8 ms·

Why Apple may be losing its edge

15 points by joxie 14y ago

someperson 14y ago
Incredible blogspam, the original source (not linked from the CBS News article is http://allthingsd.com/20121126/iphone-5-costs-may-be-eating-apples-gross-margins/ http://allthingsd.com/20121126/iphone-5-costs-may-be-eating-...). Then they spun the story into something else with a terrible editorialized headline ("losing its edge" actually means "lower gross margins per phone"). There's probably some useful discussion to be had whether Apple is really "losing its edge" in regards to making disruptive devices though. This is not that article.
- steverb 14y ago
  I think in this case they mean losing their edge as an investment/profit wise, not their technical edge.
- pretoriusB 14y ago
  >There's probably some useful discussion to be had whether Apple is really "losing its edge" in regards to making disruptive devices though. Less than two years after they introduced their last disruptive device (the iPad)? What "disruptive devices" has Apple's competition released during last 10 years exactly? Blackberry could be thought of as one. Any other? (And one could argue that the high-dpi laptop, introduced less than a year ago, is also another disruptive device in the PC industry -- as was the Air that created the whole ultraportable thing and is still unsurpassed).
  - steverb 14y ago
    There's a problem if your technical edge is disruptive devices. In order to maintain that edge you have to keep disrupting. I think the iPod, iPhone, and iPad were fairly obvious choices (although I was surprised that it was Apple that released the iPod, I had expected a killer device from one of the then traditional consumer electronics companies). Apple has already addressed all of my personal pain points, although I suppose they could eventually get AppleTV right I don't think it will be disruptive at anywhere near the scale that the iPhone was.
    - pretoriusB 14y ago
      >There's a problem if your technical edge is disruptive devices. In order to maintain that edge you have to keep disrupting. True, but why "maintain that edge"? Apple was doing just fine with just the Mac like pre iPod. And then it did phenomenal after the iPod, iPhone, iPad. Even just with those, it's a tens of billions dollar business they can continue milking. It's not like "disruptive" is what marks Apple. The iPhone 5 is not disruptive anymore, but it sells like hot cakes. Incremental improvement and more especially high class machines (design, build and software integration) is what marks Apple. They can milk that for decades.
      - steverb 14y ago
        The edge matters for investors. Yes, Apple can continue to trundle along making about what it does now for a good long while, but their stock is generally priced for growth (although that has been changing lately). In the meantime they have have Android (and eventually probably MS) swallowing their market from the low end up. To me it seems very similar to what happened with the desktop market.
        pretoriusB 14y ago
        >The edge matters for investors. Yes, Apple can continue to trundle along making about what it does now for a good long while, but their stock is generally priced for growth That's true, but I don't care much for investors. I was happy with Apple in 2002-3, when it was 1/50 today's size, because it had the product I wanted: a bloody usable Unix that can run proprietary apps, and good hi-end laptops. I wish companies were less relied in investors and the stock market and more on their actual production and revenues. Then you wouldn't have some social BS selling for several billion dollars only to die out a couple of years later...
  - chris_wot 14y ago
    The problem with defending against disruptive devices is that they only become so when they start disrupting your business.
  - gregsq 14y ago
    I'm not going to attempt to predict unpredictable disruptive technology, but the landscape is certainly changing, though by how much is still predictably uncertain. The cost reductions available to Apple are also available more widely. There's a lot of hardware work going on by lots of actors, and I don't think we should assume that restrictions on supply, for example with Samsungs Exynos 5, will continue indefinitely. It depends in the end on competitive advantage viewed from different perspectives. Apple is a great design company, and it's economies of scale are impressive. As these economies constrict, so does the advantage and within such a scenario disruption can more easily occur.
chris_wot 14y ago
That only tells me they are not as profitable, not that they've lost their edge. No real insight here I'm afraid.
- wiremine 14y ago
  I agree there isn't any real insight. I've often wondered, however, how a (relatively) lower profit margin would affect Apple. They seem to be banking the profits at this point. So, would the net effect just be $10B less in the bank, or would it actually change their operation? And, if that change _would_ effect their edge on innovation?
twootten 14y ago
Linkbait aside, if Apple's gross margin is decreasing, which it looks like it is, its most likely because of the iPad which carries a lower profit margin. So when iPad sales become a larger portion of total sales, gross margin goes down while total profits still go up.
- steverb 14y ago
  I think that the rise of Android is enabling carriers to push back a lot harder on the subsidies too. From their point of view, there's good demand across the board for Android phones and they can sell them with better profit, which would probably make them more inclined to negotiate harder with Apple. I wouldn't be surprised if one of the carriers threatens to skip the next iPhone release.
  - Tloewald 14y ago
    The carriers make way more money off iPhone customers so not likely. Also, in general, no-one switches carriers to get random android devices. They will leave carriers to get iPhones. As android increases share of the phone market (vs. smartphone market, right?) the percentage of mobile web traffic from android has, if anything, dropped. This suggests android is winning big in the "I don't care what phone I get" market. This isn't the fat juicy part of the market.
    - steverb 14y ago
      They USED to make way more money. I don't know that that is still true, based on gripes from sales people about commissions I'm pretty sure it's no longer true. I do know that carriers are pushing Android (and even Windows) phones a lot harder than they were a year ago.
      - Tloewald 14y ago
        Sales people's commissions tend to be inversely related to customer demand. iPhone demand outstrips supply to incentivizing salespeople to sell iPhones makes no sense. Think the numbers have dramatically changed since August? http://www.forbes.com/sites/ycharts/2012/08/10/can-anyone-help-these-poor-wireless-carriers-break-their-addiction-to-iphones/ http://www.forbes.com/sites/ycharts/2012/08/10/can-anyone-he...
S_A_P 14y ago
Every blogger wants to be the person who "calls" a company peaking/declining/etc. I think the zeitgeist has been that apple is going to decline ever since Steve Jobs passing. While he certainly curated apples products well, all the smart people who created them are still around.(mostly anyway) Everything is shifting to mobile, so its not a blue ocean anymore. Its going to be increasingly competitive and harder to hit homeruns with every product. Im happy to see at least 2 really competitive platforms to iOS out there. Consumers win here, and all three platforms benefit from having to stay competitive.
brudgers 14y ago
The iPhone is a great product, but it is no longer the best product for a significant portion of the market. This is due to the changes in demographics as the smartphone market has expanded and competition from sophisticated competitors with deep pockets, the desire to out innovate the market leader, and experience in commoditized markets. Apple is fighting increasingly defensive campaigns because they are increasingly confronting the same sorts of challenges RIM experienced from them a few years ago.
calciphus 14y ago
The stupdily sharp edge on my Macbook Pro says otherwise. Now where's my angle grinder...

15 points by joxie 14y ago

Incredible blogspam, the original source (not linked from the CBS News article is http://allthingsd.com/20121126/iphone-5-costs-may-be-eating-apples-gross-margins/ http://allthingsd.com/20121126/iphone-5-costs-may-be-eating-...). Then they spun the story into something else with a terrible editorialized headline ("losing its edge" actually means "lower gross margins per phone"). There's probably some useful discussion to be had whether Apple is really "losing its edge" in regards to making disruptive devices though. This is not that article.

steverb 14y ago
I think in this case they mean losing their edge as an investment/profit wise, not their technical edge.
pretoriusB 14y ago
>There's probably some useful discussion to be had whether Apple is really "losing its edge" in regards to making disruptive devices though. Less than two years after they introduced their last disruptive device (the iPad)? What "disruptive devices" has Apple's competition released during last 10 years exactly? Blackberry could be thought of as one. Any other? (And one could argue that the high-dpi laptop, introduced less than a year ago, is also another disruptive device in the PC industry -- as was the Air that created the whole ultraportable thing and is still unsurpassed).
- steverb 14y ago
  There's a problem if your technical edge is disruptive devices. In order to maintain that edge you have to keep disrupting. I think the iPod, iPhone, and iPad were fairly obvious choices (although I was surprised that it was Apple that released the iPod, I had expected a killer device from one of the then traditional consumer electronics companies). Apple has already addressed all of my personal pain points, although I suppose they could eventually get AppleTV right I don't think it will be disruptive at anywhere near the scale that the iPhone was.
  - pretoriusB 14y ago
    >There's a problem if your technical edge is disruptive devices. In order to maintain that edge you have to keep disrupting. True, but why "maintain that edge"? Apple was doing just fine with just the Mac like pre iPod. And then it did phenomenal after the iPod, iPhone, iPad. Even just with those, it's a tens of billions dollar business they can continue milking. It's not like "disruptive" is what marks Apple. The iPhone 5 is not disruptive anymore, but it sells like hot cakes. Incremental improvement and more especially high class machines (design, build and software integration) is what marks Apple. They can milk that for decades.
    - steverb 14y ago
      The edge matters for investors. Yes, Apple can continue to trundle along making about what it does now for a good long while, but their stock is generally priced for growth (although that has been changing lately). In the meantime they have have Android (and eventually probably MS) swallowing their market from the low end up. To me it seems very similar to what happened with the desktop market.
      - pretoriusB 14y ago
        >The edge matters for investors. Yes, Apple can continue to trundle along making about what it does now for a good long while, but their stock is generally priced for growth That's true, but I don't care much for investors. I was happy with Apple in 2002-3, when it was 1/50 today's size, because it had the product I wanted: a bloody usable Unix that can run proprietary apps, and good hi-end laptops. I wish companies were less relied in investors and the stock market and more on their actual production and revenues. Then you wouldn't have some social BS selling for several billion dollars only to die out a couple of years later...
- chris_wot 14y ago
  The problem with defending against disruptive devices is that they only become so when they start disrupting your business.
- gregsq 14y ago
  I'm not going to attempt to predict unpredictable disruptive technology, but the landscape is certainly changing, though by how much is still predictably uncertain. The cost reductions available to Apple are also available more widely. There's a lot of hardware work going on by lots of actors, and I don't think we should assume that restrictions on supply, for example with Samsungs Exynos 5, will continue indefinitely. It depends in the end on competitive advantage viewed from different perspectives. Apple is a great design company, and it's economies of scale are impressive. As these economies constrict, so does the advantage and within such a scenario disruption can more easily occur.

chris_wot 14y ago

That only tells me they are not as profitable, not that they've lost their edge. No real insight here I'm afraid.

wiremine 14y ago
I agree there isn't any real insight. I've often wondered, however, how a (relatively) lower profit margin would affect Apple. They seem to be banking the profits at this point. So, would the net effect just be $10B less in the bank, or would it actually change their operation? And, if that change _would_ effect their edge on innovation?

twootten 14y ago

Linkbait aside, if Apple's gross margin is decreasing, which it looks like it is, its most likely because of the iPad which carries a lower profit margin. So when iPad sales become a larger portion of total sales, gross margin goes down while total profits still go up.

steverb 14y ago
I think that the rise of Android is enabling carriers to push back a lot harder on the subsidies too. From their point of view, there's good demand across the board for Android phones and they can sell them with better profit, which would probably make them more inclined to negotiate harder with Apple. I wouldn't be surprised if one of the carriers threatens to skip the next iPhone release.
- Tloewald 14y ago
  The carriers make way more money off iPhone customers so not likely. Also, in general, no-one switches carriers to get random android devices. They will leave carriers to get iPhones. As android increases share of the phone market (vs. smartphone market, right?) the percentage of mobile web traffic from android has, if anything, dropped. This suggests android is winning big in the "I don't care what phone I get" market. This isn't the fat juicy part of the market.
  - steverb 14y ago
    They USED to make way more money. I don't know that that is still true, based on gripes from sales people about commissions I'm pretty sure it's no longer true. I do know that carriers are pushing Android (and even Windows) phones a lot harder than they were a year ago.
    - Tloewald 14y ago
      Sales people's commissions tend to be inversely related to customer demand. iPhone demand outstrips supply to incentivizing salespeople to sell iPhones makes no sense. Think the numbers have dramatically changed since August? http://www.forbes.com/sites/ycharts/2012/08/10/can-anyone-help-these-poor-wireless-carriers-break-their-addiction-to-iphones/ http://www.forbes.com/sites/ycharts/2012/08/10/can-anyone-he...

S_A_P 14y ago

Every blogger wants to be the person who "calls" a company peaking/declining/etc. I think the zeitgeist has been that apple is going to decline ever since Steve Jobs passing. While he certainly curated apples products well, all the smart people who created them are still around.(mostly anyway) Everything is shifting to mobile, so its not a blue ocean anymore. Its going to be increasingly competitive and harder to hit homeruns with every product. Im happy to see at least 2 really competitive platforms to iOS out there. Consumers win here, and all three platforms benefit from having to stay competitive.

brudgers 14y ago

The iPhone is a great product, but it is no longer the best product for a significant portion of the market. This is due to the changes in demographics as the smartphone market has expanded and competition from sophisticated competitors with deep pockets, the desire to out innovate the market leader, and experience in commoditized markets. Apple is fighting increasingly defensive campaigns because they are increasingly confronting the same sorts of challenges RIM experienced from them a few years ago.

calciphus 14y ago

The stupdily sharp edge on my Macbook Pro says otherwise. Now where's my angle grinder...