Category Archives: iPhone

Apple, Apple TV, Apple Watch, Apps, iPad, iPad Pro, iPhone, iPhone 6S, Keynotes

Apple September 2015 event quick take

13 Comments

Note: I’m cross-posting this piece from the Jackdaw Research website, where it went out earlier today as a media comment on Apple’s event. I should have more in-depth analysis on the event here and on Techpinions in the next few days. My preview piece from Tuesday is here.

Apple’s September event always sets the tone for its entire year – new iPhones are announced, and the iPhone makes up the majority of Apple’s revenue and profits, and the performance of the iPhone business largely determines overall growth rates, at least for now. But today’s event, like last year’s, added another new product category that should drive significant new revenue for Apple and for developers, and arguably the new Apple TV was one of the biggest and most important things announced today.

iPhone

The new iPhones have enough new features to make them an interesting upgrade for those who always have to have the latest device from Apple, with 3D Touch the biggest new feature. The name of Force Touch badly needed to change, since it always sounded a little like a form of assault. I’m no convinced 3D Touch is the right name, but it conveys the concept reasonably well, in that the functionality is about a more layered interaction. 3D Touch itself should make navigation and interaction much quicker and easier, but it will mean something of a learning curve for users, because there won’t be any visual cues indicating what a 3D Touch might do, a problem the Apple Watch suffers from as well. For anyone with a two-year old iPhone, which includes the vast majority of iPhone users who will upgrade in the next year, this will be a significant upgrade. For all the concerns about a down year for iPhones, I believe Apple will have another year of year on year growth, though likely significantly slower year on year than in the iPhone 6 cycle.

I’ve been saying since early last year that Apple should launch its own device installment plan for iPhones, and now it’s launching one, with the iPhone Upgrade Program. This is a huge opportunity for Apple to take control of the customer relationship away from the carriers, and that in turn is a big risk factor for carriers, which will now cede some of that relationship to Apple. Arguably, only Apple has the infrastructure in place to offer this kind of plan to customers, so this will also be a further differentiator against competitors.

Apple TV

The Apple TV has been described as a hobby at Apple for too long, and today the transition to a product worthy to sit alongside Apple’s other products begins. The new SDK will create a huge new opportunity for both existing and new developers, both in gaming and content, and in the process it’ll make the device more compelling for end users too. But what will really change the Apple TV is the launch of the Apple TV service a few months from now, because only then will the Apple TV be capable of becoming the only device you need to plug into your TV. In the meantime, Apple is going to bring casual gaming and a much broader range of apps to the platform, and especially for cord cutters, the Apple TV might well become the only device they need.

One interesting wrinkle is that Apple is giving developers less than two months to create apps for the Apple TV, which is by far the shortest time it’s ever given developers for a completely new SDK. The iPad, which leveraged what had been known as iPhone OS, gave developers 66 days, while the original iPhone gave them 127 days and the Apple Watch debuted 157 days after the SDK was released. That doesn’t give developers a lot of time, but it likely reflects the shared elements in tvOS compared with iOS on iPhones and iPads.

Apple Watch

Though a minor announcement at the event this week, Apple Watch OS 2 is going to be enormously important for the Apple Watch and for Apple. An Apple Watch running OS 2 is best thought of as the version of the Watch Apple would have wanted to launch right off the bat, if it could have. The first version of the Watch software was good, but the reality is that the apps are sorely lacking, in large part because of the heavy dependence on the iPhone for functionality. With Watch OS 2, that all changes, and apps should be snappier, more functional, and far more varied in their capabilities. I believe this new phase of its history will change the Watch as much as iPhone OS 2 changed the iPhone, and make it a much more compelling device, while creating big new opportunities for developers. The new watch and band options should also help diversify the appeal of the Apple Watch in both the premium and low-end segments, with both the Hermes watches and the new colors for the Sport option. This, coupled with the holiday season, should make for a really big calendar Q4 for Watch sales.

iPad

The iPad Pro has obvious similarities to Microsoft’s Surface, with its detachable keyboard and stylus. But the big difference is that the iPad is designed first and foremost as a standalone tablet, and the keyboard and stylus are optional extras. The Surface has always felt compromised as a pure tablet, because everything is geared around the use as a quasi-laptop. The Smart Keyboard and Pencil will add a lot of value for certain kinds of users, but the iPad Pro could easily be a replacement for a family PC for gaming or TV viewing. But with the keyboard, multi-tasking, and new apps and functionality from Microsoft and Adobe among others, it could also become a fairly compelling option in the enterprise. At a minimum of $1000 including the Keyboard and Pencil, the iPad won’t be all that price competitive against a basic PC, but with the new internals, it’s actually quite a powerful computer in its own right.

The key for the iPad is that Apple is now engaged in what you might call salami tactics here; in other words, Apple is seeking to add to the iPad opportunity incrementally with a number of smaller moves, and I see the iPad Pro in this context, along with Apple’s partnerships with IBM and Cisco. The iPad Pro by itself won’t dramatically change iPad sales, but should provide a good boost for sales, especially in conjunction with the advancements in multitasking and split-screen functionality in iOS 9. I’m still skeptical that iPad sales will start growing again over the longer term, but I think they might stabilize, and that will happen in large part due to increasing education and enterprise sales rather than renewed growth in the consumer market.

Apple, Apple TV, iPad, iPhone, iPhone 6S, Keynotes

Apple September 2015 event preview

Related topic pages: Apple, and more narrowly the Apple and TV topic page.

I’m writing up a short Apple event preview here. Please note that this isn’t a list of predictions – that’s always seemed foolish to me so close in to an event, since so much is known already, and any real out-on-a-limb projections are easily proven wrong the following day. Rather, this is an analysis of the importance and impact of the things that are likely to be announced. I’ll follow up with a comment for press in the hour or so after the event – if you’re not yet on my media distribution list but would like to be, you can sign up here.

We also did something of a preview of the event on the Beyond Devices Podcast this past week, focusing especially on the Apple TV – I’m embedding the SoundCloud player below, and you can also find the episode on iTunes and Overcast, as usual.

New iPhones

One of the key mistakes a lot of people in the press and other commentators are making with regard to the new iPhones is having a single-year upgrade mentality. And because they make this mistake, many people are predicting a first down year for iPhone sales, but this view is misguided. As long as you look at each new iPhone in comparison solely to the iPhone that came the year before, you’re going to totally miss the point, which is that the vast majority of iPhone buyers are on a two-year upgrade cycle, and therefore the important comparison this year is to the 5S (and 5C) and not to the iPhone 6 and 6 Plus. I put together the table below a while back for a client, and I think it’s very relevant here – the key thing to look at is the final column, because this is the set of new features an owner of a two-year-old device will see when purchasing the new device. As you can see, even if you ignore Force Touch, which is highly likely but as yet unannounced, there’s plenty to recommend the new devices over the 5S, and if you bought a 5C two years ago, you need to add in several more features that weren’t in that device but were in the 5S, notably Touch ID.

iPhone 2 year upgrade cycles

Beyond the two-year upgrade cycle, everything else points to another big year for iPhone sales:

  • Switching from Android should continue at the same pace, especially since all the year’s major new Android devices are now out, so there’s no sense holding off on buying a new phone.
  • Upgrades from iPhones should be big again – the 5S cycle was bigger than the 5 cycle, which drove last year’s upgrades, so the starting point is much larger, and Tim Cook has made much on earnings calls of how little of Apple’s iPhone base has upgraded to the new phones yet.
  • The iPhone 6 Plus from last year will likely drop in price by $100, meaning that you can now get an extremely capable phablet for the same price as this year’s brand new phone (and the same price the Samsung Galaxy S6 and other leading Android devices launched at).
  • Installment plans and especially leasing options (many of which are iPhone-centric) from the US carriers are driving more frequent upgrades and purchases of higher-priced devices, which should further help iPhone sales. Sprint and T-Mobile in particular are driving iPhone sales hard at the moment, and I’d expect to see some bigger promotions from Verizon and AT&T around the new iPhone launch too.

Will the year-on-year growth rate be as high as this past year? No. But will it veer into negative territory? Absolutely not. Apple should sell more iPhones this year than they did last year, as they have every year in the past. Even those users that sometimes or always upgrade every year should see plenty to like in the new phones too, with Force Touch and other new features making the new phones a nice step up over last year’s ones.

Apple TV

I’ve written a lot about the Apple TV and Apple’s TV strategy in general over the past two years, so much so that last week I put together a new topic page on this site to summarize it all. That writing kicked off with a piece from January last year on how Apple could turn the Apple TV into more than a hobby, and I stand by what I said then, which is that the real transformation can’t happen until Apple launches a TV service (note that this was well before reports that Apple was working on such a thing surfaced). I still believe that’s the case, but I also believe that the announcements that will be made tomorrow will be extremely important for the Apple TV. Adding an open SDK and App Store will create significant new opportunities for third parties and for Apple around both gaming and content, something I wrote about on Techpinions last week. The potential for gaming in particular depends a great deal on the details of execution, most importantly the ease of porting apps from other flavors of iOS, and the controllers. But I think the new Apple TV will be huge. The biggest questions in my mind are how soon it will launch and therefore how much time developers will have to begin creating apps for it. Since it’s very likely to launch before Christmas (and probably in November), it’s likely to have the shortest announce-to-launch cycle of any entirely new Apple SDK, and that’s going to make this launch very interesting to watch.

Apple Watch

Though a minor announcement at the even this week, Apple Watch OS 2 is going to be enormously important for the Apple Watch and for Apple. I think an Apple Watch running OS 2 is best thought of as the version of the Watch Apple would have wanted to launch right off the bat, if it could have. The first version of the Watch software was good, but the reality is that the apps are sorely lacking, in large part because of the heavy dependence on the iPhone for functionality. With Watch OS 2, that all changes, and apps should be snappier, more functional, and far more varied in their capabilities. I believe this new phase of its history will change the Watch as much as iPhone OS 2 changed the iPhone, and make it a much more compelling device, while creating big new opportunities for developers. This, coupled with the holiday season, should make for a really big calendar Q4 for Watch sales. I’ve written about all this in more detail here.

iPad

It’s still unclear whether we’ll see new iPads at this September event, or whether they’ll be announced in October, but either way what I say here holds. The key for the iPad is that Apple is now engaged in what you might call salami tactics here (that’s a term that was coined back in the 1940s but which I first came across in this scene from the British comedy Yes, Prime Minister). That is, there are no huge boosts for iPad sales available to Apple, but rather a series of small steps it can take one by one, each of which will help iPad sales incrementally with the IBM and Cisco deals good additional examples. I first wrote about this idea here. I definitely see the iPad Pro (or whatever the larger iPad ends up being called) in this context – it won’t dramatically change iPad sales, but should add a little to the effort, especially in conjunction with the advancements in multitasking and split-screen functionality in iOS 9 (and potentially iOS 9.1), and the possibility of a stylus and Force Touch. I wrote a piece a while back about how iPad sales might eventually tick upwards due to upgrade cycles, but we’re coming to the end of the period when I thought that might happen, and I’m now skeptical that it will. Rather, I think they might stabilize, and that will happen in large part due to increasing education and enterprise sales rather than renewed growth in the consumer market.

Summary

Apple’s September event always sets the tone for its entire year – new iPhones are announced, and the iPhone makes up the majority of Apple’s revenue and profits, and the performance of the iPhone business largely determines overall growth rates, at least for now. So the new iPhones themselves are enormously important. But I’m actually far more interested in and excited by the Apple TV and Apple Watch OS 2, because they relate to unknowns in Apple’s business. iPhone upgrade and sales patterns are fairly predictable, but the Apple Watch is so early in its life, and the Apple TV is about to embark on such a significant transformation, that these moves are arguably more important in terms of their potential to move the needle on Apple’s future growth in unpredictable ways. On a personal level, too, I’m looking forward to a new iPhone, but I’m more excited by a new Apple TV, and by the new things my Apple Watch will do when running OS 2 and the new apps developers will create.

Apple, Apple Watch, iPhone, iPod, Studying Apple

The future of Apple Watch will be more like the iPod’s than the iPhone’s

2 Comments

Note: this is the second post from Aaron Miller, who is now authoring occasional posts on Beyond Devices under the Studying Apple banner. Aaron is on Twitter at @aaronmiller. 

When Apple announced its earnings this week, they were as reticent as they promised to be about the number of Apple Watches sold. Still, some details did leak out giving us a sense of Watch’s first quarter. (Be sure to read Jan’s post where he estimated sales based on what we know.) Here they are, summarized:

  • The Other category, where they include Apple Watch revenue, grew sequentially by nearly $1 billion.
  • Apple Watch customer satisfaction is higher than for the iPhone and iPad.
  • Apple sold more Watches in its first quarter than in the first quarter of iPhone or iPad sales.

The last detail is probably the most interesting one. Comparing the Apple Watch to the iPhone implies a story about a massive future product, if not necessarily about a current one.

But the Apple Watch is hugely different from the iPhone. In fact, it’s much more like the iPod, a product now relegated to Apple’s history despite the recent updates. With iPhone at the top of everyone’s mind, we’re too quick to forget the iPod story and how similar it might be to the one playing out with the Apple Watch.

An Ecosystem Product

First, and most importantly, the Apple Watch is an ecosystem product. Right now, the Watch only works as an extension of the iPhone. Its upper boundary is the total number of iPhones in the world.

This makes the Watch much more like the iPod than the iPhone. From the time the iPod first launched, it was a product tied to a computer, first to Macs then eventually to Windows computers as well. 1 (Remember the Digital Hub strategy?) Just as the iPod existed to enhance the Personal Computer + iTunes ecosystem, the Watch exists to enhance the iPhone ecosystem. The iPhone, even if tied to iTunes early on, was never merely an ecosystem enhancement—nor designed to be one, like the iPod or Apple Watch have been.

Naturally, we expect the Watch’s reliance on iPhones to change over time. LTE and GPS seem like inevitable Apple Watch additions, for example, as does a Watch-native App Store. With true third-party apps coming soon, reliance on the iPhone will diminish even more. But there’s one limitation that may always tie Apple Watches to iPhones: the screen. Absent new technology to overcome how limiting such a small screen can be, the Watch will continue to be a capable iPhone enhancement more than a standalone product. The iPod’s limitations—most prominently, no native way to get music on it—similarly tied it to computers.

An Unsubsidized Product

The iPhone spent its first year not subsidized in the traditional way by AT&T, reflecting Apple’s intent to turn the mobile market on its head. Clearly this stood in the way of sales, because Apple changed tack just a year later with the iPhone 3G and created a much lower entry price for customers.

There are no carriers to subsidize Apple Watch purchases, and it’s hard to imagine such a subsidy ever materializing. (Perhaps we’ll all have wrist-phones someday, but taking calls on an Apple Watch is a current feature and people aren’t going nuts about it.) Without a subsidy, Apple’s profit margin has to come directly from customer’s wallets instead of indirectly through carriers.

The iPod hoed that row, and did just fine. It did sell less total units than the iPhone and had a slower upgrade cycle, but it was a record-breaking product nevertheless.

A Category-Defining Product

It amazes me how easily people forget what MP3 players looked like before the iPod. They were clunky and difficult to use. They were full of deal-killing trade-offs between physical size, capacity, battery life, and user interfaces. Some of the products were especially weird as companies tried to find niches. The iPod eliminated the majority of those trade-offs for a higher, but manageable, price.

To be clear, the Apple Watch category is not just smartwatches. The correct category is wearables, and wearables right now, at the birth of the Apple Watch, are very similar to the early MP3-player market. Some are huge and multi-functional. Some are svelte and limited. Some are banking on unique features trying to find a niche.

Because of the Android ecosystem, the Apple Watch may never wholly dominate the market like the iPod did, but it will define the category. Of course, most of Apple’s products shape their categories. But the iPod defined the category. It organized and crystalized the MP3 market. Back then, people weren’t sure what to make of MP3 players and their future. The same is true of wearables, especially smartwatches, today.

What the Future of Apple Watch May Hold

If the Apple Watch story does end up similar to the iPod story, we may see the following things play out:

  • The Watch will grow the iPhone ecosystem by driving switchers. The famous iPod halo effect gave people a reason to consider a Mac where they never had before. (This was helped in no small part by Apple Stores, where people would go in to buy an iPod and walk out with a new computer.) This effect is not trivial. PC sales as a multiple of Mac sales have been in steady decline since the iPod. It might be a coincidence that Apple reported the highest ever level of Android switchers this quarter, but expect to see even more.
  • The Watch will define and dominate the wearables category. If the Watch moves like the iPod did, you’ll see niche players like FitBit disappear. You’ll see some large competitors play copycat on features and design, but they won’t reach comparable market- or profit-share. Eventually, all wearables will be measured by the Apple Watch, just as all competing music players were measured by the iPod.
  • The Watch will get differentiated in more than just size and build materials. At its peak, the iPod branched into everything from the Shuffle to the Classic to the Nano in order to fit multiple budgets and preferences. It’s reasonable to see Apple doing something similar with the Watch. If I were to guess, I think the fitness tracking will be a core feature across all Apple wearables. (Imagine in three years the inexpensive Apple Fit, where Apple reinvokes the old FitBit-style devices killed off by the Watch. People will laugh at it. When they do, remember the iPod Shuffle.) Being an ecosystem product that can rely on iPhones, the Watch gives Apple the flexibility for slimmer features to get lower price points.
  • The Watch will see slower customer upgrade cycles. In this regard, the Watch will be like everything Apple sells except for the iPhone. 2 iPods continued working for many years beyond their purchase date. (My son is using a sixth-gen Nano that’s now over five years old.) As a result, iPod sales flattened before the iPhone entered on the scene, mostly because Apple had saturated the market and upgrades weren’t moving quickly. Just like with the iPod, expect Watch buyers to be much slower upgrading than they are with their iPhones.
  • The Apple Watch could eventually work with Android phones. I’m not at all confident on last this point because the history lines up much less reliably. Mac market share at the launch of the iPod was a small fraction compared to iPhone market share today. Apple had to get the iPod out to Windows to have any kind of customer base for it. Obviously, there’s no comparison between the 25 million Mac users in 2002 and the nearly 500 million iPhone users today.  Ultimately, this decision will depend on whether Apple feels the Watch serves better as an exclusive feature of the iPhone ecosystem or that it needs to sell to a larger market, followed by a halo effect to drive switchers after they’ve bought an Apple Watch. 3

Certainly, the Apple Watch won’t follow the iPod in every detail. But if the Watch does approximate the iPod’s history, Apple should be incredibly happy. It will be a historic product, and people will forget what life was like before it launched.

Notes:

  1. Only the iPod Touch, which owes its DNA to the iPhone, could eventually operate entirely without a computer. But consumers see it essentially as a less capable iPhone, not a dramatically better iPod. Not coincidentally, it’s been a footnote to the iPhone’s success more than a dramatic culmination to the iPod line. ↩
  2. A recent example: when iPad sales began flattening, some writers declared failure, because they were expecting iPhone-like growth. Smarter analysis recognized that 1) the market for tablets is smaller, and 2) without subsidies, the upgrade cycle is longer. ↩
  3. Obviously, an Android-capable Apple Watch would mean a different Watch than we have now, including a native App Store. Such a feat, though, is not out of the question. ↩
Apple, Apple Watch, Choice, iPhone, Malcolm Gladwell, Platonic ideal, Product, Spaghetti sauce, TED

Apple Watch and the Platonic ideal

Malcolm Gladwell and Spaghetti Sauce

I’ve been thinking recently about the sheer range of Apple Watch options, and the departure this represents from Apple’s past product strategy of a single SKU at launch for a new product. As I did so, I was reminded of several TED talks I’ve watched over the years on the subject of choices, and I went back and re-watched some of them. One in particular that seems very relevant to this topic is Malcolm Gladwell’s 2004 talk, Choice, happiness and spaghetti sauce. I’ve embedded it below in case you want to watch the whole thing – there’s also a transcript on the TED site in case you’d prefer to read the thing. I’m a Gladwell fan, generally speaking, but I know not everyone is. However, this talk is a good example of his ability to tell a good story around an ostensibly uninteresting topic, and in the process draw out some key messages.

This talk, if you haven’t seen it before, focuses on the work of a man named Howard Moskowitz, a psychophysicist (don’t know what that is? Neither does Gladwell). Moskowitz’s chief contribution to the world, as Gladwell sees it, was the invention of a concept called horizontal segmentation as applied to the food industry. The key idea here can be summed up by saying that he brought variety to product lines that had hitherto only featured a single product. The mistake, Moskowitz and Gladwell argue, that the food industry had made was to assume that there was a “Platonic dish” – a sort of ideal version of every food product that would be universally accepted as the best possible version of that thing. In reality, of course, people have different tastes, and one person’s ideal is another person’s nightmare, so you need several versions of your product to appeal to different segments. Hence the mention of spaghetti sauce in the title of the talk: Moskowitz was the one who convinced the owners of the Prego brand to diversify their offering, and specifically to introduce an extra chunky version, which became a huge success.

36 flavors of Ragu, 38 flavors of Apple Watch?

So how does all this relate to the Apple Watch? Well, what struck me as I thought about all this is that Apple has very much taken the Platonic ideal approach to its most important device, the iPhone. For seven years, there was only a single new model each year, which you might argue represented Apple’s conception of the ideal phone at that point in time. Next year, that ideal would have moved on a little, but there was still only one. A year and a half ago, Apple introduced the iPhone 5C as an alternative, but really this was just a revamped version of the previous year’s phone, and this past year Apple introduced a different spin, with two roughly equally capable phones in different sizes. Though it’s diversified a tiny bit, it’s largely stuck with the Platonic ideal approach to phones.

But now we come to watches, and the Apple Watch. One way of looking at this is that Apple has not just one Platonic ideal of a watch, but many different versions. In fact, there are 38 versions listed on Apple’s Watch gallery page, which coincidentally is quite similar to the 36 versions of Ragu Gladwell cites in his talk.  This reflects the fact that, when you move from a purely technology product to a an accessory or piece of jewelry, personal taste becomes much more important. As such, the horizontal segmentation approach comes into play, and you suddenly get an explosion of options to meet people’s different tastes and preferences (as well as body size and income).

However, I think the right way to look at all this is that there’s still just one Platonic ideal when it comes to the Watch – in terms of its functionality. The $17,000 Edition contains exactly the same technology as the $349 Sport, and it’s really just the outward appearance that’s different. In that sense, the Watch is a lot more like the iPhone than it is like the MacBook line, where there is a real difference in functionality/capability between the new MacBook, say, and the various flavors of MacBook Air and Pro. Of course, with the iPhone there are also color variations and so on to suit personal tastes, but the basic form factor remains unchanged, so no-one talks about three different “versions” of the iPhone in the same way that they’re talking about 38 versions of the Watch.

Everyone else treats devices like food

Despite the fact that Apple has largely stuck with the Platonic ideal approach for its devices, others have a different strategy. Samsung might well be the Ragu of the devices world, with many different variants designed to appeal to various market segments. Or perhaps a better analogy is the spaghetti rather than the sauce, being thrown against the wall to see whether it sticks. Apple’s approach is focused, but also limiting – I’ve often said that Apple is characterized by the limits it puts around its own addressable market. However, there are significant downsides to the opposite approach too, and not just in terms of the financial cost of a lack of scale around a single product. Another TED talk on choice comes from Sheena Iyengar, and it talks about the difficulty of making choices when presented with a myriad of options:

Interestingly, part of her talk focuses on strategies for making a plethora of choices less overwhelming, among which are categorization and concretization: i.e. divide a large number of options into broad categories, and make the category names (and therefore the differences between them) meaningful. Take a look at Apple’s 38 options and you quickly see that they’ve done both: three broad categories, with names that mean something: Watch as the broad middle category, Sport as a low-end option that could be worn while exercising, and Edition using a common descriptor associated with luxury goods. So even where Apple does offer lots of choice, it’s clear that it understands the psychological impact and has optimized for minimizing the negative impact while helping consumers to choose what’s right for them.

Android, Apple, Google, iPhone, Quick Thoughts, Smart home

Quick thoughts: Another way to think about Nest

1 Comment

A couple of good blog posts from other analysts this morning triggered a thought in my mind about Nest.

The first of the two blog posts is from my fellow Techpinions contributor Ben Bajarin. I recommend reading the whole thing, but here’s the key thought:

Apple’s customers are higher value customers and their growing installed base means they are amassing one of the largest, if not the largest, installed base of premium customers on the planet. This observation has some striking implications…

He goes on to talk about two of the implications, and I think the insight there in  particular is great. One of them is the impact this has on the competition, among which of course we find Google, which owns the mobile operating system that’s mopping up the vast majority of the non-Apple customers.

Something else I read this morning (a post from Benedict Evans that’s really about something completely different) prompted me to think about this in the context of Google’s Nest acquisition. I’ve been thinking about Nest primarily as Google’s strategic play in the smart home space, and as the hub and vehicle for the rest of what Google will do in the home. And I think that may well be in large part what that Nest acquisition is about.

But thinking about Nest in the context of Ben Bajarin’s piece made me see Nest in a different way. Think about Nest for a minute: its characteristics as a product, the people it’s likely to attract, even the people who work there. This is a very Apple-like product, made by a former Apple executive, and I’ve always said that Nest was a much better fit at Apple than at Google. It’s even sold in Apple stores.

What if Nest is at least in part about capturing those very lucrative and attractive Apple customers without having to convert them to Android? What if what Google is building with Nest is at least in part a concession that Android and phones based on Android aren’t likely to attract these customers, but by playing in a completely different space – the smart home – Google can in fact attract those customers? And once it has them there, perhaps convert them to other aspects of the Google ecosystem, which after all is where Google really makes its money? There’s no particular reason why Google needs to have all its customers on Android anymore – it’s served its function of preventing Microsoft and Apple from dominating the mobile world. And of course, there’s been lots of talk about even Google’s services making more money on iPhones than on Android. What if Google could establish a different beachhead in devices that’s not dependent on first converting people to Android? What’s fascinating about Nest is that it’s about the only recent Google initiative that’s not about reinforcing Android as a platform – Android Wear, Android Auto and Android TV are all about extending Android specifically into new domains rather than simply spreading Google services into new domains.

I’ve no idea if this was actually part of the thinking behind the acquisition of Nest – most likely, like other acquisitions, it wasn’t about a single strategic objective but rather several. But it would certainly be an interesting response to the emerging reality that Apple has captured the vast majority of the most valuable customers within its ecosystem, and trying to win them back through phones seems to be a losing strategy.

The big downside to this, of course, is that Google has very deliberately kept Nest somewhat at arm’s length from the rest of the company (a point Benedict raised in his post). But this strategy only works if Google continues to build links between the two, as it’s already begun to do with Google Now integration. With Tony Fadell now overseeing Glass as well, there’s obviously even more linkage between Google proper and the Nest team, and it’s another sign that Fadell might be asked to oversee more Google devices and pursue the same strategy.

Apple, ASPs, Earnings, iPad, iPhone, iPhone 6, iPhone 6 Plus, Q4 2014

Thoughts on Apple’s Q4 2014 earnings

6 Comments

Notes: this is part of a series on major tech companies’ Q4 2014 earnings. All past earnings posts can be seen here, and all earnings posts for Q4 2014 can be seen here. For the sake of easy comparisons and transparency, I always use calendar quarters in my analysis. Hence, Q4 2014 in this and every post on this blog means the quarter ending December 2014, even though some companies (Apple included) have fiscal years that end at other times of the year. 

A blowout quarter

The hardest posts to write are often the ones where it’s utterly uncontroversial that the results were astonishingly good, and that was definitely the case with Apple’s record-breaking earnings today. So instead of hashing over the same stuff as everyone else is, I’m going to try to pull out a few possibly overlooked data points. Apple changed its reporting structure in a couple of ways this past quarter, and that gave us one or two new insights while also sadly burying some data points and obscuring others. I’m going to be working through the revised numbers over the next 24 hours or so, and will be issuing my quarterly deck for subscribers once the 10-Q report is out, as that’ll fill in some gaps in the current data. I may well do another post on the earnings at that point too.

ASPs

I tweeted about the iPhone ASPs as follows shortly after the numbers came out:

In some ways, that about sums it up. But of course that chart shows two sets of ASPs, going in dramatically different directions (as I indicated they would in my Techpinions earnings preview post on Monday):

  • iPhone ASPs rose in Q3, but even more dramatically in Q4, largely thanks to two things: the iPhone 6 Plus, which raised the base price of the top-end iPhone model by $100, and the introduction of a 128GB model, which raised the top-end price as well. The combination of these two conspired to lift ASPs $50 above last year’s number.
  • iPad ASPs continue to fall, on a fairly predictable slope, over the last few quarters, enabled conversely by a lowering of the entry price for iPads.

The two charts below show the pricing moves behind those ASP trends:

iPad retail prices iPhone retail pricesAs you can see, the lowest price for iPhones has remained very stable for four years, while the highest possible price has risen $200 since 2010. But the iPad’s lowest selling price has fallen from $500 to $250 during that same period, while the highest price has barely changed. Given the lack of subsidies on the iPad, lower full retail prices translate directly to what consumers actually pay, whereas higher prices on the iPhone side are masked by carrier subsidies and/or installment plans in many cases. All this helps to explain why the iPhone ASP keeps rising while the iPad ASP keeps falling.

Retail’s varying importance in different geographies

Apple giveth and Apple taketh away when it comes to financial reporting. This quarter, Apple took away all visibility over the current quarter’s retail finances, as it rolled retail reporting into regional reporting. However, in so doing, it provided a wonderful insight into past retail performance on a region-by-region basis, something we’ve never had before. I’m curious to see whether it provides any retail-related financials in its 10-Q, but for now we’ll have to make do with this interesting data set. I’ve taken that historical data and generated the following chart, which shows retail revenues as a percentage of total revenues on a regional basis:

Retail as percent of revenuesThere’s obviously a huge variability by region, and this reflects a factor I’ve documented in the past. Here’s the old-style revenue split by region vs. the number of retail stores by region, which highlights the regions which have fewer retail stores than their revenue contribution would suggest:

Retail stores vs revenueAs you can see, the regions with the smallest percentage of revenue from retail are the same as those with the smallest number of retail stores relative to their overall revenue contribution, so this isn’t a big surprise. Japan comes bottom on both metrics. The next question is which of these two factors is the cause and which is the effect, given that there’s clearly a correlation. I suspect there’s some of each, but it’s also clear why Apple is investing so heavily in retail stores in China. It’s also clear why Apple is adding so many more retail stores outside the US than inside it (though that trend reversed a little in the last two quarters).

Growth remarkably diversified by region

One last data point: Apple’s growth this past quarter was amazingly widespread by region. Over the last five quarters Apple’s gone from pretty low overall growth back to roaring growth on a year over year basis. In some of those past quarters, one or two regions carried much of the overall growth, whether Japan for a couple of quarters last year, or China during almost all quarters. But this quarter was notable for just how broad-based that growth was by region, with every region but Japan making a pretty meaningful contribution to overall growth (and Japan suffering from tough comparisons with a very strong quarter a year ago rather than any poor underlying performance):

Year on year rev growth by regionApple provided some numbers around this on the earnings call, citing 22% revenue growth in developed countries, 58% revenue growth in emerging markets as a whole, but 70% revenue growth in China year on year. Unit shipments grew by an astonishing amount in the BRIC countries as a while too – I’m not 100% sure of the number but I believe it was 90%.

Divergent fortunes for Apple and other major phone makers

As I said, I hope to have more top-line analysis later on, but for now I’ll end with this thought: the contrast between Apple’s and most other phone makers’ numbers couldn’t be starker, perhaps most dramatically as it relates to Samsung: record-high shipments at record-high prices, generating record-high profits, just as other vendors are seeing ASPs plunge, shipments stall and and margins squeezed. There’s been so much skepticism for so many years about Apple’s ability to continue to make its unique business model work over the long term, and Apple continues to prove them wrong. I believe with the launch of the Apple Watch in April, HomeKit devices finally starting to ship in significant numbers in the coming months, CarPlay, Apple Pay and who knows what else that might arrive in 2015, Apple is simply reinforcing what’s becoming an incredibly strong, sticky, and growing ecosystem.

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.

 

Apple, Evolution, iPad, iPhone, Video

Further thoughts on iPad sales

On the morning of Apple’s latest iPad event, I wanted to quickly revisit the topic of iPad sales and share an idea that’s come up again and again as I’ve discussed the topic with other analysts and with reporters in the runup to today’s event. I’ve posted the video below to YouTube as a way of illustrating this idea visually, and the text below is largely the transcript of the video, with some of the same images used to illustrate key points. I’d love your feedback on the video format and on the blog post, as always. Feel free to connect with me on Twitter at @jandawson or to email me at jan@jackdawresearch.com.

(you may want to watch the video on YouTube.com to see it bigger, and whether you watch it here or there I suggest switching to the highest available resolution.)

I’ve done two blog posts recently which made use of some version of this diagram:

Apple product evolution

The first looked at the Apple Watch as the latest in a long line of increasingly mobile and personal computers Apple has released since the first Apple computers. The second examined the question of how many computers we actually need, and the tension that exists when we end up purchasing several of them to accomplish the same set of tasks in slightly different ways.

I wanted to return to this diagram to illustrate an idea that’s been percolating in my mind since I first drew this diagram, and that’s the iPad’s place in this evolution.

One way to see this diagram is as the technological equivalent of this hackneyed picture of human evolution:

Evolution-560

But of course there’s a problem with that. If you play back the Apple version of this evolution there’s a historical quirk – the iPad didn’t arrive at its logical place in the evolutionary chain: it was late:

iPad late

Though Apple started work on the iPad before the iPhone, it came to shelve that project and focus on the iPhone instead, only returning to the iPad later. As such, in a historical quirk that would have been impossible in a true evolutionary progression, the iPhone’s logical progenitor ended up coming later in the evolutionary chain. Steve Jobs explicitly recognized this relationship in introducing the iPad by placing it between the MacBook and the iPhone in Apple’s product lineup.

The problem with that approach is that it’s created a strange set of expectations for what the iPad should do, both as a device to be used and as a member of Apple’s product portfolio. Had it launched first, with the iPhone launching later, it would have been natural to assume that the iPhone would eventually cannibalize it much as it did the iPod. But because the iPad launched after the iPhone, it created this unnatural expectation that it would complement the iPhone and perhaps even exceed its success.

Only when you see the iPad in its natural place in the evolution of Apple products – despite the actual timing – does it start to become clear where the iPad sits and what its future might hold. The iPhone – and not the iPad – is the culmination of this evolution, with the Apple Watch the next evolutionary step (with the potential eventually to become the pinnacle of this evolutionary process, in time replacing the iPhone).

What does this mean in terms of iPad sales? Well, there are two big questions we don’t know the answer to with iPad sales. The first has been well discussed, and was the topic of one of my earlier blog posts, and that’s replacement cycles. With a product that’s just four years old, and which didn’t start to sell in really large numbers until 2011, it’s very hard to calculate what those might be. But it’s easy to imagine that they’re longer than iPhone replacement cycles, perhaps as long as three or four years. As such, I’ve argued that we might see a major upgrade cycle over the next couple of years as that first big wave of iPad purchases in 2011 ages to the point where it needs to be replaced.

The other big question, though, which hasn’t been discussed nearly as much, is the degree to which some iPads won’t be replaced at all, because their owners stop using them entirely. Because of the historical evolution we’ve discussed, and especially because of the launch of larger and larger smartphones, now including the iPhone 6 Plus from Apple itself, there will be many people who no longer feel the need for an iPad at all, especially the only slightly larger iPad Mini. So the real question splits into three parts: firstly, how many of the iPads Apple has sold are still in use? Secondly, what percentage of those will be upgraded or replaced at all? And thirdly, how quickly will those upgrades happen following the initial purchase?

All of which brings us to Apple’s event today, at which it will launch refreshed iPads. Apple’s job with regard to the iPad during this event is threefold: give the many existing owners a reason to upgrade, give people who haven’t yet tried iPad a reason to buy their first, and give people who may have abandoned an earlier version of the iPad a reason to give it another try. The first of these is in some ways the easiest – the new features (Touch ID, possibly a higher resolution screen) and the requisite spec bumps will increase the gap in performance between the iPads 2 and 3 many people own and the latest device even further, making an upgrade more compelling. And Apple has actually been doing a good job bringing more and more converts to the iPad too, with around 50-70% of buyers being either new to iPads or to tablets as a whole in the last few quarters. It’s the third task that’s the toughest, and I wonder to what extent Apple should even be trying to convince former iPad users to come back. If an iPhone 6 Plus is the right device, and obviates the need for an iPad, should Apple merely embrace the survival of the fittest device here?

This, in my mind, is the most interesting aspect of today’s event, because it will show us how Apple views the iPad in a product portfolio that now includes the forthcoming Apple Watch as well as the much larger iPhones. Again, had the iPad launched before the iPhone as befits its place in the evolutionary chain, we wouldn’t be marveling at the stagnant and even falling sales over the last year or so. It’s only because of the quirk of timing of the original iPhone and iPad launches that we’re even wondering about this at all. I’m looking forward to seeing whether Apple sees it that way too.

Apple, iPhone, iPhone 6, iPhone 6 Plus, Reviews

iPhone 6 and 6 Plus thoughts

As I’ve mentioned before, I don’t do “reviews” of devices as such, because I think others who focus on those full time do a better job, and I’ll add little value. But I do occasionally post some thoughts on the devices I spend time with, and I thought I’d do that with the iPhone 6 and iPhone 6 Plus which I’ve been using since they came out, thanks to two devices on loan from Apple.

First off, I get review units of lots of devices, including many Android devices, and so I’m already very accustomed to the larger sizes, unlike many regular iPhone users (several of my family members and friends included). I noted on Twitter that John Gruber’s response as detailed in his review was probably much closer to those of many regular iPhone users than those of most reviewers. As such, I was rather looking forward to the larger sizes, since the iPhone 5S I use when not testing something else was coming to feel very small in comparison. However, I’ve never been a fan of the really big devices – those with over 5″ screens, so I was curious to see how I’d respond to the 6 Plus. I first spent a week with the iPhone 6, and then a week with the iPhone 6 Plus, and have been back on the iPhone 6 since then.

iPhone 6 – what the iPhone was meant to be

For me, the iPhone 6 is what the iPhone was always meant to be – it’s the perfect instantiation of iOS on a smartphone. Just the right size, with a really great weight and thinness, which makes it fit wonderfully in the hand. I immediately liked it better than all the other iPhones I’ve tried. I’d been using the first and second generation Moto X devices over the previous few weeks, and had really enjoyed both, though the new version seemed a little large for my taste, and the iPhone 6 does a wonderful job of providing a great screen size without an over-large device, a great in-between experience between the two Moto X devices.

iPhone 6 Plus – great too, just not for me

I forced myself to use the iPhone 6 Plus for a week as well. It is enormously bigger than the 6, and feels so in every way – in your hand, in your pocket, wherever. That makes it fantastic for certain things – I found myself willing to read things I normally would have turned to an iPad for, and playing games optimized for the larger screen was great fun too (I discovered several fun new ones including the Box Trolls movie tie-in game, Beach Buggy Racing and FIFA 15).  Interestingly, my wife, who’s currently using an iPhone 5 and has never liked any of the larger Android phones I’ve shown her, immediately thought this might be a good fit for her. Her reasoning was that she runs her whole life (and our kids’ lives) from her phone most of the time, rarely being in a situation where she can use her laptop, so the bigger screen would make that easier.

As for me, I never did completely get used to the larger sized device, and could never get quite comfortable with it. It is better than most of the Androids I’ve used in this size range, in that it’s narrower, so it’s easier to get your hand around. But it’s not for me. I found taking pictures with it one-handed particularly difficult – I just couldn’t get the device to balance properly when using it in that way, something I don’t have a problem with on the iPhone 6. I was glad to go back to the iPhone 6 after my week with the 6 Plus.

But all this just highlights something that’s never been the case before with Apple’s iPhone line: it’s always been obvious which device you should get (and which I should recommend) with the iPhones before, but it’s not obvious anymore. The iPhone 6 Plus is absolutely right for some people, including apparently my wife, while the iPhone 6 is a better fit for others. Just as the iPad Air and iPad Mini are better fits for different people, and just as has always been the case with MacBooks and so on too.

Software

I’ve been running iOS 8 since it first became available to developers on my iPhone 5S, so the software here wasn’t that new. But by the time it was released on the iPhone 6es, I found it to be relatively bug-free, with only occasional issues, mostly triggered by apps that hadn’t been upgraded rather than the OS itself. I’ve enjoyed some of the enhancements and upgrades, including improvements to Siri, Spotlight search and so on. I haven’t yet made use of some of the Continuity and Handoff features although they are working on some iPads also running iOS 8. Calls and messages come through on those, but I simply don’t find myself using those features at all. I’ve been running Yosemite on a Mac Pro for a while, but it doesn’t have Bluetooth LE and so doesn’t support Handoff, and I’m looking forward to trying Handoff on a MacBook Air that does support BLE when Yosemite ships.

Photography

One of the areas where the iPhone has always led is photography, and I’ve found that the improvements here keep the iPhone above and beyond every other device I’ve tested in this department. I haven’t spent inordinate amounts of time deliberately testing the camera but I do take quite a few pictures in the normal course of events. A gallery of photos from the two devices (most of them raw, with a few edited in Snapseed and/or Instagram) can be found on my Flickr page here. I live in Utah, which is a picturesque place (indeed, Apple shot the test footage for the iPhone 6 launch there), so that helps!

Bendgate

One of the first questions almost everyone has asked when they see or hear that I have the iPhone 6 Plus is “does it bend?” This has been true for friends and family members, the teenagers I work with at Church, and a workman who was installing something at our new house this week. “Bendgate” certainly seems to have captured the popular attention and has unfortunately become one of the first things people think about when confronted with the 6 Plus. I doubt it has stopped many people from buying one, but it’s still striking how often it comes up. For my own part, I haven’t seen any sort of bending with the 6 Plus review unit I have. I haven’t tried extremely hard to bend it, but it was in a front jeans pocket for much of the week I tested it, and it simply wasn’t an issue. I suspect it won’t be for all but the unluckiest users either.

Conclusions

In my mind, the iPhone remains the phone to beat. I test lots of devices, and I really enjoy the better Android phones too (I particularly enjoyed the Moto X I tried recently). But the iPhone is my personal device of choice, and the one I always come back to. The one sacrifice lately has been screen size, and one of my other pet peeves (the lack of a swiping keyboard) has also been resolved with iOS 8’s third-party keyboard support. Interestingly, I haven’t used the swiping keyboards much – I’ve found them too error-prone, and found the built-in predictive keyboard to be pretty good. SwiftKey has just updated its app, and it seems better now, so I may try it some more. But overall, the iPhone 6 and 6 Plus just reinforce the iPhone’s place in my mind as the top phone, and especially when it comes to the camera. There really isn’t anything meaningful you can do with an Android phone now that you can’t do on the iPhone 6 or 6 Plus, and that’s really saying something.

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 →