ThoughtPiece: Apple & BlackBerry - Great minds think alike

It’s Wednesday, that means that our ringer of a contributor has corresponded once again and we can bring you another ThoughtPiece. This week, Thought looks into the Apple and BlackBerry methods of moving forward in the wireless world. Does one edge out the other? Read on. Thanks, Thought.

ThoughtPiece: Apple & BlackBerry - Great minds think alike

This past weekend I, like so many others, visited a local mall to do a little holiday shopping and people watching. I’m fortunate enough that this mall has an Apple store, in which I usually seek refuge while my wife does her shopping. What amazes me is that this store is always packed with people no matter what time of the year and is easily one of the most popular in the entire mall. Clearly, Apple is doing something right and capturing the imagination of the public like few other companies. How do they do it?

I believe a lot of their magic traces itself to their business model. Remember, business models usually determine the fate of product models. Apple uses what is called an end-to-end model, and Walt Mossberg explained it very well a while ago in his Wall Street Journal article:

“For many years, there have been two models of how to make computers and other digital devices. One is the component model, championed by Microsoft. The other is the end-to-end model, championed by Apple.

In the component model, many companies make hardware and software that run on a standard platform, creating inexpensive commodity devices that don’t always work perfectly together, but get the job done. In the end-to-end model, one company designs both the hardware and software, which work smoothly together, but the products cost more and limit choice.”

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Comments [35 Responses]

Thought
November 29th, 2006 at 11:11 am

Lloyd: thanks for your comments…certainly, you make some interesting points.

First, I think you underestimate Apple’s strength in the market and what that means. You mention Dell…well, look at how the stocks have performed over, let’s say, the last 3 years…Apple stock is up about 800%, Dell is flat, and actually down a small percentage. The same comparison holds true with Microsoft stock. Clearly the trends are in Apple’s direction…they must be doing something right.

Apple is currently number 159 on the list of Fortune 500 companies…that hardly makes it a niche player. And the iPod does set the standard for, as you point out, the DIGITAL audio market, which is clearly the future of audio. So if Apple dominates in what is clearly the future direction of audio, that is very significant.

As for the stores, they get far more than just foot traffic, they generate gangbuster sales figures. In May of this year a report came out that the stores are generating over $1 Billion in sales per quarter, and undoubtedly that has gone up since then.

Here’s what Wired Magazine reported in May:
“Just two years ago, the stores were making $1 billion a year — and at that time they were the fastest-growing retail operation in history, beating the previous record holder The Gap to $1 billion annual sales in just three years, according to Ron Johnson, the executive in charge of Apple’s retail operations. The company’s 136 stores now account for about 17 percent of its total revenue.

Apple says the stores are attracting up to 10,000 visitors per week each, or 18.1 million visitors a year in total.”

My fascination with Apple is not to suggest that all companies should copy all things Apple, but that indeed there are great things to learn from this company. Apple products do define the gold standard for design and ease of use, and in doing so, clearly captures the public’s imagination and has huge influence on the market. Any company would be foolhardy to not examine what can be learned from Apple.

Thought
November 29th, 2006 at 8:03 pm

Lloyd: your comments regarding the lack of significance of stock valuations is, to put it bluntly, flat wrong. Actually, the question of how well stock prices reflect accurately all available information (called market efficiency) is one that has been the subject of intense study and debate within the academic and financial communities. The reality is that equity markets are neither perfectly efficient nor completely inefficient. All markets are efficient to some extent, but some are more efficient than others. Most researchers consider the market for large capitalization stocks (of which Apple clearly qualifies) to be very efficient. However, the market for for small cap startup stocks, as well as for venture capital, tend to be less efficient. Hence, the bursting of the stock market bubble you allude to. As to those companies like Enron, where there was deliberate fraud, obviously that is a case of information being deliberately distorted and so markets cannot be efficient.

As you mention we are in a market that has come out of that bubble and those incidents of corporate fraud, and so Apple’s performance is even more remarkable given that. To atempt to conflate the behavior of a stock like Apple, with that of those dotcom startups that went bust, or the frauds like Enron or Worldcom, does a huge disservice.

Because there are short term disruptions in equity markets does not mean that equity markets have no meaning, esp. in the long term, and esp with large cap stocks like Apple.

You will have a hard time finding any finance expert to agree with your thesis that the markets are meaningless. They may not be perfect, but they are far from meaningless.

As to the growth rate of digital audio and the adoption rate of the iPod, again, you will find few who agree that the growth rate has not been impressive. Try starting a new market and see how far you go. The story of the iPod is one of the greatest business success stories of this new millenia so far.

Finally, of course my statement regarding the merits of design and usability of Apple products is a subjective one, but that’s because issues of design and usability, are by definition, subjective topics. However, if you took a poll, I am willing to bet that far more people would agree with my assessment than with yours. In fact, a poll has been taken, and that is the poll taken in the marketplace, where people vote with their money, and here people more nearly agree with my sentiment.

Lloyd, you certainly are entitled to your opinions, but they are most distinctly in the minority. However, I do thank you for engaging in a stimulating discussion.

Thought
November 29th, 2006 at 11:50 pm

Lloyd: in your first post, you held up Dell as a model to follow, and I pointed out that Apple had significantly outperformed Dell over the last few years as a stock. You then proceeded to discount the entire stock market and write off its implications. No matter how imperfect the market may be, the fact is that Apple outperforming Dell by a factor of 8 over the last 3 years (and a factor of 6 over the last 5) shows an indisputable trend favoring the Apple approach.

As for digital audio players, I don’t know where you get your numbers. You claim that the market for DAP’s is not all that impressive, yet according to In-Stat (and this was from an April 2006 report titled “Portable Digital Audio Players: Market Growth Exceeds Expectations”):
“The worldwide market for Flash-based and Hard Disk Drive (HDD)-based players reached 140 million units in 2005, up from 35 million units in 2004. Expectations for this market are high, with In-Stat forecasting unit shipments to reach 286 million by 2010.”

You keep citing that number of 15 million households with iPods, yet you do not define how many people make up a household. If you allow, for let’s say, 4 people per household, well, that makes for alot more people using iPods. You seem to conflate “households” with individual users.

As for iPod sales peaking in Q1 and being in decline: that is making an error of the most basic type. Of course sales peaked in Q1 because for Apple Q1 ended Dec 31 2005 and so that quarter took into account the sales during last year’s Holiday season, the time of the year when sales peak. I will bet you right now that sales of the iPod for this year’s holiday season exceed the stellar results from last year’s. Your conclusion is invalid, because you need to compare comparable quarters year to year, say, for instance Q1 2007 with Q1 2006. You instead compared Q1 2006 with Q2 2006, etc…and of course that is very misleading.

As for comparing Apple to Nokia, Motorola, Sony…well, that’s a bit absurd since in most markets they do not compete. I will only say that Sony’s DAP’s do not sell but a fraction of the number that the iPod does. With Microsoft, it is true that in the PC market, Windows machines dominate, which I never disputed. But that is largely because Windows became locked in as the de facto standard during an earlier time when other factors entered into play. As noted in the article, in this post PC era, the standards are a bit different, and tend to favor Apple. It is interesting to note that Apple has had a much better growth rate (and hence, their stock has performed better) than any of the companies you mentioned.

Therefore, I would posit that the marketplace is indeed rewarding Apple, rather handsomely, and if you don’t want to look at their stock price, look at their sales, profits, etc.

That doesn’t mean that there are not other companies of merit out there, but my article never said that. You simply use that as a straw man argument.

My basic thesis holds true: Apple achieving noteworthy successes, largely due to its device model. RIM is in many respects following the same device model, and is also achieving some great successes.

Thought
November 30th, 2006 at 9:15 am

Lloyd: Granted, Dell is still a larger company than Apple, but Apple’s sales growth has been far greater than Dell’s over the last few years. That is a significant trend for such a large company. Your analogy with the 10/1000 units really doesn’t hold water, because, again, we are dealing with far larger companies here.

I would also argue that the Apple approach to product design, which I am really dealing with, is still distinctly different than the Dell approach.

As for statistics on DAP sales, I cited a very respected industry source, while you have yet to cite your sources for sales numbers. If you choose to disregard them because you cannot understand them, then that is your choice.

Regarding the use of the household statistic: I grant you that this is a better number when dealing with household items like TVs, but less of a barometer when dealing with portable items like iPods, cell phones, etc.

Your statistic regarding Q1 sales and the assertion that sales have peaked is still misleading, because, again, any company compares same quarter to quarter on a year to year basis.

The phenomenon of sales peaking in holiday sales quarter still holds true. In previous years Apple bucked that trend because of the phenomenal growth rate of sales of the iPod product.

I still make the same wager with you: compare
Q1 2007 sales with Q1 2006 sales and I bet you that you will see a substantial increase. Also, if you want to compare quarters sequentially, what will you say when Q1 2007 sales far exceeds Q4 2006 sales? You will probably use the excuse of saying, well, that was only due to the holiday shopping season.

As to Nokia, Motorola, Sony…you are correct in that once Apple releases their iPhone they will be competing directly with these companies. And I guarantee you that all of these companies are going to be watching anxiously to see what Apple does, because they know that Apple has a good potential to grab market share very quickly from them.

Sure, these companies are larger, but to assert that “there isn’t any room for growth left” for them is absurd. I guarantee you that the boardrooms of these companies do not believe that. There is plenty of room for growth in all types of areas, so if they are not realizing such growth it’s because they haven’t figured it out yet. If any CEO of these companies told their board that they’ve topped out because there isn’t any room for growth left, they would be fired in a heartbeat.

However, again, you create a straw man argument. In my original article I never once asserted that Apple was the only worthy company, nor that other companies didn’t have their virtues. I only asserted the obvious: that Apple has indeed been on a hot streak lately, and is doing something right. Given the way they create their products and the fact that RIM uses in many ways the same model, it makes for an obvious comparison.

If you want to believe that Apple has achieved nothing of consequence, despite its billions of dollars in sales, then that is your right. If you want to believe that the design of Apple products is of no significance, and generates no excitement among people, then that is your right. If you want to believe that digital music players are going nowhere, then that is your right. If you want to believe that the earth is flat, or that we never landed men on the moon, then that is your right as well.

Steve St. Pierre
November 30th, 2006 at 3:17 pm

This is such a great read guys, thanks.

L. M. Lloyd
December 1st, 2006 at 4:56 am

Ok, at this point you seem to just be randomly taking things I said out of context, and making any inchoate argument you can throw together about how I am wrong, and Apple is incredible.

Let me try to refocus the discussion. Your premis is that Apple has some special “end-to-end” design methodology, that makes them special among all the companies in the tech sector, and means they are the company to watch in any market they choose to enter. To support this, you point to the iPod, which you claim “is one of the greatest business success stories of this new millenia so far.” You then imply that the iPhone is going to be the same kind of “success” and that if RIM wants to be able to compete they have to be more like Apple.

Now, for any of this to be anything more than a love letter to Apple, a few things have to be true.

1: This end-to-end design philosophy that you attribute to Apple (and seem to claim everyone is copying from Apple), needs to in fact describe Apple, and be at least in some part attributable to Apple.

2: The iPod needs to be the runaway success you claim it to be.

3: There needs to be some evidence that Apple is somehow ahead of the pack with their supposedly unique design philosophy.

As far as 1 goes, I do not understand (perhaps because you have not throughly explained it) how Apple’s “end-to-end” design philosophy is somehow completely different to what Sony has been doing with video since before personal computers even existed, yet quite similar to what RIM is doing. In fact, aside from the idea of including software and a distribution infrastructure tied to software, something that Sony, Nintendo, Sega, and Atari have been doing since long before the iPod ever existed, and mainframe and Mini vendors were doing long before Apple ever existed, I’m not even sure what you are considering special or unique about this “end-to-end” philosophy. Nor do I know why it is you think that Nokia and Motorola (both of whom not only develop mobile phones, but the infrastructure on which those phone operate) are somehow using what you seem to call a “component” philosophy. In fact, you seem to just be taking what Mossberg said, and saying “Mossberg says it, and that’s good enough for me. It must be true, or he wouldn’t be allowed to print it.”

As to 2, I would first like to know exactly what it takes to qualify as “one of the greatest business success stories of this new millenia so far” in your mind, because from where I’m sitting it would seem that all it needs is to be done by Apple. MP3 players have been around since ‘97, and the iPod has been around from ‘01, in all that time, dedicated DAPs have gone from nothing, to a 10% worldwide market share with Apple have somewhere around 76% of that 10%, according to NPD. That isn’t bad, but it is hardly a remarkable adoption rate for a product category that has been on the market for almost 10 years. For reference, HDTV is now at about a 15% market penetration in the US, and DVD reached a 33% market penetration in 4 years in the US. Mobile phones on the other hand, are in that rarefied area with TV, where 80% of the population of the planet has a mobile phone, and in Europe, most of Asia, and America they are hovering very close to 100% penetration! Now, as you have pointed out, if you include every device capable of playing digital audio, then that market share number goes up, but then Apple’s share of that market goes down accordingly to 16%.

The fact of the matter is that when we are specifically talking about the mobile phone market, I can’t see how you can put so much stock in the success of the iPod, with 39.5 million sold this year, when Nokia and Motorola are selling that many units of a single model in a single quarter!

As far as your arguments as to how influential the iPod is, you are quite honestly just speaking out of your depth, and parroting what you have heard from fluff sources. I live in Hollywood, and work in the entertainment industry, and I can tell you, Variety and the Hollywood Reporter have been doing very in-depth coverage of the iPod, since everyone in LA has one, and they all love Apple. The reality of the situation is that CDs are still overwhelmingly outselling iTunes, and the iTunes video store has been a complete flop. I already know you are going to freak out, and bandy about the 1.5 billion songs and 45 million videos as though that is a big deal, but I don’t think you realize the scale of the entertainment industry. ABC had more than 45 million people download Lost from their site in ONE MONTH! That’s right, one show on ABCs site had as many downloads in ONE MONTH as the entire number of video downloads from iTunes since it started selling video. And you know what else? Due to the embedded advertising (and how big a cut Apple takes for iTunes) they are making more money from those “free” downloads than they ever have from iTunes video store. As far as the particular case of The Office goes, the Nielsen study in iPod use pretty much debunks that theory (and Nielsen knows a thing or two about ratings) as it turns out that only 15.8% of all iPod owners have ever played a single video on their device, and that isn’t enough people to account for the bump in the ratings of The Office. In fact, the exact quote by the Nielsen group is on this whole topic of the importance of the iPod in the video market is, “The data could raise some profound questions about assumptions made regarding consumer behavior; specifically, whether mobile devices can truly encourage a mass audience to adopt mobile video consumption after generations of generally homebound, large-screen viewing habits.”

Now, it is true that iTunes is the most successful online music store, and the iPod is the most successful dedicated DAP, but the real question is, how impressive is that feat? Pioneer had the most successful LaserDisk players, that didn’t equate to anything, because the format never made it past a 10% market penetration. The ultimate “greatest business success stories of this new millenia” is going to be who can make digital downloadable content profitable on a mass market scale, not to 10% of the market. Apple has had several years to try, and still haven’t made it happen despite all the hype.

As to 3, despite all these issues, you still maintain (as far as I can tell almost entirely based on stock performance and the hype around the iPod) that Apple has something special that makes them uniquely suited as a role model for anyone wanting to stay competitive in the electronics market. The problem is, the electronics market didn’t just start yesterday. All the companies I named previously, got where they are for a reason, and Apple is where it is right now for a reason. It is all well and good that Walt Mossberg thinks the entire electronics industry has somehow changed in a way that favors Apple over everyone else, but I fail to see the evidence of that. Nokia is still selling the most phones, Microsoft still controls the OS market, and Sony is still the largest electronics manufacturer in the world. To say that just because one company has one hit product, there has clearly been some sea change in the entire electronics industry, seems at best like spurious logic, and at worst the wishful thinking of a biased zealot. The only evidence of this supposed shift in the entire industry (aside from the success of the iPod) is some highly questionable conclusions drawn about the motivation of Microsoft in how they structured the X-Box unit. As an aside, the entire X-Box model owes nothing to Apple, and a lot to Sega’s Dreamcast, which is where the console, X-Box Live, and the entire way they handle the unit has its roots.

It seems to me you have built a house of cards that at its base first must assume that the iPod is the most important piece of electronics ever created, and from there piles on questionable conclusion after questionable conclusion, until you end up at a dizzying peak of irrationality where Apple is somehow going to reshape the entire world by selling a pocket music player. I tend to think the world is a bit less fanciful, and if a company wants to succeed at making phones, they should try to pay attention to the companies selling phones to 80% of the world’s population, not copy a company that has had one hit product in 30 years.

L. M. Lloyd
December 4th, 2006 at 6:54 am

Oh please, a bet? Are you sure you don’t want to double-dog-dare me, or maybe we could take it outside and settle it like men? Any possibility that maybe once in the history of the Internet, there might be a critical discussion of Apple without this childish chest-thumping male bravado? No, of course not, because to imply anything short of perfection from Apple would seem to be an assault on your very manhood!

Anyway, I have no problem at all saying that most likely you will see a marginal increase in sales (maybe up to around 9 million units), but nothing anywhere close to the 14 million they saw Q1 last year.

As far as the “bottom line is that iTunes and Apple are indeed shaking up the entire media content market” comment, please quit believing every bit of hype you read, and look at some hard numbers! Warner has had the most success in digital sales so far, and all of their digital sales from all sources (including iTunes) still only makes up 12% of their music sales revenue. The numbers for video (even Disney) aren’t even close to that good. You seem to be getting consistently confused by two different things.

1: The iPod is seen as ‘hot’ and ‘hip’ right now, and Hollywood is always trying to latch onto anything ‘hot’ to help promote their shows and try to get more viewers. Being ‘hot’ and being a success are not the same thing.

2: The actual business of selling media for a profit is a numbers game, run by bean counters who don’t take any chances unless they are guaranteed a return.

You can pull up all the PR quotes you want, and they don’t prove anything, because the actual sales numbers tell the real story. In case you haven’t heard, network executives (especially when giving an “interview” to one of their employees) have a been known to lie. In fact, most people would tell you that network executives are know to lie, and are suspected to occasionally breathe. Why did he say that? I don’t know. Maybe they wanted to continue the show, but wanted to give some reason other than Steve Carell’s performance so they wouldn’t have to give him as big a pay bump. Maybe it was part of a deal to get Apple to make a bigger ad buy. Maybe they thought the hype would get more people to buy it on iTunes. Maybe they thought saying that would seem ‘hip’ and thus get more ‘hip’ people to watch the show. Truth is, I have no idea. What I do know, is that the total iTunes sales of the show don’t equal the ad revenue from a single episode, so there is no way it was any kind of deciding factor in greenlighting another season.

Oh, and please, will you give the “well you are the only one saying this” crap a rest. Things are right, or wrong, no matter how popular or unpopular they happen to be. The truth of the matter is that of the 100+ million households in the U.S. only 15 million own iPods. You can continue to quote as many people as you like to prove that it is popular to pretend that is a significant penetration, but that doesn’t make it so. Yes, everyone in Hollywood and NY, owns an iPod, and yes they all love Apple, and are rooting for them. That doesn’t change the actual trends, nor does it make the iPod some fantastic success story. To be a success, you need to gain actual mainstream market penetration, not just sell the device to the people who write the stories about the device.

You keep going on about what a successful company Apple is, and saying that is why they are important. That is where you lose me, because just off the top of my head the list of companies in the tech sector much more successful than Apple is:

HP
Hitachi
Samsung
Matsushita
Sony
LG
Toshiba
Dell
Nokia
Fujitsu
Motorola
and the list goes on…

Most of these companies are competing with RIM right now, some are doing quite well, some are not doing as well. it seems odd to jump to the very bottom of the Global 500, and go “that guy, way down there, he is the one you should really learn from!”

In fact, seeing as how you now are saying that there is nothing unique to Apple’s design philosophy, but rather that they are just a “champion” of a design philosophy used by many companies in the tech industry, I am once again back to asking my initial question “why Apple.” We have come full circle, and you still have not done anything but an exhaustive ballad to your darlings at your favorite company. You start out saying that Apple is the company to watch (at least implying that they have some different way of doing things), then as proof point to a device that hasn’t sold as many units in all its incarnations as just the RAZR alone, make some noise about relative year over year stock performance, and then end up basically saying “it isn’t my opinion, it is what everyone is saying.”

Well great, if it is what everyone is saying, then why say it? If Apple is just doing the same thing as Sony, or Nokia, or Motorola, then why not look at them, since they clearly are the companies with which RIM is competing directly?

L. M. Lloyd
December 5th, 2006 at 5:57 pm

I have no deep seated animosity for Apple, what I have is a deep seated animosity for biased reporting. I have spent my entire life bouncing back and forth between the tech sector and the entertainment industry, and have noticed that the indisputable fact that most reporters use Apple computers, has completely skewed how any story about Apple is reported.

For example, you say that a year over year drop in quarterly sales of the iPod will be a huge blow to Apple’s stock. No it won’t, because when it happens, every article about it will go way out of its way to make a lot of noise about how it is totally understandable because people were holding off for the iPhone, and the widescreen video iPod, and there were no new products, and video game consoles and HDTVs chewed up most of the tech spending for the holidays, and on, and on, and on. Every possible excuse to say that this isn’t Apple’s fault will be used, and how this is even a good thing for Apple, because it shows how much interest there is in their future products. And people will believe it, because “everyone is saying it.”

It isn’t a conspiracy, it is just simple personal bias borne out of a disconnect between the media industry and the people actually buying the product. People in the media industry use Apple products, think Apple products are better, and so are always willing to give their favorite company the benefit of the doubt, and not even question their press releases, while tearing apart every statement made by any competitor. Just look at the iPod market. As the market has grown, the iPod “dominance” of the market has slipped from almost 90% of the total worldwide MP3 player market, to around 65% of the worldwide dedicated DAP market, and only 12% (if your figures are to be believed) of the overall market for devices that can play MP3s. If Microsoft saw that sort of drop in market share (no matter how much the market grew) there would be stories in every magazine on the stand about the death of Microsoft. Yet all Apple has to do is keep reframing the wording of their press releases, and “everybody” keeps talking about how the iPod controls the entire market.

I could give you hundreds of examples, dating back decades, of times Apple has made claims that are completely unsubstantiated, and just factually incorrect, yet they are accepted as gospel by the entire media industry, because Apple said them. This isn’t my opinion, it is verifiable fact. It isn’t some vast plot to raise Apple stock, it is just a combination of being blinded by personal preference, and being too lazy to actually research something you just assume is true.

It isn’t that I want Apple to ‘lose’ or do poorly, it is that I want reporters to do their job, and actually report the truth, not what they want to believe as truth. You say that journalists report stories about Apple the way they do because it “resonates” with people, but where is the evidence of this? I have never seen a good story about Microsoft (at least in a magazine or site that wasn’t owned by Microsoft) and yet they still keep selling product. All you have been reading for several years now is how Sony is in real trouble, and cant do anything right, yet they are still dominating in many markets. I can point you to more design magazines and blogs that declare the RAZR the worst designed piece of consumer electronics in the history of the planet Earth, yet they keep selling. No, the story of how the entire world is just following Apple “resonates” with your fellow media buddies, and the rest of the world either just takes you at your word without really having an opinion of their own, or shakes their head at how wrong you got the story and moves on. You mistake your peers agreeing with you, with the general public agreeing with you. In very clear market share numbers, the general public clearly thinks that Microsoft makes the best OS, Dell makes the best computer, and a phone that plays MP3s is better than an iPod. You, or even I, may not agree with those views, but those are the views that demonstrably resonate with the general public, as proven in how they spend their hard-earned dollars.

Now, as I said before, I am perfectly fine with taking an elitist position, in which you think you know better than the general public, but in that case, it wouldn’t matter if something sold 1 unit, or 1 billion units, because the buying public is unimportant if you know better. However, if you take that position, then you cannot, with any measure of intellectual honesty, use the purchasing trends of the general public to support your position when they happen to agree with you.

Oh, and as a side note, I don’t believe for a second that your honestly think that how a story is covered has no effect on the stock price! You seem like a nice enough guy, but I think you are a bit too wrapped up in the argument, and aren’t really thinking about the ramifications of your argument. Why this site alone practically attributed the entire 30% increase in RIM’s stock to one man’s leak! You can’t honestly tell me that you think one man leaking details about one device can cause a 30% jump in a stock, but 20 years of skewed reporting by an almost predominately Mac using pool of reporters wouldn’t have a positive effect on the price of Apple stock. Hell, if the stock market is so unaffected by press and hype, why does the WSJ (or a million other trade publications) exist at all? Why do companies bother to hold press event, or put out press releases, or try to sway the press by buying ads and wining and dining them? No, there is nothing in the world that will cause a stock to rise or fall faster than favorable or unfavorable press coverage, and I think you honestly know that.

L. M. Lloyd
December 5th, 2006 at 7:45 pm

Ah, see, but I am not just speculating about how Apple iPod sales would effect the stock price, I am basing it on what has already happened. After years of steady quarter over quarter sales increases we have already seen the sales numbers for the iPod drop from 14 million to 8 million. Yet here we are, after three consecutive quarters of flat sales below 14 million, and you are defending how the iPod is still doing great! Why? Because suddenly Q1 is the best selling quarter, even though it has not been the best selling quarter for the iPod historically.

In fact, even though it has seen a good bump from the holiday season, Q2 has always exceeded the Q1 numbers. Yet as soon as it doesn’t, we are urged to change our perspective on the numbers. I am just saying that as soon as Q1 numbers next year don’t meet Q1 numbers this year, there will just be a new story that once again urges a new perspective on the numbers. My guess is it will focus on the “increasingly competitive electronics market” and “anticipatory excitement about Apple diversifying its product line.” No matter what the story is, it will focus on how these losses aren’t really losses at all. Just look at how the early reporting on the iPod focused on market share, and as they have steadily lost market share (which they have for quite a while now) the stories became more specific about what the market entailed, and focused more on the number of units sold than the actual share of the market.

I don’t care how ‘bottom line oriented’ an investor is, they are still human, and a human relates quite differently the the headline “after phenomenal growth of the dedicated DAP market, Apple still leads” and the headline “due to overall growth in the audio player market, Apple’s share has slipped from 90% to 12%.” Both are true, and which one you choose to report has a huge effect on how the company is perceived.

As to the 20-year-old “Apple is the BMW of the computer market” argument, I think you would find that if BMWs used the same engine as a Ford, and the same drivetrain as a Ford, with all their parts shipped out of the same factory as Ford’s, and sold for only 10% more than a Ford, investors would be pretty upset if they still only had 5% of the market! I’m not going to argue the validity of the BMW analogy 20 years ago when it first started popping up (I could, but why?), but today there is not really a price, component, or market rationale to support it.

Depending on configuration and promotions, a Dell might actually cost more money than an Apple, and all the parts are rolling out of the same factories, and being designed by the same engineers. The only differences between the two products lie in the case design, branding, and bundled software. That is hardly the same as comparing an $80,000 BMW luxury car with a $15,000 Ford! If you want to do something a little more fair, like comparing a Cadillac to an Mercedes, or a Hummer to a Land Rover, then I’m sure you would find plenty of people to argue on both sides as to which is better or worse, and probably would end up just coming down to personal preference. However to try and so egregiously cast two very similar products in such dissimilar lights through a flawed analogy like Dell being a Ford, and Apple being a BMW, just speaks to the very bias I’m talking about.

Thought
December 5th, 2006 at 9:12 pm

Lloyd:
As to the influence of Apple on the computer world…here are some examples, along with quotes when appropriate:
Apple instigated the personal computer revolution with the Apple II, which was the first mass market personal computer as we know them today
-Andy Hertzfeld, a former Apple employee who was part of the original Macintosh team, and author of the book Revolution in the Valley (O’Reilly, 2004).

Apple didn’t invent the mouse or the GUI, but it certainly popularized it,first with the Lisa, and then with the Mac. How long would it have taken Microsoft to get to Windows if not for Apple?

“The people that have the most to celebrate are Windows users,” said Paul Saffo, director of the nonprofit Institute For The Future research group. “But for Apple bringing out the Macintosh and demonstrating the [windows] interface and the mouse, we would all be stuck with a C: prompt.”

As word processing advanced from no upper and lower case letters to page layout capabilities and laser printing technology, Apple was at the forefront of the revolution. Macs were just better at doing Pagemaker and Illustrator. At some point along the line, Apple introduced unbelievable color quality with millions of colors. I can still remember an Engineering professor who was frightened of Macs because he didn’t understand them, telling me that no one would ever need more than 256 colors on a computer.

Of course he was wrong. Apple brought us some of the first digital cameras with Quicktakes. The first real multimedia with Quicktime. Apple was the first company to stick their neck out on 3.5 inch floppies, on CD-ROM’s built-in to computers, and eventually on computers with only USB and no floppies. The original PowerBooks from Apple defined laptop success for years. Most recently Apple brought us wireless 802.11x and figured out how to built a commercial product on top of Open-Source components.
- David Sobotta, former Apple employee

There are a lot of other, lesser features Apple pioneered as well: now that Apple has built in cameras in their PCs, I see them popping up in Dell and HP machines. Look at the way that the iPhoto software allows a user to create their own picture book…again, Apple pioneered that and now other services, including Kodak and Snapfish by HP, follow.

I’ll grant you that Apple hasn’t done everything in the computer world, but for you to assert as if they have done virtually nothing is absurd.

Even you admit that Apple is the computer of choice for those in the creative industries like graphic arts, design, etc…why do you think that is? It’s because they pioneered in this arena.

And sure, Apple buys components from other hardware manufacturers, but that’s nothing new. Do you really think they’ve always manufactured their own components? You obviously miss my point in the comparison between component and end-to-end. Apple still retains control over the design of their software and hardware, hence their end to end design model.

It’s not so much that Dell buys chips from Intel, but that it buys the OS for its machines from Microsoft that makes the model totally different.

Apple’s influence on the digital era has been huge, and will remain so. I’m willing to bet that the history books will agree with we on this one.

L. M. Lloyd
December 5th, 2006 at 10:47 pm

you really want to go through this? Ok, fine I’ve been going through for as long as I can remember, but sure.

“Apple instigated the personal computer revolution with the Apple II, which was the first mass market personal computer as we know them today.”

Wrong, the Commodore PET was the first. The PET, C64, TRS80, and Atari 400/800 outsold the Apple II. So, it was neither the first, nor the most successful, so your assertion is nothing but untrue.

“Apple didn’t invent the mouse or the GUI, but it certainly popularized it,first with the Lisa, and then with the Mac. How long would it have taken Microsoft to get to Windows if not for Apple?”

This is fine and good if the only two choices in the entire world are Microsoft or Apple, however, they aren’t. Atari and Commodore (on the consumer end), and AT&T Graphics Software Lab, Evans and Sutherland, Autodesk, and other now gone companies (on the professional end) had been offering GUI with various input devices like knobs, trackballs, joysticks, tablets, lightpens, and even the mouse, before the Lisa, and before the Mac. once again, this is a selective description of what happened biased toward Apple. Sure, MS probably never would have gone GUI had it not been for the Mac, but then there is nothing to say that had MS stuck with DOS, AT&T wouldn’t have had success with PC UNIX and it’s X windows system. To try an pretend that nothing before Apple mattered, and everything after Apple was copying Apple is simplistic and inaccurate.

“As word processing advanced from no upper and lower case letters to page layout capabilities and laser printing technology, Apple was at the forefront of the revolution. Macs were just better at doing Pagemaker and Illustrator.”

Once again, not ever remotely accurate. GML based professional editing and layout solutions from IBM date back to the early ’70s, and SGML based solutions that far surpassed Pagemaker existed in 1980! Yes, the Mac was the first time a guy in his undies on a budget could easily lay out a newsletter on the cheap, but that doesn’t mean it was the invention of digital publication and layout systems. In fact, most typesetters were still using industrial SGML systems well into the late ’80s because the Mac was just a “toy” that couldn’t handle professional typesetting. Also, for graphics and illustration, the Mac was far eclipsed by both the Atari and Commodore.

“At some point along the line, Apple introduced unbelievable color quality with millions of colors.”

Yes, at some point along the line, which is to say well after the Atari, Amiga or PC!!! The very first 24-bit color display board was developed by AT&T Graphics Software Lab, it was called the Truevision board, it cost around $10,000, and it was for the PC! It would be a couple of years before AT&T and Radius started making 24-bit boards for the Nu-Bus slot in a Mac II. Once again, just implying they were first by leaving out the rest of the industry does not make it so.

“Apple brought us some of the first digital cameras with Quicktakes”

Once again, no. Kodak was way out ahead on digital cameras with digital backs to a couple popular 35mm cameras, years before the Apple Quicktake.

“The first real multimedia with Quicktime”

Once again, flat wrong! By the time Quicktime came out, there were already professional video editing applications for the Amiga, and PC, with products like the Targa and Video Toaster allowing realtime 30FPS NTSC playback! On top of that, there were several compressed video formats used for in-game FMV that could run even in DOS. Not to mention that by the time Quicktime came out, SGI was already well underway with entire from the ground up multimedia workstations, not to mention Steve Job’s own NeXT! For that matter Macromedia Director was on the market before Quicktime came out! Hell, this one is just balls-out crazy!

“Apple was the first company to stick their neck out on 3.5 inch floppies”

Oh, got me there!

“CD-ROM’s built-in to computers”

I would like to see proof of that. The first time I ever saw a CD drive as an option on a computer was the Amiga, and the first computer I ever saw that came standard with a CD was an SGI.

“There are a lot of other, lesser features Apple pioneered as well”

Lesser than the floppy thing? Since that is the only one I’ve come across that isn’t a complete fabrication, I can only assume that is what you mean.

“now that Apple has built in cameras in their PCs, I see them popping up in Dell and HP machines.”

Great, except Sony was doing that first, so I think they deserve the credit, not Apple, who copied it from Sony.

“Look at the way that the iPhoto software allows a user to create their own picture book…again, Apple pioneered that and now other services”

I’m honestly not sure what you mean by “create their own picture book” because I don’t use iPhoto, but from a technology point of view, I would be suspicious of any claims of anything iPhoto did before ACDSee, since they pretty much pioneered the whole “organize your photos” consumer market.

“Even you admit that Apple is the computer of choice for those in the creative industries like graphic arts, design, etc…why do you think that is? It’s because they pioneered in this arena.”

No, it is because they had the first solution that an average college student could afford, and like you, those college students grew up assuming that the first time they ever saw it, must have been the first time it ever existed in the history of the Earth. Those of us doing professional graphics in the mid-to-late ’80s and early ’90s remember what life was like before the Mac, and remember that Apple and Adobe didn’t create the graphics, publishing, photo-retouching, video editing, or animation market. They just made the cheap tools for kids to play with so that they could grow up to be know-it-all Macheads who don’t even know the history of their own industry.

L. M. Lloyd
December 6th, 2006 at 1:51 am

Ok, aside from claiming I am from a parallel universe, I notice you didn’t actually in any way support your argument, or even refute mine, except to question my motivation. I have already gone through point by point and shown how your comments are just flat-out historically inaccurate, and your response seems to be “well, I reject your reality because I don’t like your tone.”

I will, however, stick on this one paragraph.

“The Apple II series of computers had an enormous impact on the technology industry and on everyday life. The Apple II was the first computer many people ever saw, and its price was within the reach of many middle-class families. Its popularity bootstrapped the entire computer game and educational software markets and began the boom in the word processor and computer printer markets. The first microcomputer “killer app” for business was VisiCalc, the earliest spreadsheet, and it ran first on the Apple II; many businesses bought Apple IIs just to run VisiCalc, because it was the only spreadsheet available at the time. Apple’s success in the home market inspired competitive home computers such as the VIC-20 (1980) and Commodore 64 (1982, with estimated sales between 17 and 25 million units). Through their significantly lower price point, these models introduced the computer to several tens of millions more home users, acquiring most of Apple’s market share in the process.”

Is this from an Apple press release or something? I find it absolutely incredible that you could ever suggest that it was the Apple II, and not the Commodore PET (which came out before the Apple II, and outsold the Apple II) that was responsible for the VIC20 and C64! In fact, it seems a little on the insane side that you are seriously claiming that Commodore somehow owes its success to Apple, when Commodore beat Apple to the market, and outsold Apple almost every step of the way! I mean, it really doesn’t even make any cursory sense how the huge success of Apple’s computer would equate into phenomenal sales for their competitor. I mean, unless you are actually making some weird and incredibly subtle joke about how the entire PC industry owes Apple because they always made sure no one else had to worry about being last.

Were you even alive back then, or are you getting this all out of a book? You don’t even have the most basic facts straight, and seem to have just gotten some primer on how the entire industry owes everything to Apple.

You can keep saying “well everyone thinks I’m right” as much as you want, but if you did even the most cursory actual research (you know, looking up real facts, instead of just asking people for their opinion) then you would see that every one of the comments I made from my “parallel universe” happen to be the truth. I never said “Apple accomplished nothing.” In fact they accomplished a lot, just not all the things you zealously attribute to them. It would seem, from your telling of history, that you didn’t quite realize that Commodore was the leader in the early computer days. You also seem completely ignorant of the fact that Atari ever made a computer, or that IBM did not start the PC industry, but rather it was Tandy.

I certainly can forgive good natured ignorance. I would suggest that rather than fanciful suggestions about my motivations and location in the time/space continuum, you go do a little learning about the history of the industry aside from asking other Mac users why Apple rocks. I think you will find that there are a lot of amazing things beyond just the narrow world of Apple fanaticism. They did teach you how to do research in journalism school didn’t they, or were they too busy teaching you how to use a Mac?

BlackBerryCool » ThoughtPiece: Is the music phone the next camera phone?
December 6th, 2006 at 9:10 am

[…] I invite you all to check-out the near all-out-brawl that’s been going on in the comments of last week’s ThoughtPiece. Here’s hoping that this week’s sparks as much controversy. Our resident rantist Thought weighs in strong this week, wondering whether or not the music phone is the next camera phone. Let him know what you think, and thanks again, Thought, for a great contribution. […]

Robb (RIMarkable)
December 6th, 2006 at 3:24 pm

These comments are classic. I was going to chime in a few days ago, however, as you guys know, my style is to toss out opinion often based on little or no facts and and I didn’t want to upset the flow and /or sound like a complete idiot.

I will just say this.

My iPod rocks and I wouldn’t trade my PC for a Mac if Steve Jobs delivered to the house himself.

I must admit, however, that the Apple 23″ media display is sweet.

L. M. Lloyd
December 6th, 2006 at 5:28 pm

Umm… excuse me Thought, but I was perfectly happy to just discuss the relative importance of the iPod, iPhone and accurate reporting of the under-reported facts of the market. You are the one who started listing Apple’s contributions to the world of computers, brought up the luxury vs. economy analogy, threw Al Gore and environmentalism in there for good measure, and started claiming that my comments were part of some vast conspiracy to malign the intellectual elite. I was just responding to those comments.

Don’t try to make some winking allusion to my attitudes on politics and ideology when you are the one who brought those topics into the discussion.

Thought
December 6th, 2006 at 9:06 pm

Lloyd: agreed that I think the original points we both wanted to make got lost in all of the other debating.

However, I believe you misinterpret my original article. I never once state that RIM should copy Apple. I only note a similarity in the way both companies design products in that both companies design their own hardware and software. This makes for a more seamless integration, making for greater ease of use for the customer.

That’s really the only point I wanted to make. In fact, I wouldn’t make much sense advocating that RIM follow Apple and the end to end model, since I note that RIM is already following that model, and has since its inception. RIM cannot copy Apple in this regard, since it developed the same model independently.

As for mentioning the iPhone, my only point, again, was not to suggest that RIM should copy that…how can they copy something not yet released? However, like Robb Dunewood, I believe that the iPhone will be a serious competitor in the consumer market, albeit the higher priced end of that market. That means it will compete against the BB consumer models like the Pearl, as well as Motorola, Sony-Erriccson, etc. I want to also add the disclaimer that in no way do I think that any new Apple cell phone will compete with RIM in the enterprise market.

Lloyd, I must say I’ve grown to luv ya man…and if I’m in the Hollywood area, I’ll have to look you up and buy you a Starbucks coffee and we can discuss all sorts of wonderful tech topics. I’ll bring my iPod of course :)

L. M. Lloyd
December 21st, 2006 at 4:47 am

I know this topic is dead and buried, but I just had to point out this somewhat relevant story:

http://www.theinquirer.net/default.aspx?article=36515

It is about a NASDAQ stock that nearly doubled in one day because of one erroneous press release! Now, we have already gone round after round on this subject, but I still maintain that examples like this are clear proof of what I’m talking about. Investors rely heavily on media coverage to decide how they are going to invest. If for some reason (like say the fact that 90% of the writers all use the same brand of computer) media coverage of one particular company is consistently skewed, then it is going to cause the stock to be consistently overvalued.

What I find incredibly ironic, is that then it becomes an Ouroboros, where the positive stories cause a rise in the value of the stock, then the writers use the rise in the stock as justification for more positive stories, which in turn gives rise to more stock increases, and thus it goes devouring itself infinitely.

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