It was AAPL earnings week, and analysis of the company dominated both the tech scene and stratechery. What has struck me in the analysis is the almost total disconnect between Wall Street and the blogosphere, to the detriment of everyone trying to understand the company and its prospects.
- Bloggers and industry observers are deeply familiar with Apple products, know they are highly differentiated by software and ecosystem, and thus cannot understand why anyone would doubt Apple’s continued success.
- Wall Street and many financial analysts are deeply familiar with Apple’s financials and market opportunities, but don’t understand how to classify the company. This article from the Wall Street Journal captures this clearly.1
The end result is extreme bears on one side, counting the days until Apple collapses, and extreme bulls on the other, saving up links to the naysayers until they can say “I told you so.”
As with most things, the truth is somewhere in the middle. I explore this most clearly in Friday’s article “Two Bears,” but plan to revisit this more fully soon.
In separate, yet related news, the Galaxy S4 reviews came in this week, and were surprisingly negative. I don’t think that will make much of a difference, as I detail here, but it’s surprising nonetheless. The success – or not – of the S4 will be an interesting test of my thesis that product is not the preeminent factor for success in mobile.
It was another great week on stratechery. As always, I greatly appreciate your spreading the word about stratechery and following @stratechery.
The Visual Case for the Low-Cost iPhone link
I combined data about average carrier ARPU by country with browser share by country. The result was the following:
The right side of the chart is the visual case for the low-cost iPhone.
Why Do Carriers Subsidize the iPhone? link
My hypothesis is as follows:
- The carriers see the iPhone as a strategic threat because Apple owns the customer relationship; the carrier is reduced to a utility. Therefore the leading carriers do not carry the iPhone
- Customers strongly prefer the iPhone; in fact, they prefer it so much that they switch carriers to get the iPhone (something that is very difficult and rare). Second-and-third place carriers add the iPhone in order to steal customers from the leader
- The leading carrier is forced to choose between losing the customer relationship to Apple or losing the customer completely
Two Bears link
There are two bear arguments for AAPL:
- iPhone demand will collapse in the face of cheap Android
- iPhone has finished growing
I argue that only the second argument is plausible, while the first argument is actually the bear case against Samsung.
- Apple Had Record Sales and Awesome Growth. Here’s Why Its Stock is Being Hammered Anyway link — The fundamental question dividing bulls and bears is remarkably subjective: Did Steve Jobs build an innovative company, or a company around his innovations?
- The S4 Design Stinks; Does It Matter? link — The S4 vs HTC One is a great test of my thesis that product doesn’t actually matter for most mobile products.
- China Mobile May Need the iPhone link — China Mobile is losing voice revenue; it seems they need a network salesman.
- Credit Agencies Deem Apple Less Safe Than Subprime Mortgages link — The justification for Apple’s credit rating belies a fundamental misunderstanding of technology generally and Apple specifically.
News & Analysis:
- Next Big Push For Lenovo: Servers link — It’s really interesting how Lenovo is making a real business out of picking up the scraps of US IT companies. Shades of the shift of manufacturing to China. I find it pretty worrisome.
- Yahoo, Apple Discuss Deeper iPhone Partnership link — This makes a ton of sense for both companies. Yahoo’s future is as a neutral service provider, and Apple needs help.
- PC Slide Doomed a Blackstone-Dell Tie link — Not to get too snarky, but did Blackstone really not see the PC downturn coming?
- Taiwan Tries to Shore Up Its Defenses Against Samsung link — The challenge for Taiwan is that there is minimal central control; the tech industry is very much every man/company for himself. That’s fine as far as it goes, but Samsung benefits from the top-down approach in Korea.
- Sleeping ad giant Amazon finally stirs link — Interesting stats, but it feels like this article is written every year.
- iTunes is 10 years old today. Was it the best idea Apple ever had? link — Yes.
- Tumblr Launches Mobile Ads Today In Big Revenue Push link — More native advertising, from a company that must be making investors increasingly impatient.
- Infinite Loop, Meet Finite Hoopla link — The best summary of the AAPL earnings that I read this week.
- Apple’s new iPhone ad, Instagram and platform sublimation link — Apple’s monetization model gives them much more scope when it comes to partnerships; they don’t directly compete with Facebook, or even Google.
- Apple’s Next Big Thing link — It’s not a watch, or TV, or smart glasses. It’s the iPad.
- The PCs New Role as an Appliance link — It’s been argued that iPads are appliance-like in that they’re locked down and low-maintenance. This is a different take on the appliance analogy; appliances are things we need but only replace when they break. Makes sense.
- The App Store: Good Deeds, Poor Communication link — Apple made the obviously correct call with AppGratis, but they’re lack of outward communication continues to hurt them.
- The Law of Wireless Gravity link — Data gets to fiber as soon as possible. Just read it. It’s really good.
- The Real Danger of Copying Music (It’s Not What You Think) link — Wherein pirating music = securitizing mortgages.
- “Win Reviews” link — Very interesting viewpoint on the failure of Windows to win over tech reviewers.
- My Transition to Surface Pro and Manga Studio link — Another artist who loves the Surface Pro’s stylus. It’s a niche use case, sure, but perhaps a profitable one.
- Chromebooks Have a ‘Leap of Faith’ Problem link — I’m a big fan of the Chromebook, and I think this title really nails what is holding them back.
- If It Ain’t Broke, Don’t Fix It: Ancient Computers in Use Today link
- Scaling Pinterest – From 0 To 10s Of Billions Of Page Views A Month In Two Years link — This was a really great read on the technical decisions Pinterest has made as they’ve scaled. Mature technologies FTW.
- Q+A: What Is the Future of GPS? Are We Too Dependent? link — Great overview of GPS and the opportunities and challenges the current system presents.
- Creator of Nike’s famed Swoosh remembers its conception 40 years later link — Fun story.
- The Surprising Reasons We Like to Work link — Is Marx more applicable than Smith in the knowledge economy?
- Eulogy for the Blog link — The Golden Age of Blogging is largely over, replaced by curated content served up by Twitter especially. I think this is probably true, but I hope it isn’t.
- 6,297 Chinese restaurants and hungry for more link — One man’s quest to eat at every Chinese restaurant in the United States.
- “Today was my first official work day back on OS X 10.6, and I have absolutely zero regrets about being back on Snow Leopard.” @WhatTheBit
- “Consumers on 24 month upgrade cycles take longer to get bored of a product pipeline than bloggers on a 12 hour cycle do.” @BenedictEvans
- “Clayton Christensen reminds me of Marx in the way people quote him as though he’s delivered a divine revelation.” @BenedictEvans
- “Can someone make a chart of the exponential rise of charts related to Apple numbers?” @parislemon
- “Apple sold around one iPad for every 4 PCs sold in the last quarter.” @fraserspeirs
- “Apple has unveiled its disruptive new product that will change the industry. They call it the iPad.” @GlennF
- “All Tim Cook needed to say about the competitive question was.. We run software not found on any competing devices.” @BenBajarin
- “Explicit acknowledgement that iPad Mini margin is ‘significantly lower’ than Apple’s overall margin makes me think no retina Mini this year” @gruber
- “Maybe its just me, but Apple management throwing a lot more obvious hints out there. Feeling the near-term pressure. Not surprising…” @SammyWalrusIV
- “Most pundits clamoring for Apple to release the next great thing didn’t recognize the prior ones when announced.” @treestman
- “Steve Jobs never would have had coffee with you.” @TheMacalope
- “It’s sometimes interesting how different my opinions are when I’m wearing my reviewer hat vs. personal hat.” @saschasegan
- “If any other vendor came from almost no share to take 7.5% of the tablet market in a couple of quarters, it’d be a story of breakneck growth” @CarmenCrincoli
- “Weird that Apple pitches the iPhone’s smaller screen with features (“resolution, color quality, white balance”) vs. what you can do with it.” @davenanian
- “App updates are a great reminder to delete apps you don’t use.” @hnshah
- “WWDC ticket sales rate was $4 million per minute (for 2 minutes). Apple pays developers that amount every 8.5 hours.” @asymco
- “Amazon mistakenly makes Q1 profit of $0.18 a share. Bezos promises to not make money in the future, stock soars in aftermarket.” @cdhowe
- Although the headline completely misses the point; I’m quite sure Apple knows who they are. It’s investors who have no idea. ↩