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How Apple Had a Spectacular Year
Hugh Pickens writes "John Boudreau writes in the Mercury News that during its just-completed fiscal year, Apple broke four consecutive quarterly revenue and profit records and amid the worst recession in decades, hired thousands while others cut jobs, but what most distinguishes Apple is that while other tech titans spent 2010 cutting costs and acquiring new technology through mergers, this $65 billion company has been relentless in innovating like a startup and ruthless in promoting technologies that disrupt its own product lines. '"It's been an awesome year. The frequency of new stuff just boggles the mind," says Charles Wolf, an analyst with Needham & Co. "There is no company that is remotely close to what Apple is doing. They are the Energizer Bunny." In September 2005, Apple killed off the popular iPod Mini to make way for the the iPod Nano; Apple openly acknowledges that the iPhone is cannibalizing its iPods — and they don't seem to care; and the iPad tablet could ultimately threaten its core laptop business. "[Apple] has a different cultural mind-set," concludes Wolf. "They are acting like a startup, though they are becoming a $100 billion company."'
The ipad, the ipad screen, the ipad power on/off button - these are all new, innovative and revolutionary technologies for slashdot and other apple fanbois.
That's because you vastly underestimate the power of Apple's marketing machine, which is completely unrivaled in the tech industry, perhaps in any industry. I was massively disappointed by the iPad, but even more so by knowing that it would sell like hotcakes because Steve told people to buy it.
Excuse me, Mr. Boudreau, Mr. Wolf? You've got something white and gooey on your chin...no...on the other side. That's it.
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They "innovated", you know, by making a new version of an iPod (with a broken antenna this time), by making a little bit better net-book, and by remaking the HP tablet PC from 2001, except without all those bothersome functional ports and things, but with less memory and computing power. Yup, real innovation. They did put the prices up a lot though. But just now they put them "down" about 8%.
Seven puppies were harmed during the making of this post.
Another, less nice, way of putting it is they over charge. Obviously they aren't over charging in the supply/demand sense but they are overcharging in the market sense. Now good for them if they can pull it off, and it is one of the things they note on their investor page. Now if you are an investor that's wonderful, you want companies with margins as high as possible. If you are a consumer, it is a bad thing, because it means you are paying more for a product and not really getting any ROI, the money isn't going to R&D or parts or whatever, it is going to profit.
Also if you look in to this, you find out why: Apple is in the fashion industry, as well as the electronics industry. They produce devices that are hip to own. The iPod wasn't the first MP3 player, nor did it do something amazing that none of the others did. What it was was a fashion accessory. It was cool to own one, it was (and still is) a status symbol. The white earbuds are a great example of this. When the iPod came to be a demand grew for high end white earbuds. This hadn't existed before because black is more understated and less obvious. However that wasn't the idea. People wanted the visible white to show the status of iPod ownership, just with better quality sound.
Well this is also a reason the margins work so well. Fashion is one of the industries where normal price sensitivity doesn't apply, and in fact a higher price can even be desirable. You have only to look at things like Ed Hardy t-shirts to see this. So Apple's position as being cool, fashionable, allows them to charge higher prices for their products. People will buy them because they are what is cool to have, even if there is a cheaper alternative because in fashion, an alternative isn't unless it is also cool.
Now that's fine, Apple can do whatever they want and whatever makes them money. Their investors should be cheering this on, as it means higher stock prices, better returns. What annoys me is when consumers cheer this on. This is all done at the expense of the consumer, it is done by taking more money from the consumer than they should. From a consumer's standpoint, all companies should always be operating on razor thin margins. When they are, it means that they are selling things as cheap as possible, and their money is going to their employees, materials, development, and so on.
Now please note that doesn't mean everything needs to be cheap shit, just that it should be as cheap as it can be given the costs, that profit margins shouldn't be high. It is the Henry Ford maxim: "Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." So in a case where you have a company with high salaries, lots of R&D, and expensive parts, well it can mean an expensive final product. However it should be expensive because of those costs, not just because it can be, at least in terms of what is best for the consumer.
So I'm not going to hate Apple for wanting to make obscene profits, I'll just note that is one of the things people love to hate MS for (their margins are also really high). I'll note that as a consumer you shouldn't be cheering a company with high margins. It is fine if you use their products, the best tool for the job and all that, but you should say "Look how great they are that they take much more of my money than they should!"
That's like your opinion man. I personally like the design of Motorola products more. But beauty is in the eye of the beholder. Functionality on the other hand is something we quantify.
No. They don't. And more often than not they won't work at all while the 'other' brand has no problem doing 'that'. And it doesn't have anything to do with technological limitations, it is always political (Apple doesn't like that) or capitalist (Apple wants your money). I think people often get confused between the words "better" and "easier". Just because your grandma can figure it out does not make it better. If we were to judge technology based on what is easier I think we all can agree the first dial pad phone was the best because they were much easier to operate. In reality ( a place Apple fears to tread) people don't want their devices fettered by Steve Jobs argument with Adobe or Apple's intense desire for your money. How long until pushing the power button is tied to your pocket book? Which Apple fan would complain(or not see it coming)? More likeyly they would spout off about what a great added value it is to have to pay to turn your device on.
I cannot recall a vendor that has put up as many roadblocks to creating applications as Apple has. They make you buy their SDK. They make you buy a license to publish software on their device. Then they can at a whim and without any declared reason reject your application. Nothing is more like "big brother" than Apple. Please watch Apple's famous 1984 ad: http://www.youtube.com/watch?v=OYecfV3ubP8 . Now listen carefully to the speaker in the video. He is saying, almost verbatim, what Apple really does! "[inaudible] A garden of pure ideology [inaudible] secure from the pests of a very unpredictable [inaudible] “ This is really the punch line to what Apple has become in the last 15 years. A mockery? No! The antithesis of its former self.
Nobody does "I'm a big company so you can go fuck yourself" like Apple does.
Nobody does "I can get you to pay me for "it" so why should I just give it to you for free?" like Apple does.
Nobody does "If you try and backwards engineer our products we will crush you." like Apple does.
Nobody does "Re-release old technology as if it has never existed." like Apple does.
Nobody does "After years of bashing your hardware platform (x86) I'll switch to it without getting any egg on my face." like Apple does.
Nobody does "We'll buy a windows handler for BSD much like KDE, and have the audacity to call it OSx." Like Apple. It's just Free BSD! Geesh!
Nobody does "We'll trade you our worthless software patents that took us $7.00 and a box of Skittles to develop for your hardware patents that took dozens of years and billions of dollars to develop and when you say "no" to the deal we'll use your patents anyway and then cry foul when we get sued for it." like Apple. And really - who does that?
Nobody does "We'll sue you if you try and make clones of our computers." - while they make cheap PC clones!
Now that takes some real intellectual dishonesty. I mean, your entire hardware and software platform was stolen (because you claim they are yours) from everyone else. You can't claim the hardware, that's Intel's. You can't claim the software, that's BSDs/AT&Ts! What exactly are people copying from you when they make a "Apple"? The fucking logo? Your windows handler? Everyone else gives their windows handler away for free! Oh ya, you're Apple, I forgot the "Why should I give y
The reason Apple is hard to predict future wise is because they are a fashion company. For some reason Mac fans hate that idea but it is the truth. They don't just sell technology, they sell FASHIONABLE technology. Their gadgets are cool to own. That's wonderful for Apple and their investors presently because their gadgets are cool. That not only means they sell a lot, but that they can sell them for a higher margin than normal. Fashion doesn't obey the extreme price sensitivity that regular electronics does. Doesn't mean they can charge anything, but means they can charge a lot more than normal, all of which is pure profit.
However the risk is that fashion is one of the most fickle things there is. What is cool now has no bearing on what is cool tomorrow. Something can become cool and remain cool for a decade or more, or it can become cool and then be forgotten about in a month. What that means is that for a company that plays in fashion there are two big things they have to contend with in terms of making high profits:
1) How long a product stays cool. Does it stay trendy long enough for you to make a killing, or does it go out of style before you've recouped your R&D and production costs?
2) Can you successfully introduce the next cool thing? When things shift can you be on the crest of that wave and introduce the next "gotta have" hip, fashionable product and keep making money, or will you miss it?
In Apple's case, well who knows? They've been amazingly successful lately. They've had very few products that haven't done well, and more than a few products that have done extremely well. However not but 12 years ago they were in rather dire straights, having difficulty moving products, needing help from a competitor (MS invested in Apple back in the 90s to keep them solvent). It could go many ways. They could continue to be strong, continue to dictate what is fashionable in consumer electronics. They could stagnate and continue to sell devices, but either not as many or not at the same margins and do fine, but see a big profitability and stock price drop. They could completely miss the boat and get outdone and see their market collapse and be back in to a dire situation again.
There's no way of knowing and it is a more volatile situation than many. While it is true any company can move up or down profit wise, you get some like IBM that are pretty stable and you have pretty good long term indications on. Good chance they aren't going to take off, also a good chance they aren't going to plummet.
They managed to get gullible fools to pay a grand for a netbook. Business-wise that's a success.