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tengen Newbie

tengen

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Interesting "behind the scenes" article on the introduction of the iPhone.

 

http://www.nytimes.com/2013/10/06/magazine/and-then-steve-said-let-there-be-an-iphone.html

 

It’s hard to overstate the gamble Jobs took when he decided to unveil the iPhone back in January 2007. Not only was he introducing a new kind of phone — something Apple had never made before — he was doing so with a prototype that barely worked. Even though the iPhone wouldn’t go on sale for another six months, he wanted the world to want one right then. In truth, the list of things that still needed to be done was enormous. A production line had yet to be set up. Only about a hundred iPhones even existed, all of them of varying quality. Some had noticeable gaps between the screen and the plastic edge; others had scuff marks on the screen. And the software that ran the phone was full of bugs.
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Liberty Newbie

Liberty

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Interesting "behind the scenes" article on the introduction of the iPhone.

 

http://www.nytimes.com/2013/10/06/magazine/and-then-steve-said-let-there-be-an-iphone.html

 

It’s hard to overstate the gamble Jobs took when he decided to unveil the iPhone back in January 2007. Not only was he introducing a new kind of phone — something Apple had never made before — he was doing so with a prototype that barely worked. Even though the iPhone wouldn’t go on sale for another six months, he wanted the world to want one right then. In truth, the list of things that still needed to be done was enormous. A production line had yet to be set up. Only about a hundred iPhones even existed, all of them of varying quality. Some had noticeable gaps between the screen and the plastic edge; others had scuff marks on the screen. And the software that ran the phone was full of bugs.

 

Thanks for posting this. There's some info about what went one behind closed doors at Apple back in the day, but relatively little about recent years.

 

For those looking for oldies but goodies, folklore.org is a great source.

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Guest valueInv

Guest valueInv

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-Business theory from the likes of people like Clayton Christensen

who ,of course, has a great track record on predicting the iPhone in the first place.

 

Come on.  Don't pretend like you haven't quoted from Christensen extensively when talking about how people in "the Valley" know all about the disruptive innovation model, whereas most value investors do not. 

 

I guess when the theory suits your views on AAPL, it's all good.  Otherwise, not so much.

 

-Sales reports for certain phones like the Nexus 4 (which admittedly don't have granular detail on whether or not the purchasers were switching from the iPhone);

Which has marketshare in the low single digits

 

True, and in my opinion, that's on purpose.  If GOOG had wanted to gain a lot of market share with the Nexus 4, they would have commissioned LG to make far more units, and they would have made an LTE version.  But they clearly didn't want to undercut their other partners like Samsung, especially after having said that they wouldn't use Motorola against their partners.

 

We're all still waiting for an LTE version of the Nexus 4 -- it may never come, though.

 

-Apparent demand for the HTC One, which is cheaper than both the Galaxy S4 and iPhone 5 and which we know has sold at least 5 million units, despite two OS refreshes (Key Lime Pie and iOS 7) looming on the horizon;

Which tells you little on whether those were people upgrading to higher end devices or switchers from Samsung. Further, just because it is cheaper doesn't mean it is low end. A Hyndai Equus is not a low end car because it is priced cheaper than a Ferrari.

 

Right, we don't have granular data on whether those HTC One buyers are switching from iPhone or choosing iPhone instead of Android after having considered the iPhone.  And I won't be able to get you that data.

 

However, until the HTC One and Galaxy S3/S4, there were no phones that even came close to being comparable with the iPhone.  Any sales of the HTC One likely cut into the sales of iPhone.

 

And I never said the HTC One was low end -- a couple of posts ago I mentioned that it had superior hardware and was cheaper (and is designed just as well, IMO).  That indicates commoditization.

 

Looks like the HTC One has eaten into iPhone sales  ;):

 

http://www.bloomberg.com/news/2013-10-06/htc-chairwoman-says-fourth-quarter-will-be-biggest-challenge-.html

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Palantir Newbie

Palantir

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Was smartphone shopping this weekend for parents. iPhone 5C looks kindof....girly, even the blue one, looks kind of a girly powder blue.

 

My parents got a Lumia 521, upon urging from me, as they were basic phone owners and wanted a cheap, simple smartphone, Android doesn't have a great low end offering set. For $144, Lumia is a steal.

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Liberty Newbie

Liberty

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http://www.macrumors.com/2013/10/08/ipad-and-iphone-usage-remains-strong-among-u-s-teenagers/

 

Our most recent semi-annual Teen survey demonstrates that Apple remains the most popular tech brand amongst teens. As of Fall 2013, the iPhone represented nearly 55% all phones used by teens and the iPad family remained at close to 70% share of tablet ownership. We believe that while Samsung seemingly had some momentum with teens over the past year, Apple's brand and product quality has enabled it to remain the top choice for teen consumer electronics.
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txlaw Newbie

txlaw

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I'm not a usually fan of John Gruber's writings (too uneven and biased), but i thought this post was very good: http://daringfireball.net/2013/10/design_quality_as_a_sustainable_advantage

 

Now, this is an interesting piece because it gets at the heart of the debate surrounding the company.  So it's worth discussing this one.

 

The first criticism I have is Gruber's characterization of the "bear" case on Apple being based primarily on the notion that Apple does not have a "sustainable advantage in the phone and tablet markets" from their design and UX expertise.  Thus, "bears" are pricing Apple as though it is in "free-fall" (i.e., it will eventually stop being a going concern). 

 

Gruber gives short shrift to the real issue, which is not whether Apple has a sustainable advantage due to design and UX expertise, but rather whether the economic benefits that result from any such advantage justify the current market valuation.  The rational "bear" case is that, given the competitive dynamics, Apple's market share will shrink, unit sales growth will slow, and margins will compress, despite any design and UX advantages in their products.  And this means that the current valuation is, at best, fair and, at worst, overvalued.  It's not that Apple is in free fall or that it is a bad company that will eventually go into run-off.  (To use another company as an example, although I may think AMZN has a sustainable advantage over its competitors, that doesn't mean that I think the market valuation of that company is rational.)

 

Gruber sort of addresses the valuation argument by perfunctorily addressing Apple's market share and stating that "Apple is sort of like BMW, Mercedes, Porsche, and Lexus all rolled into one. There just aren’t that many competitors for this segment of the market in phones and tablets, and most of them aren’t very good."  But this is a very rear window view -- there is no reason to believe that Apple can capture the entirety of the phone/tablet luxury market for the medium- to long-term.  Moreover, even if Apple could keep all of that market share, that doesn't mean that their unit sales growth will perpetually grow at a rapid clip (if the "high end" is saturated and refresh rates drop, then unit sales growth can be stagnant) or that unit margins will remain constant in the face of competition. 

 

So even if Apple somehow keeps itself as the BMW, Mercedes, Porsche, and Lexus of the mobile device space, that doesn't necessarily justify its valuation. 

 

The second criticism I have is of Gruber's view that "bear" arguments 1 and 2 are at odds with each other.  This is not the case.  Argument 2 as presented is the extreme view of the "innovation gap closing" theory.  But there are less outlandish variants of Argument 2 that go side by side with Argument 1.  Some people believe that competitors' products are superior in certain ways.  For example, the user experience for apps that make heavy use of mapping is superior on Android.  Bigger screens have a huge effect on the user experience as well, and Apple devices fare poorly in many ways when it comes to content consumption, solely because of the small screen.  And until iOS 7 was released, competitors had many other superior design features, which Apple decided to crib. 

 

The main point is that if the "innovation gap" is closing, then Apple's market share and maybe even their unit margins will be affected depending on the prices that competitors charge, whether or not those competitors make money on their hardware sales. 

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DCG Newbie

DCG

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I think most people just don't mind paying the extra $100 for the 5S. I also think with there being so many sales on the 5 before this release, a decent amount of people wanting a lower price on an iPhone probably just bought the 5.

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Liberty Newbie

Liberty

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I'm not jumping to any conclusions from this, as there can be many variables affecting production rates. So many moving parts...

 

Some that come to mind: the 5C is mostly 1-year old components, and the new part is easier to make than what it replaces (plastic exterior vs. machined glass and metal with close tolerances), so yields were probably very high and they could make them in overdrive for a while before launch. Maybe they've stockpiled tons of them and now they're just going back to a more sustainable level.

 

Maybe some of the manufacturers are being switched to making more iPads ahead of the upcoming launch. Their supply chain doesn't have infinite capacity (we see that with 5S shipping delays because they ran out of them).

 

Maybe the 5S is selling better than they expected, and those sales are replacing 5C sales (which wouldn't be a bad thing). After all, in prior years nobody would care too much if the year-old iPhone was doing well or not; it's a clear win that they now have two products that are considered 'fresh' and 'new' even though in many ways one really isn't (most people aren't techies, if it looks new, it is new, and with iOS 7, the user experience really is new anyway).

 

Etc.

 

On Apple and China: http://daringfireball.net/2013/10/apple_and_china

 

I think we'll really see what happens in China after the China Mobile deal. Right now they're not even getting distributed most places, and they're still doing well with people who can afford high-end phones.

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