The Smartphone Wars: NoWin deal “more takeover than deal”?

In this week’s installment of “As the Smartphone World Turns”, we hear dire rumors from Nokia and see (more) evidence that RIM is circling the drain. We finish with a fascinating dispatch from the Android front.

First up, Nokia will lay off up to 6,000 next week? (Hat tip to Richard Herrell.) OK, this is a thinly-sourced story in the category of “rumor”, but dismissals that size are hard to hide in a country as small as Finland. If the layoffs happen on schedule, that will be at least partial evidence for the rest.

A “senior figure” at Nokia has reported as saying “This isn’t a deal between Nokia and Microsoft, this is a Microsoft take over.” Which would certainly be consistent with Microsoft’s past history. It is also rumored that Symbian is being handed to Microsoft for development.

Symbian, handed to the managers and developers who have made WP7 so wildly successful that Microsoft now has less smartphone share than it did a year so. Oh, there’s a prospect to gladden a Nokia shareholder’s heart. Not.

I’ll take “Formerly respected companies circling the drain” again for $400, Alex. Answer: RIM. Bing! “What company just had the product it was betting on to reverse its catastrophic market share decline roundly panned?”

Yes, the RIM Playbook is out and nobody is impressed. Turns out the most interesting functions require it to be – wait for it! – tethered to another Blackberry. (Best-snark award to David Pogue at the New York Times: “RIM has just shipped a BlackBerry product that cannot do e-mail. It must be skating season in hell.”)

Business-saving advice to RIM: hunt down the genius who planned this and shoot him through the head. That is, if you can still afford the bullets by the time you find him.

Really, with competition like this, what’s going to stop Android from blowing past 55% in Q3 – a giant-meteor strike? Aside from Apple, its smartphone competitors seem to be contending mainly for the epic-incompetence award – and Apple hasn’t been doing so hot itself since the iPhone 4 antenna fiasco.

Meanwhile, 7-inch Android tablets now ship for less than $90 quantity 1.

Mind you, this is before the Android SoCs are shipping in volume. This tells us three things: first, my previous price projections were way, way too conservative – $85 tablets now implies $50 tablets by year end.

Second, the price of low-end smartphones is about to crash hard. Yield problems with the displays (and thus their cost) scale as the square of the size; when 7-inch displays are cheap enough to fit in an $85 retail price, it’s likely HTC could already build a $50 smartphone around the 4-inch displays that are midrange now.

Third: By year end, the price pressure on anything non-Android in the smartphone and tablet markets is going to be brutal. Unsurvivable for RIM; stick a fork in them, because their growth prospects are toast. Even for Apple, maintaining share will be tough uphill fight.

136 thoughts on “The Smartphone Wars: NoWin deal “more takeover than deal”?

  1. $85 tablets now implies $50 tablets by year end.

    That means within another year or two, they’ll be $29.99 at CVS/Walgreen’s and $29.97 at Walmart. I know what I’m getting the daughters and grandkids for Christmas when the price gets that low!

  2. It has crashed. T-Mobile Pulse Mini Android phone now going for £20 on pay as you go. That’s £20 to buy the phone free and clear.

    For comparison, I bought a dumbphone last year for £10 because my previous one fell to bits (I did, in point of fact, treat it quite harshly) because it was there and it was cheap.

    “The phone is still pay as you go, and while you have to buy a £10 top-up when buying it, T-Mobile is throwing in 100 free anytime voice minutes per month, a 2GB memory card, and six months of free Internet access. As a reminder, the Pulse Mini runs version 2.1 of Android, and includes a 3.2-megapixel camera and FM radio. The screen is a small 2.8-inch touchscreen, but a resistive one rather than capacitive, so you have to press a bit harder sometimes to register an input.”

    It’s crappy. But that doesn’t matter. It sets the bottom of the market expectation. By the end of the year I expect an equivalent phone to be £10 free and clear.

  3. The phone/tablet will be $29.95 (forget wifi – your kids will want to yak and text to schoolmates), but the monthly cell charges will be $150. Go back! It’s a trap!

  4. I know what I’m getting the daughters and grandkids for Christmas when the price gets that low!

    Yugos?

  5. There’s a large dish of crow out there for those people who shall remain unnamed who were proposing that Android manufacturers can’t do tablets cheaper than Apple because of economies of scale.

  6. Meanwhile, 7-inch Android tablets now ship for less than $90 quantity 1

    Read the fine print. Those are Android 1.6 devices. The cheapest 2.x devices start at $110 and are based on 800 Mhz VIA boards with very little memory and storage. The nicer stuff with more memory and Cortex A9 processors is still in the $350-400 range.

    Hardware matters.

  7. On the NoWin deal: I’m not surprised. It has definitely begun to smell more and more like Redmond in Finland. If Nokia is handing their crown jewels — Symbian — over to Microsoft, it is likely because Microsoft has all but outright purchased Nokia. Likely they are taking this approach to avoid yet another EU antitrust probe.

    Here’s what I say to the EU: let them do whatever they want. Microsoft’s track record in the mobile devices category is absolutely abysmal. They’ve been bested by the worst-of-the-worst: first by Palm, then by RIM, then by Apple, and now by Android. Ballmer should just give up already.

  8. Here’s what I say to the EU: let them do whatever they want.

    Given Apple and Android, it seems unlikely the EU would have any insurmountable antitrust concerns about this. But it wouldn’t surprise me if Finland views this as a hostile foreign takeover of an important domestic industry.

  9. There’s another market the $80 tablet will crash: What I think of as edutrash, which I link the prime example of. Specialized “educational” (big sarcastic air quotes) video game hardware, which has been overpriced for years anyhow, isn’t going to be able to compete with $80 tablets with orders of magnitude more capability on all fronts, including educational software, let alone $50 tablets. It wouldn’t even matter that it’s Android 1.6 or on relatively junky hardware, it’s still about six generations beyond what the edutrash has been getting away with.

    At least some of the companies will probably successfully transition to the tablet world with their IP, but goodness help the edutrash manufacturer that tries to fort up behind their lucrative hardware…. splat

  10. Palm Pixi is going for $40 on Verizon off-contract now. You can’t sell them on ebay for anymore than $70. AT&T Palm phones are still fetching upwards of 150$ new. The value depreciation for Verizon Palm phones is astonishing (and not exactly the type you want to be talking about like above).

    There’s a large dish of crow out there for those people who shall remain unnamed who were proposing that Android manufacturers can’t do tablets cheaper than Apple because of economies of scale.

    I think the meaning was that Android manufacturers can’t make a tablet with equivalent value as Apple’s for cheaper, which is quite a different thing from a race to the bottom.

    That’s like saying Motorola couldn’t make a tablet for less than $500. They sure can. It just wouldn’t be nearly as good as a Xoom for the market dynamics they have to deal with.

    What distinguishes cheap tablet computers from cheap netbooks? They can both run Android, one just doesn’t have a keyboard. Once you cut out the extraneous “value”, you don’t really end up with a new product at all, merely another permutation of screen and processor.

  11. And yet:

    Verizon iPhone helps Apple outgrow Android in March ad impressions

    The online presence of the iPhone grew 17 percent month over month in March, largely thanks to sales of the Verizon iPhone, according to new data from Millennial Media, the largest independent mobile advertising network. The information was revealed on Thursday as part of the advertising network’s monthly “Mobile Mix” report. Based on ad impressions on Millennial Media’s network, the iPhone grew 17 percent month over month, and the iOS mobile operating system grew 11 percent. Apple’s strong performance in the mobile space was largely tied to the Verizon iPhone, which accounted for 8.2 percent of iPhone advertising impressions in the month of March.

  12. >Read the fine print. Those are Android 1.6 devices. The cheapest 2.x devices start at $110 and are based on 800 Mhz VIA boards with very little memory and storage.

    You are right, but even $110 is about half what the minimum price was just last week when the Heropad looked like a good deal.

    What these devices are a sign of is that production of the most expensive bits in the bill of materials are ramping up to the kind of truly high volume at which they start to cost less than ten bucks a unit. That’s why I was emphasizing displays and the cost being proportional to area.

  13. @Inkstain:

    > As a devout user of KDE, I’m justifiably concerned.

    You may be concerned, but not justifiably. Qt is available under both LGPL and GPL, so if NoWin screws around too badly, there will be a fork.

  14. Just the parts for an iPad2 cost $270-$320 (http://www.pcmag.com/article2/0,2817,2381890,00.asp). And apple gets excellent pricing due to economies of scale. Do you really think that some crappy super cheap, underpowered tablet running Android 1.6 that is going to compete?

    Based on your logic, why can’t an etch a sketch take over the tablet market? They are only $15!

  15. @PapayaSF:

    the Verizon iPhone … accounted for 8.2 percent of iPhone advertising impressions in the month of March.

    So far, iAd impressions seem to be a remarkably poor proxy for handset penetration, for whatever reason. In any case, if I take this number at face value for a market proxy and make lots of favorable assumptions about how Apple sales have ramped based on comscore data, I still get only about 2 million Verizon iPhones in calendar Q1. Contrast that with this guy. (Personally, I think it’s a lot less than 2M; comscore reports an estimate of 1M in Feb and I doubt March matched it.)

    Interestingly, though, according to that article, AT&T has sold 34 million iPhones. The author makes the assumption that 10% of them are retired, but according to the comscore report, last quarter only about 17.5M iPhones were in circulation in the US. Comscore seems to have been pretty reliable. If we assume that both the 34 million and the 17.5 million numbers are correct, that would pretty much say that every single iPhone 3 user upgraded to an iPhone 4 with A&T’s special pricing. No wonder used iPhone 3′s are going for a song.

  16. >Apple’s strong performance in the mobile space was largely tied to the Verizon iPhone, which accounted for 8.2 percent of iPhone advertising impressions in the month of March.

    That’s…extremely revealing. Because unless Verizon iPhone users have a dramatically different response to advertising than AT&T iPhone do, I think this gives us a good upper bound on Apple’s share growth over the first 6 or 7 weeks after the introduction of the iPhone V. It’s worth at most 25% * 0.082 = 2.05 points of overall share, on the optimistic assumption that those were all new customers rather than already-committed iPhone fans bailing out of AT&T’s crappy network.

    This tells me that the best case for Apple’s 2Q2011 share number is for it to rise by about 6% to 31% – that’s assuming share growth doubles for Apple in the back half of the quarter. I think this is wildly unlikely. More likely Apple got an early-adopter bump and actual share growth will be at most about 3.5%. Meanwhile, anyone betting on Android to gain fewer than 5% points of share against a colllapsing RIM and zombie Microsoft should put down the crack pipe – I think another 7% gain looks pretty likely, actually.

    So, under any plausible scenario Android’s lead widens by a minimum of 1.5%. The iPhone V isn’t a winner, it’s strictly a damage limiter.

  17. @phil:

    And apple gets excellent pricing due to economies of scale.

    Sure, but so do their major competitors.

    Do you really think that some crappy super cheap, underpowered tablet running Android 1.6 that is going to compete?

    Depends on what you mean by “compete.” If your definition of “compete” is what the cool kids get and what the rest of them lust after, no. But if your definition of “compete” is what the overwhelming hordes of non-cool kids actually manage to extract from their parents, then “yes.”

    Based on your logic, why can’t an etch a sketch take over the tablet market? They are only $15!

    Although Ohio Art won’t release sales figures, they claim that in its 50 year history, sales have been “steady” and are even up 20% after the Toy Story 3, and that total sales have exceeded 100M units, or 2M/year. What was Apple selling even 10 years ago that you can still buy?

    In any case, the cheesiest Android tablet has orders of magnitude more compute, memory, pixels, and connectivity than the out-of-reach stuff I was lusting after even 20 years ago.

  18. >So, under any plausible scenario Android’s lead widens by a minimum of 1.5%. The iPhone V isn’t a winner, it’s strictly a damage limiter.

    On 10 Feb, based on first-day sales, I predicted an anemic first two quarters of iPhone V sales. I note that Patrick Maupin followed out some of the same logic I did in a comment that crossed mine, but now I’ll go further. If ad impressions are as good a proxy for userbase penetration as Patrick and I think, Apple’s going to have a tough time breaking my 2.6-million-unit threshold before mid-year. If they exceed it, it’s not going to be by much, and almost certainly not by 4% of the market.

  19. This makes perfect sense, as MS is no friend of open-source. The interesting question is what this means for the future of Qt. As a devout user of KDE, I’m justifiably concerned.

    I work with Qt professionally, and just a few weeks ago got the email indicating which addresses at Digia to contact for Qt support now that Nokia has walked away from it.

    Open-source Qt will live on; if nothing else the LGPL version will be forked. It’s us commercial users who have more to worry about. For some reason Digia — being what appears to be a large consulting firm along the lines of Accenture — doesn’t inspire much confidence.

  20. Based on your logic, why can’t an etch a sketch take over the tablet market? They are only $15!

    Because Etch-A-Sketches are Veblen goods. Due to competition pressures from open and cheap-to-manufacture Magic Slates, Ohio Art has been forced to retreat upwards. :)

  21. @Patrick Maupin

    ]>Sure, but so do their major competitors.
    Apple has more scale than anyone else.

    It seems you and esr both think technology inevitably becomes a commodity. Quality/usability don’t matter much. The key is basic functionality for a cheap price. Price is the primary driver. Is that correct?

    I think SOME technologies become commodities. And some don’t. RAM, hard drives, LCD panels are commodities. But software largely isn’t (Office, Windows, Oracle DB, Photoshop).

    I think smart-phones and tablets are more like software than hardware components. Some people will buy the cheapo crap tablet/phone. Most will consider these devices too important to just take the lowest cost POS. We shall see who is right…

  22. @Jeff Read:

    It’s us commercial users who have more to worry about.

    No doubt. The LGPL is a gateway license — because it doesn’t demand to be on top of a multi-licensed open source project, it is speciously seductive to those who object to the viral nature of the GPL. The idea that you have to give out source for any changes you make to the actual LGPLed library is a perfectly reasonable trade in many circumstances, but the idea that any program that embeds an LGPLed component must allow the end user to actually re-link the application itself after modifying the component is a gotcha that many permissive library authors might miss. So when a permissive library makes use of an LGPLed component, from the perspective of the average commercial vendor, the whole thing might as well have been under the GPL — it’s untouchable, if the maintenance and customer support headaches by themselves aren’t bad enough, the added ease of reverse engineering and perhaps changing copyright notices and other mischief would give any executable vendor pause.

    Due to competition pressures from open and cheap-to-manufacture Magic Slates…

    And don’t forget the sketch-a-etch. Takedown notice and Lanham Act lawsuit in 3.. 2.. 1..

  23. I think SOME technologies become commodities. And some don’t. RAM, hard drives, LCD panels are commodities. But software largely isn’t (Office, Windows, Oracle DB, Photoshop).

    For most purposes, OpenOffice, StarOffice, KOffice, iWork, and other suites could replace MS Office without the users’ being aware of IT just said that they were a version upgrade. And I run Linux on everything from my network routers to my phone to my laptop to my cloud server instances. What would qualify as “commoditization” for you?

  24. @phil:

    Apple has more scale than anyone else.

    The last quarter of last year (Christmas season, when expensive phones would be in vogue), HTC and Samsung together shipped more phones than Apple. A factor of 2 increase in shipments just isn’t going to give you that much better price. And when you factor in that Apple’s business requires higher margins, the scale difference really becomes meaningless.

    It seems you and esr both think technology inevitably becomes a commodity.

    Desirable plastic and silicon-based technology, yes. At least until we run out of the trace levels of rarer substances required to manufacture them.

    Quality/usability don’t matter much.

    Oh, they definitely matter to an extent. Just like income matters to happiness. Once you reach a certain level, it’s not so important.

    The key is basic functionality for a cheap price. Price is the primary driver. Is that correct?

    Once you hit the required level of functionality, sure, for most of the world. Remember, there are 5 billion cellphones in the world…

    I think SOME technologies become commodities. And some don’t. RAM, hard drives, LCD panels are commodities.

    Yes. Silicon and plastic (and bits of metal).

    But software largely isn’t (Office, Windows, Oracle DB, Photoshop).

    Network effects. But if you’re not creating word docs on your phone, you don’t need word, so don’t need a particular OS. And Android is already so popular that that it is creating its own network effects that run completely counter to the proprietary locked-in Windows one. For instance, a version of one of your examples (Photoshop) is available on Android for free.

    I think smart-phones and tablets are more like software than hardware components. Some people will buy the cheapo crap tablet/phone.

    You’d be surprised at how well a cheapo crap tablet/phone has to work. Walmart’s and Target’s return policies are pretty liberal. If Walmart can sell a tablet at $99, you can bet that most of them aren’t coming back. Given their target demographic, that’s actually a fairly large cash outlay for some people.

    Most will consider these devices too important to just take the lowest cost POS. We shall see who is right…

    Sure, but you’re missing the point that, just like Linux runs on everything from cellphones to supercomputers, so too does Linux on the cellphone run on cheap POS phones and better phones alike. As others have repeatedly pointed out — if you learn how to use an Apple phone, you have one product choice. But what if you want a cheap solar powered phone for when you go hiking? Or an expandable dual screen phone.

    The fact that some users actually choose Windows because they are familiar with it and actually want it, rather than because it comes preloaded on almost any computer is due to the very simple fact that it came preloaded on their previous computer. To the extent that those sorts of network effects define winners and losers, Apple has already been relegated to also-ran status. More users are now running Android smartphones than Apple smartphones, and unless they are truly unhappy with them, when it’s time to get a new smartphone, Android will be the top choice for them.

  25. For most purposes, OpenOffice, StarOffice, KOffice, iWork, and other suites could replace MS Office without the users’ being aware of IT just said that they were a version upgrade.

    For most of Office, I’d agree with you, but for MS Excel in particular OOCalc, at least, can’t really compete. I don’t use spreadsheets that much, but the few occasions when I do are the few occasions when I willingly use a Microsoft product over its free equivalent.

  26. @Patrick Maupin: You’re missing one point. Apple’s shipping 2 phones and 1 tablet, they both massively outsell any equivalent device from anybody else. Sure there’s different configurations, but right now there’s essentially only two iPhone variants (CDMA and HSPA) with the only other difference being memory configurations and 1 iPad variation with 6 total minor variants (3G/Wifi and 3 RAM configs each) which are all based off the same basic hardware.

    This gives Apple significantly more economies of scale than their competitors, all of whom are getting their higher overall numbers by shipping less units of far more products. Simple product variation, even between broadly similar hardware, means that the competition can’t get the same economies of scale on their products, they have to purchase a wider range of parts.

    Simply put, shipping 1 million units of a single device nets more scaling benefits than selling 1.5 million units of 3 devices.

    So no, if Apple maintains aggressive margins no Android device will be able to match the price/performance of the Apple device. But Android can and will attempt to repeat its successful entry into the smartphone market in the tablet market by selling lots and lots of cheaper, crappier devices. Remember it’s not the halo handsets that won the overall market for Android in Smartphones, it’s the cheap, crappy and common handsets. The Halo devices exist to build mindshare and profit margins, not to dominate the market.

  27. Even for Apple, maintaining share will be tough uphill fight.

    Apple doesn’t care about market share, it cares about revenue. By that criterion it totally dominates both smartphone and tablet markets.

  28. @Adam Mass
    “Simply put, shipping 1 million units of a single device nets more scaling benefits than selling 1.5 million units of 3 devices.”

    I think you hit the head on the nail! ;-)

    We are not thinking about shipping 1 million units, but 1 billion units.

    Try to ship 1 billion units of a single device? What type of economics of scale are coming up? Will there be a market for 1 billion identical units? Will 10 models shipping in 100 million batches outsell it? Or 100 different models each shipping 10 million units?

    Redo for 5 billion units.

  29. @Adam Maas:

    Actually i’m pretty sure

    A factor of 2 increase in shipments just isn’t going to give you that much better price

    directly contradicts your point. Assuming you mean that he’s only counting phones, no tablets, A) how much extra scale will you get from ordering an (effectively) completely different product? Bugger all would be my guess and B) Even if you assume that pads sold as well as phones (which they decidedly didn’t) I doubt that a factor of 4 would increase it that much either. You want factors of 10 to get the worthwhile discounts. Maybe i’m wrong.

    But all of this is meaningless yap. Eric has directly shown that you can get a comparably specced product (OK, ram and storage is less on the base unit) for $150 less than an iPad, and a functional product of no-where near that spec for considerably less than that. Talking about how Apple can get better economies of scale is meaningless unless you can show me a page where i can buy one for $300 or less.

  30. There are commentators on the web speculating on Nokia’s timing of the announcement in relation to the parliamentary elections that will be held in Finland this Sunday, 17 April. Supposedly Nokia is keeping quiet until after the election, but I doubt that has much to do with it. The layoffs are more likely timed to the summer vacation season. The negotiation process required by Finnish law for a large layoff like this one takes a few weeks, and this one will be completed at some point in June, just when Finns start to go on their vacations (the school term ends in the beginning of June). The reason is to have the workers spend their remaining days with the company on vacation to minimize the damage the disgruntled ones might do, and to avoid keeping demotivated people hanging around at the office. This is the way Nokia has done layoffs for years now. Makes for some depressing and stressed Christmas breaks and summer holidays.

    There’s actually been surprisingly little talk about Nokia in the debates and election campaigns. I suppose it’s not really a question that could be politicized in any obvious way. The big issue is the financial aid to the PIG countries (and now possibly Spain, too), which is a very hard sell in Finland. A populist party named True Finns looks set to pull a historical upset. They even have the Wall Street Journal concerned, since there’s a chance that they might get into the cabinet and derail Finland’s support for the EU financial support deals.

  31. > It seems you and esr both think technology inevitably becomes a commodity. Quality/usability don’t matter much. The key is basic functionality for a cheap price. Price is the primary driver. Is that correct?

    That’s their view of open source, in a nutshell.

  32. Oh, I just love how you used ‘Bing!’ in the “RIMshot”.

    Tickles my funny bone.

  33. >when I willingly use a Microsoft product over its free equivalent

    A comment I made on HN yesterday:

    I’ve been using Windows and Linux side-by-side for different things since 1996. Some things have just been more trouble to set up in Linux than I wanted to bother with, with Windows available and easy to use. But Vista annoyed me enough that I am gradually switching more of my work to Linux, hopefully by the time this Vista box dies, I will just switch everything over to Linux.

  34. Btw, the idea that Nokia sold their smartphone business to MS was already discussed in February. See the comments section in the blog post:
    http://esr.ibiblio.org/?p=2931
    At the time it did not look like a complete take-over. But that might still be the case.

    After reading how MS was able to kill Bing-search, it is obvious how MS will kill any prospect of a successful product Nokia might still have up their sleeves. And if Google opens up shop close to Nokia’s plants, they can staff a complete R&D center with very experienced developers.

    The Rise And Fall Of Microsoft Bing: How One Company Was Destroyed By Grown-ups, Process, And Discipline
    http://www.businessinsider.com/the-rise-and-fall-of-microsoft-bing-how-one-company-was-destroyed-by-grown-ups-process-and-discipline-2011-4

  35. @Adam Maas:

    You’re missing one point. Apple’s shipping 2 phones and 1 tablet…

    As JonB pointed out, I already mentioned that I don’t think this bumps up total volumes enough to dramatically increase the cost. In any case, you’ll use a lot of the same components in a lot of different devices, and as Winter pointed out, a manufacturer shipping 10 million units each of 5 different devices is not going to gain nearly as much economy by dropping a model as a manufacturer which only ships 1 million units of each device.

    In any case, I did actually address the point that Apple ships far fewer SKUs than other manufacturers — from a marketing perspective to the average consumer, Apple’s dearth of models is actually a net negative, despite any slight slight economy of scale advantage.

    Nonetheless, I find it interesting that, according to phil, I can’t possibly be right because I think that cellphones are becoming commodities, and according to you, I can’t possibly be right because Apple is the only cellphone manufacturer that is truly taking the steps necessary to make all its products fungible commodities.

    All you have to do to get a glimmer of how markets like this will really work as the costs come down is go look at a market where margins, economy of scale, and positioning (cachet for some users, price for others) all matter, and look at the behavior of the manufacturers. Yes, I’m talking about the toothpaste aisle at the local supermarket. Just try to find your old favorite standby among the crowded field of johnny-come-lately entrants.

    But Android can and will attempt to repeat its successful entry into the smartphone market in the tablet market by selling lots and lots of cheaper, crappier devices.

    Your hypercritical value judgments on the worth of individual contenders won’t affect the inevitable outcome one whit.

  36. >That’s their view [Quality/usability don’t matter much. The key is basic functionality for a cheap price.] of open source, in a nutshell.

    No. Patrick can speak for himself; this is certainly not my view of open source. It is true in general that technology tends to commoditize, with cost as a primary driver. But the shift to open source is only partly driven by cost; more of it comes from seeking engineering quality, reliability, and the abolition of certain sorts of asymmetrical power relationships between users and vendors.

  37. After reading how MS was able to kill Bing-search,

    Reading the article, it’s pretty clear why Microsoft is becoming irrelevant.

    The guy heading Bing was obviously heavily influenced by CatB (and its sequels) or at least by the process it describes:

    Gaurav is notorious for saying, “you ship or you suck,” taking the emphasis away from the framework builders. Your promotion was solely dependent on the amount of stuff you ship and the impact you make (that’s not too much news to Web startups?.) They had weekly release cycles — faster than Google back then. The rule on the ground was if code breaks or does not ship in time, the engineer is held responsible, No — not the test, not the project manager. Engineer should drive everything.

    This is basically an echo of esr’s Release Early, Release Often mantra. And what did they do? They shut him down. Not a surprise. What would Microsoft know about building “solid” products? Nothing, apparently.

    If Microsoft is allowed to take over Symbian development, stick a fork in it. It’s done.

    For extra credit, compare and contrast the CatB series with Code Complete. Then you’ll see why I’m not surprised and why I think Symbian is toast under a Microsoft regime.

  38. @Richard Thompson:

    It seems you and esr both think technology inevitably becomes a commodity. Quality/usability don’t matter much. The key is basic functionality for a cheap price. Price is the primary driver. Is that correct?

    That’s their view of open source, in a nutshell.

    Eric already gave one answer. I’ll add to it. Vertical integration in a hardware company is hard. It requires huge amounts of capital and labor and multiple core competencies. You may think that Apple is now vertically integrated because they “do” their own chips. That’s more true than in the past, but just to get a chip out the door requires a silicon wafer supplier, several chemical suppliers, a fab, a company that makes mask sets (OK, one-time NRE per rev), a company that provides the plastic for the packaging, a company that provides stamped or etched frames for the packaging, the company that does the actual packaging, the company that does the test, etc. A lot of those are often under one roof — a packaging house might do test, for example, and a huge industrial powerhouse like Intel might actually do a lot of the stuff in-house. But even that’s not a given, for the simple reason that the market will punish vertical integration (as a misallocation of resources) as often as it rewards its efficiencies. In any case, Apple doesn’t own a semiconductor fab or packaging house. Hell, they don’t even build their own boards.

    While it’s not inevitable that all given technologies becomes commoditized, certainly any technology that has a huge potential demand at a price that supports the startup capitalization costs of multiple market entrants will be commoditized, absent government interference like blocking patent grants. This usually happens gradually if the market demand is unknown up front. One market entrant will start to sell a lot, and the competitors will crowd in. This is true not only of basic technology, but also of incremental improvements and combinations of technology. This is how it is always has been; the fact that in this market the first mover advantage happens to go to a company named Apple doesn’t make the situation at all special.

    Which brings us to software. From a market perspective, software does not really operate differently than hardware. The equations are the same, but the constants are different. The capital startup costs and per-unit manufacturing costs are minimal, while startup labor and support labor can be very expensive. For a desirable product, margins can be insanely high. This is all well-known.

    But the significant difference between software and hardware that is not discussed as often is that it is comparatively much cheaper to build a vertically integrated software company than a vertically integrated hardware company. This doesn’t mean that you don’t have to spend a lot of money and time doing it, just that you don’t need to buy and run mines, fabs, packaging houses, etc. All the work can be done under one (potentially very large) roof, by people with overlapping and somewhat fungible skill sets.

    This means that, historically, the most profitable software companies were highly vertically integrated, because when production costs approach zero, insane profit margins follow. It’s as if General Motors owned all its suppliers with zero carrying costs. If Ford still had to pay their suppliers per-unit, they lose. Sure, there were always library and small tool vendors, but they sold to other small companies. That whole custom market is dwarfed by something like Office on top of Windows. Because of the vertical integration, first mover advantage in a well-funded software company can be huge. Not only are there customer network effects (word documents), but if the company plows profits back into the business, it can be very hard for a competitor to reach the same functionality.

    On the other hand, because the hardware keeps getting more powerful, and the development tools and pre-built commodity software blocks keep getting more powerful, each year it becomes much easier to build software capabilities that were state of the art in years past.

    Open source is a huge boon to the competitiveness of the software market, because it lowers the cost to compete against a huge, vertically integrated monolith. If Ford didn’t actually own the suppliers, but didn’t have to pay them per-unit either, and only occasionally wrote them a check for specialized NRE (or just did it themselves and gave it back to the supplier), then they would, in fact, stand a chance of competing against the vertically integrated GM. An integrator can pull several pre-built pieces together, modifying them as needed, add a bit of custom code and pump out a software product. Will that first attempt be ugly compared to the vertically integrated product from the proprietary company? You betcha. Will it attract enough attention to garner development that makes the whole system less ugly? That depends on a lot of factors, but when they all come together, it can and will happen. Will it generate the same amount of profit? Hell, no, but that’s not a negative — it just shows how pervasive the rent-seeking in the industry actually was.

    Which brings us to Apple and Microsoft. Microsoft is the vertical integration pure-play. Apple is actually ahead of them in the game right now, because they don’t suffer from NIH anywhere near as badly. The Mach kernel, BSD, LLVM/CLANG, WebKit, CUPS…

    If you’re trying to argue that Apple wins against open source, you’re missing the point completely. Apple is currently an arbitrage play, because they seem to understand the world is going open source, and while they do a lot of in-house development, they’re gradually crawling up the value stack.

    There will always be a place for premium integrators in the market, but you can’t seriously simultaneously argue that Apple is primo stuff and open source is bad stuff, for the simple reason that a lot of Apple stuff is built on open source. But the open source community is crawling up the value stack as well, simultaneously providing components that Apple can use in their next product, while competing directly with Apple’s previous product.

    Apple’s ability to perform this arbitrage dance is why they are doing so well in the market compared to Microsoft. But this dance requires some pretty fancy footwork to not get crushed by the other dancers.

  39. @esr

    “The last quarter of last year (Christmas season, when expensive phones would be in vogue), HTC and Samsung together shipped more phones than Apple. A factor of 2 increase in shipments just isn’t going to give you that much better price. And when you factor in that Apple’s business requires higher margins, the scale difference really becomes meaningless.”

    1) Economies of scale in this context only apply to 1 company at a time
    2) HTC and Samsung have many different models, and many different parts so they don’t get as much of a scaling effect.

    Samsung is interesting though as they supply many parts(RAM, Flash, LCD) to companies like Apple. So they may be able to produce a phone as cheaply as Apple with the exact same components.

    “And when you factor in that Apple’s business requires higher margins, the scale difference really becomes meaningless.”
    I assume you are saying they don’t pass on any savings to the consumer, so the there is no direct impact to the consumer. In countries with subsidized phone plans, Apple is squeezing the cash out of the carriers, not the consumer so much. iPhone costs to the consumers are about the same as equivalent Android phones. However, this doesn’t apply to all countries and Apple does have a problem there.

    Notice that Apple has decided to go after market share with the iPad. Their margins are much lower than the iPhone as they can’t squeeze the carriers….

    ESR says: I suspect you meant to be replying to Patrick Maupin here, not me.

  40. @phil:

    All those issues have been addressed before, in comments on other posts here:

    > 1) Economies of scale in this context only apply to 1 company at a time

    If you think that’s true, you don’t know the first thing about how Asia works.

    > 2) HTC and Samsung have many different models, and many different parts so they don’t get as much of a scaling effect.

    You’d be surprised how much commonality there is. You’d be surprised how many components are shared by high and low end dishwashers, refrigerators, and washing machines, as well.

    > Samsung is interesting though as they supply many parts(RAM, Flash, LCD) to companies like Apple. So they may be able to produce a phone as cheaply as Apple with the exact same components.

    As I said in my previous post, sometimes vertical integration is good, and sometimes it can lead to resource mis-allocation. The old Motorola (when they built cellphones and chips) was a prime example of this. The cellphone unit had to buy chips in-house; for all practical purposes the chip company couldn’t sell to other cellphone manufacturers because they didn’t want to support their competitors. Where is Motorola now?

    >> “And when you factor in that Apple’s business requires higher margins, the scale difference really becomes meaningless.”
    > I assume you are saying they don’t pass on any savings to the consumer,

    No, I mean there are no savings, because their business requires higher margins. And there shareholders know their business requires higher margins and will revolt if it appears that Apple is dropping margins too much and concentrating on market share. Hell, look at what happened to google in the market since Page took over.

  41. @ Morgan Greywolf “Read the fine print. Those are Android 1.6 devices. The cheapest 2.x devices start at $110 and are based on 800 Mhz VIA boards with very little memory and storage.”

    True, but it’s a start, and it may be tempting enough to induce people to buy tablets who wouldn’t have bought tablets otherwise.

  42. @Patrick Maupin:

    You may think that Apple is now vertically integrated because they “do” their own chips.

    One minor nit that actually bolsters your point: Apple does not “do” their own chips. Oracle’s Sun division “does” their own chips — the SPARC processor line. The Apple A4 is an SoC package-on-package containing an ARM Cortex A8 and a PowerVR GPU. The combination, while engineered by Apple, is manufactured by Samsung.

  43. True, but it’s a start, and it may be tempting enough to induce people to buy tablets who wouldn’t have bought tablets otherwise.

    And, in fact, it presents quite a few business opportunities for those who like doing custom integration. I envision cheap customized Android tablets with the MiFi radios disabled, being put to such tasks as a portable stocking terminal in a retail store, or an electronic medical chart in a hospital. At $90, the hardware cost would blow the pants off of what exists for the equivalent devices that exist today, and the software stack could be 100% open source.

    The money to be made here is in integration and ongoing support.

  44. Eric, if you look at the customer reviews on those $85 apads, they’re all people complaining that they got nothing for their $85.

  45. In fact it seems as though when you read actual reviews, the real asking price is $150, and for that you get a device which won’t run 2.2, has 128mb of ram, 1 hour of battery life, and constantly overheats.

  46. In fact it only runs Android 1.2, requires a stylus and must be kept plugged in all the time. And after 30 days or less, the screen starts to peel off. Not to beat a dead horse, but I think it’s fair to say that Android tablets have not yet hit the $150 point, much less the $85 or $50 point.

  47. @Morgan:

    Why do you think “do” is in quotes? :-)

    In point of fact, Sun doesn’t fab their own chips, either and to my knowledge, never has (or if they did, it would have been a very long time ago). State of the art semiconductor fabs are really expensive.

    I work for a dedicated chip company. We “do” our own chips, we sell them all on the open market (we are not a captive supplier like Apple’s chip operations or like part of Freescale used to be), and we rely exclusively on third parties for fab, packaging and volume test.

  48. In fact it seems as though when you read actual reviews, the real asking price is $150, and for that you get a device which won’t run 2.2, has 128mb of ram, 1 hour of battery life, and constantly overheats.

    My first S100 memory card had 64K, cost upwards of $500, and gave off a hell of a lot more heat that the device you’re talking about.

    Yes, there will be bottom feeders trying to exploit the bottom of the market. That doesn’t mean the price of quality stuff isn’t rapidly dropping. The B&N Nook Color is $250, sometimes $200 with a coupon. Can the $350 B&N Nook “Communicator” with cameras, faster processor, more memory, etc. be far behind?

  49. @Patrick Maupin: My point is that Sun designs their own chips from the ground up, even if they don’t fab them themselves. The exact same thing could be said of AMD since 2009; they don’t fab chips anymore, either, they spun that business off. Apple, OTOH, simply integrates others’ chips on a SoC and gets someone to fab that. That’s a lot different than designing and engineering your own CPU from the ground up.

  50. > Apple, OTOH, simply integrates others’ chips on a SoC and gets someone to fab that. That’s a lot different than designing and engineering your own CPU from the ground up.

    That’s not entirely true. Apple bought and integrated both P. A. Semi and Intrinsity.

    Look, you know I’m no big Apple fan, but unless the principals of those acquired companies bailed, I gotta tell you that Apple has some best-in-breed chip designers in-house.

  51. > My first S100 memory card had 64K, cost upwards of $500, and gave off a hell of a lot more heat that the device you’re talking about.

    Yeah, but that was of some use to you at the time, and presumably didn’t turn you off buying memory at retail in the ensuing years. I don’t think it’s a good thing for Android if the experience people have is that they buy something which can’t connect to the Android market and won’t perform very basic tasks such as email or web browsing. If anything, these shitty devices are going to cement $500 as the accepted price point for tablet PCs, just as $200 has become the accepted minimum price point for portable games consoles. Consumers will come to believe that you just have to pay $500 or more to get a decent tablet. And when they see prices significantly below that, they’ll see crap rather than a bargain and avoid it.

    It’s just silly to suggest that every category of device will eventually drop to some arbitrarily low level. Laptops have been around since 1975 in some form or other and you still can’t buy one new for $50. The cost of the electronic components is less than half of the picture… you have to also consider the chassis, shipping, labour, and far more importantly, the ever-increasing expectations of functionality among your customers.

  52. > Laptops have been around since 1975 in some form or other and you still can’t buy one new for $50.

    No, but there’s a positive feedback loop, when things get cheap enough that more people buy them, then the volume makes them even cheaper, then even more people buy them, etc.

    You can get a name-brand laptop for $300. The difference in manufacturing costs suggests that a high-end cellphone shipping in similar volume should be around $150, a tablet maybe $200. But the cellphones and tablets won’t ship in similar volumes — the TAM is much higher, so this cycles the costs down even more.

    Nobody knows what natural price cellphones and tablets will settle on in a couple of years, but I’d personally be willing to bet that you will be able to get a mid-range quality 10″ tablet for $200 in a year, and $150 in a year and a half.

  53. Interesting article from Reuters today: http://www.reuters.com/article/2011/04/15/mobile-software-meego-idUSLDE73E08F20110415

    Halla, who worked for years on Nokia’s Linux software and swapped to Intel following Nokia’s announcement, said Nokia’s dominant role in the project had held back other phone makers from adopting the technology.

    This week LG Electronics joined a working group to develop a handset version of the software, joining companies like ZTE (000063.SZ) and China Mobile (0941.HK), Halla said.

    It’s PR from Intel, of course, but still interesting.

  54. Halla, who worked for years on Nokia’s Linux software and swapped to Intel following Nokia’s announcement, said Nokia’s dominant role in the project had held back other phone makers from adopting the technology.

    Yep. That’s where Android won on the hearts and minds of the phone makers: Google isn’t seen as a competitor, while Meego is/was Nokia’s thing and WebOS is Palm/HP’s thing.

    The lesson here, in case Oracle wasn’t a big enough clue stick: open source isn’t magic fairy dust that somehow separates a code project from its owner.

  55. The people griping about the $85 Android tablets being crappy hardware that only runs 1.6 and a screen that delaminates in use are missing the point. Of course the first iterations of low-end disruptors are crap; they almost always are. But they won’t be crap next quarter, and at the pace this market is evolving they may not even be crap next month.

  56. “Economies of scale” matter less as scale increases. It’s mostly a question of amortizing tooling and setup costs, and a little bit of specialization. It’s a pretty quick slope, especially in a manufacturing ecosystem (like China) that’s entirely built around making lots of different products in the same factory. (Lots of cheap humans help with this.)

    Yes, economies of scale matter between 100 and 1000 units, and between 10,000 and 100,000, and maybe even between 100k and 1 million. But by that point you’ve basically wrung all there is to wring out of scaling. You might get a little more at the point where you vertically integrate suppliers or transportation or something, but that’s going to take huge and sustained demand, and might not be a good idea even then, and is fairly rare.

    Which is to say, if Apple’s making 1 million and someone else 700k units, the Apple advantage is maybe a couple bucks. Less if volumes are higher (which they must be.) Other factors will influence cost by a lot more.

  57. “Of course the first iterations of low-end disruptors are crap; they almost always are.”

    You mean like the fabled $100 laptop? Crap then, crap now.

    There is also the issue of if this low end market is interesting. Nokia dominated (dominates?) the low end market of phone and has for quite a while. And look where it got them… let’s say android captures the low end phone market (seems like a reasonable prediction to me). But these people don’t have decent data plans because they are in 3rd world countries or simply don’t want to spend the bucks for data plans. Does this market share really matter? They matter some of course, but the valuable target market is people who use their phones as internet devices (ads/apps) and have disposable income.

  58. >But these people don’t have decent data plans because they are in 3rd world countries or simply don’t want to spend the bucks for data plans. … [T]he valuable target market is people who use their phones as internet devices (ads/apps) and have disposable income.

    I would estimate > 90% of my iPhone internet usage is via wifi.

  59. Apparently, on the Verizon network right now, the HTC thunderbolt is outselling the iPhone 4.

    Given these mano a mano results, it ought to be difficult to maintain beliefs in (a) Apple’s superior purchasing power making it difficult for others to compete; (b) Apple’s superior design skills making it difficult for others to compete; and (c) the iPhone 4′s ability to catapult Verizon ahead of AT&T.

    Nonetheless, I fully expect several commenters here to continue to maintain all these beliefs and expound upon them at length.

  60. @phil:

    > They matter some of course, but the valuable target market is people who use their phones as internet devices (ads/apps) and have disposable income.

    A couple of hours ago, manufacturing scale was everything. Now, the additional customers who create the scale are almost nothing.

  61. “I would estimate > 90% of my iPhone internet usage is via wifi.”

    But would this low end market have wifi?

  62. > A couple of hours ago, manufacturing scale was everything. Now, the additional customers who create the scale are almost nothing.

    The middle/upper range is still very interesting and offers a lot of scale. This talk of billions of people going android is still theoretical anyway.

    “Given these mano a mano results, it ought to be difficult to maintain beliefs in (a) Apple’s superior purchasing power making it difficult for others to compete; (b) Apple’s superior design skills making it difficult for others to compete; and (c) the iPhone 4?s ability to catapult Verizon ahead of AT&T.”

    Obviously Android competes just fine. There are great android phones out there. All I am saying is that the iPhone will keep a nice chunk of market share in the long term. I expect iPhone to grow, Android to grow, and everyone else to shrink (continuation of the current trend)

    AT&T, Verizon, and Apple all report results next week. We will have some real numbers then.

  63. >Apparently, on the Verizon network right now, the HTC thunderbolt is outselling the iPhone 4

    Your link for this leads to a story that is is badly written and makes dubious use of the numbers it quotes; I would not trust it alone. But I googled for “HTC Thunderbolt outselling iPhone” and found lots of reports presenting the BITG study in a less hyped fashion.

    This is indeed bad news for pretty much every theory of successful Apple fightback against Android. The plain fact is that Apple’s market-share growth has stalled out while Android continues to gain share by leaps and bounds. The news that iPhone on Verizon is being outcompeted by a single Android device suggests that the quarter when Apple’s smartphone follows RIM’s down a death spiral is not as far off as I previously thought.

  64. > A couple of hours ago, manufacturing scale was everything. Now, the additional customers who create the scale are almost nothing.

    No one has any hard numbers on the scaling issue anyway, so I think both sides have made their case.

    What I don’t buy is that everything inevitably becomes a commodity. I think software and design are what will keep tablets and smart-phones from being completely commoditized. Which will keep Apple a major player.

    You guys think Android is good enough and pricing will drive Apple into a small high end niche like the mac. Right?

  65. I’m more interested in the tablet space.

    The yields on 10″ tablet touch screens with high resolution, coupled with the limited number of manufacturers who can make them (currently three….) and the two year long ramp up time needed to add additional capacity show a bottleneck coming up.

    If you look closely at its financials, Apple has more or less bought out abut 85% of the world’s manufacturing capacity on these items through 2012-2013. Apple also gets to sell most of its products direct, without middle-men tiering them; Apple can still make more per iPad 2 sold at $500 than Motorola makes on a Xoom selling at $800.

    And looking at the feature set that the iPad 2 has – it’s pretty clear that this was a refresh to kill off some of the excess stock in screens and components. I love where competition is driving this market. It’s still priced out of my general utility level at this point, but I love where it’s going.

    Tim Cook may not have Steve Jobs’ brilliant vision and product development/industrial design chops, but he’s damned near a perfect match for the “19th century robber-baron” out of a two penny opera. He’s not afraid to make a huge gamble with Apple’s cash reserves to buy options on manufacturing to keep the competitors out of the market for a while.

    I can admire Tim Cook and Apple’s resource stack management with, say, the same admiration that I admire a great white shark. Doesn’t mean I want to be anywhere near it when it’s hungry.

    (Someone, somewhere, needs to get a picture of Tim Cook and Larry Ellison and Steve Ballmer playing PowerGrid…)

  66. > You guys think Android is good enough and pricing will drive Apple into a small high end niche like the mac. Right?

    Speaking for myself…

    Only if Apple’s smart enough to take the deal. If they try to keep playing low margin games with the big dogs, they will watch their revenue stream dry up on just another cellphone.

    The smartest thing Apple can do right now is to bring out new, higher cost models, and develop an EOL plan for old models that doesn’t involve deep discounting. They’ve pushed the strategy of flooding the market to acquire new users about as far as is prudent.

    The thing that might dissuade Apple from taking this approach is that volume numbers help the revenue from the app store and from ad impressions. But google doesn’t have any per-unit costs for their ad impression revenue, and google’s busy salting the the earth on viable app store pricing, so that revenue’s probably going to peak soon, if it hasn’t already.

  67. @phil:

    But would this low end market have wifi?

    Sure. WiFi routers are available for as cheap as $15, and wired broadband Internet service can be had in some areas for as little $20 a month. And McDonald’s and most hotels have free wifi. You can get an AT&T Wifi hotspot account for $20 a month as well and use WiFi wherever they have those. I’ve given serious thought to that last option as a means of saving money by dumping my wireless provider and just using WiFi on my smartphone to make calls using my Vonage account. That would cut ~$200 a month off of my budget. I don’t think my wife would ever go for it, however.

    I expect iPhone to grow, Android to grow, and everyone else to shrink (continuation of the current trend)

    Yes, this will happen until the market gets much closer to saturation. The closer to saturation, the lower market share the minority players will have. This will likely include iPhone.

  68. >The people griping about the $85 Android tablets being crappy hardware that only runs 1.6 and a screen that
    >delaminates in use are missing the point. Of course the first iterations of low-end disruptors are crap; they almost
    >always are. But they won’t be crap next quarter, and at the pace this market is evolving they may not even be
    >crap next month.

    Except that they will always be crap, since what’s crap is defined in large part by what is state of the art. That isn’t to say you won’t have stuff that is functional and “good enough”. My netbook is “good enough” to do what little utility I want to get out of it. It’s still crap, it has crap battery life, crap screen, crap processor and crap RAM. And even though newer netbooks are better than it, the newer ones are still crap because everything has shifted up.

  69. @Ken Burnside:

    The yields on 10? tablet touch screens with high resolution, coupled with the limited number of manufacturers who can make them (currently three….) and the two year long ramp up time needed to add additional capacity show a bottleneck coming up.

    Only 3? Do you have a cite? I would have thought at least Samsung, LG, Sharp, CPT, and maybe AUO and CMO or some others. But I don’t follow the market that closely. I would think all laptop LCD makers would be busy trying to transition.

  70. >You guys think Android is good enough and pricing will drive Apple into a small high end niche like the mac. Right?

    That’s correct. I (and I think Patrick as well) anticipate a near-repeat of the PC wars of the late 1980s and 1990s, which drove the Mac down to around 10% stable market share.

  71. For most of Office, I’d agree with you, but for MS Excel in particular OOCalc, at least, can’t really compete. I don’t use spreadsheets that much, but the few occasions when I do are the few occasions when I willingly use a Microsoft product over its free equivalent.

    Indeed. Excel and Outlook are absolutely indispensable in the corporate world. You can replace Word and PowerPoint because nobody really uses all that functionality except to make things pretty.

  72. >The smartest thing Apple can do right now is to bring out new, higher cost models, and develop an EOL plan for
    >old models that doesn’t involve deep discounting. They’ve pushed the strategy of flooding the market to acquire
    >new users about as far as is prudent.

    Honestly, the smartest thing they can do (IMO) is to do what they’ve been doing since roughly 1998 which is not get attached to a product “as is”. They don’t need to make a higher end iPhone, they need to make the iPhone’s replacement. Sure it can function like an iPhone, but it doesn’t have to be an iPhone. Apple’s stated strategy from 98 has been making your mac the “digital hub” for your life. The Apple TV, the iPod, the iPhone and iPad are all parts of this, but crucially none of them are irreplaceable, and Apple (at least under Steve Jobs) will gladly kill one for a newer better product, and they will gladly shift their focus to whatever product makes this “digital hub” concept a better reality. Compare this to Microsoft, who appears to be unwilling to allow any product that is separate from, or even displaces the Windows/Office kingdom.

    Whether this willingness to be their own competitor, and to kill the old for the sake of the new will continue after Jobs is gone remains to be seen, but hopefully he’s instilled enough confidence in the senior leadership and the investors to show people that it really can work.

  73. >Except that they will always be crap, since what’s crap is defined in large part by what is state of the art.

    No. You’ve changed the subject. I was using ‘crap’ in the sense of “fails to meet actual user needs”. The difference between my definition and yours is a yawning chasm that routinely swallows Fortune 500 companies. Now go read The Innovator’s Dilemma.

  74. @esr:

    > I (and I think Patrick as well) anticipate a near-repeat of the PC wars of the late 1980s and 1990s

    Agreed, but only if Apple is smart enough to take the plea bargain. If they keep pleading their innocence, they’ll get 99 years.

    OK, bad analogy, but I seriously believe they’ll keep a larger share if they keep their cachet as a positional good. And one of the things they need to do in order to accomplish that is to effectively raise the price (which, of course, just means standing pat and not following Android down the curve too quickly).

  75. but of course, on reflection, they didn’t take the plea in the great PC wars, and that’s when they almost died. SO, I’ve sort of got my condition backward. If they don’t transition cleanly from “the” smartphone to the “primo” smartphone, and manage to lose all the cool kids in the process, best case will be a PC wars scenario and worst case will be death or acquisition. If they do transition cleanly and keep enough innovations coming to keep the Apple coolness edge, they could gracefully drop to 5-10% market share without ever being at serious risk. (I think that Mac market share may be up around 15% these days but that their natural smartphone market share could be considerably lower than that, because of the huge, untapped, low-income smartphone market.)

  76. I think Android is a gift from Google to Apple. Without Android, Apple would be heading into monopoly territory and the total market would grow much slower. With Android, Apple still earns most of the profit in the cell phone, tablet, and computer industry, and it looks like that will continue for a long time. Android does not threaten Apple at all. Apple can price products where they want, distribute where/how they want, choose markets they want, and monetize data how they want. The software development community loves Apple as much as the consumers do. Most important, Apple’s organization and innovative culture are second to none.

    The existence of Android is a good thing for Apple. It takes the heat off without removing the profit.

  77. >The existence of Android is a good thing for Apple. It takes the heat off without removing the profit.

    And will continue to be until Apple experiences disruptive collapse (term of art: see The Innovator’s Dilemma). Which, last week, I thought was several years out. Today I ain’t so sure.

  78. Not perfect by any means but looks servicable
    AUD $150
    Agora 7″ Tablet PC with Capacitive Touchscreen…
    CPU Model: Cortex A8
    CPU Speed: 1.0 Ghz
    Memory: 512MB DDR2
    Storage: 4GB NAND
    External Storage: microSD card expansion up to 32GB
    Operating System: Android 2.2
    Touchscreen: 7″ Capacitive Touchscreen
    Screen Resolution: 800 x 480
    HDMI out

    http://www.kogan.com.au/shop/7-inch-tablet-pc-android/

  79. All these tablets with the 7″ screens are basically crap… not big enough to be usable.

  80. The news that iPhone on Verizon is being outcompeted by a single Android device suggests that the quarter when Apple’s smartphone follows RIM’s down a death spiral is not as far off as I previously thought.

    And here’s the big thing for me… it can’t be argued that it’s because of price.

    The Thunderbolt($249.99) neatly splits the 16gig($199.99) and 32gig($299.99) iphones for price.
    Assuming those numbers are correct, The Thunderbolt is playing in precisely the same niche as the iPhone CDMA and winning.

  81. >All these tablets with the 7? screens are basically crap… not big enough to be usable.

    That’s your opinion. I’m very near sighted without glasses and use my iPhone for reading in bed (mostly off the kindle and nook apps). The iPhone actually seems a little small for that purpose. Though I don’t yet have a tablet, I’ve long thought 7-8 inches is about the right screen size for me. In fact, I believe lots of people use or will use tablets for reading in bed, and a 10 inch screen just seems awkward to me, especially if you lie on your side. Is anyone aware of any studies on this topic?

  82. In fact, I’m kind of interested in the various ways people use tables. I currently use my iPhone for playing Angry Birds while exercising on the elliptical trainer. Again, it is usable (makes the time go faster) but a bit small for that purpose. I think a 10 inch screen would be too big and the sweet spot for this purpose would be on the order of 7-8 inches.

  83. >All these tablets with the 7? screens are basically crap… not big enough to be usable.

    Not necessarily. While I do think that as far as consumers and consumer content goes, the 10″ screen is better the 7″ I think is most useful in a business environment. Consider the use of a tablet as a portable inventory device, or a tracking and signature capture device (think the clunky boxes the fedex guys carry around). In these scenarios, the tablet is not the primary focus of the task at hand, and therefore is best served being exactly big enough to be useful, while being small enough to be tucked away, or held in awkward positions. In this case a 7″ tablet I think fits the bill a lot better than a 10″ one does. Being that Apple tends to not court the corporate world, and prefers to focus on consumer / creative, it also explains why there’s no 7″ iPad.

  84. “Indeed. Excel and Outlook are absolutely indispensable in the corporate world. You can replace Word and Powerpoint because nobody really uses all that functionality except to make things pretty.”

    You seriously underestimate how heavily Powerpoint is used in the corporate world. Most documents I receive these dates is written in Powerpoint, not Word. Every time I do a project, the result gets written up in Powerpoint. When we get a deck from an outside vendor summarizing research they’ve done for us or outlining a proposal, it’s always in Powerpoint. And since they often come in by email, I have to have the software on my desk to open them. I have headaches enough these days because my employer is still on 2003, while most of our vendors send us 2007 files. Usually the converter works, but we’ve had some issues.

    However, I agree that Excel is critical. I absolutely detest Microsoft and all they stand for, but I have to reluctantly acknowledge that this is the one piece of software they’ve written where they did a good job. (Of course, their market share has little to do with that, and everything to do with proprietary lock-in.)

  85. “All these tablets with the 7? screens are basically crap… not big enough to be usable.”

    The market doesn’t agree with you. Follow the link to the 7″ tablet, and you’ll see on that page:

    “1st Production Run of this Tablet SOLD OUT at 5.52pm on 14th April 2011.”

    Granted, they may have done a small production run initially to reduce inventory risk and generate appeal through scarcity. Still, it implies that someone is buying it.

  86. @phil: “It seems you and esr both think technology inevitably becomes a commodity. Quality/usability don’t matter much. The key is basic functionality for a cheap price. Price is the primary driver. Is that correct?”

    Hmm, it seems to me that you are creating a false dichotomy here. You are assuming that a commodity product cannot provide quality and usability. But why would you assume that?

    “Commodity” in this context simply means that intangibles like branding do not raise the price of the product above its manufacturing cost (raw materials plus labor) plus the cost of capital required by the efficient market.

    On the other hand, being the latest “cool” product is not terribly compatible with commoditization. However, the “cool” market is a form of fashion, and as Coco Chanel once said, “Fashion is what goes out of fashion.” Apple has done an impressive job of rolling forward, surfing the waves of new categories (note: not just new products in existing categories), but that can’t continue forever.

  87. Thunderbolt is, for the purpose of comparing stats, equivalent to a 32gb iPhone, as it comes preloaded with a 32gb micro-sd

  88. The current king of Android tablets is the Archos 101. You’ll pay more for it than for one of the cheapy ones (though still under 400 USD), but Archos is looking to fill the void left by Nokia in the “nifty geeky touchscreen toy” space. Currently they are offering as a download a firmware unlocker that lets you install another OS on the device at the expense of voiding their warranty — and they are actively promoting and offering Ångström as an alternative OS to Android. There are even USB host ports on the thing so you can plug in an external keyboard.

    It’s pretty much what I always wanted: a nice cheap low-power ARM-based PC.

  89. “Indeed. Excel and Outlook are absolutely indispensable in the corporate world. You can replace Word and PowerPoint because nobody really uses all that functionality except to make things pretty.”

    The key point about Excel and Outlook is that they are the applications the people who sign the cheques live in all day, every day. So the apps are very good at what they do. PowerPoint is OKish and Word is for peons. Windows is a utility.

    (In Outlook/Exchange’s case, I’m thinking of meetings, rather than email.)

  90. @Jeff Read:

    The Archos appears to be both loved and hated at Amazon.

    Of possible concern for your envisioned use-case is this comment, which claims that actually installing Angstrom will void the warranty…

  91. “Don’t ever sacrifice economies of speed to achieve economies of scale.”
    - – Freeman Dyson, Infinite in All Directions

    This is one thing the Android ecosystem is seems to be doing much better than Apple. Having a shorter development cycle, being able to bring out new hardware quicker, and being able to change direction quicker to take advantage of new opportunities and more useful in building mindshare than trimming a little off prices through economies of scale.

  92. Patrick Maupin,

    I mentioned the warranty-voiding in my comment.

    Really it makes sense: if you are going to reflash the lowest level firmware of your device, you’d better know what you’re doing. Still, they are saying publicly “hey geeks, come and hack our kit”, which is a few rungs above the typical strategy of most hardware vendors — say, installing a secret bootloader which detects and removes custom ROMS, or giving you a hypervisor which suddenly gets removed for “security reasons” in a mandatory firmware update.

  93. > I mentioned the warranty-voiding in my comment.

    So you did. I don’t read so good before my coffee.

    > Really it makes sense

    It “makes sense” in the sense that any manufacturer would love to have an incentive to entice some percentage of their customers to sign away their warranty coverage. But it doesn’t really make sense that my screen warranty depends on my software.

    Unfortunately, other manufacturers try to do the same thing, although it may partly be due to cluelessness (who the heck would trust that the warranty information for a laptop would remain unmolested in some registry file somewhere).

    At the end of the day, if they sell enough of these, and enough people who install linux have hardware problems, there will be a class action suit and they will find out that asking somebody to sign away their warranty rights on a computing device if they want to compute using a different OS than the default one is tantamount to letting someone sell themselves into slavery, aka not the done thing unless the government gets a cut.

  94. > You guys think Android is good enough and pricing will drive Apple into a small high end niche like the mac. Right?

    Yes, and for me this is an admission against interest because I loathe Unix with the same deep intensity that ESR has toward Windows. I don’t particularly want to see Apple win the Smartphone wars, but emotionally at least I’d be happy to see Android lose.

  95. >> You guys think Android is good enough and pricing will drive Apple into a small high end niche like the mac. Right?

    >Yes, and for me this is an admission against interest because I loathe Unix with the same deep intensity that ESR has toward Windows. I don’t particularly want to see Apple win the Smartphone wars, but emotionally at least I’d be happy to see Android lose.

    You *do* realize that iOS is largely BSD under the covers, don’t you?

  96. @Cathy:

    “Hmm, it seems to me that you are creating a false dichotomy here. You are assuming that a commodity product cannot provide quality and usability. But why would you assume that?”

    Let’s see. Dell. Laptop trackpads other than Apple’s. BluRay players that take 3 minutes to open when you hit eject. TVs that take 5 seconds to switch a channel, have 60 buttons, and need a training session.

    Table salt is a commodity that has good quality and usability. I’ll give you that.

    Most people fight their commoditized gadgets. They suck.

  97. From the article:

    Today [the Google/Verizon] agreement serves as the model for Android’s relationship with all major carriers—fundamentally changing the wireless industry. The iPhone, revolutionary as it was, didn’t alter one underlying dynamic: Phone manufacturers—who wanted to make the most capable, feature-rich phones—were still at odds with the carriers that provide the pricey bandwidth to power those features. That had led to conflict between Apple and its carrier partners, especially AT&T. Apple wanted users to take full advantage of the iPhone’s capabilities, but carriers then had to spend billions to keep up with the demand on their overtaxed networks. Android finally rewrote that calculus. Because carriers get a cut of app sales and ad revenue, they stand to make money when subscribers surf the web or download applications. For once, the interests of software designers, manufacturers, carriers, and customers are all aligned.

  98. > You *do* realize that iOS is largely BSD under the covers, don’t you?

    Truth to tell, I hadn’t. I knew OSX was largely BSD under the covers, but somehow it hadn’t registered with me that iOS was too. But as I said, I didn’t particularly want Apple to win the Smartphone wars, and now I have even more reason.

  99. >Article about the history of Android at wired:

    Good article in general, but I agree with the comment that criticized it for leaving out HTC. The Motorola Droid sold well, and that’s good, but the standout hardware in the Android world has usually been HTC’s. Today it’s the HTC Thunderbolt, not a Motorola device, that is outselling the iPhone on the Verizon network.

  100. >Truth to tell, I hadn’t. I knew OSX was largely BSD under the covers, but somehow it hadn’t registered with me that iOS was too.

    I’m afraid you’re doomed to disappointment, Lurker. With Android and iOS dominating the smartphone and tablet spaces, there is no longer a plausible future that isn’t Unix as far as the eye can see.

  101. Well, yeah, wrt Unix ruling smartphones and tablets.

    You can still color me skeptical, however, about smartphones or tablets becoming the primary computer platform for most people. That I don’t see happening: The form factor is too small, and I don’t think any sort of “docking station” solution will be generally accepted.

    Likewise I remain skeptical about Unix suddenly bursting out onto the laptop & desktop markets, after Linux being a bit player there for so long.

  102. I’m afraid you’re doomed to disappointment, Lurker. With Android and iOS dominating the smartphone and tablet spaces, there is no longer a plausible future that isn’t Unix as far as the eye can see.

    Actually, Deep Lurker, you should be cheering for Android because there is absolutely nothing that ties Dalvik, and by extension, the rest of the Android shell to Linux. There is no reason whatsoever that Android couldn’t run on QNX or Windows or any number of other operating systems. Well, okay, even QNX is Unix. That leaves…um…Windows.

    Nevermind, it’s definitely not looking for Unix haters.

    HTH.

  103. Well, it looks like the diversity that was Nokia is being assimilated. Resistance is futile.

  104. > Nevermind, it’s definitely not looking for Unix haters.

    That’s OK. Us Unix haters aren’t looking for it, either.

  105. Just noticed this article in fortune from about a week ago:

    http://tech.fortune.cnn.com/2011/04/11/why-apple-investors-shouldnt-sweat-android/?section=magazines_fortune

    In a remarkable case of projection, he explains how financial journalists often get it wrong:

    Financial journalists often miss the larger picture or fail miserably at raising any actual or material concerns for Apple.

    And then he proceeds to get it all wrong, with paragraphs like:

    First of all, because Google doesn’t actually make any hardware it becomes very difficult to tell exactly where these gains are coming from. Are the gains being derived from actual growth and conversion rates or are these gains simply coming from Google offering up its platform to more smartphone makers? The latter tells us nothing while the former is very revealing. For example, suppose Research in Motion (RIMM) decided it wanted to offer the Android operating system on all of its phones starting on December 31, 2010.

    and:

    Secondly, if anyone ought to worry about a platform becoming singularly dominant it should be Google. Apple has its iOS seeded in not only one, but three separate markets that it dominates — the iPhone, the iPad and the iPod Touch. Even more importantly, the next version of Apple’s Mac OS (Lion) is going to assume many key elements of the iOS operating system, which will likely result in higher conversion rates to the overall Apple ecosystem.

    I can understand how someone who has not been paying attention might not understand how hard the Android freight train will hit tablets, but how the hell can someone whose “main area of knowledge is in global macro economics, fundamental analysis and technical analysis” not be able to figure out where Android’s gains are coming from, or that the iPod Touch is rapidly becoming irrelevant? (On that last one, maybe he just missed this chart from this article.

    I suppose he wants us to consider himself better than the financial journalists he excoriates, but a quick read between the lines gives a strong indication that his motivation for writing is probably his long position in Apple.

    Alternatively, if he really is as smart as he claims, maybe he simply wants to talk the stock up now so it bounces harder later and he can make more covering his shorts.

  106. Eric!! The line is “Get used to disappointment.” MUST I refer you to the canonical list of popular culture we discussed here a few months ago??

  107. GOD I’m screwing up closing tags lately. Need to find a wordpress editor plugin or something.

  108. >Most people fight their commoditized gadgets. They suck.

    Nonsense. Most of your examples are only recently, or not yet, commoditized. Any time companies are trying to differentiate themselves on “features” it is not a commodity. Commodities are often things you use without even thinking about them, and definitely without thinking about who makes them. Light bulbs are the classic example, but nowadays most home appliances and some computer peripherals and parts, mice and RAM for example, have also been almost completely commoditized. Some things like keyboards are mostly commoditized, but there is enough personal variation that they are never likely to be fully.

  109. “Nonsense. Most of your examples are only recently, or not yet, commoditized.”

    Jesus. I’m not saying they trade on the commodities market. I’m saying these items compete mainly on price.

  110. “I can understand how someone who has not been paying attention might not understand how hard the Android freight train will hit tablets”

    You must think this guy is clueless too: http://www.asymco.com/

  111. phil Says:
    > You must think this guy is clueless too: http://www.asymco.com/

    Yes. Among many other problems he thinks the iDevices run OSX. He contradicts himself frequently. His claims and conclusions show the opposite of what his own graph illustrates. That article at the top appears to be classic fanboy stuff. Ignore.

  112. Eric, the sub-$90 tablet you describe has a resistive touchscreen. I can’t find a decent resource for the cost difference between the manufacturing processes of the two, but it seems like drawing conclusions about capacitive cost based on resistive cost seems problematic at best.

    It seems obvious that no real tablet or smartphone contender will have a resistive touchscreen.

  113. ” Among many other problems he thinks the iDevices run OSX”

    iOS is based on OS X. You gave no examples of anything else.

  114. With regards to the Thunderbolt outselling iPhone 4 on Verizon.

    I don’t know how they compare and you guys don’t either. The survey was of 150 Verizon stores over a 2 week period immediately after the Thunderbolt was released. So maybe you can extrapolate that out to a longer time period and all Verizon stores. And Best Buy. And the Apple Store (probably not).

    So maybe it’s true – the Thunderbolt is outselling the iPhone 4 week after week across all Verizon buyers. But there are no real numbers yet.

  115. @phil:

    You must think this guy is clueless too: http://www.asymco.com.

    I don’t know that either of them are completely clueless. They may be, or they might simply both be so overexposed to Apple stock that they have to write something, anything, to explain why Apple’s trajectory will be, if anything, heating up over the next year. Of course, the problem with making things up is that you have to ignore some portion of reality. But when you do that, you are immediately at odds, not only with reality, but with others who are making things up by ignoring a different portion of reality.

    The fortune magazine article I found claims, essentially, that platform market share doesn’t matter at all, while the asymco article you found strongly implies that platform market share is everything, but that the only two platforms that matter are Apple and Microsoft.

    You don’t even have to know what reality is to know that these two guys are not on the same page. And, of course, absent any extrinsic evidence, the fact that they’re both predicting the same outcome doesn’t necessarily mean that either one of them can be right. They could, in fact, both be right about the outcome, but at most one of them could be right about how that comes about.

    @Michael Hipp: Among many other problems he thinks the iDevices run OSX.

    @tmoney: ¿Que?

    I think Michael’s referring to this gem from the asymco article (referring to the supposedly lethal combination of Macs + iPads):

    The bottom line is that Windows-only computer units are down 2.0% while OSX-based computer units are up 272% (this excludes both the iPhone and iPod touch).

    As Michael points out, that’s only the tip of the iceberg. For example, while I agree with the article author that it’s true that anybody who doesn’t think that tablets are going to cut into PC usage isn’t paying attention, I also happen to think it’s true that anybody who discounts the possibility that the phone form factor is going to cut into tablet and PC usage likewise isn’t paying attention.

    In short, if you add together Macs and iPads into a single indistinguishable market, while simultaneously ignoring, not only smartphones but even other tablets, then after that point, it doesn’t really matter how good your analytic or math skills are, or whether you have the correct numbers for shipments — garbage in/garbage out.

  116. @phil:

    iOS is based on OS X. You gave no examples of anything else.

    To the extent this is true, you can also say that Windows is based on DOS. Well, at least earlier versions of Windows.

    OTOH, to the extent that OS X and iOS are both based on BSD, you can say that *nix systems are taking over. Which, I can assure you, is not the point the asymco article was trying to make.

  117. @phil:

    So maybe it’s true – the Thunderbolt is outselling the iPhone 4 week after week across all Verizon buyers. But there are no real numbers yet.

    Unfortunately, Verizon never seems to break out its phone numbers, and Apple probably will lump Verizon numbers in with international CDMA numbers. So the only numbers we have to work with are indirect ones. We are used to working with various quality indirect numbers. We have found that the comscore reports seem to line up extremely well after the fact with numbers that google and Apple and AT&T put out, so they are much higher quality than some numbers.

    There are probably two reasons for this: (1) comscore apparently, deep in their core DNA, considers themselves a “measurement” firm rather than a “PR” firm, and (2) on this particular survey-based report, they measure by asking people what they have done, e.g. what smartphone did they buy and actually put into their pocket. The worst numbers seem to come from the bought and paid survey takers who ask people what they are going to do in the next few months, presumably using very slanted leading questions (how else could some of them be off that far?)

    It’s much harder to fudge the more factual surveys, and would probably insure much more attention from the SEC if you were found to do so. The Thunderbold/iPhone survey was described, in part, like this:

    We called 150 Verizon Wireless stores in 22 major cities in the United States and asked the sales people that answered whether they were selling more Thunderbolts or more iPhones over the past week. 61% of the stores that we contacted said they sold an equal amount of both phones, 11% said they sold more iPhones (principally in the Southeast) and 28% of stores had sold more ThunderBolts.

    Since we will be left to extrapolate from indirect numbers, your “but there are no real numbers yet” comment is meaningless. Unless Verizon changes its behavior, there will never be direct numbers on Verizon iPhone sales. Which means that we have to rely on indirect numbers. We certainly have to try to discern the accuracy of the indirect numbers by correlating as many different inputs as possible, but absent any other numbers, these are what we have. And they don’t directly contradict other indirect numbers and anecdotes we have acquired (other than pie-in-the-sky projections about what will happen).

    And, the analyst who did this survey has been covering this sector a very long time. In 2000, Walter Piecyk was named the fourth best “Wireless Telecommunications Analyst” by thestreet.com, and thestreet’s methodology for their choices is laid out in rigorous detail on that site.

  118. phil Says:
    > iOS is based on OS X.
    Irrelevant. When you can take, say, your CD of Intuit QuickBooks for Mac and install it on your iPod Touch then it might mean something.

    > You gave no examples of anything else.
    Patrick already answered this well enough, but when the writer takes his own graph that shows Mac growth to be relatively stagnant like all PCs but then conflates it with the (entirely expected) high growth rate of a brand new platform (iPad) he shows that he is just not to be taken seriously. Making them equivalent actually contradicts his main point below.

    Another example: he talks out of both sides of his mouth when he declares that iPads are not about “media consumption” but then says the iPad’s growth is happening in “low-end grazing type of usage”. What, pray thee tell, is the difference?

    Yes, as Patrick said, his general conclusion that the smartphone/pad is a disruptor in the low end PC space is correct. But that’s hardly an original observation and the article has little to say otherwise.

    Fanboy at six o’clock low!

  119. > Fanboy at six o’clock low!

    Well, although we may not know a direct breakout of Verizon iPhone shipments, we’ll have a lot more numbers to play with later this week:

    Apple and AT&T release quarterly earnings Wednesday
    Verizon releases quarterly earnings Thursday.

    HTC released great earnings on the 8th, but apparently estimates demand going forward, but doesn’t disclose handset figures shipped.

    Samsung released preliminary earnings about the same time, but I think it won’t discuss actual business unit results until the end of the month.

    It is interesting to note that Samsung is warning that it was “hit by weakness in its liquid crystal display business and price competition in tablet computers” and that Galaxy Tab profits suffered “due to severe price competition” from Apple.

    Given that Apple ran out of iPad 2s on opening day, but that most of the component market shortages are easing and most of the non-junk tablets are priced about the same or higher, it seems that Apple is pricing iPads well below the point where they need to in order to sell what they are building. Perhaps they misjudged demand, or perhaps they want to restrict output until they beat better margin pricing out of their suppliers. In any case, they’re still going for the jugular against the competition.

    Note to all the fanbois who have been claiming that market share doesn’t matter: Apple doesn’t believe you.

  120. @phil:

    BTW, it took awhile for me to find it, but the claim in that asymco article that the iPad was munching into PC sales reminded me of this article:

    http://techcrunch.com/2010/07/21/ipad-sales-mac/

    Neither view is complete, but I find this story somewhat more compelling than the one about the iPad killing all computers. To the extent that the iPad and iPhones are adjuncts to computers, it makes sense that someone might decide that they like Apple’s vision and splash out on a Mac as well.

  121. You must think this guy is clueless too: http://www.asymco.com/

    I wouldn’t say clueless. Instead, I’d say about as disconnected from reality as a schizophrenic. I’d like to know in what reality iPad’s primary competition is Windows PCs. I’d also like to know in what reality iPads and Macintoshes should be added together as a singular product category.. I’d also like to know what that guy was smoking.

    Maybe I should make a graph comparing the sales of Linux desktops to slide rules. That’d make about as much sense.

  122. . I’d also like to know in what reality iPads and Macintoshes should be added together as a singular product category..

    I don’t know if this is the right answer but an answer is probably “one where the stock price trumps network effects”.

    We’ve had (and potentially still have) that same reality shift on A&D every now and then when someone says “but Apple still makes a hojillion dollars a quarter” and someone responds with “thats great and they’ll probably continue to but thats not what we’re talking about here”.

    So the product category in question here is possibly “things that make AAPL money”.

  123. > So the product category in question here is possibly “things that make AAPL money”.

    But then, how does it make sense for the article in question explicitly exclude iPhones and iPods from the summation?

  124. >someone says “but Apple still makes a hojillion dollars a quarter” and someone responds with “thats great and they’ll probably continue to but thats not what we’re talking about here”.

    It has really been kind of hilarious watching the progression of denial among Apple fanboys.

    Hm. I was going to list the stages here, but I think this is worthy of a blog post.

  125. But then, how does it make sense for the article in question explicitly exclude iPhones and iPods from the summation?

    Probably because he’d need to write more drivel to show the implausible graph to the side. Where did he learn to build graphs from? It certainly wasn’t Tufte thats for sure. The graph (particularly the distinct lack of lines between 30% and 300%) just makes the whole thing more confusing.

    I concede the point on this one, it seems he truly does believe that iPad is just another entrant to the PC category while at the same time saying that you don’t use them for media consumption, about the only place where (IMO) you could plausibly put them in the same category (is facebook “media consumption”?).

  126. First they ignore you, then they complain about fragmentation, then you win?

  127. Just to keep up the good work, and some humor. Note that WP7 is not only more mature and secure, it will also be the choice of corporate space. I smell the brewing of some corporate “incentives” to go WP7.

    I expect MS to sabotage access to corporate services running Exchange and Sharepoint. What use is a monopoly if you cannot block competitors with it?

    Windows Phone evangelist says Android too insecure, complex
    Microsoft says developers tools for Windows Phone more mature
    http://www.computerworld.com.au/article/383576/windows_phone_evangelist_says_android_too_insecure_complex/

    Windows Phone will eventually succeed in the business market because there is too much malware attacking the Android operating system, which is also more difficult to develop for, says Microsoft’s Windows Phone developer evangelist.

    Initially aimed at the consumer market, Windows Phone 7 (WP7) is slowly gaining momentum in the corporate space where it will become a mainstream option alongside BlackBerry, Symbian and the newer big guns iOS and Android, according to Microsoft Australia’s Windows Phone developer evangelist, Dave Glover.

  128. > That’s not entirely true. Apple bought and integrated both P. A. Semi and Intrinsity.

    Someone is forgetting that Acorn Group and Apple Computer Inc each had a 43% shareholding in ARM in 1996. In a very real way, Apple co-owns ARM.

    Also, Samsung and Intrinsity announced the Hummingbird core in the summer of 2009. Hummingbird is a ground-up, cycle-accurate, high-performance remake of ARM’s Cortex A8 architecture, done by Intrinsity and Samsung in order to get the A8′s clockspeed comfortably up to 1GHz on a 45nm process.

    The question becomes, what will Samsung do next, now that Apple owns Intrinsity? Qualcomm, TI, etc. are definitely cut-off as well.

  129. > Someone is forgetting that Acorn Group and Apple Computer Inc each had a 43% shareholding in ARM in 1996.

    Perhaps, but not me. IIRC, they sold it all around 1999.

    > In a very real way, Apple co-owns ARM.

    Umm, so I still co-own everything I ever sold? Cool!

    > what will Samsung do next, now that Apple owns Intrinsity?

    Short term, detente based on Samsung’s flash, DRAM, and LCD.

    Long term, Samsung might have to find a different high-performance flow. OTOH, they probably have iron-clad licenses to build their current processors.

    Interestingly, via valid reasoning or not, the expected glut of tablets is apparently ratcheting ARM’s share price down:

    http://blogs.forbes.com/ericsavitz/2011/03/10/arm-holdings-shares-tumble-on-worries-over-non-apple-tablets/

    Not that I’ve bothered trying to value ARM, but the way their licenses work and the fact that pretty much all tablets have an ARM in them mean that this article really doesn’t make too much sense to me.

    I could understand someone saying “there’s a tablet bubble, and there aren’t going to be as many sales as were expected.” But conflating that with the statement that there are too many competitors just doesn’t make any sense. A plethora of competitors should drive the tablet prices down faster, so the consumers buy more, so ARM makes more money. But, as I said, I haven’t thought it about all that hard, so there could be a piece I’m missing.

  130. @tmoney:

    I sit corrected, but possibly not by quite that much:

    Apple is not listed among ARM’s largest institutional shareholders here (but I don’t know if they are in the right category for that):

    http://ir.arm.com/phoenix.zhtml?c=197211&p=irol-ownershipsummary

    The article you quoted says that in early 99, after selling 2 M shares, they had 7.2M left.

    A bit of google-fu for ‘ site:apple.com ” shares of arm holdings” ‘ yields a confusingly large number of shares sold, until you realize that there were apparently a couple of stock splits:

    http://getsplithistory.com/ARMH

    So, as near as I can figure from that google search:

    4/14/1999 — sold 2M, 7.2 M left (same sale as article you found, I think)
    4/21/1999 — 4:1 split, 28.8 M left
    7/15/1999 — sold 10M, 18.8M left
    1/19/2000 — sold 5M, 13.8M left
    4/19/2000 — sold 1.5M, 12.3M left (all reporting for previous quarter…)
    4/19/2000 — 5:1 split, 61.5M left
    7/18/2000 — sold 5M, 56.5M left
    10/18/2000 — sold 7.1M, 49.4M left
    1/17/2001 — sold 3.8M, 45.6M left
    4/18/2001 — sold 23M, 22.6M left

    Given that there seem to be 440M shares outstanding or so, that would seem to give Apple around 5% of ARM, if I haven’t missed any transactions.

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