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iPhone 5S surprises

hardware By October 20, 2013 Tags: , 18 Comments


I will withhold judgment on the new iPhone until I have a chance to play customer, buy the product (my better half seems to like the 5C while I pine for a 5S), and use it for about two weeks — the time required to go beyond my first and often wrong impressions”.

I wrote those words a little over a month ago. I’ve now played customer for the requisite two weeks — I got an iPhone 5S on October 3rd — and I’m prepared to report.

But first, some context.

iPhone launches always generate controversy, there’s always something to complain about: Antennagate for the iPhone 4, the Siri beta for the 4S, the deserved Maps embarrassment last year – with a clean, dignified Tim Cook apology.

(Whether these fracas translate into lost revenue is another matter).

As I sat in the audience during the introduction of the original iPhone, back in January, 2007, I thought the demo was too good, that Steve was (again) having his way with facts. I feared that when the product shipped a few months later, the undistorted reality would break the spell.

We know now that the iPhone that Steve presented on the stage was unfinished, that he trod a careful path through a demo minefield. But the JesusPhone that Apple shipped — unfinished in many ways (no native apps, no cut-and-paste) — was more than a success: It heralded the Smartphone 2.0 era.

iphone 5s

This year, Tim Cook introduced the riskiest hardware/software combination since the original iPhone. The iPhone 5S wants to be more than just “new and improved”, it attempts to jump off the slope with its combination of two discontinuities: a 64-bit processor and a new 64-bit iOS. Will it work, or will it embarrass itself in a noisome backfire?

First surprise: It works.

Let me explain. I have what attorneys call “personal knowledge” of sausage factories, I’ve been accountable for a couple and a fiduciary for several others. I have first-hand experience with the sights, the aromas, the tumult of the factory floor, so I can’t help but wince when I approach a really new product, I worry in sympathy with its progenitors. The 5S isn’t without its “aromas” (we’ll get to those later), but the phone is sleek and attractive, the house apps are (mostly) solid, and the many new Application Programming Interfaces (API) promise novel applications. Contrary to some opinions, there are fewer warts than anyone could have expected.

Surprise #2, the UI: I had read the scathing critiques of the spartan excesses, and, indeed, I feel the drive for simplicity occasionally goes too far. The buttons on the built-in timer are too thin, too subdued. When I meditate in the dark I can’t distinguish Start from Cancel without my glasses. But I’m generally happy with the simpler look. Windows and views get out of the way quickly and gracefully, text is neatly rendered, the removal of skeuomorphic artifacts is a relief.

The next surprise is the fingerprint sensor a.k.a. Touch ID. Having seen how attempts to incorporate fingerprint recognition into smartphones and laptops have gone nowhere, I had my doubts. Moreover, Apple had acquired AuthenTec, the company that created the fingerprint sensor, a mere 15 months ago. Who could believe that Apple would be able to produce a fingerprint-protected iPhone so quickly?

But it works. It’s not perfect, I sometimes have to try again, or use another finger (I registered three on my right hand and two on my left), but it’s clear that Apple has managed to push Touch ID into the category of “consumer-grade technology”: It works often enough and delivers enough benefit to offset the (small) change in behavior.

A personal favorite surprise is Motion Sensing.

When Apple’s Marketing Supremo Phil Schiller described the M7 motion processor, I didn’t think much of it, I was serving the last days of my two-month sentence wearing the JawBone UP bracelet mentioned in a previous Monday Note. (A friend suggested I affix it to his dog’s collar to see what the data would look like.)

Furthermore, the whole “lifestyle monitoring” business didn’t seem like virgin territory. The Google/Motorola Moto X smartphone introduced last August uses a co-processor that, among other things, monitors your activities, stays awake even when the main processor is asleep, and adjusts the phone accordingly. A similar co-processing arrangement is present in Moto X’s predecessors, the Droid Maxx, Ultra and Mini.

But then I saw a Twitter exchange about Motion Sensing apps about a week after I had activated my iPhone 5S. One thumb touch later, the free Pedometer++ app asked for my permission to use motion data (granted) and immediately told me how many steps I’d taken over the past seven days.

I went to the chauffeured iPhone on my wife’s desk and installed the app. I did the same on friends’ devices. The conclusion was obvious: The M7 processor continuously generates and stores motion data independent of any application. A bit of googling shows that there are quite a few applications that use the motion data that’s obligingly collected by the M7 processor; I downloaded a number of these apps and the step counts are consistent.

(Best in class is the ambitious MotionX 24/7. Philippe Kahn’s company FullPower Technologies licenses MotionX hardware and software to many motion-sensing providers, including Jawbone and, perhaps, Apple. Wearable technologies aren’t just for our wrists…we carry them in our pockets.)

My wife asked if her iPhone would count steps from within her handbag. Ever the obliging husband, I immediately attended to this legitimate query, grabbed her handbag, and stepped out of the house for an experimental stroll. A conservatively dressed couple walked by, gave me a strange look, and didn’t respond to my evening greeting, but, indeed, the steps were counted.

A question arises: Does Apple silently log my movements? No, my iPhone records my locomotion, but the data stays within the device — unless, of course, I let a specific application export them. One must be aware of the permissions.

Other 5S improvements are welcome but not terribly surprising. The camera has been smartly enhanced in several dimensions; search finally works in Mail; and, to please Sen. McCain, apps update themselves automatically.

All of this comes with factory-fresh bugs, of course, a whiff of the sausage-making apparatus. iPhoto crashed on launch the first three or four times I tried it, but has worked without complaint since then.  A black Apple logo on a white background appeared and then quickly disappeared — too brief to be a full reboot, too sparse to be part of an app.

I’ve had to reboot the 5S to recover a dropped cellular connection, and have experienced hard-to-repeat, sporadic WiFi trouble that seems to spontaneously cure itself.(“How did you fix it?” asks my wife when her tech chauffeur gets the sullen device to work again. “I don’t know, I poke the patient everywhere until it responds.”)

From my admittedly geeky perspective, I’m not repelled by these glitches, they didn’t lose my data or prevent me from finishing a task. They’re annoying, but they’re to be expected given the major hardware and software changes. And I expect that the marketplace (as opposed to the kommentariat) will shrug them off and await the bug fixes that will take care of business.

So, yes, overall, the “discontinuous” 5S works.

[I’m also using a pre-release of Mavericks, the upcoming 10.9 version of OS X, on two Macs. There, I wonder if I’m not seeing the opposite of the iPhone 5S: less risk, more bugs. I hope things straighten out for the public release. I’ll report if and when warranted.]

[I can’t resist: The Washington Post’s Wonkblog calls the iPhone’s third color… Dignified Gold. I wonder: Is it a compliment to Sir Jony’s unerring taste? Or a clever, indirect ethnic slur?]


64 bits. It’s Nothing. You Don’t Need It. And We’ll Have It In 6 Months

hardware By September 22, 2013 Tags: , , , 40 Comments


Apple’s A7 processor, the new iOS 7 and “house” apps are all industry firsts: genuine, shipping 64-bit mobile hardware and software. As we’ve seen before with the iPhone or the iPad, this new volley of Apple products is first met with the customary bursts of premature evaluations and counterfactual dismissals.

On September 10th, Apple revealed that the new iPhone 5s would be powered by its new 64-bit A7 processor. The initial reactions were less than enthused. We were treated to exhumations of lazy bromides…

“I don’t drink Kool-Aid. Never liked the stuff and I think we owe it to ourselves to collectively question whether or not Apple’s ‘reality distortion field’ is in effect when we consider how revolutionary the iPhone 5S is and if Apple’s 64-bit A7 processor under its shiny casing will be all its [sic] cracked up to be when the device hits the market in volume.” [Forbes]

…and equally lazy “markitecture” accusations…

“With current mobile devices and mobile apps, there really is no advantage [to 64 bits] other than marketing — the ability to say you’re the first to have it…” [InfoWorld]

…and breezy brush-offs, such as this tweet from an industry expert:

“We’ll see just how good Apple’s marketing team is trying to leverage 64-bit. 64-bit add more memory and maybe registers. Period.” [Twitter]

Rather than wonder what these commenters were drinking, let’s turn to AnandTech, widely regarded as one of the best online hardware magazines.

Founded by Anand Lal Shimpi when he was all of 14-years-old, AnandTech is known for its exhaustive (and sometimes exhausting) product reviews. The 14-section September 17th iPhone 5S review doesn’t disappoint. Among other things, it provides detailed iPhone 5S vs. iPhone 5 performance comparisons such as this:

5S GeekBench Anand Edited

There are many other charts, comparisons, and considerations of the new 64-bit ARMv8 instruction set, the move from 16 to 32 floating-point NEON 128-bit registers, the hardware acceleration of cryptography operations… It’s a very long read, but not a boring one (at least not for interested geeks).

The bottom line is plain: The A7 processor is a substantial improvement that’s well supported by the 64-bit iOS7. (And I’d like to meet the author and bow to his encyclopedic knowledge.)

Was it because of AnandTech’s cool analysis that the doubters have changed their tune?

As I predicted, Apple A7 benchmarks well due to CPU arch (for IPC), new GPU, ARM v8′

Now that the A7 had become a Benchmarking Beast, the author of the previous week’s brush-off tweet (“more memory and maybe registers. Period”) has revised his position [emphasis mine]:

“The improvements Apple made with the A7 are truly incredible, and they really went against the grain in their choices. With an industry obsessed with more cores, they went with fewer, larger and efficient cores. With people expecting v8 and 64-bit ARM in late 2014, Apple brings it out in 2013 with full Xcode support and many performance optimizations.” […] “Apple has done it again, but this time in unexpected fashion.”

That all-purpose defense, unexpected, provides a key to the wrong-footing of many “experts”.

When Apple entered the microprocessor field a mere five years ago with its acquisition of Palo Alto Semiconductor, the move was panned: Apple had no future competing with established industry leaders such as Intel, Qualcomm, Nvidia, and Samsung.

But with the successive, increasing refinement of the A4, A5, and A6, the designs were ultimately viewed as good, very good, roughly on par with the rest of the industry. What these processors lacked in raw power was more than made up for by they way they were integrated into Apple’s notion of a purposeful, usable mobile device: Enhanced UI responsiveness, reduced power consumption, obeisance to the unique requirements of media and communications.

The expectation was that Apple would either fail, or produce a “competent” (meaning not particularly interesting) iteration of previous A4-5-6 designs. No one expected that the processor would actually work, with all in-house apps running in 64-bit mode from day one.

But let’s back up and rewrite a bit of history, ourselves:

On September 10th, Samsung announced its flagship 64-bit Exynos processor, supported by Android 5.0, the 64-bit version of Google’s market-leading mobile OS. The new Galaxy S64 smartphone, which will ship on September 20th, features both 64-bit hardware and software components. Samsung and Google receive high praise:

“Supercomputer-class processor… Industry-leading performance… Tightly integrated 64-bit software and hardware open a new era of super high-performance applications previously impossible on mobile devices…”

And Apple gets its just deserts:

“Once again, Apple gets out-innovated…This confirms the trend we’ve seen since Tim Cook took over… iPhones have become second-class devices… The beginning of a long decline…”

Apple can be thankful this is fantasy: The real world would never treat it like this (right?).

My fantasy isn’t without basis: Within 24 hours of Apple’s September announcement, Samsung’s mobile business chief Shin Jong-kyun said his company will have its own 64-bit Exynos processor:

“Not in the shortest time. But yes, our next smartphones will have 64-bit processing functionality…” [The Korea Times]

As for Android support, no problem: 64-bit versions of the underlying Linux kernel already exist. Of course, the system software layer that resides on top of the Linux kernel — the layer that is Android — will also need to be converted to take advantage of the 64-bit processor, as will the Software Development Kit (SDK) that third-party developers use to create apps. It’s a sizable challenge, but one that’s well within the Android’s team skills and resources; the process has certainly been under way for a while already.

The real trouble starts outside of Google. Which 64-bit processor? Intel’s (the company says it will add 64-bit “capabilities” to Android)? Samsung’s? Qualcomm’s?

Who writes and supports device drivers for custom SoC modules? This sounds a lot like Windows device driver complications, but the complexity is multiplied by Google’s significantly weaker control over hardware variants.

Apple’s inherent control over all of the components in its platform will pay dividends in the speed and quality of the transition. There will be glitches — there will always be new, factory-fresh bugs — but the new 64-bit hardware is designed to run existing 32-bit apps, and it seems to actually do so in practice.

Now let’s go beyond the iPhone 5S. In his September 10th presentation, Phil Schiller, Apple’s Marketing Supremo, called the A7’s performance “desktop class”. These words were carefully calibrated, rehearsed, and approved. This isn’t a “Can’t innovate anymore? My asssaeta, blurted while seized by religious fervor at last Spring’s Apple Developers Conference.

Does “desktop class” imply that Apple could use future versions of its 64-bit processor to replace Intel chips in its Mac devices?

In the AnandTech post quoted above, several benchmarks compare Apple’s A7 to a new x86 chip, Intel’s Baytrail, with interesting results:

AnandTech Baytrail A7

So, yes, in theory, a future Apple 64-bit processor could be fast enough to power a Mac.

But let’s consider a 3GHz iMac running a high-end media creation application such as Photoshop or Autodesk. The processor doesn’t want to be constrained by power consumption requirements, it’s optimized for performance (this even ignores the upcoming MacPro and its thermal management prowess).

Can we see a split in the Mac product line? The lower, more mobile end would use Apple’s processors, and the high-end, the no-holds-barred, always plugged to the wall desktop devices would still use x86 chips. With two code bases to maintain ß OS X applications to port? Probably not.

Apple could continue to cannibalize its (and others’) PC business by producing “desktop-class” tablets. Such speculation throws us back to a well-known problem: How do you compose a complex document without a windowing system and a mouse or trackpad pointer?

We’ve seen the trouble with Microsoft’s hybrid PC/tablet, its dual Windows 8 UI which is considered to be “confusing and difficult to learn (especially when used with a keyboard and mouse instead of a touchscreen).”

The best suggestion I’ve seen so far comes from “a veteran design and management surgeon” who calls himself Kontra and proposes An interim solution for iOS ‘multitasking‘ based on a multi-slot clipboard.

If Apple provides a real way to compose complex documents on a future iPad, a solution that normal humans will embrace, then it will capture desktop-class uses and users.

Until such time, Macs and iPads are likely to keep using different processors and different interaction models.



Apple Market Share: Facts and Psychology

hardware By September 15, 2013 Tags: , , 109 Comments


Remember netbooks? When Apple was too greedy and stupid to make a truly low-cost Macintosh? Here we go again, Apple refuses to make a genuinely affordable iPhone. There will be consequences — similar to what happened when the Mac refused to join netbooks circling the drain. 

My first moments with the iPad back in April 2010 were mistaken attempts to use it as a Mac. Last year, it took a long overdue upgrade to my eyeglasses before I warmed to the nimbler iPad mini, never to go back to its older sibling.

With that in mind, I will withhold judgment on the new iPhone until I have a chance to play customer, buy the product (my better half seems to like the 5C while I pine for a 5S), and use it for about two weeks — the time required to go beyond my first and often wrong impressions.

While I wait to put my mitts on the new device, I’ll address the conventional hand-wringing over the 5C’s $549 pricetag (“It’s Too Damned High!” cry the masses).

iphone5c copie

Henry Blodget, who pronounced the iPhone Dead In Water in April 2011, is back sounding the alarm: Apple Is Being Shortsighted — And This Could Clobber The Company. His argument, which is echoed by a number of pundits and analysts, boils down to a deceptively simple equation:

Network Effect + Commoditization = Failure

The Network Effect posits that the power of a platform is an exponential function of the number of users. Android, with 80% of the smartphone market will (clearly) crush iOS by sucking all resources into its gravitational well.

Commoditization means that given an army of active, resourceful, thriving competitors, all smartphones will ultimately look and feel the same. Apple will quickly lose any qualitative advantage it now enjoys, and by having to compete on price it could easily fall behind.

Hence the preordained failure.

As a proof-of-concept, the nay-sayers point to the personal computer battle back in the pre-mobile dark ages: Didn’t we see the same thing when the PC crushed the Mac? Microsoft owned the personal computer market; PC commoditization drove prices into the bargain basement…

Interpret history how you will, the facts show something different. Yes, the Redmond Death Star claimed 90% of the PC market, but it failed to capture all the resources in the ecosystem. There was more than enough room for the Mac to survive despite its small market share.

And, certainly, commoditization has been a great equalizer and price suppressant — within the PC clone market. Microsoft kept most of the money with the de facto monopoly enjoyed by its Windows + Office combo, while it let hardware manufacturers race to the bottom (netbooks come to mind). Last quarter, this left HP, the (still) largest PC maker, with a measly 3% operating profit for its Personal Systems Group. By contrast, Apple’s share of the PC market may only be 10% or less, but the Mac owns 90% of the $1000+ segment in the US and enjoys a 25% to 35% margin.

After surviving a difficult birth, a ruthlessly enforced Windows + Office platform, and competition from PC makers large and small, the Mac has ended up with a viable, profitable business. Why not look at iDevices in the same light and see a small but profitable market share in its future?

Or, better yet, why not look at more than one historical model for comparison? For example, how is it that BMW has remained so popular and profitable with its One Sausage, Three Lengths product line strategy? Aren’t all cars made of steel, aluminium (for Sir Jony), plastic, glass, and rubber? When the Bavarian company remade the Mini, were they simply in a race to the bottom with Tata’s Nano, or were they confidently addressing the logical and emotional needs of a more affluent — and lasting — clientèle?

Back to the colorful but “expensive” 5C, Philip Elmer-DeWitt puts its price into perspective: For most iPhone owners, trading up to the 5C is ‘free‘ due to Apple’s Reuse and Recycle program. We’ll have to see if The Mere Matter of Implementation supports the theory, and where these recycled iPhones end up. If the numbers work, these reborn iPhones could help Apple gain a modest foothold in currently underserved price segments.

Still thinking about prices, I just took a look at the T-Mobile site where, surprise, the 5C is “free“, that is no money down and 24 months at $22 — plus a $10 “SIM Kit” (read the small print.) You can guess what AT&T offers: 24 months at $22/month (again, whip out your reading glasses.) Verizon is more opaque, with a terrible website. Sprint also offers a no-money-down iPhone 5C, although with more expensive voice/data plans.

This is an interesting development: Less than a week ago, Apple introduced the iPhone 5C with a “posted price” of $99 — “free” a few days later.

After much complaining to the media about “excessive” iPhone subsidies, carriers now appear to agree with Horace Dediu who sees the iPhone as a great “salesman” for carriers, because it generates higher revenue per user (ARPU). As a result, the cell philanthropists offer lower prices to attract and keep users — and pay Apple more for the iPhone sales engine.

Of course, none of this will dispel the anticipation of the Cupertino company’s death. We could simply dismiss the Apple doomsayers as our industry’s nattering nabobs of negativism, but let’s take a closer look at what insists under the surface. Put another way, what are the emotions that cause people to reason against established facts, to feel that the small market share that allowed the Mac to prosper at the higher end will inevitably spell failure for iDevices?

I had a distinct recollection that Asymco’s Horace Dediu had offered a sharp insight into the Apple-is-doomed mantra. Three searches later, first into my Evernote catchall, then to Google, then to The Guardian, I found a Juliette Garside article where Horace crisply states the problem [the passage quoted here is from a longer version that’s no longer publicly available; emphasis and elision mine]:

“[There’s a] perception that Apple is not going to survive as a going concern. At this point of time, as at all other points of time in the past, no activity by Apple has been seen as sufficient for its survival. Apple has always been priced as a company that is in a perpetual state of free-fall. It’s a consequence of being dependent on breakthrough products for its survival. No matter how many breakthroughs it makes, the assumption is (and has always been) that there will never be another. When Apple was the Apple II company, its end was imminent because the Apple II had an easily foreseen demise. When Apple was a Mac company its end was imminent because the Mac was predictably going to decline. Repeat for iPod, iPhone and iPad. It’s a wonder that the company is worth anything at all.”

This feels right, a legitimate analysis of the analysts’ fearmongering: Some folks can’t get past the “fact” that Apple needs hit products to survive because — unlike Amazon, as an example — it doesn’t own a lasting franchise.

In the meantime, we can expect to see more hoses attached to Apple’s money pump.

Next week, I plan to look at iOS and 64-bit processing.


Apple’s Wearables Future

hardware By September 8, 2013 Tags: , , 26 Comments


Wearable technologies have a huge future. For Apple, they’ll create a new product category with an iPhone-like revenue stream! No so fast. Smartwatches and other wearable consumer products lack key attributes for breaking out of the novelty prison. 

‘I Think the Wrist Is Interesting’ Thus spake Tim Cook on the opening night of last May’s D11 conference.

When pressed to discuss his company’s position on wearable technologies, Cook was unusually forthcoming: Instead of pleading Apple’s Fifth, Cook launched into a substantial discussion of opportunities for his company to enter the field, calling wearables “a very key branch of the tree”.

But when asked about the heavily publicized Google Glass he parried the question by suggesting that people who don’t otherwise wear glasses might be reluctant to don such an accoutrement.

I don’t find Tim Cook’s dismissal of eyewear very insightful: Just go to a shopping center and count the eyewear stores. Many belong to the same rich Italian conglomerate, Luxottica, a company with about ten house brands such as Oakley, Persol, and Ray-Ban, and a supplier to more than twenty designer labels ranging from Armani to Versace. (As the perturbing Sixty Minutes exposé on Luxottica pointed out, the company nicely rounds out its vertical dominance of the sector through its ownership of EyeMed, a vision insurance business.)

Eyewear, necessary or not, is a pervasive, fashionable, rich product category, a fact that hasn’t escaped Google’s eye for numbers. The company is making an effort to transmute their geeky spectacles into fashion accessories. Courtesy of Counternotions I offer this picture of Sergey Brin and fashionista Diane von Furstenberg proudly donning the futuristic eyewear at the NY Fashion Week:

Glass Fashion Brin

On a grander scale, we have a Vogue article, Google Glass and a Futuristic Vision of Fashion:

Glass en Vogue 2

The company’s efforts to make Google Glass fashionable might be panned today for pushing the envelope a little too far but, in a not-too-distant future, they stand a chance of being viewed as truly visionary.

If eyewear doesn’t excite Tim Cook, what does? To him, the wrist feels more natural, more socially acceptable. We all wear one or more objects around our wrist(s).

The wristwear genre isn’t new (recall Microsoft’s 2004 Spot). Ask Google to show you pictures of smartwatches, you get 23M results and screen after screen like this one:


The genre seems to be stuck in the novelty state. Newer entries such as Samsung’s Gear have gotten mixed reviews. Others contend a 2010 iPod nano with a wristband makes a much nicer smartwatch.

Regardless, by comparison, pre-iPod MP3 players and pre-iPhone smartphones were getting better press – and more customers. Considering the putative iWatch, the excitement about Apple getting into this class of devices appears to be excessive.

The litmus test for the potential of a device is the combination of pervasiveness and frequency of use. Smartphones are a good example, they’re always with us, we look at their screens often (too often, say critics who pretend to ignore the relationship between human nature and the Off button).

The iWatch concept makes two assumptions: a) we’ll wear one and, b) we’ll only wear that one.

Checking around we see young adults who no longer wear watches — they have a smartphone; and middle-agers use watches as jewelry, possessing more than one. This defeats both pervasiveness and frequency of use requirements.

Then there’s the biometry question: How much useful information can a wearable device extract from its wearer?

To get a better idea about what’s actually available (as opposed to fantasized), I bought a Jawbone UP wristband a little over a month ago. With its accelerometers and embedded microprocessors, UP purports to tell you how many steps you took, how long you’ve been inactive during your days, it logs your stretches of light and deep sleep, and even “makes it fun and easy to keep track of what you eat”.  Once or twice a day, you plug it into your smartphone and it syncs with an app that displays your activity in graphic form, tells you how well you’re doing versus various goals and averages. It also suggests that you log your mood in order to “discover connections that affect how you feel.”

At first, I found the device physically grating. I couldn’t accept it the way I’m oblivious to my watch, and I even found it on the floor next to my bed a couple of mornings. But I stuck with it. The battery life is as promised (10 days) and I’ve experienced none of the first versions troubles. I traveled, hiked and showered with it without a hitch other than the cap covering the connecting pin getting a bit out of alignment.

Will I keep using it? Probably not.

Beyond the physical discomfort, I haven’t found the device to be very useful, or even accurate. It’s not that difficult to acquire a useful approximation of hours slept and distance walked during the day — you don’t need a device for these things.

As for accuracy, the other day it declared that I had exhibited a substantial level of physical activity… while I was having breakfast. (I may be French, but I no longer move my hands all that much as I speak.)

The app’s suggestion that I log my food consumption falls into the magical thinking domain of dieting. A Monday morning step on a scale tells us what we know already: Moderation is hard, mysterious, out of the reach of gadgets and incantations.

For a product to start a new worthy species for a company as large as Apple, the currency unit to consider is $10B. Below that level, it’s either an accessory or exists as a member of the ecosystem’s supporting cast. The Airport devices are neat accessories; the more visible Apple TV supports the big money makers — Macs, iPads and iPhones — by enhancing their everyday use.

With this in mind, will “wearables” move the needle, will they cross the $10B revenue line in their second or third year, or does their nature direct them to the supporting cast or accessory bins?

Two elements appear to be missing for wearable technologies to have the economic impact that companies such as Apple would enjoy:

  • The device needs to be easily, naturally worn all the time, even more permanently than the watch we tend to take off at night.
  • It needs to capture more information than devices such as the Jawbone do.

A smartwatch that’s wirelessly linked to my smartphone and shows a subset of the screen in my pocket…I’m not sure this will break out of the novelty category where the devices have been confined thus far.

Going back to Tim Cook’s oracular pronouncement on wearables being “a very key branch of the tree”, I wonder: Was he having fun misdirecting his competition?


PS: After two July Monday Notes on the company, I’ll wait for the Microsoft centipede to drop one or two more shoes before I write about the Why, When, How and Now What of Ballmer’s latest unnatural acts. There in an Analyst Day coming September 19th — and the press has been disinvited.

PPS: In coming days, to keep your sanity when trying to drink from the Apple kommentariat fire hydrant, you can safely direct your steps to three sites/blogs:

  • Apple 2.0 , where Philip Ellmer-DeWitt provides rational news and commentary, skewers idiots and links to other valuable fodder.
  • Asymco, where Horace Dediu provides the absolute best numbers, graphs and insights into the greatest upheaval the tech industry has ever seen. Comments following his articles are lively but thoughtful and civilized.
  • Apple Insider. You might want to focus on learned, detailed editorials by Daniel Eran Dilger such as this one where he discusses Microsoft and Google (partially) shifting to an Apple-like business model. Daniel can be opinionated, animated even, but his articles come with tons of well-organized data.


Apple Buys Intel

hardware, Uncategorized By April 29, 2013 Tags: , 27 Comments


Getting rid of Samsung as a processor supplier and, at the same time, capturing the crown jewel of the American semiconductor industry. How could Apple resist the temptation to solve its cash problem and make history again?

Halfway through the second quarter of the 2013 fiscal year, most of Apple’s top execs meet at an undisclosed location (Eddy Cue’s chair is empty – he’s been called away to a Ferrari board meeting). They’re joined by a few trusted industry insiders: Bill “the Coach” Campbell, Apple and Intuit Director and adviser to Google’s founders, Mssrs. Page and Brin; Larry Sonsini, the Silicon Valley consigliere of more than three decades; and Frank Quattrone, the star investment banker with nine lives.

The meeting isn’t about the company’s dwindling profit margins. The smaller margins were expected and invited: The reduced-price iPad and heavy promotion of the “old” iPhone 4 as an entry-level product are part of the long term strategy of guarding Apple’s lower end (so to speak). And no whining about AAPL’s grim slide over the last six months, a problem that has only one solution: Apple needs to record a series of better quarters.

The problem of the day is, once again, what to do with Apple’s obscene pile of cash.

By the end of December 2012, the company held about $137B in cash (or equivalents such as marketable securities), including $23B from operations for the quarter.

CFO Peter Oppenheimer delivers the bad news: It looks like operations will disgorge another $35B this quarter. The stock buy-back and dividend program that was designed to bleed off $45B over the next few years (see this March 2012 Monday Note) won’t be enough if the company continues at this rate.

Apple needs something bigger.

Quattrone has been sitting quietly at the end of the table. He clears his throat and speaks:

Buy Intel.

Well, yes, Frank (says Tim Cook), we’ve been buying Intel processors for the Mac since 2005.

Not the chips. The company. The planets are aligned for Apple to strike a blow that will leave the industry forever changed. Make history, acquire Intel.

Quattrone has their attention. He unfolds the celestial calibration:

  • Apple needs to extract itself from the toxic relationship with Samsung, its ARM supplier.
  • Intel is the best large-scale silicon manufacturer in the world. They have the people, the technology, and the plant capacity to match Apple’s needs for years to come.
  • “But Intel doesn’t do ARM!” you say. Indeed, Intel has no interest in the fierce competition and small margins in the ARM-based SoC market. Joining the ARM fray would severely disrupt Intel’s numbers and infuriate Wall Street. But if Intel were to essentially “go private” as Apple’s semiconductor manufacturing arm (pun intended), catering to all of Apple’s x86 and ARM needs (and whatever else Bob Mansfield is secretly plotting), Wall Street would have no such objection.
  • Intel is flailing. The traditional PC market – Intel’s lifeblood – continues to shrink, yet the company does nothing to break into the ARM-dominated mobile sector. In the meantime, the company makes perplexing investments such as buying McAfee for $7.68B.
  • There’s a leadership vacuum at Intel. Six months after announcing CEO Paul Otellini‘s “retirement”, Intel’s Board has yet to find a replacement who can sail the ship in more competitive waters. Apple could commission Pat Gelsinger, a 30-year Intel veteran and former CTO (Intel’s first) who fled to VMware after his career stalled at Intel. Despite being a bit of a Bill Gates look-alike (once upon a time), Gelsinger is a real technologist who would fit well within Apple, especially if he were given the opportunity to really “go for” the ARM architecture instead of iteratively tweaking x86 devices.
  • Last but not least, Intel’s market cap is about $115B, eminently affordable. The company is profitable and generates a good deal of cash, even after the heavy capital expenditures required by its constant need to build new and expensive manufacturing plants.
  • …oh, and one more thing: Wouldn’t it be fun to “partner” more closely with Microsoft, HP and Dell, working on x86 developments, schedules and… pricing?

A lively discussion ensues. Imagine solving many of Apple’s problems with a single sweeping motion. This would really make Cupertino the center of the high-tech world.

It’s an interesting idea, but there will be obstacles, both cultural and legal.

The Coach goes first: “Knowing both of these companies more than a little bit, I can attest to the pride they have in their respective cultures. They’re both disinclined to reconsider their beliefs in any meaningful way. Merging these two dissimilar groups, shedding unnecessary activities such as McAfee and the like would be dangerously disruptive to Apple’s well-honed, cohesive culture. As a general rule, merging two large organization rarely succeeds… unless you consider merging airlines a success…”

Finally, the Consigliere speaks: “It’s a tempting fantasy, it will mean years of work for my firm and many, many others, but as a friend of the company, as a past confidant of your departed Founder, don’t do it. There will be too much legal trouble with the Feds, with competitors, with Intel partners. Most fantasies aren’t meant to be enacted.”

I won’t dwell on the reality of the meeting: I made it up as a way to explain why Apple really has no choice other than submit to another cash phlebotomy, this time for an additional $60B. And, as with real-world phlebotomies, the procedure will treat the problem, but it won’t cure it. With $30B from operations per quarter, the $60B lancing will have to be repeated.

Some read the decision to return gobs of cash to shareholders as an admission of defeat. Apple has given up making big moves, as in one or more big acquisitions.

I don’t agree: We ought to be glad that the Apple execs (and their wise advisers) didn’t allow themselves to succumb to transaction fever, to a mirage of ego aggrandizement held out by a potential “game changing” acquisition.

A final word on taxes. To return the additional $60B (for a total of $100B when including the ongoing program announced last year) through increased dividends and repurchased shares, Apple will have to borrow money.

Borrow? When they have so much cash?

Yes, thanks to our mangled tax code. As explained here, about $100B of Apple’s cash is stored overseas. If repatriated, it would be “heavily” (read “normally”) taxed. Like most US companies that have international operations, Apple plays complicated, entirely legal tax games that allow their international profits to be taxed at very low rates as long as the profits — and the resulting cash — stay outside Uncle Sam’s reach. And thus we have the apparent paradox of borrowing money when cash-rich.

The benefit of these tax code contortions is difficult to explain to normal humans — as opposed to legislators who allowed the loopholes.

All this now makes Apple a different company. Once a fledgling challenger of established powerhouses such as IBM, Microsoft or HP, it now makes “too much cash” and is condemned to a life of paying dividends and buying back shares — like the old fogies it once derided.




Apple is Losing The War – Of Words

hardware By March 17, 2013 Tags: 118 Comments


Besides its ads, Apple says very little, confident numbers will do the talking. This no longer works as others have seized the opportunity to drive the narrative. 

The day before Samsung’s big Galaxy S4 announcement, Apple’s VP of Marketing, Phil Schiller, sat down for an interview with Reuters and promptly committed what Daring Fireball’s John Gruber calls an unforced error:

“…the news we are hearing this week [is] that the Samsung Galaxy S4 is being rumored to ship with an OS that is nearly a year old,” [Schiller] said, “Customers will have to wait to get an update.”

Not so, as Gruber quickly corrects:

But it ends up the S4 is — to Samsung’s credit — shipping with Android 4.2.2, the latest available version. Not sure why Schiller would speculate on something like this based solely on rumors.

To Samsung’s delight, we can be sure, the interview received wide coverage in publications such as the Wall Street Journal and Bloomberg, just hours before the S4 was unveiled, complete with the month-old Android operating system.

This didn’t go over well. Even before the “year old Android version” was exposed as unfounded conjecture, reactions to Schiller’s trash talk were uniformly negative. Apple was accused of being on the defensive.

But, the true-believers ask, isn’t this something of a double-standard? What about the trash talk Samsung ads that depicted the iPhone as old-fashioned and its users as either cult sheep or doddering golden agers, weren’t they also a form of defensiveness? Why were Samsung’s mean-spirited ads seen as fun and creative, while Schiller’s slight misstep is called “defensive”?

Yes, Apple is held to a (well earned) different standard. Once a challenger with an uncertain future, Apple has become The Man. Years ago, it could productively poke fun at Microsoft in the great I’m a Mac, You’re a PC campaign (the full series of ads is here), but the days of taking potshots at the incumbent are over. Because of its position at the top, Apple should have the grace to not trash its competitors, especially when the digs are humorless and further weakened by error.

Schiller’s faux pas will soon be forgotten — it was a minor infraction, a five yard penalty — but it stoked my enduring frustration with a different sort of Apple-speak characteristic: The way Apple execs abuse words such as incredible“, “great“, “best when they’re discussing the company’s products and business.

My accusation of language molestation needs examples. Citing a page from W. Edwards Deming’s gospel, In God We Trust, Everyone Else Brings Data, I downloaded a handful of Apple earnings calls, such as this one, courtesy of Seeking Alpha, and began to dig.

[Speaking of language faux pas, Deming’s saying was shamelessly and badly appropriated — without attribution — by Google’s Eric Schmidt in a talk at MIT.)

Looking just for the words that emanated from the horses’ mouths, I stripped the intros and outros and the question parts of the Q&As, and pasted into Pages (which has, sadly, lain fallow since January 2009).  Pages has a handy Search function (in the Edit > Find submenu) that compiles a list of all occurrences of a word in a document; here’s what I found… .

  • Across the five earnings statements, some form of the word “incredible” appears 7, 9, 9, 11 and 9 times. The Search function offers a handy snippet display so you can check the context in which the word was used:

  • “Tremendous”, in its various forms, appears 12 times.
  • Amazing: 8
  • Strong: 58
  • Thrilled: 13
  • Maniacally focused: 2
  • All told, “great” appears 70 times. A bit more than half are pathetic superlatives (“great products”, “great progress”, “we feel great about…”), some are innocuous (“greater visibility”), but there’s an interesting twist: The snippet display showed that six were part of the phrase “Greater China”:

“Greater” or not, China is mentioned 71 times, much more than any other country or region I checked (Korea =  1, Japan = 6, Europe = 12).

(In the interest of warding off accusations of a near-obsessive waste of energy, I used a command line program to generate some of these numbers. Android? give me a second…4. Google=0, Facebook=4, Samsung=2.)

Now let’s try some “sad” words:

  • Disappoint: 0
  • Weak: 7. Six of these were part of “weak dollar”; the other was “weak PC market”. By contrast, only five or six of the 58 “strongs” referred to the dollar; the rest were along the lines of “strong iPad sales”.
  • Bad: 0
  • Fail: 0

The dissection can go on and on, but let’s end it with a comparison between more and less . Eliminating instances of less as a suffix (“wireless”), the result shows a remarkable unbalance: morewins each of the five sessions with a consistently lopsided score: 28 to 3…more or less.

But, you’ll object, what’s wrong with being positive?

Nothing, but this isn’t about optimism, it’s about hyperbole and the abuse of language. Saying “incredible” too many times leads to incredulity. Saying “maniacally focused” at all is out of place and gauche in an earnings call. One doesn’t brag about one’s performance in the boudoir; let happy partners sing your praise.

When words become empty, the listener loses faith in the speaker. Apple has lost control of the narrative; the company has let others define its story. This is a war of words and Apple is proving to be inept at verbal warfare.

In another of his sharply worded analyses titled Ceding the Crown, John Gruber makes the same point, although from a different angle:

The desire for the “Oh, how the mighty Apple has fallen” narrative is so strong that the narrative is simply being stated as fact, evidence to the contrary be damned. It’s reported as true simply because they want it to be true. They’re declaring “The King is dead; long live the King” not because the king has actually died or abdicated the throne, but because they’re bored with the king and want to write a new coronation story.

I agree with the perception, but blaming the media rarely produces results, we shouldn’t point our criticism in the wrong direction. The media have their priorities, which more often than not veer in the direction of entertainment passed as fair and balanced information (see Amusing Ourselves To Death by Neil Postman). If Apple won’t feed them an interesting, captivating story, they’ll find it elsewhere, even in rumors and senseless hand-wringing.

Attacking competitors, pointing to their weaknesses, and trumpeting one’s achievements is better done by hired media assassins. A company, directly or through a PR firm, engages oft-quoted consultants who provide the required third-party stats, barbs, and encomiums. This isn’t theorizing, I once was a director at a company, one of many, that used such an arrangement to good effect.

A brief anecdote: When Microsoft was Microsoft, Waggener Edstrom, the company’s PR powerhouse, was an exemplary propagandist. I distinctly remember a journalist from a white-shoe East Coast business publication coming to my office more than twenty years ago, asking very pointed questions. I asked my own questions in return and realized that the individual didn’t quite know the meaning of certain terms that he was throwing around. A bit of hectoring and cajoling, and the individual finally admitted that the questions were talking points provided by the Seattle PR firm. A few years later, I got a comminatory phone call from one of the firm’s founders. My offense? I had made an unflattering quip about Microsoft when it was having legal troubles with Apple (the IP battle that was later settled as part of the 1997 “investment” in Apple and Steve Jobs). PR firms have long memories and sharp knives.

The approach may seem cynical, but it’s convenient and effective. The PR firm maintains a net (and that’s the right word) of relationships with the media and their pilot fish. If it has the talent of a Waggener Edstrom, it provides sound strategic advice, position papers, talking points, and freeze-dried one-liners.

Furthermore, a PR firm has the power of providing access. I once asked a journalist friend how his respected newspaper could have allowed one of its writers to publish a fellacious piece that described, in dulcet tones, a worldwide Microsoft R&D tour by the company’s missus dominicus. “Access, Jean-Louis, access. That’s the price you pay to get the next Ballmer interview…”

Today, look at the truly admirable job Frank Shaw does for Microsoft. Always on Twitter, frequently writing learned and assertive pieces for the company’s official blog. By the way, where’s Apple’s blog?

The popular notion is that Apple rose to the top without these tools and tactics, but that’s not entirely true. Dear Leader was a one-man propagandastaffel, maintaining his own small network of trusted friends in the media. Jobs also managed to get exemptions from good-behavior rules, exemptions that seem to have expired with him…

Before leaving us, Jobs famously admonished “left-behind” Apple execs to think for themselves instead of trying to guess what he would have done. Perhaps it’s time for senior execs to rethink the kind of control they want to exercise on what others say about Apple. Either stay the old course and try to let the numbers do the talking, or go out and really fight the war of words. Last week’s misstep didn’t belong to either approach.

One last word: In the two trading days bracketing the Samsung S4 launch Schiller clumsily attempted to trash, Apple shares respectively gained 1%, followed by a 2.58% jump the day after the intro. Schiller could have said nothing before the launch and, today, let others point to early criticism of the S4’s apparent featuritis.


The Next Apple TV: iWatch

hardware By February 17, 2013 Tags: 108 Comments


Rumors don’t actual Apple products make, see the perennial Apple TV — and the latest iWatch rumors. This is an opportunity to step back, look at Apple’s one and only love –personal computers — and use this thought to sift through rumors. 

Every week brings new rumors of soon-to-be-released Apple products. The mythical Apple TV set is always a favorite: Gossip of an Apple buyout of troubled TV maker Löwe has sent the German company’s stock soaring. We also hear of a radio streaming service that will challenge Pandora and Spotify, and there’s the usual gaggle of iPhone, iPad, and Mac variations. More interesting is the racket surrounding Apple’s “stealth” projects:  an iWatch and other wearable devices (and “racket” is the right word — see these intimations of stock manipulation).

There is a way to see through the dust, to bring some clarity, to organize our thoughts when considering what Apple might actually do, why the company would (or wouldn’t) do it, and how a rumored product would fit into the game plan.

The formula is simple: Apple engineers may wax poetic about the crystalline purity of the software architecture, execs take pride in the manufacturing chain and distribution channels (and rightly so), marketing can point to the Apple Customer Experience (when they’re not pitching regrettable Genius ads or an ill-timed campaign featuring Venus and Serena Williams). But what really floats their bots, what hardens Apple’s resolve is designing, making, and selling large numbers of personal computers, from the traditional desktop/laptop Mac, to the genre-validating iPad, and on to the iPhone — the Very Personal Computer. Everything else is an ingredient, a booster, a means to the noblest end.

Look at Apple’s report to its owners: there’s only one Profit and Loss (P&L) statement for the entire $200B business. Unlike Microsoft or HP, for example, there is no P&L by division. As Tim Cook put it:

We manage the company at the top and just have one P&L and don’t worry about the iCloud team making money and the Siri team making money…we don’t do that–we don’t believe in that…

Apple’s appreciation for the importance and great economic potential of personal computers — which were invented to act as dumb servants to help us with data storage, text manipulation, math operations — may have been, at first, more instinctual than reasoned. But it doesn’t matter; the company’s monomania, it’s collective passion is undeniable. More than any other company, Apple has made computers personal, machines we can lift with our hands and our credit cards.

With these personal computer glasses on, we see a bit more clearly.

For example: Is Apple a media distribution company? Take a look at Apple’s latest 10-Q SEC filing, especially the Management Discussion and Analysis (MD&A) section starting page 21. iTunes, now reported separately, clocked $3.7B for the last quarter of 2012.  Elsewhere, Horace Dediu sees $13.5B for the entire year. A big number indeed, and, certainly, iTunes is a key to Apple’s success: Without iTunes there would have been no iPod, Apple’s “halo product“, proof that the company could come up with a winner.  Later, iTunes begat the App Store, a service that solidified the App Phone genre.

Some misguided analysts look at the numbers and argue that Apple ought to spin off iTunes. They use the old “shareholder value” gambit, but the “value” simply isn’t there: Horace Dediu puts iTunes margins in the 15% region, well below Apple’s overall 38%. iTunes is a hugely important means to the personal computer end, but it’s not a separate business.

How about Apple as a retail company? The success of the Apple Store is stellar, a word that’s almost too weak: The Apple Stores welcomed three times more visitors than all of the Disney parks, and generated more than $20B in revenue last year — that works out to an astonishing $6000 per square foot, twice as much as the #2 shop (Tiffany and Co.). But Apple’s 400 stores aren’t a business, they only exist to create an experience that will lead to more sales, enhanced customer satisfaction, and, as a consequence, increased margins.

Apple as a software company? No. The raison d’être for OS X, iOS, iWork, and even Garage Band is to breathe life into Apple hardware. By now, the calls for Apple to see the error of its ways, to not repeat the original sin of not licensing Mac OS, to sell iOS licenses to all comers have (almost) died.
During my first visit to Apple’s hypergalactic headquarters and warehouse in February 1981, I was astonished at the sight of forklifts moving pallets of Apple ][ software. The term “ecosystem” wasn’t part of the industry lingo yet, but I had witnessed the birth of the notion.
Apple had a much harder time building a similarly rich set of applications for the Macintosh, but the lesson was eventually learned, partly due to the NeXT acquisition and the adoption of object oriented programming. We now have a multi-dimensional macrocosm — a true ecosystem — in which our various forms of personal computing work together, share data, media, services.

Where does the current Apple TV device (the black puck, not the mythical TV set) fit into this scheme? Apple TV runs on a version of iOS, and it knows how to communicate with a Bluetooth keyboard — but that doesn’t mean the device is a personal computer. Perhaps Apple will (someday) provide a TV Software Development Kit (SDK) so developers can adapt existing iOS apps or write new ones. But I still see it as a lean-back device, as opposed to a lean-forward PC.

In any case, sales of the $100 black puck don’t move the needle. Four million Apple TVs were sold in 2012; even if ten million are sold this year — and that’s a very optimistic estimate — it won’t make a noticeable difference, at least not directly. Apple TV is a neat part of the ecosystem, it makes iPhones, iPads, Macs and our iTunes libraries more valuable, but it’s still just a member of the supporting cast.

This brings us back to the putative iWatch. Computer history buffs will recall the HP 01 watch. Buoyed by the success of its handheld calculators, including the programable HP 65 with its magnetic card reader, HP convinced itself it could make a calculator watch, introduced in 1977:

A technology tour de force, fondly remembered by aging geeks, but a market failure: too expensive, too hard to use, ill-fitting distribution channels.

Apple is in a different spot. Today, you can find a number of iPod watchbands such as this one:

It’s hard to imagine that Apple would merely integrate an existing accessory into a new iPod. Sales of the iPod proper are decelerating, so the iPod-as-iWatch could give the line a much needed boost, but it’s difficult to reconcile the rumors of “100 people” working on the project if it’s just a retrofit job. Is Apple working on an iWatch that can be experienced as an Even More Personal personal computer — an “intimate computer”? If so, many questions arise: user interface, sensors, iOS version, new types of apps, connection with other iDevices… And, of course price.

This would be much more interesting than the perennially in-the-future Apple TV set. Of course, iWatch and Apple TV aren’t necessarily mutually exclusive. If the Löwe buyout rumors are true, Apple could do both — the company could develop its own watch device and repurpose Löwe’s TV. (I still doubt the TV set part, as opposed to enhancing the black puck.)

But once we understand what Apple’s only business is, and that the related software, retail, and services are simply part of the supporting cast, Apple’s attitude towards big acquisitions becomes clearer. Apple isn’t looking at buying a big new business, it already owns The Big One. So, no movie studio, no retail chain or cable company, no HP or Dell, or Yahoo!. (But… a big law firm, perhaps?) Integrating a large group of people into Apple’s strong, unbending culture would, alone, prove to be impossible.

A small acquisition to absorb technology (and talented people) makes sense. The cultural integration risks remain, but at a manageable scale, unlike what happened to Exxon in the early eighties when it burned $4B (that was real money, then) in a failed attempt to become an information systems company — you know, the Oil of the Twenty-First Century.

Let’s just hope Apple doesn’t talk itself into a “because we can” move.



Apple Ads Only Samsung Could Love

advertising By September 9, 2012 Tags: 8 Comments

Over the years, Apple has produced a number of memorable TV commercials. The “1984” Super Bowl spot, with its dystopian noir and portrayal of Big Blue as Big Brother, is arguably the most celebrated commercial ever made. This bit of sixty-second cinema by Ridley Scott (now Sir Ridley) — director of epoch-making films such as The Duellists, Alien, and, my favorite, Blade Runner — was, and still is, mesmerizing. After the ad was screened for the first time at Apple’s Fall 1983 Sales Meeting in Honolulu the crowd sat in stunned silence… for about three seconds.

When Steve Jobs rebooted Apple in 1997, he needed a rallying cry…and he found one that still resonates: Think Different. Richard Dreyfuss narrated the campaign’s “The Crazy Ones” commercial, but there’s another, never-aired version voiced by Jobs that still moves me to tears. (Last year, on the occasion of Jobs’ demise, AdWeek edited the famous commercial and spliced in a smiling picture of the young Steve at the ending, right after the image of the child opening her eyes… )

Then there’s the long and well-loved “I’m A Mac, You’re a PC” series, featuring John Hodgman and Justin Long (the link gives you access to all 66 TV spots of this historic campaign). It’s more than good fun, it’s a great, lasting example of a classic (a polite way of saying apparently “unoriginal”) strategy: Us vs. Them. The ads are brilliant, consistent, cleanly executed with simple, unencumbered visuals and a sly, understated humor. A joy.

Occasionally, Apple’s sense-of-commercial misses the mark, such as in this PowerMac G4 dud that features tanks and a US Army sergeant voice-over. But the missteps have been few; Apple advertising is typically well thought out and well done. Good ideas, near flawless execution.

That brings us to today. Over the past few months, Apple has put out a series of commercials that fall into two categories: a good idea poorly executed, and the great execution of a troubling concept.

First, we have the “Genius” ads. The Apple Store Geniuses provide, undoubtedly, the best tech support in the industry, leading the company’s products to top scores in customer satisfaction surveys. An ad campaign that promotes this advantage while poking subtle fun at the immodesty of the “Genius” designation should have been a straight shot. The idea lends itself to a series of humorous vignettes that end with a relieved customer, a show back on the road, a CEO in distress saved from embarrassment, and so on.

But in practice, as you can see for yourself here, here, and here, the ads fail. The worthy idea is ruined by stories that feel forced and overly cute, the message falls far short of the clarity we expect from Apple’s marketing campaigns… and they’re just not funny. Even the production seems cheap and hurried, right down to continuity problems: A sleeping Genius, garbed in his official blue t-shirt, is roused by a panicked knock on the door and appears a split-second later… with his badge-cum-business card holder now draped around his neck.

The ads were widely panned and, soon, mercifully yanked.

In the more troublesome category, we have the Siri commercials featuring celebrities Zooey Deschanel, Samuel L. Jackson, John Malkovich, and Martin Scorsese. They’re smart and well-produced, they’re flatteringly imitable — and Samsung must love them.


Because they’re pernicious: They dilute the focus, they detract from Apple products’ own well-deserved and well-earned celebrity.

As a comparison and a template, regard the series of Louis Vuitton ads produced by the great photographer Annie Leibovitz. What, or rather, who do you see? Sean Connery, Catherine Deneuve, Michael Gorbachev, Roger Federer, Keith Richards, Muhammad Ali…

… with a Louis Vuitton bag.

The message is cynical but clear: Our bag is no better than a Gucci or an Hermès, but if you sport our logo, you’ll have something in common with iconic athletes, artists, intellectuals… You, too, can be like Mikhail Gorbachev or Michael Phelps… if only in our accoutrements. (The Annie Leibovitz campaign is pompously called “Core Values” — or, given the roster of subjects, is this unconscious honesty?).

This is an exceedingly well-thought out and executed plan; Louis Vuitton is an astute, superbly managed company, at the top of its game. But what does it say about the iPhone if Apple feels it has to use Louis Vuitton-like tactics to entice consumers?

Until the Siri celebrity campaign, Apple products had always been the focus of Apple marketing. The product is the hero, the ad extolls what it does and how it does it. The recourse to celebrity endorsement sends a new message: The product isn’t strong enough, it needs the propinquity of the famous. And that message becomes even more dangerous because the ads are so slick, so well executed. (The Scorsese ad even includes a sweet visual joke that refers to the director’s 1976 Taxi Driver movie. A nice touch…but it has nothing to do with Apple.)

That’s why Samsung must have an extra reason to smile when they see Ms. Deschanel dance in her pajamas, and that’s why these ads should be yanked and why the celebrity strategy — a first for Apple if memory serves — should be reconsidered.

And, then, at the risk of piling on, there is the product being promoted: Siri.

Doubtless, it works for some people, but how many?

How many give up after a few tries?

I recently asked an Apple insider that very question. The individual thought a moment but couldn’t recall seeing a Siri-using colleague.

There is a difference between a beta product such as a spreadsheet exhibiting annoying but reasonably well-defined bugs — and a beta like Siri that “kind of works” and discourages some users while pleasing others.

I have no doubt Apple has thought out ambitious long term plans for Siri, plans that might unfold in time and make Siri as universally and reliably usable as a other iPhone functions and apps. But, for the time being, besides their feeble Vuitton-like recourse to celebrities, the slick Siri ads could be perceived as misleading. Another reason to shelve them.

As for the Genius campaign: Fire the ad agency, but keep the concept. Press the reset button, keep the message, rewrite the ads. The idea has potential for a series of effective and fun ads.


Apple Never Invented Anything

design, hardware By September 2, 2012 Tags: 111 Comments

Monsieur Voiture, you hopeless [redacted French slur], you still can’t prepare a proper mayonnaise! I’ll show you one last time while standing on one foot…”

[Bear with me, the connection with today’s title will become apparent in a moment.]

The year is 1965, I’m midway through a series of strange jobs that I take between dropping out of college and joining HP in 1968 — my “psychosocial moratorium”, in California-speak. This one approaches normal: I’m a waiter in a Paris restaurant on rue Galande, not far from Notre-Dame.

Every day, before service starts, it’s my job to make vinaigrette, remoulade, and mayonnaise, condiments for the hors d’oeuvres (French for appetizers) I’ll wheel around on a little cart — hence the Monsieur Voiture snicker from the chef.

The vinaigrette and remoulade are no problem, but the mayonnaise is not my friend: Day after day, my concoction “splits” and the chef berates me.

So now, pushed beyond limit, he grabs a cul-de-poule (a steel bowl with a round bottom), throws in the mustard, vinegar, and a bit of oil, cracks an egg on the bowl’s edge, separates and drops the yolk into the mixture — all with one hand. I see an opportunity to ingratiate myself: Obligingly, I reach for a whisk.

“No, all I need is a fork.”

Up on one foot, as promised, he gives the mixture a single, masterful stroke — and the mayonnaise begins to emulsify, I see the first filaments. The chef sniffs and walks away. I had been trying too hard…the rest was obvious: a thin trickle of oil, whisk calmly.

Clearly, the episode left its mark, and it came back to mind when I first saw the iPad.

For thirty years, the industry had tried to create a tablet, and it had tried too hard. The devices kept clotting, one after the other. Alan Kay’s Dynabook, Go, Eo, GridPad, various Microsoft-powered Tablet PCs, even Apple’s Newton in the early nineties….they didn’t congeal, nothing took.

Then, in January 2010, Chef Jobs walks on stage with the iPad and it all becomes obvious, easy. Three decades of failures are forgotten.

This brings us to last week’s animated debate about Apple’s talent for invention in the Comments section of the “Apple Tax” Monday Note:

“…moving from stylus to touch (finger) was a change in enabling technology, not some invention by Apple – even gesture existed way back before the iPhone. Have an IPAQ on my desk as a reminder – a product ahead of the implementing technology!
Unfortunately Apple have run out of real innovation…”

In other words: “Nothing new, no innovation, the ingredients were already lying around somewhere…”. The comment drew this retort from another reader:

“iPaq as a precursor to iPad?
Are you on drugs? Right now?”

Drugged or sober, the proud iPaq owner falls into the following point: The basic ingredients are the same. Software is all zeroes and ones, after all. The quantity and order may vary, but that’s about it. Hardware is just protons, neutrons, electrons and photons buzzing around, nothing original. Apple didn’t “invent” anything, the iPad is simply their variation, their interpretation of the well-known tablet recipe.

By this myopic logic, Einstein didn’t invent the theory of relativity, Henri Poincaré had similar ideas before him, as did Hendrik Lorentz earlier still. And, come to think of it, Maxwell’s equations contain all of the basic ingredients of relativity; Einstein “merely” found a way to combine them with another set of parts, Newtonian mechanics.

Back to the kitchen: Where does talent reside? Having access to commonly available ingredients or in the subtlety, the creativity — if not the magic — of their artful combination? Why are the great chefs so richly compensated and, yes, imitated? Alain Ducasse, Alain Senderens, and Joel Robuchon might be out of our price range, but Pierre Herme’s macarons are both affordable and out of this world — try the Ispahan, or the salted caramel, or… (We’ll note that he opened his first boutique in Tokyo, where customers pay attention to details.)

In cars, Brand X (I don’t want to offend) and BMW (I don’t drive one) get their steel, aluminum, plastics, rubber, and electronics from similar — and often the same — suppliers. But their respective chefs coax the ingredients differently, with markedly different aesthetic and financial outcomes.

Did IBM invent the PC? Did HP invent the pocket calculators or desktop computers that once put them at the top of the high tech world? Did Henry Ford invent the automobile.

So, yes, if we stick to the basic ingredients list, Apple didn’t invent anything…not the Apple ][, nor the Macintosh, not the iPod, the iPhone, or the iPad…to say nothing of Apple Stores and App Stores. We’d seen them all before, in one fashion or another.

And yet, we can’t escape a key fact: The same chef was involved in all these creations. He didn’t write the code or design the hardware, but he was there in the kitchen — the “executive chef” in trade parlance — with a unique gift for picking ingredients and whipping up unique products.

As a postscript, two links:

— Steve Wildstrom valiantly attempts to clear up the tech media’s distortions of the patents that were — and weren’t — part of the Apple-Samsung trial:

Whatever happens on appeal, I think the jury did an admirable job making sense of the case they were given. They certainly did better than much of the tech media, which have made a complete mess of the verdict.

— This August 2009 Counternotions post provides a well-reasoned perspective on the iPhone’s risks and contributions, as opposed to being a mere packaging job. (The entire Counternotions site is worth reading for its spirited dissection of fashionable “truths”.)



The Apple Tax, Part II

Uncategorized By August 26, 2012 Tags: , 66 Comments

Once upon a time, Steve Ballmer blasted Apple for asking its customers to pay $500 for an Apple logo. This was the “Apple Tax“, the price difference between the solid, professional workmanship of a laptop running on Windows, and Apple’s needlessly elegant MacBooks.

Following last week’s verdict against Samsung, the kommentariat have raised the specter of an egregious new Apple Tax, one that Apple will levy on other smartphone makers who will have no choice but to pass the burden on to you. The idea is this: Samsung’s loss means it will now have to compete against Apple with its dominant hand — a lower price tag — tied behind its back. This will allow Apple to exact higher prices for its iPhones (and iPads) and thus inflict even more pain and suffering on consumers.

There seems to be a moral aspect, here, as if Apple should be held to a higher standard. Last year, Apple and Nokia settled an IP “misunderstanding” that also resulted in a “Tax”…but it was Nokia that played the T-Man role: Apple paid Nokia more than $600M plus an estimated $11.50 per iPhone sold. Where were the handwringers who now accuse Apple of abusing the patent system when the Nokia settlement took place? Where was the outrage against the “evil”, if hapless, Finnish company? (Amusingly, observers speculate that Nokia has made more money from these IP arrangements than from selling its own Lumia smartphones.)

Even where the moral tone is muted, the significance of the verdict (which you can read in full here) is over-dramatized. For instance, see this August 24th Wall Street Journal story sensationally titled After Verdict, Prepare for the ‘Apple Tax’:

After its stunning victory against rival device-maker Samsung Electronics Co., experts say consumers should expect smartphones, tablets and other mobile devices that license various Apple Inc., design and software innovations to be more expensive to produce.

“There may be a big Apple tax,” said IDC analyst Al Hilwa. “Phones will be more expensive.”

The reason is that rival device makers will likely have to pay to license the various Apple technologies the company sought to protect in court. The jury found that Samsung infringed as many as seven Apple patents, awarding $1.05 billion in damages.

The $1B sum awarded to Apple sounds impressive, but to the giants involved, it doesn’t really change much. Samsung’s annual marketing budget is about $2.75B (it covers washer-dryers and TVs, but it’s mostly smartphones), and, of course, Apple is sitting on a $100B+ cash hoard.

Then there’s the horror over the open-ended nature of the decision: Apple can continue to seek injunctions against products that infringe on their patents. From the NYT article:

…the decision could essentially force [Samsung] and other smartphone makers to redesign their products to be less Apple-like, or risk further legal defeats.

Certainly, injunctions could pose a real threat. They could remove competitors, make Apple more dominant, give it more pricing power to the consumer’s detriment…but none of this is a certainty. Last week’s verdict and any follow-up injunctions are sure to be appealed and appealed again until all avenues are exhausted. The Apple Tax won’t be enforced for several years, if ever.

And even if the “Tax” is assessed, will it have a deleterious impact on device manufacturers and consumers? Last year, about half of all Android handset makers — including ZTE, HTC, Sharp — were handed a Microsoft Tax bill ($27 per phone in ZTE’s case), one that isn’t impeded by an obstacle course of appeals. Count Samsung in this group: The Korean giant reportedly agreed to pay Microsoftbetween $10 and $15 – for each Android smartphone or tablet computer it sells.” Sell 100M devices and the tax bill owed to Ballmer and Co. exceeds $1B. Despite this onerous surcharge, Android devices thrive, and Samsung has quickly jumped to the lead in the Android handset race (from Informa, Telecoms & Media):

Amusingly, the Samsung verdict prompted this gloating tweet from Microsoft exec Bill Cox:

Windows Phone is looking gooooood right now.

(Or, as AllThingsD interpreted it: Microsoft to Samsung. Mind if I Revel in Your Misfortune for a Moment?)

The subtext is clear: Android handset makers should worry about threats to the platform and seek safe harbor with the “Apple-safe” Windows Phone 8. This will be a “goooood” thing all around: If more handset makers offer Windows Phone devices, there will be more choices, fewer opportunities for Apple to get “unfairly high” prices for its iDevices. The detrimental effects, to consumers, of the “Apple Tax” might not be so bad, after all.

The Samsung trial recalls the interesting peace agreement that Apple and Microsoft forged in 1997, when Microsoft “invested” $150M in Apple as a fig-leaf for an IP settlement (see the end of the Quora article). The interesting part of the accord is the provision in which the companies agree that they won’t “clone” each other’s products. If Microsoft could arrange a cross-license agreement with Apple that includes an anti-cloning provision and eventually come up with its own original work (everyone agrees that Microsoft’s Modern UI is elegant, interesting, not just a knock-off), how come Samsung didn’t reach a similar arrangement and produce its own distinctive look and feel?

Microsoft and Apple saw that an armed peace was a better solution than constant IP conflicts. Can Samsung and Apple decide to do something similar and feed engineers rather than platoons of high-priced lawyers (the real winners in these battles)?

It’s a nice thought but I doubt it’ll happen. Gates and Jobs had known one another for a long time; there was animosity, but also familiarity. There is no such comfort between Apple and Samsung execs. There is, instead, a wide cultural divide.