4 ms·

>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

>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...
  - kenjackson 13y ago
    Apple does focus on marketshare, but a different market than most pundits look at. Even when they launched the iPhone Steve Jobs had a specific marketshare target (I think it was 1% or something). The issue they have is that they've so dominated the US in marketshare with a great subsidy model that they've generated record profits. It's hard to come down from that to say, "well our profits will drop substantially, but we're happy at being 20% of the US market -- which is actually much better than our wildly successful PC market". They can't afford to do that -- unless they have some magic up their sleeve.
- awj 13y ago
  > As the US (and the world) moves more to a non-subsidy model I think this disproportionately impacts the iPhone. This is the exact model Apple's computer division deals with, and they're wildly profitable compared to most PC vendors even though they charge premium prices all around. What's different about phones?
  - Touche 13y ago
    The computer division is funded by the overall success of Apple. It allows the computer division to have a bigger budget to spend on things like marketing and R&D. It's not a coincidence that the computer division has been doing so much better since Apple had other mega-successes that serve as the cash cow for the entire company. If the iPhone ever ceases to be as profitable it will have a ripple-effect throughout the entire company as they scramble to find the next thing that will replace those lost profits.
    - redler 13y ago
      Actually, Apple spends remarkably little on R&D, perhaps even to a fault. The third chart on this page from Asymco [1] is interesting, especially considering Apple's R&D is for computers, phones, and whatever other lines they're developing, and the R&D for a company like HTC is likely to be clustered around its narrower product lines. [1] http://www.asymco.com/2012/01/30/you-cannot-buy-innovation/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Asymco+%28asymco%29 http://www.asymco.com/2012/01/30/you-cannot-buy-innovation/?...
simonh 13y ago
More like 25 years plus. I keep seeing people talk like Apple 'lost' the PC wars and will 'lose' the phone wars the same way, yet Apple's PC business is insanely profitable by PC market standards. Commoditization of the PC market hasn't touched Apple's PC business in any way. What it does is lock the other PC vendors into a race to the bottom, leaving Apple as the only company with the resources and brand position to support premium gear at premium prices. Exactly the same thing is happening in phones. Every single Android phone is in an even battle with every other Android phone. The market for premium Android devices in split roughly evenly between the top half dozen, perhaps even a dozen or more devices. Meanwhile the market for the premium iPhone is split between, er, one device. None of the other manufacturer can afford Apple's software, services and several-year-long device support. This dynamic isn't going to change any time soon. At some point yes perhaps Apple's huge phone margins may decline, but there's no reason to suppose their premium brand position and margins will disappear completely for the foreseeable future. They've been living that life in the PC market for almost their entire existence. It's what they do.
- deleted 13y ago
  [deleted]
- Pxtl 13y ago
  > What it does is lock the other PC vendors into a race to the bottom, leaving Apple as the only company with the resources and brand position to support premium gear at premium prices. I do wish that other PC developers would copy the marketing strategy used by car companies: separate branding for their high-end line. Ford/Lincoln, Honda/Acura... why didn't we have Compaq/HP? They could've kept HP as a brand to be proud of. Google could've used Motorola to fill in low-end products unworthy of the Nexus moniker.
Pxtl 13y ago
Good point. You don't see the swarm of MacBooks all over campus because of carrier subsidies, you see it because every other company makes miserable plastic crap laptops. Even if a company sells a notebook that provides a comparable experience to a Macbook, the company soils its own reputation with the crappy ones so people are suspicious of the higher-end.

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...
- kenjackson 13y ago
  Apple does focus on marketshare, but a different market than most pundits look at. Even when they launched the iPhone Steve Jobs had a specific marketshare target (I think it was 1% or something). The issue they have is that they've so dominated the US in marketshare with a great subsidy model that they've generated record profits. It's hard to come down from that to say, "well our profits will drop substantially, but we're happy at being 20% of the US market -- which is actually much better than our wildly successful PC market". They can't afford to do that -- unless they have some magic up their sleeve.
awj 13y ago
> As the US (and the world) moves more to a non-subsidy model I think this disproportionately impacts the iPhone. This is the exact model Apple's computer division deals with, and they're wildly profitable compared to most PC vendors even though they charge premium prices all around. What's different about phones?
- Touche 13y ago
  The computer division is funded by the overall success of Apple. It allows the computer division to have a bigger budget to spend on things like marketing and R&D. It's not a coincidence that the computer division has been doing so much better since Apple had other mega-successes that serve as the cash cow for the entire company. If the iPhone ever ceases to be as profitable it will have a ripple-effect throughout the entire company as they scramble to find the next thing that will replace those lost profits.
  - redler 13y ago
    Actually, Apple spends remarkably little on R&D, perhaps even to a fault. The third chart on this page from Asymco [1] is interesting, especially considering Apple's R&D is for computers, phones, and whatever other lines they're developing, and the R&D for a company like HTC is likely to be clustered around its narrower product lines. [1] http://www.asymco.com/2012/01/30/you-cannot-buy-innovation/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Asymco+%28asymco%29 http://www.asymco.com/2012/01/30/you-cannot-buy-innovation/?...

simonh 13y ago

More like 25 years plus. I keep seeing people talk like Apple 'lost' the PC wars and will 'lose' the phone wars the same way, yet Apple's PC business is insanely profitable by PC market standards. Commoditization of the PC market hasn't touched Apple's PC business in any way. What it does is lock the other PC vendors into a race to the bottom, leaving Apple as the only company with the resources and brand position to support premium gear at premium prices. Exactly the same thing is happening in phones. Every single Android phone is in an even battle with every other Android phone. The market for premium Android devices in split roughly evenly between the top half dozen, perhaps even a dozen or more devices. Meanwhile the market for the premium iPhone is split between, er, one device. None of the other manufacturer can afford Apple's software, services and several-year-long device support. This dynamic isn't going to change any time soon. At some point yes perhaps Apple's huge phone margins may decline, but there's no reason to suppose their premium brand position and margins will disappear completely for the foreseeable future. They've been living that life in the PC market for almost their entire existence. It's what they do.

deleted 13y ago
[deleted]
Pxtl 13y ago
> What it does is lock the other PC vendors into a race to the bottom, leaving Apple as the only company with the resources and brand position to support premium gear at premium prices. I do wish that other PC developers would copy the marketing strategy used by car companies: separate branding for their high-end line. Ford/Lincoln, Honda/Acura... why didn't we have Compaq/HP? They could've kept HP as a brand to be proud of. Google could've used Motorola to fill in low-end products unworthy of the Nexus moniker.

Pxtl 13y ago

Good point. You don't see the swarm of MacBooks all over campus because of carrier subsidies, you see it because every other company makes miserable plastic crap laptops. Even if a company sells a notebook that provides a comparable experience to a Macbook, the company soils its own reputation with the crappy ones so people are suspicious of the higher-end.