“The investor community has its agenda. Make lots of money and delight themselves. Apple has its own agenda. Make lots of money and delight the customers,” John Martellaro writes for The Mac Observer. “When these two agendas clash, $AAPL tanks. Think of it as punishment for Apple raking in all that money.”
“Investment analysts, VCs, and some media sites get a simple-minded idea. Apple should sell cheap iPhones to stop the infestation of cheap Android phones in emerging markets,” Martellaro writes. “That will surely allow Apple to squeeze out the bad guys and dominate the market. If Apple dominates, its investors get rich.”
Martellaro writes, “Apple executives have access to information we do not. They know how each part of the design of the iPhone fits into their strategy and the markets the company pursues. They know what sells and what doesn’t. They can estimate what would be lost by going cheap.”
Read more in the full article here.
MacDailyNews Take: Asking Apple to produce cheap iPhone in a profitless unit share chase is ridiculous. Why rack up cheap customers who do not buy apps, TV shows, movies, music, and, certainly not, extras like iTunes Match? It makes no sense when you already are developers’ first choice. Smart developers create apps for Apple iOS products for the same reason they do for Mac: Apple has the best customers who are willing to pay for software (see related articles below).
Oh, some say, developers will stop developing for iOS first and switch to fragmandroid because of sheer numbers. No, the smart developers won’t. One non-paying piracy-loving user is the same as one billion of them: Worthless to developers.
We look at the choice of personal computer, tablet, portable media player, and smartphone purchases as an IQ test. It’s pass/fail. You can either understand a simple value equation or you’re too stupid. It’s very useful in a coffee shop or an airport; you know instantly who’s worth talking to. (Now, listen, smart people can make mistakes. That’s why we always ask people how they like their Android phones before we try to help them. If you screwed up and saddled yourself with a Windows PC or an Android phone, it’s never to late to wise up.)
The quality of the customer matters. Apple understands this implicitly.
There is no good reason for Apple to make a cheap iPhone. It would only dilute the brand and cause 100x the work for too little, or actual damage, in return. In this case, unit share is nowhere near as a valuable as some Wall Street analysts and Apple pundits would have us believe.
As we wrote back in November 2012:
It’s the marketing, stupid.
Android is pushed to users who are, in general:
a) confused about why they should be choosing an iPhone over an inferior knockoff and therefore might be less prone to understand/explore their devices’ capabilities or trust their devices with credit card info for shopping; and/or
b) enticed with “Buy One Get One Free,” “Buy One, Get Two or More Free,” or similar ($100 Gift Cards with Purchase) offers.Neither type of customer is the cream of the crop when it comes to successful engagement or coveted demographics; closer to the bottom of the barrel than the top, in fact. Android can be widespread and still demographically inferior precisely because of the way in which and to whom Android devices are marketed. Unending BOGO promos attract a seemingly unending stream of cheapskate freetards just as inane, pointless TV commercials about robots or blasting holes in concrete walls attract meatheads and dullards, not exactly the best demographics unless you’re peddling muscle building powders or grease monkey overalls.
Google made a crucial mistake: They gave away Android to “partners” who pushed and continue to push the product into the hands of the exact opposite type of user that Google needs for Android to truly thrive. Hence, Android is a backwater of second-rate, or worse, app versions that are only downloaded when free or ad-supported – but the Android user is notoriously cheap, so the ads don’t sell for much because they don’t work very well. You’d have guessed that Google would have understood this, but you’d have guessed wrong. Google built a platform that depends heavily on advertising support, but sold it to the very type of customer who’s the least likely to patronize ads.
iOS users are the ones who buy apps, so developers focus on iOS users. iOS users buy products, so accessory makers focus on iOS users. iOS users have money and the proven will to spend it, so vehicle makers focus on iOS users. Etcetera. Android can have the Hee Haw demographic. Apple doesn’t want it or need it; it’s far more trouble than it’s worth.
Related articles:
Android phones 3 times more likely than Apple iPhones to have been bought at discount store – August 22, 2013
CIRP: Apple iPhone users are younger, richer, and better educated than those who settle for Samsung knockoff phones – August 19, 2013
Twitter heat map shows iPhone use by the affluent, Android by the poor – June 20, 2013
Apple’s iPhone generates more in carrier fees than rival smartphones – January 30, 2013
Unsurprisingly, survey says Apple’s iOS is highest priority among mobile developers – January 23, 2013
People buy more Android phone units and do less with them vs. Apple’s revolutionary iPhone – November 14, 2012
Study: iPad users more likely to buy – and buy more – online than traditional PC users – September 29, 2011
iPhone users smarter, richer than Android phone users – August 16, 2011
Yankee Group: Apple iPhone owners shop more, buy more, remain more loyal vs. other device users – July 20, 2010
iPhone owners more likely to pay for digital content – November 26, 2009
Study: Apple iPhone users richer, younger, more productive than other so-called ‘smartphone’ users – June 12, 2009
Apple iPhone users buy many more apps, surf the Web much more than other ‘smartphone’ users – March 27, 2009
NPD: Mac users significantly more likely to pay for music than Windows PC owners [updated] – December 19, 2007
Report: Apple iPod owners buy more music – September 19, 2006
Study shows iPod owners significantly less likely to steal music than the average person – January 13, 2006
There are those here that also like Apple more for its stock than for its products! Stock price should not drive product development for a company such as Apple. ANY Leader who would run Apple for its stock price RISE does not deserve to head up Apple. Vision in roduct development, attention to detail, best possible product, – should be the CEO’s purpose and they have one now who does this!
The CEOs purpose is to maximize revenue,profits and growth for the owners of the company. That would be the shareholders.
It is the responsibility of the investor to choose companies whose mission, behavior and risk exposure are compatible with the investor’s preferences.
This approach is the reason we as a country are in such a mess. The goal of a company and it’s CEO should be to make the best most desirable product possible, and it’s success is then shared with those who believed in the companies vision and invested. Making lots of money should be the byproduct of making successful products not the goal. It is this misguided focus on squeezing every last penny of profit that has led to the moving of manufacturing to other countries, the cutting of corners in safety and design. I would applaud any CEO the ignores stockholder pressure for profit at the expense of the quality of the product.
fscuttle, I agree that corporate management has a fiduciary responsibility to the shareholder, and Apple has been highly successful in this respect for long-term shareholders. As Damian states, Apple focuses on the customer experience and delivering the best possible integrated products, the result being tremendous sales and profits. People can attempt to disparage Apple and its current management all they like, but the undeniable truth is that Apple is a powerhouse, an overwhelmingly dominant force in modern consumer electronics. In the 1990s everyone wanted to “be like Mike.” In the 2000s, everyone started trying to emulate Apple.
IMO, the majority of the complainers are the opportunists, speculators, and manipulators who just want to make a quick buck via volatility induced through FUD, misinformation, and hype. Apple management has no reason to respond to these folks. In fact, that would be a disservice to the long term investors.
But in reality the shareholders does not really own the company.
Any corporate leader who makes decisions based on “shareholder value” is usually the shareholder in question.
Investors punish apple because they have failed to innovate in recent years. I love their products but as a shareholder I’m disgusted with their failure to innovate. I hope that changes soon, and not some stupid Iwatch. Luckily, however, their are millions of fanboys who will buy whatever apple puts out. My fear is that won’t last forever and people will stop paying premium prices for products that aren’t premium anymore…
Not trying to feed a troll here, but in the event that you’re just clueless and are actually truly interested in understanding what “innovation” actually is, I suggest a couple of articles.
Read this whole thing. It’s long, but spot on:
http://appleinsider.com/articles/13/09/14/after-its-disastrous-exynos-5-octa-samsung-may-have-lost-apples-a7-contract-to-tsmc
Once you understand what Apple has actually done from the above article, read this one to understand why Wall Street doesn’t get it:
http://appleinsider.com/articles/13/09/16/secrecy-of-apple-inc-new-64-bit-a7-chip-may-have-incited-spurious-aapl-stock-downgrades
Once you’ve read and understand those 2 articles, read the above again. Especially these bits:
“The investor community has its agenda. Make lots of money and delight themselves.
“That will surely allow Apple to squeeze out the bad guys and dominate the market. If Apple dominates, its investors get rich.”
In the event that you’re too lazy or unmotivated to actually get informed, I’ll try to summarize it for you: Xeroxing out new SKUs as an alarmingly fast rate is not innovation. Creating devices with every possible combination of everyone else’s technology inside and seeing what sticks is *not* innovation.
Having vision for where you want to go, maintaining the focus to get there and methodically laying out the path piece by piece and then actually following it, *is* innovation. And that’s what Apple is doing, in spades.
Outstanding post, Kevin. Right on the mark. You saved me the work. Five stars for you, sir.
Superb post, Kevin, well thought out and presented. Sadly, the likes of MattC, MacFreek, and others, do not have the intellectual capacity to parse what you have written and linked to, so they’ll continue to pollute the Internet with their mindless drivel.
There’s a case to be made, sometimes, for euthanasia to be used for the greater good of society… 😉
Excellent post but I would note that what you describe is not actually innovation. It is strategic planning. LONG TERM strategic planning. One of the aspects that sets Apple /APPL apart is this long view. They are not obsessed about the next quarter as way others are and as Wall Street would like. What truly makes them extraordinary in this day and age is that they can couple their strategic planning with the true innovations they create. No one outside of Apple knows what they have in their labs and they are happy to WAIT to implement until the time is right. This is good leadership. This is how they create new markets or transform /disrupt existing ones SEEMINGLY overnight.
You’re exactly right, and this is a very good point. The strategic planning part of innovating is what allows Apple to, at some point in the future, drop that one last piece of the puzzle into place; thus making the whole picture complete, and suddenly you have an overnight “innovation”.
The i* ecosystem is a prime example of this, the most obvious culmination of which was the iPhone launching.
I think we’ll see the fruits of this strategic planning at some point with a paradigm shifting “final piece” dropping at which point everyone will be caught off guard again (which is what the first article I linked to alludes to).
I’m not knocking your opinion, but I’d like to know precisely what you’re expecting from a smartphone that makes you so dissatisfied with Apple products. I know you want a larger display but what else? A much better camera? Longer battery life? A much faster processor? Far more memory? And you want Apple to charge less money for all that. You need to realize companies can’t stay in business doing those things.
I also think Apple could do more with their vast wealth but then so could many companies. Why aren’t all consumer products half the price they are now. Why do automobiles only get 40 mpg when they should be getting 80 mpg?
Innovation doesn’t really come all that easily as you think it should because we’d all be doing interstellar travel by now. You could point at NASA and say they’re not innovating fast enough because no man has been put on Mars by now. I personally think mankind is progressing technically a lot faster than it is socially.
What’s your rush for innovation? I can’t believe you think the average iPhone isn’t up to your standards. I don’t think you’ve lived long enough to see how wonderfully consumer products have progressed in the last 50 years or so.
As a shareholder, I hate Wall Street, not Apple. I’m perfectly satisfied with Apple’s products and customer service. I feel that a company which actually makes money and pleases consumers should be very valuable, not become less valuable on the stock market. Innovation is only a very small part of the equation when I choose a product. For me, reliability and ease of use is much more important. Money doesn’t enter into the equation because I can afford any of Apple’s products if I really wanted them. Anyway, the term innovation to me is rather vague and I think it means different things to different people.
@MattC and others of this persuasion:
“I love their products but as a shareholder I’m disgusted with their failure to innovate. ”
Maybe you should sell your stock and go with some one that innovates by throwing products out right an left, hoping they hit a homerun (or even a single) on occasion. Your purpose for investing is misguided.
Why did you choose a company to invest in, that even under SJ and continuing under TC, repeatedly lets people (and investors) know that they are out to make the best product they can for the end user, not for stock price. They won’t knowingly or repeatedly release a product before it is ready. They have learned not to release a product before they can keep up with demand. This is their strategy and they let people (investors) know it. Are you expecting them to bend the rules for you? Your investment strategy doesn’t make sense to me.
Astroturfer, party of one?
Hello?
Astroturfer, party of one?
Apple should not care about the stock price. Criminals at Wall Street will continue to manipulate the stock well after we are dead. Unless public hangings make a comeback.
As to their failure to innovate…
Yea, what phone or tablet out there is better?
What other company has over $120 BILLION in cash for emergencies?
And your last point, millions of people around the world in many different countries and demographics are all FANBOYS?
Wow, that’s such a joke of a statement.
The above post was meant for MattC.
This little article should be required reading for the “analysts” of Wall Street and for the small investors. Hubris, thy name is analyst.
(With thanks to the Bard for the structure, if not the word…)
Please, please, please: a chip that runs TWICE as fast is not considered innovative? I guess for true innovation you need to look at companies like Google, Samsung, Nokia, Dell, HP, Microsoft, Amazon (and let’s also throw in Goldman Sachs, too) — right? ha ha ha
There’s better analysis of Apple and Android in the MDN Take than from all the investment house analysts combined.
Perhaps you should refresh your memory as to the history of Macintosh computers vis a vis market share as a counter-point to your thesis. Neither Blackberry nor Windows Mobile are disappearing solely because of market share; both possess fatal structural deficiencies that precipitated their declining market shares.
It was the same with Descartes. When he stood in front of his horse and was asked, “Another bad of feed?” He replied, “I think not.” And immediately vanished!
Agree with mac daily take
you have 2 food vendors on a street in new York one is the palm restaurant and the other is a hot dog cart in front the palm sells 100 dinners a night at a price of about 400 dollars a dinner at 30 % food cost and the hot dog guy sells 800 hotdogs for a dollar apiece do we invest in the hot dog cart because he has market share or the palm because of its margin? DUH!!!!!
I like Tim, but he should never of given in to Wall St. Once they get your money (dividends), they will always bleed you for more.
Buy backs, takeovers, increase payments.
Steve told them where to go.
It’s “should never have given”
Apple was mistreated on Wall Street under Jobs’ reign as well. (Remember the 0 hit it took AFTER the iPhone release).
Also, I think you’re missing what buybacks do. If you don’t do a buyback, you leave more shares out there for Wall Street to pump and dump.
These analysts can’t be that stupid. They know that creating a cheap phone would not be good for Apple in the long run. The real agenda for bashing Apple is an attempt to pump up worthless stocks like NOK.
“Why rack up cheap customers who do not buy apps, TV shows, movies, music, and, certainly not, extras like iTunes Match?”
Because you’re a greedy, myopic investor — not a businessman with a capacity for thinking and planning for the long term?
It’s AMAZING TO ME – and has been for sometime – how smart everyone claims to be, I’m not talking just SMART – but the REALLY SMART people – you know the ones who say “I” need a bigger screen, “I” need xxxxx, Apple “has” to make a cheaper phone.. etc etc
My simple question to you/them is “Why – Seeing how f*cking smart you are – are you not running Apple?”
Surely someone with such incredible mental foresight and business acumen – shouldn’t be saddled in your parents basement – or university cubicle…
How could this be?
Thought so…. So just shut the f*ck up..
I’m an investor in Apple. A happy investor. I don’t sweat the up and down roller coaster brought on by whore street and the so called analysts and jouranalysts that tries to punish Apple and them put the blame on…huh, the investors?
Let’s face it, you won’t read an article on how smart Apple investors feel smug. They have the insight into Apples’ formula, it’s no secret…”the power to be your best.”
Those that have had their personal power usurped have no clue as to what empowerment is about.
Let’s face it, you won’t read an article breaking forth the idea that Apple will release a 64 bit-chip in the latest iphone because those analysts, jouranalyst are dazzled by the bright colors.
Let’s face it, you won’t read an article revealing how and where the 64 bit-chip is manufactured after the fact because those analysts and journanalyst have no clue on how to do investigative reporting anymore. They’ll just wait for Apple’s press release then thump their chest with more speculation as their whore street pimps shove it so far up inside them that it gives new meaning to the word dick head.
What you will read though, at this site is a group of people that do get it. To those I thank for your diverse views and insights.
Please Go AWAY!!
http://ballmersleftnut.wordpress.com/2011/04/22/hello-world/
What I find hilarious about this constaint refrain is what has happened with Microsoft – – they’ve been quite successful at the chase for marketshare … yet do investors really want Apple’s stock to drop all the way down to where MS’s is?
As I write this, MSFT’s stock price is 33.
-hh
Doubtful that they would fall below that percentage that you speak of in the markets that matter. They will do just fine in China. Who cares about Western Europe? They have no subsidies and pile luxury taxes on everything. It is a declining market.