Friday, 29 February 2008

iPhone launch in Ireland indicates continuation of high-margin strategy

MacPredictions has been arguing for some time that Apple's high margin on iPhone is limiting its potential market penetration, and that Apple will learn from experiences in the UK, and price the iPhone more keenly as it launches in other markets.

It appears that we were a bit off on that prediction. Ireland's Independent has already raised concerns about the high pricing of the Irish iPhone, which is even more expensive that the UK version. So it seems that Apple are continuing to favour high margins over high volume - at least for the time being. The company seems unconcerned by the harm that this kind of media attention could do to its brand. 

Given Apple's recent response to the European Commission's intervention on iTunes pricing, we wonder whether the same principle applies to mobile handsets as well. Time will tell.

Thursday, 28 February 2008

More clues on emerging themes from Apple

Two bits of news yesterday which seem to reinforce what MacPredictions has been arguing for the past few weeks. Firstly, AppleInsider reports on a talk from Steve Cook, Apple's chief operating officer, at the Goldman Sachs Investment Symposium. According to AppleInsider, Cook referred to Apple's relationship with AT&T saying, "we're not married to any business model. What we're married to is shipping the best phones in the world." Implying that Apple might be open to offering contract-free or "SIM-free" iPhones in the future.

The second clue is MacNN reporting on Apple's new iPod Touch TV ad, which premiered on US prime time TV last night. Whilst this is hardly earth-shattering news, it is indicative of Apple's continuing redirection in focus towards the Touch.

If MacPredictions was working for Apple's marketing team, we'd be pushing for the unification of the iPod Touch and iPhone lines under a single moniker, with a premium sim-free iPhone option, a discounted network-locked iPhone, and an affordable phone-free option (the Touch). Apple could then run ads promoting the entire line, and avoid the confusion of marketing iPod Touch against iPhone. But what to call it... hmmm...

Wednesday, 27 February 2008

SDK = Strangely Dull Keynote

It’s ironic that whilst Apple normally uses its invitation teasers to build excitement and speculation in the run up to a Stevenote, today’s SDK invitation is designed to do the opposite. First, it makes clear that the focus will be on enterprise software – which means corporate messaging, VPNs and so on. Hardly exciting fodder for most iPhone fans. Second, the roadmap clearly shows an SDK announcement followed by a software update. Indeed, the whole use of the term roadmap seems to be in the special “peace process” sense, meaning don’t get your hopes up that anything will happen anytime soon.

So it seems likely that all we’ll get next week is a demo of forthcoming enterprise technology (e.g. Blackberry/Notes/Exchange/VPN support), and a kit for developers with a promise of 3rd party software sales via iTunes this summer. Ho-hum. Nothing to see here, move along!

Tuesday, 26 February 2008

New MacBook Pro and MacBook launched today

The new MacBook Pro and MacBook updates have just been posted on the Apple Store. Sadly no new enclosure design - just faster processors for the MacBooks and more powerful graphics processors and Multi-Touch trackpads for the Pros.

This makes our prediction of new MacBook Pro enclosures following the design style of MacBook Air less likely, at least for the time being. We still think it's probable by the end of the year.

Sunday, 24 February 2008

Apple Store Watch – iPod Touch is hot, iPhone is not


Here’s a geeky idea for an occasional feature on MacPredictions. This is a rough floor layout of the Apple Store on Regent Street, London UK (as of 23/02/08). You can tell the products that Apple wants to push, since they’re positioned towards the front of the store (indicated in red). You can see the products that customers are interested, based on the relative crowds in each product area (blue circles). There’s always a bias towards Macs, since many people just mill around the store checking their e-mail. Nonetheless, it’s clear right now that Apple’s pushing the Macbook Air, and shoppers seem interested. Apple’s also pushing the iPod Touch in preference to the iPhone, which is now bizarrely tucked at the back of the store. It seems both Apple and shoppers are in agreement that iPod Touch is hotter than iPhone right now. See previous post for a possible solution!

Could Apple resort to a contract-free iPhone?

Recent press reports indicate that Apple has three problems with its iPhone strategy:All three problems arise from one root cause – the networks. Sales are presumably lower than expected because the barrier imposed by requiring users to switch networks and sign new, expensive contracts is proving to be tougher to overcome than Apple had hoped. Income from network revenue-shares is lower than anticipated because of the large minority of unlocked handsets. The global rollout is slower than expected because Apple appears unable to extract the same revenue-share terms from other networks that they negotiated with AT&T.

Ironically, the deal that Apple struck with AT&T, which seemed so favourable to Apple at the time, is turning out to be more in the network’s favour. Whilst Apple succeeded in extracting an unprecedented agreement to share the networks’ revenue, this was at the costs of exclusivity to the network. And it’s precisely this exclusivity that is now limiting Apple’s options to promote sales. From AT&T’s perspective, however, the deal presumably still makes sense, because it’s helping to attract new customers to the network.

However, given that the success of iPhone is mission critical to Apple, Mac Predictions anticipates that the company will be willing to pay a hefty price to renegotiate with the networks. The result could be a new contract-free iPhone, sold at a small premium, alongside the locked iPhone.

Friday, 22 February 2008

Steve Jobs' February 2008 SDK Keynote [Part 2]

Time is running out for Apple to organize a February keynote - but since they haven't announced a delay in the SDK, we're assuming invitations will go out on Monday for an event on Thursday or Friday next week. We can but hope! In the meantime - enjoy this fantasy transcript, a continuation from the previous post.

Of course, Apple has got a lot of experience with office productivity software. Our iWork package has been hugely popular on the Mac. So it’s simple, right? We just port iWork to the iPhone… Wrong! Because it turns out that word processing on a mobile device is an entirely different kind of application to word processing on a desktop. And you can’t make a business presentation on a mobile phone screen – even a beautiful high-density widescreen like the one we put in the iPhone.

So what do people want to do with documents, spreadsheets and presentations on their phone? Well the main thing is that they want to view their documents – and you already can do that on an iPhone because we’ve got this great feature built right into our Mail application that let’s you do just that. It’s built on the same rock-solid technology we use for QuickLook in Leopard. And for many users, that’s all they need. Which is great.

But then, what if I want to do more than read the document? Maybe I’ve got ten minutes to spare on my way to a meeting, and so I take the opportunity to read through a document. But I have changes that I want to share with my colleagues, and I want to track those changes. It’s amazing, but as far as we know, there is no mobile software out there right now that let’s you track changes on Word documents. Now we couldn’t believe that, so we spent a lot of time looking, but we really couldn’t find any.

The next thing I might want to do is to make some comments on that document. Again, there isn’t much mobile software out there that allows you to do this, and there’s certainly no mobile software out there that makes it easy. So that’s exactly what we’ve done. We started from scratch to build a whole new kind of application – a mobile word processor that makes it really easy to read through documents, to track changes and to make comments. And I’d like to show it to you now. [Demo]

…so that’s Pages. But what about presentations?

We looked at the mobile presentation software out there, and a lot of it seems to be focused on letting you edit presentations. But we don’t think that’s what people want to do. Working with graphics isn’t easy on a handheld device. We just don’t think that people want to design this stuff on their phones. So what do people want to do with presentations on their phones? Simple – they want to present them. And there’s no slicker way of making a presentation than with Keynote.

So, we launched our Keynote application back in 2003, and the reaction has been huge. You see Keynote does the same thing as other presentation packages out there [show’s icon of PowerPoint on screen]. The difference is that Keynote does it a whole lot better. It really takes advantage of the amazing graphics capabilities in Mac OS X to deliver incredibly slick and impactful presentations. Well, the great news is that the same graphics technologies that Mac OS X ships with are also built right into iPhone. So we can deliver almost all of the amazing visual impact of Keynote from something as small and compact as an iPhone. It’s truly amazing. Of course, you’re not limited to viewing your presentations on the iPhone’s built in screen. You can plug in our Apple Component AV cable, and hook it right up to your TV. And today, we’re introducing a new iPhone compatible VGA cable, so that you can hook up your iPhone to any VGA display – it means you can leave you Mac behind, and still take your Keynote presentations with you on the road. And the great thing is that your iPhone turns into this wonderful remote. You see, we’ve made our VGA cable really thin and flexible, so that it doesn’t get in the way when you’re presenting. On your iPhone screen you have a big back and next button… you have speaker notes… you can even check out the next or previous slides. I don’t know any other presentation remote that lets you do all that.

So Keynote on iPhone really is a great new way to take presentations with you on the road, and you can even use it with PowerPoint presentations – you’ll just have to do without Keynote’s amazing graphics.

Then, of course, there’s Numbers. Now, not everybody loves number crunching – I guess only an accountant can really love a spreadsheet. But of course there are numbers that we all like to keep track of [shows chart tracking iTunes sales on an iPhone screen, to laughs from the audience]. Anyone in business has numbers that they need to have at their fingertips, and iWork Touch does exactly that. It literally puts your numbers at your fingers. You see it turns out that our MultiTouch interface is really great for working with spreadsheets. Scrolling across big spreadsheets is a breeze – and if you double tap on a cell, you can adjust numeric values with this neat slider, without even having to use the keyboard. Plus of course, there are all these great 3D graphs and charts. So that’s Numbers on iPhone.

So we have these three great applications. What do they all have in common? Well they’re all redesigned from the ground up as mobile applications – providing you with the stuff you need to carry on doing your job when you’re on the road. They all take advantage of our amazing MultiTouch user interface. They all work with our hugely popular iWork suite for Mac, and of course, Microsoft Office as well, including Office 2007 & 2008 for Mac.

So as you can see – with our new iWork Touch suite – Pages, Keynote and Numbers, we’ve re-invented mobile business software. And after today, I don’t think anyone will want to settle for anything less. But there are a couple more thing that all these applications need. [Copy & Paste appears in words on screen to another round of applause]. In fact it’s not just for iWork – as we’re getting more 3rd party apps, we’re going to need copy and paste system-wide. But how?

Well we already have this great magnifying glass that helps you to position your insertion point. Well now we’ve made it so that if you hold down one finger as you move the magnifying glass, it let’s you highlight text. They you can simply tap the highlighted text to bring up a context menu that gives you some options – you can choose cut; copy; make note; send as e-mail or send as text. Then when you want to paste, you just use the magnifying glass again to position the insertion point, and then tap the insertion point to paste the text. It’s that simple. Let me show you [Demo].

So that’s how we’ve done copy and paste. And we know a lot of users have been wanting this for a while now. Well it’s so simple to use, we think you’re going to find it was worth the wait.

But there is one more thing that we’re going to need for all these amazing new apps. On the Mac, we call if the “Finder” [Finder icon appears on screen]. It’s what we use to browse documents. And in Leopard, we introduced CoverFlow, so you can browser through these gorgeous large thumbnails of your documents. We’ll we thought – wouldn’t it be great to have that on your iPhone too, so that you can browse through documents using CoverFlow, just like you browse through your music. It’s amazing. This is a real, desktop class file browser, right here on your iPhone. And it couldn’t be simpler to use. Here’s how it works. We’ve got this new icon in iTunes, called “Documents” – it appears under your iPhone icon. You can either drag your documents straight to it, or you can set up a folder on your Mac or Windows PC to sync right onto your iPhone. But that’s not the only way you can send and receive files. You can…
  • Sync with a folder on your Mac or PC via iTunes
  • Save attachments from e-mail on iPhone
  • Send and Receive files via Bluetooth from any compatible device
  • .Mac integration, so you can access you iDisk directly from your iPhone via WiFi
Of course, you’ve got plenty of storage – whether you have the 8GB iPhone, or the new 16GB model that we launched last month. This is way more built-in storage than most smart phones come with, so there’s no need to fiddle around with tiny removable media – everything fits neatly into your iPhone.

So as we promised at the end of last year, today we’re launching our SDK. Although we’re admittedly pushing it a little for “February” – fortunately this year is a leap year! [Laughs from audience]. But it’s actually a whole lot more than just an SDK that we’re introducing today:
  • iPhone Games
  • Buy Software from iTunes Store
  • Finder for iPhone with CoverFlow
  • Bluetooth File Exchange
  • Copy and Paste
  • New iPhone VGA Cable support
We already had the world’s most advanced mobile wireless platform – now we’re taking the next leap – we’re calling it “iPhone 2.0 Software Update”. It’s available today. It’s free of charge to our iPhone customers, and it’s also free to all our iPod Touch customers who have purchased the January Software Update. [More applause]. Plus, once you've installed the update, you can buy iWork Touch from the iTunes store for $79.

Well, that’s all we have for you today – we’ve been working really hard on this over the past twelve months. The entire team have been putting in a monumental effort to make this update something truly special, and I think you’ll agree, they’ve done a fantastic job. Thank you.

Wednesday, 20 February 2008

Steve Jobs' February 2008 SDK Keynote

The following is just creative writing for fun - it is entirely speculation based upon publicly available information.

So we have this fantastic new SDK for our touch platform. It means we can build more great apps. But what apps should we build? After all, the iPhone and iPod Touch already do so much.

Well the first question we asked was “do people really want to buy more apps?” It seems like most smart phone users decide to just stick with the software their phone comes with. And that’s no surprise when you see what’s involved in buying and installing software on most smart phones. I don’t want to name any names, but you know what I mean. It’s not a great experience today.

But then in January, we released a software update for our iPod Touch customers, and it turns out that the response has been huge. We were absolutely staggered by the numbers on this – in the first week after it was released, over XX% of iPod Touch owners had bought the upgrade. That’s an amazing number.

So what does this tell us? It tells us that people will buy software for their mobile devices, as long as we get three things right:
  • Make it easy – buying mobile software right now is just too hard
  • Make it good – let’s be honest, the downloadable mobile software on the market today just isn’t great
  • Make it affordable – people don’t want to pay desktop prices for mobile software
So if people want to buy mobile software, what kind of software do they want to buy? Well let’s take a look at what kinds of software you get on a desktop Mac or PC:

  • Multimedia already have the iPod built in
  • Calendars already have a great calendar
  • Communication already have world’s best mobile phone and desktop class e-mail
  • Creative Professionals people don’t want to design or make music on their mobile
  • Utilities don’t need utilities, iPhone works beautifully just as it is
  • Education phones are not really for the classroom
  • Games
  • Business Productivity

That just leaves two areas – games and business. Well we’ve been selling games on our classic iPods for years now, and it turns out they’re really popular. But not with hard-core gamers. You know, we don’t have people playing World of Warcraft on their iPods. No. These games are different – they’re for mere mortals, and they’re fun. And one of our biggest games on the 5th generation iPod is from a company called PopCap, and it’s called Zuma. Well we gave PopCap an advanced copy of our SDK, and they’ve been busily working on developing some great games of our MultiTouch devices, including Zuma. These games are not simple ports – PopCap have really got into the whole touch interface thing, and it turns out that Zuma is even better with a MultiTouch display. And at this point, I’m delighted to introduce PopCap’s CEO, David Roberts who’s here to tell us all about it…

…Thanks David, that really was something special. So that’s games, and we think you’re really going to have a lot of fun with them. But what about Business? Do business users want to use an iPhone? Isn’t it really for fun stuff like music? Well in fact, ever since we launched the iPhone, AT&T, O2, T-Mobile and Orange have been inundated by requests for special business plans. Turns out most business users were no more impressed with the competitors’ offerings that we were. That’s why in January both AT&T in the US, and O2 in the UK announced new business plans. Because business users also want the full internet experience and desktop class e-mail on their mobile. But what else do business users want? Well what they really want is this… [shows graphic of spreadsheet, document and presentation icons moving onto an iPhone display, to a round of applause] That’s why today I’m delighted to announce a brand new Apple product, and the first piece of iPhone software that we’re going to make available on the iTunes store. iWork Touch. Because we felt this was a piece of software that was so important to the iPhone, that we wanted to do it ourselves, to make sure that we get it right.

Of course, Apple has got a lot of experience with office productivity software. Our iWork package has been hugely popular on the Mac. So it’s simple, right? We just port iWork to the iPhone… Wrong! Because Word processing on a mobile device is an entirely different kind of application to word processing on a desktop…

To be continued – Part Two this weekend.

Sunday, 17 February 2008

Apple to get the SDK ball rolling with “iWork Touch”? [Updated]

Here’s what we know:
  • iPhone SDK launches some time this month (this is official)
  • Installing 3rd party apps will require digital signatures (Engadget)
  • Firmware is likely to be an incremental update to 1.1.4, so expect evolution, not revolution (Macrumors)
  • 3rd Party Software will be distributed via iTunes (Macrumors)
  • The recently released update 1.1.3 provides a means for 3rd party applications to appear alongside the default apps on the start screen
  • Apple has recently extended its trademark registration to cover games (Trademork)
On this basis, we make the following four predictions (just guesswork - no insider info!)

1. iWork Touch
To get the ball rolling with selling applications on the iTunes Store, Mac Predictions anticipates that Apple will launch a mobile version of it’s iWork productivity app, enabling users to view and (to a limited extent) edit documents, spreadsheets and presentations (in iWork or Office format) on their phones. This will be paid-for software, and Apple may add extra features for tight integration with the desktop version of iWork.

2. “Documents” File browser
Since many 3rd party apps will require user access to part of the file system to work with documents, a file browser for iPhone is a likely addition as part of the 1.1.4 update. Whilst Mac Predictions has previously guessed that this app would be called “Finder,” with a Mac-style blue face icon, we’re now suspecting that it will make more sense to call it “Documents” since it’s functionality will be much more limited than the Mac’s Finder app.

3. Document syncing
This would probably involve adding a “Documents” menu to iTunes - users would probably have two options - to drag documents directly into the iTunes window, or to select a folder on your Mac or PC for syncing. iTunes would warn if any file extensions are not supported by installed applications

4. Copy & paste
This feature would be required for many 3rd party apps, and so will probably have to make its debut with the SDK

Update:
It appears that the MacRumors story referenced in this article may be a fake. This makes it less certain that the next update will be 1.1.4 - maybe 2.0 after all?

Saturday, 16 February 2008

Top 10 analyst misconceptions about Apple - Part 3

In January, Mac Predictions published the following "Top 10 analyst misconceptions about Apple"
  1. Apple is really a software company
  2. Apple should license the Mac OS to other PC manufacturers
  3. Apple formats are proprietary, whereas Microsoft formats are standards
  4. Apple is making the same mistake with the iPod that they did with the Mac
  5. Apple is now a monopolist
  6. Apple’s success is down to it’s “legendary ease of use”
  7. Apple should integrate Windows emulation into Mac OS X
  8. Apple’s notorious secrecy is harming it’s business
  9. Apple doesn’t make a profit on the iTunes store
  10. Apple is the BMW of the computer world
We've already covered off misconceptions 1 to 6. Here's the final installment...

7. Apple should integrate Windows emulation in OS X

The idea that Apple might be working on “native” support for Windows applications in Mac OS X became quite popular with analysts in the run up to the launch of Leopard. The thinking went that the ability to run Windows applications on Macs would massively increase the appeal of the Mac platform. If you look at the issue that superficially, it’s hard to challenge. And anyone who remembers the excellent “Classic” environment that Apple offered in early versions of Mac OS X knows that it’s perfectly feasible. But if you explore it in any greater depth, it quickly becomes apparent the the idea is a non-starter.

The first, and perhaps most important issue is developers (as Microsoft’s CEO, Steve Ballmer, would doubtless agree). What signal would Apple be sending out to their Mac OS X developers if they provided a Windows applications environment on the Mac. It’s very simple, they’d be saying “don’t bother to develop special versions of your applications that take full advantage of Mac OS X - save your money and tell your customers to buy the Windows product instead”. In other words, Windows emulation would undermine the very thing that make Macs special - Mac OS X. Apple would inadvertently be driving developers, and indirectly their customers, into Microsoft’s waiting arms. After all, if you want to run Windows apps, you’ll always be better off with a Windows PC - a Mac running Windows apps is inevitably second best.

The writing was on the wall for Windows app support when MacWorld.com reported that that Phil Schiller (Apple’s VP for Worldwide Product Marketing) said the company would “‘absolutely not [offer Windows virtualization], the R&D would be prohibitive and we’re not going to do it.” You can’t get more unequivocal than that - but oddly, some analysts continue to speculate about it, to this day.

8. Apple’s notorious secrecy is harming it’s business

Every year, the IT industry frantically prepares for the biggest date in the calendar – January’s CES show in Las Vegas. All the big names are there, except one. Apple doesn’t even have a booth. Two weeks later, Apple sets out its stall – in its own time, and on its own terms, at the MacWord Expo in San Francisco. You might imagine that this smaller, single-vendor event would inevitably play second fiddle to CES. Far from it. MacWorld generates a massive buzz, and it seems as if before CES is even over, hacks start to tire of Vegas, and speculate wildly about what Steve Jobs may have up his sleeve for them.

And speculate is all anyone can do, because Apple famously keeps its cards close to its chest. The company never comments on unannounced products. Ever. And when one of their suppliers accidentally spills the beans, they don’t remain a supplier for very long. So what good does all this secrecy really do?

It creates what economists call an “information asymmetry” - where one party knows more about what is going on than the other. In the case of Apple’s press relations, the effects of this information asymmetry are twofold. Firstly, since demand for information massively exceeds supply, the value of the information increases. Anticipation for and coverage of Apple events increases as a result. Secondly, information asymmetries give an advantage to the party holding the information - in this case, Apple - enabling them to manipulate the other party into misjudging the value of the goods on offer. So for example, last year Apple unveiled the iPhone - a revolutionary new product, and a major news story. This year, in contrast, they unveiled a slimline notebook, a movie rental service and a wireless backup solution - hardly a news story there at all. The press gave an excessive amount of coverage for the notebook, because they had been expecting another iPhone - and by the time the had attended the keynote and held the front page, they had little option but to make the most of what they’d got.

Secrecy has certainly served Apple well in PR terms. So where’s the harm? It can certainly get embarrassing during futile analyst quarterly conference calls, where Apple’s CFO and COO play the usual game of not answering the analysts questions. Their deft handling of analyst questions would make C.J. Cregg blush. It’s easy to see why analysts are frustrated by all the secrecy. It can also be a problem with enterprise customers, who expect their vendors to provide detailed long term roadmaps. This argument is sometimes overstated, however, since Apple does publish plenty of technical information about their long term technical plans for Mac OS X, via their Apple Developer Connection. Dave Hyatt, the lead developer on Apple’s Safari web browser even maintains a blog.

So in fact, Apple are not quite as secretive as analysts sometimes make out, and when they are secretive, you can usually just put it down to their highly effective PR strategy. The press are pleased - they get their story in the end, whilst blogs like Mac Predictions have a field day with all the speculation. The biggest losers from all the secrecy are analysts, who don’t get all the numbers they want to crunch - no wonder they gripe about it.

9. Apple doesn’t make a profit on the iTunes store

In 2003, Apple claimed they just about break-even on the iTunes Store, and that this is fine, since they see music sales as a means of promoting iPods. Not a surprising claim in itself, given that this is just the kind of information to strengthen Apple’s hand in their ongoing negotiations with the record labels. Effectively Apple were claiming poverty, and stressing the pivotal importance of the iPod to the entire music industry in the process. What was more surprising was that so many journos and analysts bought it then, and continue to believe it even now.

Whilst there might have been true, back in 2003, when Apple had only sold 13 million songs, it’s hard to believe now, given that Apple have sold well over 3 billion! Surely in an electronic distribution business, marginal costs (the cost of selling an additional track) will reduce massively as the business starts to benefit from economies of scale? Apple takes 31% of the price of every track downloaded. It’s just about conceivable that they might not make much money out of this on 2003 sales volumes, but if they’re not doing good business on this revenue today, there’s surely something wrong with their productivity.

Apple’s “notorious secrecy” (see above) means that they don’t provide a breakdown of results from the iTunes store, choosing instead to bundle it in with all proceeds from music related products and services. But given that there’s only so much income to be generate from replacement headphones, leather cases and speakers, it certainly appears to be delivering healthy revenue ($808 million in the last quarter alone).

If Apple were serious about targeting breaking-even on download sales in order to drive sales of iPods, I suspect that they would have dropped the price by now, or reduced their cut in order to woo truculent TV networks. Mac Predictions doesn’t begrudge Apple their hard-earned profits on the iTunes Store, we just wonder when everyone will stop pretending that they don’t exist.

10. Apple is the BMW of the computer world

Analysts and journalists seem to love this one in equal measure. No other phrase quite cuts it when you’re looking for a hackneyed way to describe what differentiates Apple from the rest of the industry. The thinking is that Apple’s relatively small market share is fine, since they’re a niche player selling luxury, high performance products to a highly discerning target audience... just like BMW. But, as with all our misconceptions, this one is just wrong.

Back in the bad old days for Apple, Jean Louis Gassée pursued what was known as a high-right strategy - focusing on selling high performance machines at a high price. By neglecting the low end of the market, Apple’s market share dwindled, as did its sales. These days, Apple’s product range spans from entry level products such as the iPod shuffle through to luxury products such as the MacBook Air. If you compare like-for-like system configurations between Apple.com and Dell.com, Apple’s prices are pretty comparable, and in some cases even competitive. And that’s before you factor in the value of the bundled iLife software.

The BMW analogy is useful only in demonstrating that a relatively small market share doesn’t don’t mean that a company can’t be profitable. It’s hardly a mission statement. For Macs to achieve their full potential, they need to achieve a critical mass of market penetration for the network effect to kick in. This is where the BMW analogy breaks down.

Saturday, 9 February 2008

MacBook Pro updates may reflect MacBook Air design style (mockup)



In late January, AppleInsider speculated that MacBook Pro updates were imminent, and that they would feature the same MultiTouch trackpad that debuted in the MacBook Air. Earlier this month, MacRumors stoked the speculation further with a report on new MacBook Pros appearing in Best Buy’s inventory tracking system.

Just for fun, Mac Predictions has put together this Photoshop mockup to illustrate how the new MacBook Pro may take its design cues from the style of the MacBook Air. It’s interesting to note that the “bulging” cross-section of the Air is also reflected in the new design of the iPod Classic and iPod Nano. This appears to be a new motif that Apple is rolling out across its entire product line. The advantage of the bulge is that it suggests that the product is thinner than it really is, since the product narrows at the sides to present a shallower edge profile.

Friday, 8 February 2008

Forget Microsoft/Yahoo!, think Apple/Adobe

Apple has maintained a relentless pace of innovation over the past few years. Their management team are far from risk-averse, and yet they rarely seem to put a foot wrong (the Cube, Apple TV "Take One" and Sherlock are the only flops Mac Predictions can think of since Steve Jobs, return). As a consequence, their value has grown stratospherically (even allowing for the recent wobble in share price).

Compare Apple’s stellar performance with that of Adobe – a company that has plodded along, with a low innovation, risk adverse culture. They’ve been resting on their laurels for years, making a reasonable income by charging customers over and over again for essentially the same products. The only two highlights in the past decade were the launch of InDesign – a worthy competitor to QuarkXpress that has gained significant adoption – and the purchase of Macromedia, which is effectively an “if you can’t beat them, buy them” strategy.

Adobe’s performance is remarkably disappointing when you consider that they are one of the only companies that has ever been in a position to give Microsoft a run for their money. PDF is the only viable competitor to Microsoft’s Word document format. Flash could be a serious threat to Microsoft’s plans to make the web dependent on its own proprietary extensions and technologies. And Flash Video has been a surprise entrant into the media streaming sector, that has left the others standing, and today powers the mighty You Tube behemoth.

If Mac Predictions was an Adobe shareholder, we’d be asking the following questions:
  • Why hasn’t Adobe leveraged their Flash product into an end-to-end web application development platform, that becomes a true threat to Microsoft’s .Net
  • Why hasn’t Adobe leveraged their PDF platform to compete with Microsoft’s Office productivity suite?
  • Where is the next Photoshop or InDesign coming from, and when?
  • Why has Adobe failed to get into web services that extend their software expertise? Surely You Tube should have been an Adobe product. Web-based Photoshop seems too little too late, and why did Adobe Stock Photos fail?
  • Why is it that Apple can run rings around Adobe in their heartland sector of creative professionals, with products like Final Cut Studio, when this isn’t even a core business for Apple?

It’s pretty obvious where this is all pointing. Bizarrely, some analysts and pundits are predicting that Apple may make a counter bid for Yahoo!. This is inconceivable. It’s hard to think of a company that offers Apple less synergy. A purchase of Adobe, however, would be a very smart move. Apple’s management team stand a much better chance of delivering value from Adobe’s IP than the existing management team seem able to do. When you consider the potential synergies of combining Apple technologies such as Mac, iPhone, QuickTime and iTunes with Flash and PDF, you get a to-do list so long, the challenge is working out where to start.

Adobe’s market cap was quoted by Yahoo! as $18.56 billion on market close, February 8th, 2008. That’s oddly close to the $18.4 billion figure that Apple was quoted to have as cash balance in closing Q1 2008. Could Apple be saving up for something?

Tuesday, 5 February 2008

Psst, don't tell anyone, but here's the 16GB model

Apple is not a company well known for understatement. Hence every new Mac has to be hailed as "the most powerful Mac we've ever produced", and every year's iPod line up is described as "our best ever iPod line" - statements so inane that they surely go without saying. Imagine if Apple announced that this year's iPods are not quite as good as last year's.

Funny then, that the new 16GB iPhone was launched today with such a distinct lack of fanfare. One might almost describe its launch as furtive.

Could it be that the backlash from last year's iPhone price drop has got the company so spooked that they're fearful of prompting more ire with something so bold as a press release for the new 16GB model?

Whatever the reason, the new model should certainly help to inject a bit of sizzle into iPhone's sales. It's just a shame that Apple doesn't dare to shout about it!

Sunday, 3 February 2008

Top 10 analyst misconceptions about Apple - Part 2

In January, Mac Predictions published the following "Top 10 analyst misconceptions about Apple"
  1. Apple is really a software company
  2. Apple should license the Mac OS to other PC manufacturers
  3. Apple formats are proprietary, whereas Microsoft formats are standards
  4. Apple is making the same mistake with the iPod that they did with the Mac
  5. Apple is now a monopolist
  6. Apple’s success is down to it’s “legendary ease of use”
  7. Apple should integrate Windows emulation into Mac OS X
  8. Apple’s notorious secrecy is harming it’s business
  9. Apple doesn’t make a profit on the iTunes store
  10. Apple is the BMW of the computer world

Numbers 1 to 3 were covered off in January's post. Here are numbers 4 to 6:

4. Apple is making the same mistake with the iPod that they made with the Mac

Analysts making this assertion miss the patently obvious fact that an iPod addresses a very different market to a Windows PC, and as such it requires a very different marketing approach.

Windows run on industry standard hardware, which results in a competitive market between numerous commoditised PC vendors. Competition drives down prices. Commoditisation minimises vendor lock-in. The result is a product that appeals to businesses, which rapidly adopted the platform in the late eighties and early nineties, accounting for the vast majority of Microsoft’s early sales lead, and still account for the majority of Microsoft’s revenue today.

By contrast, iPods are consumer electronics – purchased by individuals who are not particularly concerned by issues of vendor lock-in, and are not as price sensitive as business customers. Instead, they have different priorities. Firstly, unlike business customers, consumers do not have IT help desks – they need their gadgets to “just work”. A vertically integrated solution, such as Apple’s, where hardware, software and online services are provided by a single vendor, results in a product that is less likely to go wrong, plus there’s the reassurance that if something does go wrong, you know exactly who to talk to about it. Secondly, consumers do not seek out commoditised products, favouring instead products that differentiate, and express their individuality. A sensible, cheap, boring MP3 player from Dell, running similar software to your PC at work, was never going to cut it.

This may seem like a statement of the obvious now, considering that even Microsoft has given in and copied Apple’s vertically integrated solution with their Zune product. But it’s amazing to consider the number of supposedly respectable IT journalists and analysts who argued for so many years that Apple’s business plan was flawed, and that Microsoft’s Windows Media Plays For Sure “ecosystem” would inevitably win out in the end.

5. Apple is now a monopolist

Apple’s music business is increasingly being described by industry commentators, analysts and legislators as a vertical monopoly. Comparisons are even made between Apple’s monopolistic control of the music industry and Microsoft’s Windows monopoly. However, such analogies unravel under closer scrutiny.

Strictly speaking, a monopolist has complete control of the supply of a particular commodity or service. In this sense, neither Microsoft nor Apple are monopolists, since they both have competitors in their respective markets. Windows competes with Linux, Solaris and Mac OS X, whilst Apple’s music business competes with any number of music stores and music players. But in the IT industry, there’s a special kind of monopoly – where a proprietary platform becomes so dominant that customers become locked-in to such an extent that competitors’ products are no longer a viable option.

For many customers, Windows is just such as monopoly – since users expect their PC to interoperate with other PCs, which use proprietary Microsoft technologies such as Windows File Sharing and Windows Media. The only aspect of Apple’s music business that is comparable is “FairPlay,” Apple’s DRM solution. Since FairPlay tracks can only be purchased from Apple, and are supported only by Apple’s devices, FairPlay is undoubtedly a closed solution. For it to be a monopoly, however, this would require that Apple’s customers have no alternative but to purchase Apple’s products, and this is simply not the case. Music can be purchased on CDs, which do not contain DRM, or from an increasing number for digital services that provide DRM-free tracks.

The market is clearly moving towards DRM-free music, which will eliminate Apple’s lock-in advantage in DRM music. Whilst it’s possible that Apple may come to dominate movies in the same way that they currently dominate music, this is by no means assured, and many other competitors, such as Microsoft, plan to give Apple a run for their money in this area.

6. Apple’s success is down to it’s “legendary ease of use”

The concept of Apple’s “legendary ease of use” harks back to the late eighties and early nineties – specifically the period after the launch of the Mac, and prior to the introduction of Windows 95. During this period, there was no denying the fact that Apple’s computers were the easiest to use. But only analysts over the age of thirty, who still hanker after those halcyon days would reel off this tired old argument today.

Macs may still be easy to use, but in an era when most users are more familiar with Windows, adapting to the Mac is not always an easy transition. Furthermore, Mac OS X is a sophisticated (we may even say complex) product… Far more so than earlier incarnations of the Mac OS. As such, mastering its intricacies is not always an easy task.

Whilst it’s undoubtedly true that ease of use is important, we should take care not to overstate the argument. Reliability, stability, security, good design, aftersales support, bundled applications… the list of benefits for Apple’s products is so long that ease of use is these days a much smaller part of the overall picture.

Hate to say “I told you so”... alright...

In December last year, Mac Predictions reported on lower than expected demand for iPhone in the UK - speculating that this was due to a combination of high upfront handset costs combined with expensive tariffs (in the UK, “plans” are called “tariffs”).

Given the negative reaction from US consumers when Apple substantially dropped the handset price there, it seemed unlikely that they would do something similar in the UK. Nonetheless, Mac Predictions speculated that Apple would have to do something to stimulate sales.

Sure enough, this week, O2, Apple’s UK mobile network partner, announced substantial drops in the prices of their tariffs, plus greater flexibility, with the addition of “bolt on” options. Whilst the iPhone still has it’s own “exclusive” tariffs, they are at least now more comparable with 02’s standard 18 month contracts.

This is a neat strategy, making the iPhone more affordable without provoking the ire of early adopters by dropping the handset price. Instead, early adopters are rewarded with access to the new, cheaper, more flexible tariff options. Mac Predictions suspects that this price drop has been largely funded out of Apple’s commission on 02 revenue, since this is the only obvious reason why iPhone tariffs were more expensive than standard 02 tariffs in the first place.

Apple will be hoping that the newly competitive tariffs will revive UK iPhone sales. The risk is that it’s too little, too late, and that they have now missed their window to gain early sales momentum during the launch campaign and press coverage. This experience in the UK market will likely discourage Apple from pursuing such high-price strategies at launch in other markets, and will likely strengthen the mobile networks’ negotiating position going forward.