AAPL - Apple Inc.

[Guest valueInv]

subsidy model going bye bye....

 

http://www.afterdawn.com/news/article.cfm/2013/12/11/at_t_smartphone_hardware_subsidies_are_likely_dead_into_the_future?utm_source=adeng_news&utm_medium=tickerbar&utm_campaign=englishNews

 

And ATT customers will go bye bye too  ;)

[Guest valueInv]

subsidy model going bye bye....

 

http://www.afterdawn.com/news/article.cfm/2013/12/11/at_t_smartphone_hardware_subsidies_are_likely_dead_into_the_future?utm_source=adeng_news&utm_medium=tickerbar&utm_campaign=englishNews

 

It's not really a subsidy, though, is it? There's no such thing as a free lunch. People pay the whole price, just over time, through higher monthly payments. It's not as if carriers have been generously paying for people's phones so far and now want to stop. They're just offering a form of financing that's rolled up into a single price.

 

I don't see why these would go away because competitors who don't stop would have a big advantage, and even if everybody does it at the same time cartel-like, everybody will just sell fewer devices because most people would rather pay nothing up-front and a bit more per month than a big chunk up-front and a bit less per month (facts show this -- a lot more people go for that than for expensive unlocked phones). Not to mention that without this form of financing, they won't be able to lock people into long-term contracts as effectively, which is a big downside when you look at how much each customer is worth to them and at the customer acquisition costs.

 

Maybe they'll do it differently, like by splitting the service payments from the device payments (offering low-cost financing that ends up being similar to the current model in practice), though.

 

In fact, I think the pressure is for that form of phone financing to get adopted in countries where it's not present. As soon as one carrier does it, it has a big advantage over competitors, and then they all have to do it. It's similar to how all auto makers offer financing for their products so you don't have to pay for it all up-front -- if they didn't, they'd sell fewer vehicles.

 

That's my reasoning, anyway.

 

You nailed it. Before, the "subsidy" was paid back by the customer by bundling it with the service. Now, they are splitting it out and calling it what it is - "financing".

 

Far from decreasing, financing is increasing - ATT's Next plan makes it easier to upgrade each year. T-mobile started this trend and is moving aggressively - You can get a 5s and a iPad mini for $0 down.  And T-mobile is winning customers.

 

In other words, this may well drive an increase in upgrades, not a decrease.

[krazeenyc]

subsidy model going bye bye....

 

http://www.afterdawn.com/news/article.cfm/2013/12/11/at_t_smartphone_hardware_subsidies_are_likely_dead_into_the_future?utm_source=adeng_news&utm_medium=tickerbar&utm_campaign=englishNews

 

Good luck to AT&T with that - I put their chances of success removing the subsidy and maintaining market share at 2% or less.  A $400 subsidy to retain a current customer is a pittance to retain a customer that pays them about $4400 in revenues over 2 years. If AT&T thinks that they'll get customers to stay without a subsidy they have another thing coming (VZ might have a shot as they have the best network currently).  As Sprint improves its network they'll be very very aggressive in pricing AND providing subsidies.

 

When my contract at AT&T ended last November, I was planning on leaving (AT&T after all kind of sucks).  I was paying for 3 line family plan - my smartphone with unlimited data (first 5gb not throttled), and 2 dumb phones at $9.99.  My monthly cost was about $120.00. 

 

Here is what AT&T did to keep my business for a 1 year commitment.

- Allow me subsidized upgrades on all 3 lines (including cross upgrading -- i.e. i can get an iPhone on a dumb phone line and move it back to the smartphone line).  These subsidies would not increase my commitment to 3 years, but the standard 2 years -- i.e. not ADDED to the 1 year). 

- they gave me  a $60 1 time upfront credit.

- they gave me a $30 PER month credit for 12 months.

- Free text messaging across the lines.

- Also agreed to change my voice plan to a plan no longer offered that's $20 cheaper and supplement it with 10,000 rollover minutes. 

 

Note: I had been an AT&T customer since 2006 and had previously never asked for a retention deal other than getting upgrades to my phone.

 

Given the importance of customer retention I doubt AT&T will be getting rid of subsidies (they might try to promote other options) any time soon -- and if they did they'd reinstate them pretty fast as they would see massive customer defections ( I believe the 2 year contract + subsidy is a huge part of AT&T and VZs success).  IF AT&T really did this, I'd expect that once Sprint's network improves, they'll follow the Softbank strategy and aggressively price AND subsidized and take market share directly from AT&T.

 

[Guest valueInv]

Apple reveals very little about its product design process but this gives you a look into how Apple thinks:

 

http://www.wired.com/design/2013/12/the-new-square-reader-a-look-at-how-gadget-guts-are-designed/#slideid-362751

 

This is a simple device, a smartphone is multiple orders of magnitude more complex. Square is the only other example I have seen of  company that puts that kind of care and innovation into its products.

 

I do product development for living and I can say that it really depends. The article talks about an ASIC and the feel of the swipe. There is nothing exceptional about that, I have done ASICs to reduce size and played with push buttons strengths to make the product feel better many times in the past.

 

What is exceptional is that a company has put a lot of work and attended to every detail.

 

The strength of a company does not rely on the amount of attention d details it puts but how it can, identify, quantify and prioritize those details. If the definition is not well done at the beginning the development team will languish for months without a clear understanding of what to accomplish. This is where the problem lies and where a good product manager comes into.

 

Both Apple and Square have done very well in that regard. Apple in particular is very good at figuring out what matter.

 

Also, the attention to details comes at the price of the amount of products that can be developped. A deep attention to detail will surely reduce the amount of products being developped since the engineering team will be overwhelmed by small details. This is the second part of the problem,  a rigourous selection of which products to develop needs to be done before any project starts.

Again, Apple does very well in this area. Square seems to be displaying the same qualities.

 

To conclude, you can look at two models of product creation. There is the organic model (example google) where there is a lot of ideas thrown and tested but a lot of them will fail. Just like nature works, the strongest ideas survive and the weakest die. The second model is a planned model (example apple) where there is an enourmous amount of thinking being done at which products to make  and how to make them.

 

Both models work, if you have managers that have a lot of vision and market insight than the planned model will be more suited. If you have managers that are more technically focused but have little vision on how everything will fit together than the organic model is preferred.

 

BeerBaron

 

And at which company has the organic model worked well?

[Guest valueInv]

The issue is not whether the S4 is better than iPhone 5S, it's really about when the rival product is "good enough" so that the iPhone is not such a big upgrade anymore. That is, if you like Android, I don't see why you'd get an iPhone over the Nexus, which is very comparable and $200 cheaper.

 

The way I see it, in the eyes of most users, GS4 is only superior to the iPhone 5S due to its screen size. If/When Apple fixes that, then they're going to be playing on an even footing which will hurt Samsung IMO.

 

True.  It's about whether Android products are "good enough" and how the price point differential affects Apple's unit sales and profits. 

 

But if we are going to be comparing iOS and Android in terms of "how ahead" they are, we really should be looking at Kit Kat on new hardware versus iOS on the latest hardware (iPhone 5S).  Also, there's really no way to say that Apple will be on even footing if/when Apple fixes the small screen problem because we don't know what Samsung's new phones will look like at that time.  Samsung will always have a COGS advantage because they are vertically integrated -- which means that Apple will never be on equal footing with Samsung at least in one important aspect: price.

 

As usual, you are not even close to reality. Apple has already shifted to 64 but not so much Kit Kat.

btw, the nexus 5 still doesn't have a fingerprint sensor and the camera still sucks. I could go on and on.

 

You probably could have done without putting that first sentence in.  I'm willing to "engage with you intellectually" if you learn some manners.

 

I don't consider support for 64-bit to be of much use at this time.  However, I do think it becomes more important on upcoming next gen devices because I still believe in convergence, where the phone will be the only computer you need (the Ubuntu Edge vision, if you will).  The fingerprint reader is pretty nice, but it's only one feature and doesn't make it a given that Apple is way ahead. 

 

In some respects, Apple is behind.  Small screen is absolutely a problem.  Tighter integration of Google Now into Kit Kat blows Apple out of the water for the very common use case of finding stuff on the fly on your phone.  iCloud integration still isn't very good compared to Android and Google services.

 

So, no, I wouldn't say Apple is far ahead.

 

Here's one more:

 

http://techcrunch.com/2013/12/11/google-android-device-manager-play-store/

 

Simple, basic functionality that has been available on iOS for years.

[beerbaron]

And at which company has the organic model worked well?

 

Well one could argue that society and evolution has worked well with an organic type of development.

 

Most companies fall into the organic model, very few are able to clearly define their frame of operation. Some are succesfull some were succesfull. Samsung, GE, GM 6 years ago, Microsoft, etc...

 

As an engineer I tend more toward the focused model of product development but if you ask a sales person he'll tell you that a sale is a sale. So there is probably a professionnal bias there.

 

BeerBaron

[Guest valueInv]

And at which company has the organic model worked well?

 

Well one could argue that society and evolution has worked well with an organic type of development.

What worked for society and evolution does not necessarily apply to companies.

 

Most companies fall into the organic model, very few are able to clearly define their frame of operation. Some are succesfull some were succesfull. Samsung, GE, GM 6 years ago, Microsoft, etc...

 

Microsoft, Samsung, Google, etc. rely on a fast follower strategy. They have managed to produce little in form of successful product innovation (with the exception of Google in the early years). Remember embrace and extend?

 

As an engineer I tend more toward the focused model of product development but if you ask a sales person he'll tell you that a sale is a sale. So there is probably a professionnal bias there.

 

BeerBaron

 

I used to be an engineer too. The whole organic model is quite the rage these days - Agile ,Scrum, Lean Startup, etc. Remains to be seen if this is just a fad. Eric Reis's own company (IMVU),  on which Lean Startup is based on, hasn't made much of a dent despite his success in selling books and consulting.

[gfp]

iPhone market share in China has increased -

 

http://www.counterpointresearch.com/top-10-handsets-in-october

[Guest valueInv]

iPhone market share in China has increased -

 

http://www.counterpointresearch.com/top-10-handsets-in-october

 

Ssshhhhhhh, you'll give Wellmont heartburn...... ;D

[Palantir]

^I thought market share doesn't matter when it goes down, but when it goes up, you celebrate. #gofigure

[Liberty]

^I thought market share doesn't matter when it goes down, but when it goes up, you celebrate. #gofigure

 

I think the other variable is how you gain or lose market share.

 

If Apple had gained market share by making cheaper, less profitable phones, that would be different than gaining market share with the same, very profitable higher-end phones.

 

If they lose market share because other people make great high-quality phones that compete in the most profitable segment of the market, that's different than losing market share because the low-end is expanding and more people are getting crappy phones that are called 'smartphones' but aren't really competing with the iPhone (similar to how many cheap tablets aren't really competing with the iPad, but they all count in the same market share figures).

 

In this case, it looks like they gained market share despite huge growth at the low-end and without having reduced their prices/margins. That's the best of both worlds.

[Guest wellmont]

i am going to wait to celebrate the china news until the "big boys" weigh in with their guesstimates. #8 on this list gives me some pause....one thing I do and I recommend this to all is read the fine print. but if the big boys do confirm this, as a fellow stockholder, boy will I celebrate.

 

Top 10 smartphone list of October 2013

Rank Brand Model Category

1 Apple iPhone 5S smartphone

2 Apple iPhone 5 smartphone

3 Samsung Galaxy S4 smartphone

4 Apple iPhone 5C smartphone

5 Samsung Note III smartphone

6 Samsung Galaxy S III smartphone

7 Samsung Galaxy S 4 mini smartphone

8 Nokia 105 feature phone

9 Samsung Galaxy S III mini smartphone

10 Nokia Asha 501 feature phone

[Guest valueInv]

^I thought market share doesn't matter when it goes down, but when it goes up, you celebrate. #gofigure

 

Firstly, no one is celebrating anything. Apple is a seasonal business with a big chunk of its sales coming in the last and the first quarters of

each year. Android is less seasonal because of a constant stream of device releases through the year. It is idiotic to compare Apple's trough

quarters to Android and claim Android has 80% marketshare. My posts are intended to show this ridiculousness.

 

Marketshare is important, but you have to segment the market properly. Don't include segments where Apple does not compete and say Apple's share in declining. Yeah, as Google ramps up Glass, Apple's share in wearables is also declining  ;)

 

Let the numbers come out in Jan, I'll decide if there is anything to celebrate. 

[Guest valueInv]

The issue is not whether the S4 is better than iPhone 5S, it's really about when the rival product is "good enough" so that the iPhone is not such a big upgrade anymore. That is, if you like Android, I don't see why you'd get an iPhone over the Nexus, which is very comparable and $200 cheaper.

 

The way I see it, in the eyes of most users, GS4 is only superior to the iPhone 5S due to its screen size. If/When Apple fixes that, then they're going to be playing on an even footing which will hurt Samsung IMO.

 

True.  It's about whether Android products are "good enough" and how the price point differential affects Apple's unit sales and profits. 

 

But if we are going to be comparing iOS and Android in terms of "how ahead" they are, we really should be looking at Kit Kat on new hardware versus iOS on the latest hardware (iPhone 5S).  Also, there's really no way to say that Apple will be on even footing if/when Apple fixes the small screen problem because we don't know what Samsung's new phones will look like at that time.  Samsung will always have a COGS advantage because they are vertically integrated -- which means that Apple will never be on equal footing with Samsung at least in one important aspect: price.

 

As usual, you are not even close to reality. Apple has already shifted to 64 but not so much Kit Kat.

btw, the nexus 5 still doesn't have a fingerprint sensor and the camera still sucks. I could go on and on.

 

You probably could have done without putting that first sentence in.  I'm willing to "engage with you intellectually" if you learn some manners.

 

I don't consider support for 64-bit to be of much use at this time.  However, I do think it becomes more important on upcoming next gen devices because I still believe in convergence, where the phone will be the only computer you need (the Ubuntu Edge vision, if you will).  The fingerprint reader is pretty nice, but it's only one feature and doesn't make it a given that Apple is way ahead. 

 

In some respects, Apple is behind.  Small screen is absolutely a problem.  Tighter integration of Google Now into Kit Kat blows Apple out of the water for the very common use case of finding stuff on the fly on your phone.  iCloud integration still isn't very good compared to Android and Google services.

 

So, no, I wouldn't say Apple is far ahead.

 

Here's one more:

 

http://techcrunch.com/2013/12/11/google-android-device-manager-play-store/

 

Simple, basic functionality that has been available on iOS for years.

 

One more simple, basic feature not in Android:

 

https://www.eff.org/deeplinks/2013/12/google-removes-vital-privacy-features-android-shortly-after-adding-them

 

You want privacy, you want iOS.

[Guest valueInv]

The issue is not whether the S4 is better than iPhone 5S, it's really about when the rival product is "good enough" so that the iPhone is not such a big upgrade anymore. That is, if you like Android, I don't see why you'd get an iPhone over the Nexus, which is very comparable and $200 cheaper.

 

The way I see it, in the eyes of most users, GS4 is only superior to the iPhone 5S due to its screen size. If/When Apple fixes that, then they're going to be playing on an even footing which will hurt Samsung IMO.

 

True.  It's about whether Android products are "good enough" and how the price point differential affects Apple's unit sales and profits. 

 

But if we are going to be comparing iOS and Android in terms of "how ahead" they are, we really should be looking at Kit Kat on new hardware versus iOS on the latest hardware (iPhone 5S).  Also, there's really no way to say that Apple will be on even footing if/when Apple fixes the small screen problem because we don't know what Samsung's new phones will look like at that time.  Samsung will always have a COGS advantage because they are vertically integrated -- which means that Apple will never be on equal footing with Samsung at least in one important aspect: price.

 

As usual, you are not even close to reality. Apple has already shifted to 64 but not so much Kit Kat.

btw, the nexus 5 still doesn't have a fingerprint sensor and the camera still sucks. I could go on and on.

 

You probably could have done without putting that first sentence in.  I'm willing to "engage with you intellectually" if you learn some manners.

 

I don't consider support for 64-bit to be of much use at this time.  However, I do think it becomes more important on upcoming next gen devices because I still believe in convergence, where the phone will be the only computer you need (the Ubuntu Edge vision, if you will).  The fingerprint reader is pretty nice, but it's only one feature and doesn't make it a given that Apple is way ahead. 

 

In some respects, Apple is behind.  Small screen is absolutely a problem.  Tighter integration of Google Now into Kit Kat blows Apple out of the water for the very common use case of finding stuff on the fly on your phone.  iCloud integration still isn't very good compared to Android and Google services.

 

So, no, I wouldn't say Apple is far ahead.

 

Like I've said before, there is a difference between reading articles on the Internet and being in the trenches:

 

http://blog.hubspot.com/uattr/qualcomm-apple-64-bit-chip-hit-us-in-gut

 

A big difference.

[Guest valueInv]

5s Vs 5c:

 

http://ben-evans.com/benedictevans/2013/12/8/who-buys-the-iphone-5c

[Guest valueInv]

subsidy model going bye bye....

 

http://www.afterdawn.com/news/article.cfm/2013/12/11/at_t_smartphone_hardware_subsidies_are_likely_dead_into_the_future?utm_source=adeng_news&utm_medium=tickerbar&utm_campaign=englishNews

 

It's not really a subsidy, though, is it? There's no such thing as a free lunch. People pay the whole price, just over time, through higher monthly payments. It's not as if carriers have been generously paying for people's phones so far and now want to stop. They're just offering a form of financing that's rolled up into a single price.

 

I don't see why these would go away because competitors who don't stop would have a big advantage, and even if everybody does it at the same time cartel-like, everybody will just sell fewer devices because most people would rather pay nothing up-front and a bit more per month than a big chunk up-front and a bit less per month (facts show this -- a lot more people go for that than for expensive unlocked phones). Not to mention that without this form of financing, they won't be able to lock people into long-term contracts as effectively, which is a big downside when you look at how much each customer is worth to them and at the customer acquisition costs.

 

Maybe they'll do it differently, like by splitting the service payments from the device payments (offering low-cost financing that ends up being similar to the current model in practice), though.

 

In fact, I think the pressure is for that form of phone financing to get adopted in countries where it's not present. As soon as one carrier does it, it has a big advantage over competitors, and then they all have to do it. It's similar to how all auto makers offer financing for their products so you don't have to pay for it all up-front -- if they didn't, they'd sell fewer vehicles.

 

That's my reasoning, anyway.

 

You nailed it. Before, the "subsidy" was paid back by the customer by bundling it with the service. Now, they are splitting it out and calling it what it is - "financing".

 

Far from decreasing, financing is increasing - ATT's Next plan makes it easier to upgrade each year. T-mobile started this trend and is moving aggressively - You can get a 5s and a iPad mini for $0 down.  And T-mobile is winning customers.

 

In other words, this may well drive an increase in upgrades, not a decrease.

 

More on this:

 

http://www.mondaynote.com/2013/12/15/shameless-carriers/

 

On decreasing subsidy:

 

You see a lot of retailers like Walmart and others discount iPhones. For example, Walmart is selling the 5c for $27. There are three possibilities:

 

1, Apple is offering Walmart a discount and Walmart keeps its margins.

2, Apple offers no discount, Walmart is losing a lot of money offering the discount itself

3, The operators offer a kickback to Walmart for selling a contract, which is then passed on to the customer as a discount i.e. a true subsidy

 

Take your guess  ;)

[fareastwarriors]

http://www.nytimes.com/2013/12/19/business/international/china-mobile-says-it-is-still-in-talks-with-apple.html?ref=international&_r=0

 

China Mobile Says It Is Still in Talks With Apple

[Guest valueInv]

http://www.nytimes.com/2013/12/19/business/international/china-mobile-says-it-is-still-in-talks-with-apple.html?ref=international&_r=0

 

China Mobile Says It Is Still in Talks With Apple

 

Something tells me Apple has a better negotiating position than people think:

 

http://www.bloomberg.com/news/2013-12-19/china-billionaires-set-to-shake-up-wireless-market-tech.html

[Liberty]

China Mobile has yet to reach agreement with Apple, but good news deserves to be waited for, and we expect to release related cooperation information soon," said Xi Guohua, chairman of China Mobile, asking customers to have more patience.

 

http://www.ibtimes.com/apple-inc-aapl-china-mobile-chl-deal-still-being-negotiated-formal-announcement-week-unlikely

[Guest valueInv]

Some history:

 

http://www.theatlantic.com/technology/archive/2013/12/the-day-google-had-to-start-over-on-android/282479/

[Guest valueInv]

And we have a hit:

 

http://www.ibtimes.com/apple-iphone-5s-commercial-misunderstood-will-hit-you-right-feels-video-1512502

[Guest valueInv]

http://www.nytimes.com/2013/12/19/business/international/china-mobile-says-it-is-still-in-talks-with-apple.html?ref=international&_r=0

 

China Mobile Says It Is Still in Talks With Apple

 

Confirmed, goes on sale on Jan 17th.

 

Btw, pay particular attention to the last paragraph of the linked article.

[Liberty]

Excellent news, even if expected. I like that they mention that it's a "multi-year agreement".

 

One small thing to take into account: Only the 5s and 5c will be sold on China Mobile at first (because of network compatibility issues, afaik).

 

Next year when the iPhone 6 comes out, they'll likely have at least 3 models available (one of the 5's available at a lower price point), which should help even better with segmentation.

 

But just getting the iPhone out in China Mobile's stores all around the country and pushed to its 760 million customers should help a lot. 2014 should be quite interesting for Apple.

 

"China Mobile plans to sell 220m smartphones in 2014 (including 100m on LTE), versus 150m in 2013"

[krazeenyc]

subsidy model going bye bye....

 

http://www.afterdawn.com/news/article.cfm/2013/12/11/at_t_smartphone_hardware_subsidies_are_likely_dead_into_the_future?utm_source=adeng_news&utm_medium=tickerbar&utm_campaign=englishNews

 

It's not really a subsidy, though, is it? There's no such thing as a free lunch. People pay the whole price, just over time, through higher monthly payments. It's not as if carriers have been generously paying for people's phones so far and now want to stop. They're just offering a form of financing that's rolled up into a single price.

 

I don't see why these would go away because competitors who don't stop would have a big advantage, and even if everybody does it at the same time cartel-like, everybody will just sell fewer devices because most people would rather pay nothing up-front and a bit more per month than a big chunk up-front and a bit less per month (facts show this -- a lot more people go for that than for expensive unlocked phones). Not to mention that without this form of financing, they won't be able to lock people into long-term contracts as effectively, which is a big downside when you look at how much each customer is worth to them and at the customer acquisition costs.

 

Maybe they'll do it differently, like by splitting the service payments from the device payments (offering low-cost financing that ends up being similar to the current model in practice), though.

 

In fact, I think the pressure is for that form of phone financing to get adopted in countries where it's not present. As soon as one carrier does it, it has a big advantage over competitors, and then they all have to do it. It's similar to how all auto makers offer financing for their products so you don't have to pay for it all up-front -- if they didn't, they'd sell fewer vehicles.

 

That's my reasoning, anyway.

 

You nailed it. Before, the "subsidy" was paid back by the customer by bundling it with the service. Now, they are splitting it out and calling it what it is - "financing".

 

Far from decreasing, financing is increasing - ATT's Next plan makes it easier to upgrade each year. T-mobile started this trend and is moving aggressively - You can get a 5s and a iPad mini for $0 down.  And T-mobile is winning customers.

 

In other words, this may well drive an increase in upgrades, not a decrease.

 

More on this:

 

http://www.mondaynote.com/2013/12/15/shameless-carriers/

 

On decreasing subsidy:

 

You see a lot of retailers like Walmart and others discount iPhones. For example, Walmart is selling the 5c for $27. There are three possibilities:

 

1, Apple is offering Walmart a discount and Walmart keeps its margins.

2, Apple offers no discount, Walmart is losing a lot of money offering the discount itself

3, The operators offer a kickback to Walmart for selling a contract, which is then passed on to the customer as a discount i.e. a true subsidy

 

Take your guess  ;)

 

You saw what happened when NTT DOCOMO caved and started carrying the iPHONE. Price war. The big key is that Apple iPhone customers are the carriers' best customers. I  wonder if that'll happen in China. (obviously not to the same extent as the iPhone is super popular in Japan)