Jean-Louis Gassée for Monday Note:
When the iPhone grew to represent more than 50% of Apple’s revenue, critics worried that the company was overly dependent on the device. Now, critics fret because the percentage fell to 48% in the quarter ending in June. The decline isn’t bad news; it’s the mark of a neatly maturing business that benefits from its ecosystem’s network effects…
Apple’s iPhone Game Plan is in plain view, repeatedly explained by its executives to Wall Street analyst in Earnings Release conference calls and other public pronouncements: Let the iPhone stay in its natural element: the Affordable Luxury segment, analogous to Audi for cars or Burberry for clothing. And, from there, play the ecosystem game…
Now there’s this special kind of network effect that should help us rethink and understand Apple’s business. It sheds a better light on the company’s chance to continue prospering in the smartphone segment, even when compared to muscular competitors such as Samsung and Huawei. Certainly, Apple’s ecosystem isn’t as strong outside of the US as it is in its US home market, but, still, Apple Watches, iPhones, and AirPods work well together everywhere.
MacDailyNews Take: Yup.
It’s the ecosystem, stupid. — MacDailyNews, March 1, 2013
For as long as Apple has been Apple there have been calls for the company to make “affordable products.” By this, most mean lower price tags. They’re not talking value or Total Cost of Ownership (TCO). When you bring those ideas into the discussion, Apple’s prices are very low indeed. Apple iPhones get software updates and the company supports older iPhone models for far longer than do fake iPhon peddlers (Android). No, this is all about sticker prices.
One major problem: Offering low priced products is, as Apple’s leadership likes to say, “not part of Apple’s DNA.” This is a nice way of saying: We can’t dominate entire markets (outside of the fluke iPod/iTunes Store) because it would irrecoverably damage the Apple brand or as Steve Jobs once said, “We can’t do it; we just can’t ship junk.” More recently, this has been parroted by Tim Cook: “There’s always a large junk part of the market. We’re not in the junk business.”
The other issue is that those who settle for Android devices are not equal to iOS users. The fact is that iOS users are worth significantly more than Android settlers to developers, advertisers, third-party accessory makers (speakers, cases, chargers, cables, etc.), vehicle makers, musicians, TV show producers, movie producers, book authors, carriers, retailers, podcasters… The list goes on and on.
The quality of the customer matters. A lot.
Facile “analyses” that look only at market (unit) share, equating one Android settler to one iOS user, make a fatal error by incorrectly equating users of each platform one-to-one.
When it comes to mobile operating systems, all users are simply not equal. – SteveJack, MacDailyNews, November 15, 2014
Again, Apple sells premium products at premium prices to premium customers. Android can have the rest. They’re more trouble than they’re worth as they generally only want things for “free,” “discounted,” or “cheap” and they buy demonstrably fewer apps, accessories, and subscriptions.
Not the iPhone company? Says who? That tariff is aimed directly at the iPhone and the dumping panic is due to the fact iPhone prices will go up and sales will go down. Hence a hefty loss of revenue and profits. Same thing with the devaluation of the yuan. That will cost Chinese consumers more money to buy an iPhone (not that they’re going to buy one anyway). That’s sounds spot-on like an iPhone company to me. There is nothing else Apple has that will offset those iPhone losses.
All the other tech companies are going to come back strong from this market correction while Apple will struggle to regain these recent share price losses. That’s just the way it is with Apple. First to be dumped and the last to be bought back. If Apple can buy back some more shares in the meantime, then that’s all well and good for loyal shareholders such as myself. For better or for worse, Apple has too much dependency upon China and now nothing is going Apple’s way.
Apple is not longer the company that created enthusiasm with its products.
When the iPhone brought in a major part of revenue, it was a problem.
When the iPhone no longer brings in a major part of revenue, it’s a problem.
Bottom line: It’s simply always a problem because Apple.
/end sarcasm
If Apple was proud of its unit sales or revenue, it would reveal those numbers to investors. Instead Apple is drifting its way into becoming just another fat conglomerate with balkanized operations in banking, hardware, media production, dongles, software, and insurance. Oh and emojis. Lots of dongles and emojis.
Global smartphone 2nd quarter estimates:
Samsung 75.1 million
Huawei 58.7 million (despite US sanctions)
Oppo 36.2 million
Apple: 35.3 million
https://www.businessinsider.com/apple-4th-in-ihs-markit-list-top-smartphone-makers-2019-8
You can pretend all you want that Apple makes more money today than the competition does, but at some point this trend will drive all app development to prioritize Android over iOS, because that’s where 90% of customers are. Windows vs Mac all over again, and the Mac lost that battle. Even Apple is too lazy to write great new software for the Mac platform today… Timmy doesn’t think it would make enough money to be worthwhile. Self-inflicted prophesy.
Samsung is gleeful that Trump continues to be a loyal supporter. By avoiding the ban on Chinese made goods, their South Korean factories can continue to pump lower cost Android phones to increasingly cost sensitive US consumers. Timmy is so slow to diversify Apple manufacturing that they may be at a significant disadvantage, at least until Timmy kisses Trump’s ring.
When Apple put iTunes on Windows it exploded in the iPod segment. There was even, IIFC, a cheaper version of the iPod with no display – Music was random then. The results was that the iPod became the most popular and the wide range of pricing was a major factor.
Apple can deliver quality at a price that a lot of people can afford. Even with the $1,000 iPhone selling well they can improve the designs and components of the SE and open up another market segment.
As for your “premium customers” bit, there are far fewer premium customers than “normal customers”. Look at the lines at the Apple Stores – you think they all drive BMWs?
Apple will own the “Affordable Luxury” market when and if it sells a 4” iPhone Pro that, to the extent physically and technologically possible, is as full-featured as the XIs. Insofar as Apple drops the ball, it leaves itself open to a disenchanted significant segment of that market abandoning the Apple ecosystem for a new enchanting technology.
Professionals will pay a large markup for a Pro device.