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Will Apple be a victim of its own success?

Posted in Mobile Devices and Company Updates by Manas Ganguly on March 19, 2012


Indexing Apple’s share price on the basis of its history

In June 1984, Apple share price was a piddly $1.84. That was when Apple was under attack from Microsoft and Apple machines were being given a miss by the consumer community at large. Today Apple trades at $601.10. Apple’s stock price has appreciated at a CAGR of 23% ever since. Frankly now, that statistic isn’t wowing. So here’s something to wow … post the announcement/launch of the iconic iPhone 5 years back, Apple’s share price has registered 48% CAGR. Ever since the iPad was announced in January 2010, the share price of Apple has zoomed 71% Y-o-Y. And for the nay-sayers, the share price of Apple has gone from $351 to $601 since the death of Steve Jobs.In an earlier post, i had written about Apple’s valuation being higher than the combined valuation of Google and Microsoft combined. In response to Michael Dell’s comment of selling Apple and paying its shareholders back, Apple could buy Dell thrice over with its loose change.


Up, up and away -Apple’s soaring share price

Apple could well be on its way to become a $trillion company (as predicted by MSNBC). If that were to be anytime soon, Apple would be the 16th largest economy in the world (If it were a country). Currently it is ranked 19th at par with Switzerland (IMF estimates) as the 19th biggest economy in the world (If it were a country). If I were to tally Apple revenue’s against the GDP of all the countries in the world, Apple would be equal to GDP of the bottom 105 countries put together. Try this with the CIA factbook data of GDP of world nations. Not withstanding the $100bn cash reserves that Apple holds.


Blockbuster products: The Sales tracker

Selling it as fast as they come: Five years ago, it took Apple 74 days to build — and sell — the first 1 million iPhones. Last year, for the launch of the iPhone 4S, the company was able to supply 4 million units for the first weekend and build more than 24 million within the first three months. Last Friday, at least 3 million new iPads were ready for sale in 10 countries, with more on their way to 25 additional countries this coming Friday. Meanwhile, Apple is still building iPhones and iPods by the millions.

Apple is on such a winning course because it’s encapsulated all of its different big products in the famed/infamous “walled garden”. Apple devices work together so well because of the tight integration of the devices, services and experiences across a variety of use cases. However, the question that begs to be asked is how will Apple replicate its success year on year, product after product. Steve Jobs had been immensely successful at building a robust platform (iTunes, Apps Store, iCloud) and then creating device led experiences that were unparalleled amongst the contemporary others.

Currently, the biggest challenge for Tim Cook remains to sustain this momentum. Currently it was iPhone4S and iPad which have been instrumental in pushing the Apple share price by 50% in less than 6 months. Sustaining the craziness and momentum is a formidable challenge and Apple will need to out innovate and out-do the customer experience. Currently the only major new innovation due from Apple is the ITV. The iTV has some formidable base with Apple’s support services. One can expect Apple to perfect the device experience yet again. However, I have this feeling that Apple could be a victim of its own heady success. Apple has set the bar too high and outdoing itself year on year comprehensively is a feat that will be quite impossible. Then again, we speak of Apple here….

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Apple: What next?

Posted in Mobile Devices and Company Updates by Manas Ganguly on July 23, 2009

Apple’s Q3 results have been very good! The thought is that this is Apple’s brightest hour and having hit the peak, there is no way but a gradual slide down. However there is more in the communication from Apple on how they let their own products cannibalize themselves and how they are innovating the future! Apple COO stops short of naming iTablet as the next from Apple Stable

Ref: http://online.wsj.com/article/SB124820913514969595.html; http://online.wsj.com/article/SB124821056118269783.html; http://blogs.wsj.com/digits/2009/07/21/live-blogging-apple-earnings-2/

Apple has been heaped with praises for its non-conformist strategy and super-hit portfolio of products which have upstaged the industry incumbents. The Q3 results declared this week have been Apple’s moment in history! Third-quarter sales rose to $8.34 billion, up from $7.46 billion a year ago, due in part to strong sales of the iPhone. Net income rose to $1.23 billion, up from $1.07 billion. Apple’s growth of 4% with IDC forecasting negative 3 percent and Gartner forecasting a negative 5 percent, puts them 7-9 points ahead of the market.

Apple range

  • Response to the new iPhone 3GS has been tremendous with over 1 million sold by the third day after its June 19th launch. Apple goes on record saying that they are currently unable to make enough iPhone 3GSs to meet demand and are working to address that.
  • Apple registered outstanding sales of 2.6 million Macs setting a new June quarter record and nearly meeting the all time quarterly record.
  • Apple sold 10.2 million iPods which was down from 11 million in the year ago quarter. There were two key reasons for this decline: First, we reduced channel inventory by over 400,000. Second, sales declined by 4% year-over-year.
  • The iTunes store delivered another great quarter fueled by strong sales of music, video and apps.
  • Apple retail stores hosted 38.6 million visitors during the quarter compared to 31.7 million visitors in the year-ago quarter –an increase of 22%.
  • Apple’s app store has more than 65,000 apps, compared with 1,000 to 2,000 at the Nokia store. Apple thus has a substantial lead on apps.

 There were a few significant announcements during the earnings call, which warrant attention.

The first point 

  • The iPod growth story now appears to be tapping off. Shipments of iPods fell 7% from the first quarter to second. And iPod ASPs also declined, despite the growth of the more expensive iPod Touch.
  • Revenues from selling Mac computers actually fell 8% last quarter compared to a year ago. The company sold 4% more Macs than it did in the same period last year, at a lower price point.

Macs and iPods are slowing down and may be entering the declining plateau stage of their life cycles! Apple would have seen this coming, and the $99 iPhone would be cannibalizing the iPods, by design.

Secondly, if you read between the lines of Timothy Cook’s message, it appears that Apple has a trick up its sleeve. Quoting Apple COO, Timothy Cook

I think some of the netbooks that are being delivered, or many of them, are very slow. They have software technology that is old. They don’t have a robust computing experience. They lack horse power. They have small displays and cramped key boards.”

Apple

Is this what Apple is going to spring upon Netbook manufacturers?

The invective makes you think that while Apple rails against the existing Netbook makers, may be, it has a net-book product that it plans to launch soon! Is this the Apple heralding its iTablet.

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Microsoft’s “Apple” Scare

Posted in The Technology Ecosystem by Manas Ganguly on April 6, 2009

One of the general principles of advertising is not to mention your competitor by name in your ads. That limits the field of your offering and also gives the feeling tht you are acknowledging the competitor as a benchmark (to Consumers/in products) or a threat (to yourself). This is especialy true for Market leaders.It is in this context that Microsoft’s Lauren ad has raised a few eye brows. After all, Microsoft retains a whopping 90% market share in the OS markets world over.It shows a young woman, Lauren shopping for a under $1000 laptop with a 17 inch screen and mentions Mac by name and feaatures the Mac Store. The ad is essentially about Bargain hunting (a reference to recessionary times) and comes up with a $699 price tag for the 17 inch Hewlett Packard laptop that Lauren wants. Watch the ad here.

The swipe at Apple may look like a reaction to losses registered in numbers of Windows users who have switched away from cheap PCs to Macs, and tiny losses in market share to Mac! However, it has more to do with other aspects in which Microsoft and Apple compete in the world markets. The ad is probably a reaction to the following that Apple has been trouncing Microsoft at:
1. The Music Space (with iTunes and iPods)
2. The Smartphone space
3. The Apps store space
4. Apple’s positioning campaign redefining PCs and Macs and adding the “cool” quotient. (View here)

It starts in the Music space, where Zune (Microsoft’s answer to the iPod) has made no headway in gaining market share from the iPod. Zune features down in the matching the “sexy” iPod looks and iPod trounces it when it is combined with the iTunes. (Read the comparison here)

Microsoft’s famous forbearance “errors” plagues it in the smartphone space as well. When Apple announced the iPhone in January 2007, Microsoft CEO Steve Ballmer infamously dismissed the iPhone as too expensive. to quote Steve Ballmer in the April 2007, USA Today interview, ““There’s no chance that the iPhone is going to get any significant market share”. “No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60 percent or 70 percent or 80 percent of them, than I would to have 2 percent or 3 percent, which is what Apple might get.”As it has turned out in the 2 years since, Apple has come from 0 to 10.4% in smartphone OS space, where as Microsoft has been at the 11.8 – 12.4% for sometime now. Covered in a previous blog: http://technologyandtelecom.blogspot.com/2009/03/mobile-operating-systems-by-market.html

To complement its smartphone growth and popularity, Apple already has the first and currently most popular (and “profitable”???) business in distribution of applications world over. This is something that Microsoft has not ventured in though one may have expected it to be a pioneer in this field given its technology advantage. http://technologyandtelecom.blogspot.com/2009/03/apple-software-services-as.html

Apart from stiff competition, the popularity of the iPhone presents another problem for Microsoft: like the iPod, it’s introducing Apple technology to millions of Windows users. Among the factors in the rise in the Mac’s market share, the iPod “halo effect” cannot just be ruled out. Positioning oneself as a cool technology provider versus, Microsoft’s “straight jacketed, pin robbed, stiff and official” is where Apple is also making astatement with consumers. In face of that, “Lauren” could get nastier at taking swipes at Apple! Steve Balmer is already at it talking tough about overpriced Macs! (So he’s exploiting the bad economy with an ad like “Lauren” to depict Macs as an impractical choice. )

Cost advantage may be good speaking point in these recessionary times, but with Apple’s kind of brand equity building up steadily, one wonders if Microsoft is really the cocky confident it once was.

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