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Internal Apple document: FY'14 Planning Offsite

131 points by molf 13y ago

davis_m 13y ago
Seems more like "The customers we don't have want what we don't have"
- jusben1369 13y ago
  Or "Prospects (tive customers) want what we don't have"
kenjackson 13y ago
Apple faces a severe potential financial crisis in coming years -- one that dwarfs Microsoft's. They rely so heavily on the premium subsidy for their revenue that if the subsidy is merely brought down to normal levels they will see a huge drop in revenue -- and this assumes that they keep selling the same number of phones. Now that there are viable alternatives in Android, and to a lesser extent Windows Phones, with much lower subsidies, I think you'll see the carriers push these other devices. And if we move to a model where consumers pay for the full price of the phone (which is what much of the world does today), then you'll actually see iPhone sales fall. Sub $200 low-margin phones are the future. Apple can still do well with a premium phone -- especially if the camera is really good, but I think it's a tougher niche than the high-end PC market.
- NathanKP 13y ago
  My understanding of Apple's business model is that they plan to make most of their money from the 30% commission on in app purchases, and their share from media sales made through iTunes. The sale of the hardware is just a way to get a purchase platform in the hands of the consumer. Apple could probably sell a sub $200 iPhone with no difficulty, and then pay off the subsidy using their other sources of indirect revenue. Of course in that case we will probably see iPhones become even more of a walled garden, and a lot more of a crackdown on jailbreaking.
  - 0x0 13y ago
    You're probably right, which is funny since just a couple of years ago the app store was claimed to be a break-even operation. Too bad for Samsung they don't have one.
  - bdcravens 13y ago
    My understanding of Apple's business model is that they plan to make most of their money from the 30% commission on in app purchases, and their share from media sales made through iTunes. Actually, it's project to only grow to about 37% of their total profit by 2020, not exactly "most": http://appleinsider.com/articles/14/03/24/itunes-and-app-sales-projected-to-grow-to-20-of-apple-profit-by-2020 http://appleinsider.com/articles/14/03/24/itunes-and-app-sal...
    - NathanKP 13y ago
      To be more clear when I said "most of their money" I did not mean most of their total revenue for the company, I meant most of the money they make from you during their relationship with you as their customer. If you think about it your relationship with Apple as their customer begins with the hardware purchase, but then as you use the hardware you keep feeding money to Apple every time you make an iTunes purchase, in app purchase, buy extra iCloud storage, etc. The goal is that this residual source of income will surpass the initial income from the sale of the hardware. In that case they could give away the hardware at a very cheap, subsidized price, or even for free and then enjoy the steady stream of money from their other services that run on the device.
      - xuki 13y ago
        Apple make money by selling hardware. First they sell you iPod, which you like very much and start looking for their mac. Then the iPhone come out and you like them too. Next one is iPad, guess what, you already know how to use them. They drive apps price to 0.99 and make their OS free, what does that tell you about their way to make money? Apple at heart is a hardware company with very good software engineer.
      - 13y ago
- bdcravens 13y ago
  Sub $200 low-margin phones are the future. Wouldn't this be as problematic for Samsung (or any other vendor with high end offerings, but Samsung is the big dog) as Apple? While Samsung has some sub-$200 phones, doesn't the massive profit from the latest and greatest make that possible?
  - Mikeb85 13y ago
    It's problematic for a lot of manufacturers, but it's what Google, Amazon, and even MS are pushing for, since their business is software (Google through ads, MS) and commerce (Amazon). Not to mention it's the eventual result of a competitive market (Econ 101).
    - bdcravens 13y ago
      Not to mention it's the eventual result of a competitive market (Econ 101). I like how you appended that course number as a sly insult. In a perfectly competitive market, perhaps. But there are other forces at play. Why does Whole Foods prosper when you can buy food at Wal-Mart? Why do Priuses still sell when they may not be the most cost effective transportation mechanism (after you factor in initial cost)? Why do people still buy Ralph Lauren and Louis Vuitton? Commoditization isn't inevitable in anything other than the theoretical environment you'd find in Econ 101.
      - arjie 13y ago
        Ha ha, excellent stuff. Econ 101 is Econ 101 because it is simplistic. It's like saying "Pi is 22/7. This is high-school mathematics, guys". The whole thing is made simple so you can grasp some concepts. You learn the complexity when you progress through the classes. Realistically then, saying something is Econ 101 is saying that "looking at this without considering any of the subtleties of the situation, we have the following result".
      - Mikeb85 13y ago
        If you'd taken any econ you'd know that differentiating factors exist which essentially create a 'new' market. Whole Foods doesn't compete in the same market as Wal-Mart. Louis Vuitton doesn't compete with (insert nameless brand... Not sure, my wife likes high-end things). Anyhow, the comment was meant tongue in cheek anyhow, don't know why you're so upset. Your retort was bad anyway.
- happyscrappy 13y ago
  As long as Apple keeps making the best hardware available they will have my money. Are you willing to put your hard earned dollars on the line shorting AAPL? If not why?
  - hindsightbias 13y ago
    AAPL is not treated rationally by Wall Street. The stock has been bad mouthed every quarter for years. Last quarter, they ONLY sold 52M iphones instead of the analysts' projection of 54M. Stock drops. As an AAPL holder, it makes me want to get into shorts, but then I'm speculating on the whim of some ass on the TV.
    - waterfowl 13y ago
      and shorts without options to cover your ass are probably more stress for the individual(non filthy rich) investor than they're worth.
    - redler 13y ago
      You can conservatively play an irrational suppression of Apple's stock price by selling out-of-the-money covered calls against your position. Highly liquid market, immediate income in your pocket. Your worst cases are 1) The stock goes down (you were apparently holding anyway, but now you have more cash); or 2) The stock is called away during a run-up (so you pre-sold some fraction of your potential profits to the option buyer). Edit: Clarity
- pjmlp 13y ago
  I think I already went through this scenario around 20 years ago.
- usethis 13y ago
  It is a matter of staying ahead of the curve and not let your competitors catch up. Whether that means in terms of marketing, or product quality doesn't matter. So far plenty consumers are convinced that Apple's prices are justifiable and don't have a reason to switch an ecosystem they have invested in. You are right that Apple faces a crisis if their sales drop, so does every other company. The worst reaction though, would be to start competing on prices, and thus quality. This inevitably leads to a race to the bottom, where they're unable to compete against companies that are based in cheap labor countries. Much in the same way as Philips, or Sony couldn't compete against companies like Samsung once they lost their competitive edge in their product categories.
  - kenjackson 13y ago
    I think you missed my point. They face a crisis even if their sales do NOT drop. They face a crisis if Verizon says to them, "We are no longer willing to give you a subsidy premium. You will get the same subsidy rates as the Samsung Galaxy Sx." Apple will continue to sell at the same rate, but their revenue will drop substantially. On top of that is the fear of their sales actually dropping if carriers stop doing subsidies altogether (which is the direction they are going).
    - gress 13y ago
      Carriers still get much higher ARPU from iPhone users. While that is true, the subsidy will remain.
- anon1385 13y ago
  >Why being insanely profitable is bad for Apple Microsoft fans have been making this argument for 15 years or more. They said Apple should copy Dell and sell cheap enterprise desktops with low margins because that was where the money was. Then they said Apple should copy Asus and HP and sell cheap netbooks with low margins because that was the future. Then people said Apple should be making a really cheap ebook reader to compete with the Kindle. People are constantly advising Apple that they should get into low margin markets and compete on price with companies that are barely breaking even. This advice seems to mostly be based on what they want the market to look like, more than how it actually is.
  - kenjackson 13y ago
    To be clear I think Apple has a great model, but they need to be realistic that it won't last. The only markets in the world that the iPhone has substantial market share is in countries with subsidies (at least I believe so). In markets with no subsidy, Android is killing. As the US (and the world) moves more to a non-subsidy model I think this disproportionately impacts the iPhone. All OEMs will have to deal with this, but Samsung, LG, Huawei, Coolpad, are used to this world already as they sell really well worldwide. iPhone hasn't figured out how to sell full price phones around the world.
    - gress 13y ago
      That 'android' that is killing is AOSP, not GMS, and the accompanying users are the least valuable to operators. Where the market is not saturated, any customer is a win, but in saturated markets, the competition is to skim premium customers out of the churn. If anything this situation is likely to become more prevalent, not less so.
    - blktiger 13y ago
      Apple doesn't focus on market share and it never has. Instead they focus on profit. Take (for example), the personal computer market. According to wikipedia, Mac OS X has around a 7% market share[1] yet Apple's larger competitors like HP and Dell are barely making any money while Apple is still making huge profits. (Not as much as on their iOS businesses of course.) [1] https://en.wikipedia.org/wiki/Usage_share_of_operating_systems https://en.wikipedia.org/wiki/Usage_share_of_operating_syste...
- smackfu 13y ago
  >And if we move to a model where consumers pay for the full price of the phone (which is what much of the world does today) It's coming pretty fast. AT&T is pushing Next pretty hard, which is essentially an interest-free repayment plan spread over 20 or 26 months. If you go to buy a phone now, that installment price is listed first, rather than the contract prices. You still don't see the "real" retail price, but you sure do see that an iPhone is $25 a month and a Moto X is $15 a month. (The Moto X is the cheapest current gen phone they have, I think. Something like a Nexus 5 would be even less but isn't on Next.)
- waylandsmithers 13y ago
  Maybe someone can correct my uninformed opinion on this (plus I've had the same iphone 4s for about two and a half years), but doesn't it seem like all the cool stuff is happening on Android? Android: Pause video when you look away, send data by bumping two phones, run multiple apps at once, watch/wrist devices iPhone: Now in five different colors
  - cloudwalking 13y ago
    The problem is, these "cool" things you mention are mostly just marketing and don't work very well. I have only heard complaints about Galaxy Gear. Same for the eyeball tracking stuff on the new Galaxy phones--it just doesn't work very well.
- bunderbunder 13y ago
  At the peak, Microsoft's profit margins on their core products where hovering around 90%. If I remember right, Apple's profit margins on the iPhone peaked at a bit short of 75% with the 4S, and have generally been sub-60%. Furthermore, Apple hoards cash in a way that Microsoft never did. What this means is that Microsoft was sinking the cash into other business ventures - in other words they created a heavy reliance on those wide profit margins by creating a bunch of units that needed to be subsidized by other units' wide profit margins to survive. By contrast, Apple's taken a strategy of building up an enormous nest egg that they can use to help get them through the lean times should that ever become necessary. Who'd you say is living at greater financial risk? Someone who makes an enormous salary but is only a brief period of unemployment away from foreclosing on their palatial house and having their Porsche repossessed? Or someone who relatively recently fell into a very high-paying (if not quite so enormously lucrative) job but has stuck with a relatively frugal lifestyle and instead devoted the extra money to investing in more liquid assets?
  - 300bps 13y ago
    Someone who makes an enormous salary but is only a brief period of unemployment away from foreclosing on their palatial house and having their Porsche repossessed? So, in this part of your analogy, it seems Microsoft is the company you're comparing to a person that is ready to have their possessions repossessed. Is that right? If so, I humbly invite you to look at the facts regarding Microsoft. Microsoft's most recent quarter saw literally record revenue and they blew away everyone's profit expectations. http://www.bloomberg.com/news/2014-01-23/microsoft-s-second-quarter-profit-sales-top-estimates.html http://www.bloomberg.com/news/2014-01-23/microsoft-s-second-... Microsoft also has more cash on hand than the U.S Government: http://finance.yahoo.com/news/microsoft-starting-hoard-cash-now-194453195.html http://finance.yahoo.com/news/microsoft-starting-hoard-cash-...
    - bunderbunder 13y ago
      Microsoft wasn't always so prudent with its money. I was meaning to compare to when Microsoft's favorite thing to do with cash was to burn it. Remember Skype? I wouldn't be surprised if this (welcome) new strategy isn't at least partially inspired by observing how Apple does things.
joshontheweb 13y ago
For Apple to maintain the lead they have had they need to continue to innovate new types of products, not just keep improving what they have. I think there is plenty of opportunity for this. Think smart appliances, houses, cars. The question is whether they still have the ability to do that with Jobs gone. Time will tell. Edit: Probably the most likely new category would be wearable computing now that I think about it. Longterm perhaps electronics integrated with the body.
- psychometry 13y ago
  They've done some impressive things on the hardware front recently--the Mac Pro redesign and streamlining their MacBook line come to mind--but since the iPhone 4, which had some incredible innovations like the antenna and Retina display, their mobile line has only seen predictable iteration. I expect the iPhone 6 to be a significant deviation in form factor from the iPhone 4/5/5S because Apple is run by smart people who are rarely late to the party.
  - joshontheweb 13y ago
    No doubt. They are still doing great things. But, especially in the case of the smart phone market, the competition is catching up. Or at least coming close enough for a lot of consumers. In order for them to maintain the kind of dominance they are now used to, I think new types of products will be necessary. FWIW I'm not giving up my iPhone anytime soon and would be lost with out my Macbook Air.
  - hahainternet 13y ago
    I hate to be the anti-Apple cynic here, but really? Higher resolution screens, a smaller computer and discontinuing products? That really doesn't strike me as that impressive.
    - psychometry 13y ago
      The retina display was a significant achievement and you need only compare the ppi counts of its contemporaries to see that.
malux85 13y ago
Where are their 4K displays? ... That's what I'm waiting for :)
- deleted 13y ago
  [deleted]
  - malux85 13y ago
    Nah, Thunderbolt Display ... my current one is 2560x1440 ... I would like a higher res external screen.
- octopus 13y ago
  They recommend to buy this 4K display (it is not produced by Apple) if you own a Mac Pro 2013 or a MacBook Pro 2013: http://store.apple.com/ca/product/HD971LL/A/sharp-32-pn-k321-4k-ultra-hd-led-monitor?fnode=53 http://store.apple.com/ca/product/HD971LL/A/sharp-32-pn-k321...
oxymoron 13y ago
Better mind those second derivatives.
GazNewt 13y ago
I'm hoping for 2,272 x 1280 5-6 inch screens this year
gum_ina_package 13y ago
Apple needs to show customers what they want, that's the real issue. Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted. Instead, they've made defensive moves by making their existing products cheaper and more attractive.
- matthewmacleod 13y ago
  Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted. Jobs died a relatively short time ago; even when he was at Apple, it's not like they created new product categories all that often - maybe every 3–5 years? I can't help but feel people have expectations which are a little too high.
  - phantomb 13y ago
    This. In its 35+ years Apple created - or at least codified - the personal computer, the mp3 player, and the modern smartphone. I think it's closer to a big new product category every 5-10 years, really.
- dragonwriter 13y ago
  > Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted. More like since the PC. Since then, they've mostly capitalized on market needs that were widely recognized (and, in the case of portable digital music players, that were already widely popular), but where there was an opportunity to execute better than the incumbents were executing. (Not saying this isn't noteworthy, but its very different than creating "a new product category that none of us knew we wanted.")
iandanforth 13y ago
This strikes me as very boring, non-Apple style thinking. I don't think the experience of a 5 inch phone is better than a 4 inch phone. But it is a bigger number and thus easy to market. And things that are easy to market are the playground of boring companies. Apple, on the other hand, should look at these numbers and say "people obviously want something new." Giant phones are being heavily marketed as the new thing, so people are buying them. Not because it feels good to try to shove a small book into a front pocket, or that they love having to use both hands to type out text messages. A boring business would follow the heard because they don't know how to distinguish customer needs from customer inertia. Apple, traditionally, is very good at knowing when something is a trend, and when something speaks to a deeper human need. I sincerely hope that Apple has not become a boring company.
- JoeAltmaier 13y ago
  Apple is periodically a boring company. It just made better macs for a decade, and slid into irrelevance. Then they got (back) a CEO that made their products relevant again. Then he died. So I'm predicting history will repeat itself.
  - gress 13y ago
    Yeah - because they've forgotten about that.
    - JoeAltmaier 13y ago
      Who's this 'they'? Corporations are automatons without insightful leadership.
      - gress 13y ago
        Tim Cook, Jony Ive, Schiller, etc.
  - mortenjorck 13y ago
    That's not really a fair characterization. 1990s Apple did indeed only iterate its Macs until Jobs returned, but they absolutely didn't stop trying to innovate – they just didn't do it with focus. I mean, Apple invented the PDA without its co-founder at the helm, and repeatedly tried to put a revolutionary operating system on the Mac, but failed due to institutional bloat and uncertain leadership.
badman_ting 13y ago
I guess Apple really is doomed! Based on these three pages of a document.
hit8run 13y ago
Authenticity? It's bullshit because Apple is successful because it doesn't follow every trend and it's not serving the low margin non premium segment.
- DannyBee 13y ago
  It's a court exhibit, filed in Apple v. Samsung. It shows up on the pacer docket. It's authentic (AFAICT), presumably part of discovery apple was required to turn over to samsung.
GVIrish 13y ago
I think this is a case of Apple's stubborness giving them a little bite in the ass. It took them a long time to come out with the iPad mini because they didn't believe in the inbetween tablet size, and now it's taken them far longer than it should've to come out with a bigger iPhone. Apple was late to the party with 4G as well. I think once a bigger iPhone drops it will put a big gust of wind in their sails but I also think that Apple needs to be skating to where the puck will be if they want to keep their place as the premium manufacturer. If they're 2 or 3 years behind what Android (Samsung really) phones have the narrative that Samsung is more innovative is going to gain steam. The other looming challenge for Apple is that software services are growing as a differentiator in phone ecosystems. Most of the Google services thoroughly outclass iCloud, meaning that iCloud doesn't give the Apple the competitive boost that it could.
- dreamfactory2 13y ago
  N.B. that the _smaller_ ipad was the untapped opportunity. Plenty of people choose the iphone precisely because it is smaller. If Apple want to find the undiscovered new market again, they should look at an iphone mini, not a me-too iphone maxi.
- selectodude 13y ago
  >Apple was late to the party with 4G as well. I remember the battery life being just awful on LTE phones until around the time the iPhone 5 came out.
onmydesk 13y ago
Its dated only a year ago.. Id have hoped they would have been working on this obvious problem for a lot longer
shawnc 13y ago
I remember when everyone was bagging on the iPhone for being 'so big'. "who is going to put that damn thing up to their face? They look hilarious! What is this, 1990?" Really amazing how times change. I think it's because when the iPhone came out, no one could think of using their Phone for everything that they are now used for - so it just seemed like overkill. Now for a lot of people, it's their computer.
- TheCoelacanth 13y ago
  Maybe that should be taken as an indication that there isn't any one size that will suit everyone's needs. Some people want a phone that is larger than an iPhone and some people want one that is smaller than an iPhone. Those people are served well by other phone manufacturers who have a variety of sizes, but aren't well served by Apple who only makes one size of phone.
  - cooper12 13y ago
    Apple makes their iphone screen that size because it is part of their tailored user experience (ie: you can reach each part of the phone with your thumb and developers can target that screen size) and because of uniformity (You know a case will fit and you know what to expect). If apple started making their phones larger it would disrupt that experience they built and would introduce fragmentation. Apple does consider screen size though, thats why the ipad mini was released and the ipad itself was made even though Steve Jobs hated the idea of a tablet, so it's not entirely unplausable that they would release an iphablet alongside the next iphone, and as this document shows they are aware of the problem. Apple has also considered the price aspect of the document too, with the iphone 5c, so time will tell what else they'll try.
- reboog711 13y ago
  I have no memory of that...
- 1ris 13y ago
  That didn't happen in my world. The iPhone was always small. Even when it was new the competitors where bigger. The HD2 had a 4.7" display, the iphone had a 3.5". I got a Nexus One, with a sightly larger display and i considered it too small right from the beginning.
yalogin 13y ago
This is all over the internet today. Why is this a bad thing? Everyone knows the smartphone market is maturing (or matured) Samsung/Google has exhausted all its options (all screen sizes) where as Apple still has the bigger screen sizes to release. So we know Apple atleast one more product cycle to go through.
schuke 13y ago
I'm surprised keyboard size is mentioned only once so far. When I have to type Chinese a bigger screen is a lot more accurate. I switched to my current iPhone 5c from a Lumia 920. Typing Chinese has been a major setback for me. (Typing English is not that much different though)
ergest 13y ago
I wonder how a document that says "Highly Confidential - Attorneys' Eyes Only makes it into the wild.
- Spooky23 13y ago
  It was turned over during discovery and released with court documents in the Apple vs. Samsung litigation.

131 points by molf 13y ago

davis_m 13y ago

Seems more like "The customers we don't have want what we don't have"

jusben1369 13y ago
Or "Prospects (tive customers) want what we don't have"

kenjackson 13y ago

Apple faces a severe potential financial crisis in coming years -- one that dwarfs Microsoft's. They rely so heavily on the premium subsidy for their revenue that if the subsidy is merely brought down to normal levels they will see a huge drop in revenue -- and this assumes that they keep selling the same number of phones. Now that there are viable alternatives in Android, and to a lesser extent Windows Phones, with much lower subsidies, I think you'll see the carriers push these other devices. And if we move to a model where consumers pay for the full price of the phone (which is what much of the world does today), then you'll actually see iPhone sales fall. Sub $200 low-margin phones are the future. Apple can still do well with a premium phone -- especially if the camera is really good, but I think it's a tougher niche than the high-end PC market.

NathanKP 13y ago
My understanding of Apple's business model is that they plan to make most of their money from the 30% commission on in app purchases, and their share from media sales made through iTunes. The sale of the hardware is just a way to get a purchase platform in the hands of the consumer. Apple could probably sell a sub $200 iPhone with no difficulty, and then pay off the subsidy using their other sources of indirect revenue. Of course in that case we will probably see iPhones become even more of a walled garden, and a lot more of a crackdown on jailbreaking.
- 0x0 13y ago
  You're probably right, which is funny since just a couple of years ago the app store was claimed to be a break-even operation. Too bad for Samsung they don't have one.
- bdcravens 13y ago
  My understanding of Apple's business model is that they plan to make most of their money from the 30% commission on in app purchases, and their share from media sales made through iTunes. Actually, it's project to only grow to about 37% of their total profit by 2020, not exactly "most": http://appleinsider.com/articles/14/03/24/itunes-and-app-sales-projected-to-grow-to-20-of-apple-profit-by-2020 http://appleinsider.com/articles/14/03/24/itunes-and-app-sal...
  - NathanKP 13y ago
    To be more clear when I said "most of their money" I did not mean most of their total revenue for the company, I meant most of the money they make from you during their relationship with you as their customer. If you think about it your relationship with Apple as their customer begins with the hardware purchase, but then as you use the hardware you keep feeding money to Apple every time you make an iTunes purchase, in app purchase, buy extra iCloud storage, etc. The goal is that this residual source of income will surpass the initial income from the sale of the hardware. In that case they could give away the hardware at a very cheap, subsidized price, or even for free and then enjoy the steady stream of money from their other services that run on the device.
    - xuki 13y ago
      Apple make money by selling hardware. First they sell you iPod, which you like very much and start looking for their mac. Then the iPhone come out and you like them too. Next one is iPad, guess what, you already know how to use them. They drive apps price to 0.99 and make their OS free, what does that tell you about their way to make money? Apple at heart is a hardware company with very good software engineer.
    - 13y ago
bdcravens 13y ago
Sub $200 low-margin phones are the future. Wouldn't this be as problematic for Samsung (or any other vendor with high end offerings, but Samsung is the big dog) as Apple? While Samsung has some sub-$200 phones, doesn't the massive profit from the latest and greatest make that possible?
- Mikeb85 13y ago
  It's problematic for a lot of manufacturers, but it's what Google, Amazon, and even MS are pushing for, since their business is software (Google through ads, MS) and commerce (Amazon). Not to mention it's the eventual result of a competitive market (Econ 101).
  - bdcravens 13y ago
    Not to mention it's the eventual result of a competitive market (Econ 101). I like how you appended that course number as a sly insult. In a perfectly competitive market, perhaps. But there are other forces at play. Why does Whole Foods prosper when you can buy food at Wal-Mart? Why do Priuses still sell when they may not be the most cost effective transportation mechanism (after you factor in initial cost)? Why do people still buy Ralph Lauren and Louis Vuitton? Commoditization isn't inevitable in anything other than the theoretical environment you'd find in Econ 101.
    - arjie 13y ago
      Ha ha, excellent stuff. Econ 101 is Econ 101 because it is simplistic. It's like saying "Pi is 22/7. This is high-school mathematics, guys". The whole thing is made simple so you can grasp some concepts. You learn the complexity when you progress through the classes. Realistically then, saying something is Econ 101 is saying that "looking at this without considering any of the subtleties of the situation, we have the following result".
    - Mikeb85 13y ago
      If you'd taken any econ you'd know that differentiating factors exist which essentially create a 'new' market. Whole Foods doesn't compete in the same market as Wal-Mart. Louis Vuitton doesn't compete with (insert nameless brand... Not sure, my wife likes high-end things). Anyhow, the comment was meant tongue in cheek anyhow, don't know why you're so upset. Your retort was bad anyway.
happyscrappy 13y ago
As long as Apple keeps making the best hardware available they will have my money. Are you willing to put your hard earned dollars on the line shorting AAPL? If not why?
- hindsightbias 13y ago
  AAPL is not treated rationally by Wall Street. The stock has been bad mouthed every quarter for years. Last quarter, they ONLY sold 52M iphones instead of the analysts' projection of 54M. Stock drops. As an AAPL holder, it makes me want to get into shorts, but then I'm speculating on the whim of some ass on the TV.
  - waterfowl 13y ago
    and shorts without options to cover your ass are probably more stress for the individual(non filthy rich) investor than they're worth.
  - redler 13y ago
    You can conservatively play an irrational suppression of Apple's stock price by selling out-of-the-money covered calls against your position. Highly liquid market, immediate income in your pocket. Your worst cases are 1) The stock goes down (you were apparently holding anyway, but now you have more cash); or 2) The stock is called away during a run-up (so you pre-sold some fraction of your potential profits to the option buyer). Edit: Clarity
pjmlp 13y ago
I think I already went through this scenario around 20 years ago.
usethis 13y ago
It is a matter of staying ahead of the curve and not let your competitors catch up. Whether that means in terms of marketing, or product quality doesn't matter. So far plenty consumers are convinced that Apple's prices are justifiable and don't have a reason to switch an ecosystem they have invested in. You are right that Apple faces a crisis if their sales drop, so does every other company. The worst reaction though, would be to start competing on prices, and thus quality. This inevitably leads to a race to the bottom, where they're unable to compete against companies that are based in cheap labor countries. Much in the same way as Philips, or Sony couldn't compete against companies like Samsung once they lost their competitive edge in their product categories.
- kenjackson 13y ago
  I think you missed my point. They face a crisis even if their sales do NOT drop. They face a crisis if Verizon says to them, "We are no longer willing to give you a subsidy premium. You will get the same subsidy rates as the Samsung Galaxy Sx." Apple will continue to sell at the same rate, but their revenue will drop substantially. On top of that is the fear of their sales actually dropping if carriers stop doing subsidies altogether (which is the direction they are going).
  - gress 13y ago
    Carriers still get much higher ARPU from iPhone users. While that is true, the subsidy will remain.
anon1385 13y ago
>Why being insanely profitable is bad for Apple Microsoft fans have been making this argument for 15 years or more. They said Apple should copy Dell and sell cheap enterprise desktops with low margins because that was where the money was. Then they said Apple should copy Asus and HP and sell cheap netbooks with low margins because that was the future. Then people said Apple should be making a really cheap ebook reader to compete with the Kindle. People are constantly advising Apple that they should get into low margin markets and compete on price with companies that are barely breaking even. This advice seems to mostly be based on what they want the market to look like, more than how it actually is.
- kenjackson 13y ago
  To be clear I think Apple has a great model, but they need to be realistic that it won't last. The only markets in the world that the iPhone has substantial market share is in countries with subsidies (at least I believe so). In markets with no subsidy, Android is killing. As the US (and the world) moves more to a non-subsidy model I think this disproportionately impacts the iPhone. All OEMs will have to deal with this, but Samsung, LG, Huawei, Coolpad, are used to this world already as they sell really well worldwide. iPhone hasn't figured out how to sell full price phones around the world.
  - gress 13y ago
    That 'android' that is killing is AOSP, not GMS, and the accompanying users are the least valuable to operators. Where the market is not saturated, any customer is a win, but in saturated markets, the competition is to skim premium customers out of the churn. If anything this situation is likely to become more prevalent, not less so.
  - blktiger 13y ago
    Apple doesn't focus on market share and it never has. Instead they focus on profit. Take (for example), the personal computer market. According to wikipedia, Mac OS X has around a 7% market share[1] yet Apple's larger competitors like HP and Dell are barely making any money while Apple is still making huge profits. (Not as much as on their iOS businesses of course.) [1] https://en.wikipedia.org/wiki/Usage_share_of_operating_systems https://en.wikipedia.org/wiki/Usage_share_of_operating_syste...
smackfu 13y ago
>And if we move to a model where consumers pay for the full price of the phone (which is what much of the world does today) It's coming pretty fast. AT&T is pushing Next pretty hard, which is essentially an interest-free repayment plan spread over 20 or 26 months. If you go to buy a phone now, that installment price is listed first, rather than the contract prices. You still don't see the "real" retail price, but you sure do see that an iPhone is $25 a month and a Moto X is $15 a month. (The Moto X is the cheapest current gen phone they have, I think. Something like a Nexus 5 would be even less but isn't on Next.)
waylandsmithers 13y ago
Maybe someone can correct my uninformed opinion on this (plus I've had the same iphone 4s for about two and a half years), but doesn't it seem like all the cool stuff is happening on Android? Android: Pause video when you look away, send data by bumping two phones, run multiple apps at once, watch/wrist devices iPhone: Now in five different colors
- cloudwalking 13y ago
  The problem is, these "cool" things you mention are mostly just marketing and don't work very well. I have only heard complaints about Galaxy Gear. Same for the eyeball tracking stuff on the new Galaxy phones--it just doesn't work very well.
bunderbunder 13y ago
At the peak, Microsoft's profit margins on their core products where hovering around 90%. If I remember right, Apple's profit margins on the iPhone peaked at a bit short of 75% with the 4S, and have generally been sub-60%. Furthermore, Apple hoards cash in a way that Microsoft never did. What this means is that Microsoft was sinking the cash into other business ventures - in other words they created a heavy reliance on those wide profit margins by creating a bunch of units that needed to be subsidized by other units' wide profit margins to survive. By contrast, Apple's taken a strategy of building up an enormous nest egg that they can use to help get them through the lean times should that ever become necessary. Who'd you say is living at greater financial risk? Someone who makes an enormous salary but is only a brief period of unemployment away from foreclosing on their palatial house and having their Porsche repossessed? Or someone who relatively recently fell into a very high-paying (if not quite so enormously lucrative) job but has stuck with a relatively frugal lifestyle and instead devoted the extra money to investing in more liquid assets?
- 300bps 13y ago
  Someone who makes an enormous salary but is only a brief period of unemployment away from foreclosing on their palatial house and having their Porsche repossessed? So, in this part of your analogy, it seems Microsoft is the company you're comparing to a person that is ready to have their possessions repossessed. Is that right? If so, I humbly invite you to look at the facts regarding Microsoft. Microsoft's most recent quarter saw literally record revenue and they blew away everyone's profit expectations. http://www.bloomberg.com/news/2014-01-23/microsoft-s-second-quarter-profit-sales-top-estimates.html http://www.bloomberg.com/news/2014-01-23/microsoft-s-second-... Microsoft also has more cash on hand than the U.S Government: http://finance.yahoo.com/news/microsoft-starting-hoard-cash-now-194453195.html http://finance.yahoo.com/news/microsoft-starting-hoard-cash-...
  - bunderbunder 13y ago
    Microsoft wasn't always so prudent with its money. I was meaning to compare to when Microsoft's favorite thing to do with cash was to burn it. Remember Skype? I wouldn't be surprised if this (welcome) new strategy isn't at least partially inspired by observing how Apple does things.

joshontheweb 13y ago

For Apple to maintain the lead they have had they need to continue to innovate new types of products, not just keep improving what they have. I think there is plenty of opportunity for this. Think smart appliances, houses, cars. The question is whether they still have the ability to do that with Jobs gone. Time will tell. Edit: Probably the most likely new category would be wearable computing now that I think about it. Longterm perhaps electronics integrated with the body.

psychometry 13y ago
They've done some impressive things on the hardware front recently--the Mac Pro redesign and streamlining their MacBook line come to mind--but since the iPhone 4, which had some incredible innovations like the antenna and Retina display, their mobile line has only seen predictable iteration. I expect the iPhone 6 to be a significant deviation in form factor from the iPhone 4/5/5S because Apple is run by smart people who are rarely late to the party.
- joshontheweb 13y ago
  No doubt. They are still doing great things. But, especially in the case of the smart phone market, the competition is catching up. Or at least coming close enough for a lot of consumers. In order for them to maintain the kind of dominance they are now used to, I think new types of products will be necessary. FWIW I'm not giving up my iPhone anytime soon and would be lost with out my Macbook Air.
- hahainternet 13y ago
  I hate to be the anti-Apple cynic here, but really? Higher resolution screens, a smaller computer and discontinuing products? That really doesn't strike me as that impressive.
  - psychometry 13y ago
    The retina display was a significant achievement and you need only compare the ppi counts of its contemporaries to see that.

malux85 13y ago

Where are their 4K displays? ... That's what I'm waiting for :)

deleted 13y ago
[deleted]
- malux85 13y ago
  Nah, Thunderbolt Display ... my current one is 2560x1440 ... I would like a higher res external screen.
octopus 13y ago
They recommend to buy this 4K display (it is not produced by Apple) if you own a Mac Pro 2013 or a MacBook Pro 2013: http://store.apple.com/ca/product/HD971LL/A/sharp-32-pn-k321-4k-ultra-hd-led-monitor?fnode=53 http://store.apple.com/ca/product/HD971LL/A/sharp-32-pn-k321...

oxymoron 13y ago

Better mind those second derivatives.

GazNewt 13y ago

I'm hoping for 2,272 x 1280 5-6 inch screens this year

gum_ina_package 13y ago

Apple needs to show customers what they want, that's the real issue. Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted. Instead, they've made defensive moves by making their existing products cheaper and more attractive.

matthewmacleod 13y ago
Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted. Jobs died a relatively short time ago; even when he was at Apple, it's not like they created new product categories all that often - maybe every 3–5 years? I can't help but feel people have expectations which are a little too high.
- phantomb 13y ago
  This. In its 35+ years Apple created - or at least codified - the personal computer, the mp3 player, and the modern smartphone. I think it's closer to a big new product category every 5-10 years, really.
dragonwriter 13y ago
> Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted. More like since the PC. Since then, they've mostly capitalized on market needs that were widely recognized (and, in the case of portable digital music players, that were already widely popular), but where there was an opportunity to execute better than the incumbents were executing. (Not saying this isn't noteworthy, but its very different than creating "a new product category that none of us knew we wanted.")

iandanforth 13y ago

This strikes me as very boring, non-Apple style thinking. I don't think the experience of a 5 inch phone is better than a 4 inch phone. But it is a bigger number and thus easy to market. And things that are easy to market are the playground of boring companies. Apple, on the other hand, should look at these numbers and say "people obviously want something new." Giant phones are being heavily marketed as the new thing, so people are buying them. Not because it feels good to try to shove a small book into a front pocket, or that they love having to use both hands to type out text messages. A boring business would follow the heard because they don't know how to distinguish customer needs from customer inertia. Apple, traditionally, is very good at knowing when something is a trend, and when something speaks to a deeper human need. I sincerely hope that Apple has not become a boring company.

JoeAltmaier 13y ago
Apple is periodically a boring company. It just made better macs for a decade, and slid into irrelevance. Then they got (back) a CEO that made their products relevant again. Then he died. So I'm predicting history will repeat itself.
- gress 13y ago
  Yeah - because they've forgotten about that.
  - JoeAltmaier 13y ago
    Who's this 'they'? Corporations are automatons without insightful leadership.
    - gress 13y ago
      Tim Cook, Jony Ive, Schiller, etc.
- mortenjorck 13y ago
  That's not really a fair characterization. 1990s Apple did indeed only iterate its Macs until Jobs returned, but they absolutely didn't stop trying to innovate – they just didn't do it with focus. I mean, Apple invented the PDA without its co-founder at the helm, and repeatedly tried to put a revolutionary operating system on the Mac, but failed due to institutional bloat and uncertain leadership.

badman_ting 13y ago

I guess Apple really is doomed! Based on these three pages of a document.

hit8run 13y ago

Authenticity? It's bullshit because Apple is successful because it doesn't follow every trend and it's not serving the low margin non premium segment.

DannyBee 13y ago
It's a court exhibit, filed in Apple v. Samsung. It shows up on the pacer docket. It's authentic (AFAICT), presumably part of discovery apple was required to turn over to samsung.

GVIrish 13y ago

I think this is a case of Apple's stubborness giving them a little bite in the ass. It took them a long time to come out with the iPad mini because they didn't believe in the inbetween tablet size, and now it's taken them far longer than it should've to come out with a bigger iPhone. Apple was late to the party with 4G as well. I think once a bigger iPhone drops it will put a big gust of wind in their sails but I also think that Apple needs to be skating to where the puck will be if they want to keep their place as the premium manufacturer. If they're 2 or 3 years behind what Android (Samsung really) phones have the narrative that Samsung is more innovative is going to gain steam. The other looming challenge for Apple is that software services are growing as a differentiator in phone ecosystems. Most of the Google services thoroughly outclass iCloud, meaning that iCloud doesn't give the Apple the competitive boost that it could.

dreamfactory2 13y ago
N.B. that the _smaller_ ipad was the untapped opportunity. Plenty of people choose the iphone precisely because it is smaller. If Apple want to find the undiscovered new market again, they should look at an iphone mini, not a me-too iphone maxi.
selectodude 13y ago
>Apple was late to the party with 4G as well. I remember the battery life being just awful on LTE phones until around the time the iPhone 5 came out.

onmydesk 13y ago

Its dated only a year ago.. Id have hoped they would have been working on this obvious problem for a lot longer

shawnc 13y ago

I remember when everyone was bagging on the iPhone for being 'so big'. "who is going to put that damn thing up to their face? They look hilarious! What is this, 1990?" Really amazing how times change. I think it's because when the iPhone came out, no one could think of using their Phone for everything that they are now used for - so it just seemed like overkill. Now for a lot of people, it's their computer.

TheCoelacanth 13y ago
Maybe that should be taken as an indication that there isn't any one size that will suit everyone's needs. Some people want a phone that is larger than an iPhone and some people want one that is smaller than an iPhone. Those people are served well by other phone manufacturers who have a variety of sizes, but aren't well served by Apple who only makes one size of phone.
- cooper12 13y ago
  Apple makes their iphone screen that size because it is part of their tailored user experience (ie: you can reach each part of the phone with your thumb and developers can target that screen size) and because of uniformity (You know a case will fit and you know what to expect). If apple started making their phones larger it would disrupt that experience they built and would introduce fragmentation. Apple does consider screen size though, thats why the ipad mini was released and the ipad itself was made even though Steve Jobs hated the idea of a tablet, so it's not entirely unplausable that they would release an iphablet alongside the next iphone, and as this document shows they are aware of the problem. Apple has also considered the price aspect of the document too, with the iphone 5c, so time will tell what else they'll try.
reboog711 13y ago
I have no memory of that...
1ris 13y ago
That didn't happen in my world. The iPhone was always small. Even when it was new the competitors where bigger. The HD2 had a 4.7" display, the iphone had a 3.5". I got a Nexus One, with a sightly larger display and i considered it too small right from the beginning.

yalogin 13y ago

This is all over the internet today. Why is this a bad thing? Everyone knows the smartphone market is maturing (or matured) Samsung/Google has exhausted all its options (all screen sizes) where as Apple still has the bigger screen sizes to release. So we know Apple atleast one more product cycle to go through.

schuke 13y ago

I'm surprised keyboard size is mentioned only once so far. When I have to type Chinese a bigger screen is a lot more accurate. I switched to my current iPhone 5c from a Lumia 920. Typing Chinese has been a major setback for me. (Typing English is not that much different though)

ergest 13y ago

I wonder how a document that says "Highly Confidential - Attorneys' Eyes Only makes it into the wild.

Spooky23 13y ago
It was turned over during discovery and released with court documents in the Apple vs. Samsung litigation.