomes, are premium Android devices only made in sizes above 4.5 inches because that’s all anyone wants, or is that all anyone wants because that’s all that Android OEMs make? I’d argue that Android device makers have very deliberately targeted the larger size as a way to set themselves apart from the iPhone, but that doesn’t necessarily mean it was demand-driven.

For these reasons, I’m skeptical that we’ll see the same share of sales by screen size with the iPhone as we’ve seen with Android, even if Apple does release a 5.5″ phone. Apart from anything else, there are people who have very deliberately stayed with or switched to the iPhone precisely because it fits their hand better.

That raises another question few people seem to have tackled: will there still be a premium iPhone, i.e. one with the same specs as the 4.7″ and 5.5″ models, at 4 inches? In other words, will it be possible to buy the equivalent of the iPhone 5S at the same screen size in late September, or will the 4-inch screen be the lonely province of the 5C equivalent? And if that’s the case, does it mean that this screen size gets phased out altogether next year or the year after? I’d like to see the 4″ size stick around in the premium tier for at least another year, just to give customers a chance to vote with their feet. If no-one buys the 4″ device, Apple can jettison it next year. But I suspect there are people who like the 4 inch size and will find it difficult to abandon. Having said that, of course, if Apple stops making that size, where else will those customers go? The iPhone is already the only premium handset being made at that size.

The last question is how these three sizes might sell. My guess is that if all three sizes stick around, the 4.7″ model will sell best, followed by the 4″ model, and lastly the 5.5″ model. If the 4″ model doesn’t stick around, then the 4.7″ model will vastly outsell the 5.5″ model. If it’s just 4.7″ and 4″, it might be 70/30 in favor of 4.7″. Of course, a lot depends on the pricing. If it’s strictly tied to size, and each size bump triggers a big price increase, that’ll tip things significantly in favor of the smaller devices. I suspect Apple might give the larger devices more storage capacity too, as a way to bridge the gap, such that they start at 32GB instead of 16GB. Regardless, it’ll be fascinating to watch.

Amazon, Apple, Google, M&A, Microsoft, Techpinions

Techpinions post: potential acquisitions for Apple, Google and Microsoft

This week’s Techpinions column was prompted by a tweet from Alex Wilhelm of TechCrunch, who asked which companies Apple, Google and Microsoft should acquire next. I fired off a quick response, but decided that this would make an interesting post in its own right, and spent some more time drawing up a list. I also added Amazon to the list of potential acquirers just for fun. Here’s what I came up with:

  • Apple – Bose, Broadcom’s baseband business, Yelp
  • Google – Spotify, Jawbone/Fitbit/Withings, Pinterest
  • Microsoft – Here, Foursquare, Everpix/Picturelife
  • Amazon – Hulu, Pandora, Etsy/Shopify.

You can read the full post, which includes my rationale behind each of these choices, over on Techpinions.

Apple, Bluetooth LE, Mobile payments, NFC, Payments, Techpinions, Wearables

This week’s Techpinions column – Apple and Mobile Payments

My column for Techpinions this week is about Apple and mobile payments, and was prompted by the current heightened interest in Apple’s plans in this area, driven both by the prospect of new iPhones and wearables. I quote survey results from my recent report on smartwatches, but also highlight the vicious circle that plagues the mobile payments space:

The mobile payments vicious circle

Aside from the overall challenges facing any company in the payments space, I talk about the major technologies Apple might choose to use, including both NFC and Bluetooth LE (Apple has so far favored the latter). You can read the whole thing on the Techpinions site. All my Techpinions columns can be seen here.

Android Wear, Apple, iWatch, Smartwatches, Techpinions, Wearables

New report and post on smartwatches

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My firm, Jackdaw Research, has just published a report for subscription clients on the topic of smartwatches, entitled Smartwatches: Market Prospects. It features several consumer surveys which gauge demand for current and future smartwatch features, and evaluates the current offerings in the smartwatch market. I’m bearish on smartwatches as they currently stand – demand for the features they offer is weak, and that demand is currently being met by weak supply too, as all of the current offerings are flawed by virtue of the compromises they make between battery life, displays, performance and usability. The market is likely to remain small unless something changes – one of those, of course, being a disruptive entry to the market by Apple.

My Techpinions post today summarizes some of the key findings of the report. Here’s a quote:

Measured against these criteria, the current crop of smartwatches on sale does very poorly. I did my own ratings as part of my report, and I ended up with scores which were barely above 50% across these seven categories. Unlike most reviewers, I don’t see the Pebble as the clear leader in this market – in fact, all the devices ended up clustered around a very small range of unimpressive scores. If we’re really honest with ourselves, we should expect much more of these devices before we embrace them, and unless they do more we’re not likely to see them sell above current levels.

The UK’s Guardian newspaper also did an extensive write-up on the report, which you can find here.

There’s more information about the report, and an opportunity to buy it directly, on the Jackdaw Research website. The report is available as part of our subscription research service for clients, and is $500 for non-clients.

Apple, Earnings, Q2 2014

Thoughts on Apple’s earnings for Q2 2014

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I did a quick piece on the iPad specifically, already, so go read that if you’re so inclined and then come back and read this deeper dive on calendar Q2 earnings. The full set of posts for consumer tech companies’ Q2 earnings is here, and will continue to be updated with new posts as they arrive.

iTunes divergence continues

I’ve talked before about the divergence in trends within iTunes revenues, and it continued this quarter. Apple doesn’t report these numbers directly, but it’s possible to calculate them based on the numbers it does share. Here’s how the iTunes, Software and Services segment splits between its three constituent parts:

iTunes Software and Services splitThe App Stores continue to grow very rapidly, and note that the line in the chart above only reflects Apple’s net revenues from App sales – the gross revenue from App sales is over three times as high, at $4 billion this past quarter alone. Meanwhile, content sales continue to fall as music consumption in particular shifts to subscription and free streaming options. What’s impressive is that Software and Services is holding up so well despite the shift to pricing OS upgrades and iWork at zero. This is likely driven by iCloud, AppleCare and Google search revenues, offset somewhat by software declines, but it’s impressive that it’s the largest of the three sub-segments, at least for now. But it’s entirely possible that Apple will generate more net revenue from apps than content next quarter, and that app revenue will pass Software and Services revenue within a year.

It’s also worth looking at Apple’s app revenue in the context of Google’s, since we now know a little more about that following I/O. Here’s an updated chart showing my estimates for app revenue at both companies, incorporating Q2 data: Continue reading →

Apple, Earnings, Growth, iPad, Q2 2014

Why iPad shipments aren’t growing, but might start again soon

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As with last quarter’s Apple earnings call, there has been lots of handwringing about why iPad shipments aren’t growing this quarter.  I’ve done a fair amount of thinking about this, and did some analysis as part of the recent Apple profile my clients received. I thought I’d share some of that thinking here, and expand on it a bit. A fuller review of Apple’s earnings will be coming shortly.

Update: In-depth review of Apple’s earnings is up here now.

Shipments versus the base

First, it’s important to be clear about one very important thing: the difference between iPad shipments and the iPad base. Stagnant or even shrinking shipments don’t mean the base is shrinking, and in fact it’s likely growing at a decent rate. Here’s my estimate of the iPad installed base over time:iPad installed base over timeYou’ll see that it’s been growing at a fairly steady clip, and that it’s reached about 180 million. Naturally, I’ve made some assumptions about how long people hang on to their iPads based on various data sources, so it’s not 100% accurate, but it’s likely a good guess at what’s been happening. So the first thing to note is that the number of people who have iPads is growing, not flat or shrinking, even if shipments are stagnant or falling slightly. Continue reading →

80–20 rule, Apple, IBM, Pareto principle, partnerships

Apple, IBM and the Pareto principle

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If you studied high school economics, you might have come across the Pareto principle, which many people merely refer to as the 80–20 rule. This Wikipedia summary is as good as any:

The Pareto principle … states that, for many events, roughly 80% of the effects come from 20% of the causes.

Apple’s growth so far with the iPhone and iPad has been astonishingly rapid, as the chart below shows:

iPhone and iPad growth

However, both curves have begun to slope less steeply, and the iPad one has essentially flattened in recent quarters. Growth so far has been driven by fairly basic factors: releasing compelling products on a regular basis, and expanding distribution over time. The iPhone base, and the distribution relationships Apple had built to sell the iPhone, helped the iPad to grow much more rapidly. But growth in both products has begun to slow, especially in percentage terms. Apple’s product and sales strategy for the iPhone and iPad has changed little since both products were launched, but these have led to very rapid penetration of the addressable market for both products.

This is where the Pareto principle comes in. At this point, Apple needs to make a strategic shift as it enters a new phase in the growth of these two products. The established strategies will continue to drive some growth, but it needs to augment these with new, more tactical, approaches to penetrate the remaining parts of the market where these established strategies won’t serve it as well. One obvious example of this is the enterprise, where Apple has so far fared very well simply through its existing strategies of creating compelling products for consumers and slowly adding support for enterprise use cases. But Apple will only grow so far in the enterprise as long as IT departments support Apple devices reluctantly rather than wholeheartedly, and the IBM deal is a way to change that. It won’t move iPhone sales by a huge percentage, but it’s one of many smaller strategic moves that Apple will have to execute on to drive the next phase of iPhone growth.

Another example of this strategy is the 8GB iPhone 5C Apple began to make available in March 2014. Again, it’s not going to move overall numbers by a huge amount, but it may well drive enough to make a difference. I’m expecting to see quite a few of these sorts of initiatives from Apple as we go forward. We’ll see a more complex and diverse set of growth strategies to drive the other 20% of growth, compared with the 20% strategies that drove the first 80%. Some of them will be announced with significant fanfare like the IBM deal, while others will be much less noticeable, but as a strategic direction, I suspect the IBM deal is the shape of things to come.

Apple, HealthKit, iWatch, Smartwatches, Wearables

Apple will make several wearables, but not a watch

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Back in January, I did a post titled “Why Apple may not launch an iWatch anytime soon.” The gist of the piece was this: that Apple doesn’t enter markets particularly early, but rather enters at the point where the technology is ready for it to provide the kind of transformative product it’s used to disrupt the music player, smartphone and tablet markets in the past. At the time, my conclusion was that Apple would likely stay out of the wearables business entirely, until such time as the underlying technology was ready. However, given the other things we’ve seen from Apple in the last few months, I now believe it’s very likely we’ll see something in this category from Apple in the near future, but it won’t be a watch, and it’s likely that it will actually be several products rather than just one.

Smartwatches aren’t delivering on the promise, but the promise is flawed too

There are two big problems with the smartwatch market as it stands: firstly, the underlying technology doesn’t seem to be ready, which means it doesn’t deliver on the promise of the category. But secondly, the promise itself simply isn’t all that compelling for the vast majority of the general population. There’s a sense that if someone can just crack the smartwatch category it’ll suddenly explode, but I’m just not sure I agree with that. It still fundamentally seems like a solution in search of a problem at this point. But the coverage – as is so often the case – is driven by a very small number of people who likely are in the target segment and therefore talk up both the promise and the reality well beyond what’s justified.

A different approach solves some fundamental problems

For all these reasons, I’m still skeptical that Apple will release a product that’s identifiable as a watch. If I think about the thorniest technological challenge with smartwatches, it’s the fact that you’re having to squeeze both a fairly smart CPU and a decent display, and the battery to power them, into what has to be a very small form factor. That problem essentially goes away if you see wearables less as notification screens and more as off-device sensors, as Apple seems to, in contrast to Google:

Android Wear vs Apple HealthKit

If wearables are merely providing sensor extensions to the smartphone rather than trying to replicate smartphone functions, you can do away with the bright, big screen and the powerful CPU, and strip both down significantly. On some wearables, you might retain a small display, but it’s entirely possible that others would do away with it entirely. Put in the relevant sensors, a Bluetooth LE radio and a small CPU, and you’d be done. This would allow you to make the device significantly smaller and sleeker, make the battery last much longer, and also allow for many other form factors that could be worn in different places around the body. Continue reading →