SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

What’s Apple Up To?

Posted by Bob Warfield on April 3, 2008

The most successful brand in the world is in the news quite a lot lately.

The latest startling statistic just in from a leaked memo is that Apple has officially passed Wal-Mart to become the world’s largest music retailler, and not by just a little bit.  Apple apparently has cornered 19% of the market while Wal-mart clocks in with 15%.  Despite offering DRM-free music, Amazon is a distant #4 at 6%.  There’s 28% still up for grabs from no-names.

What this tells us is that people will pay for a convenient user experience, which is what iTunes boils down to.  Not only that, but they will shift their behaviour very rapidly if they like the experience.  More alarming I’m sure for the music industry was that according to the same research in thememo, 48% of US teens didn’t buy a signle CD in 2007 compared to 38% in 2006.  I can’t remember the last time I bought one personally, but it was sometime shortly after I got my first iPod and there was only 1 or 2 and then I quit buying them altogether.  Music has moved into the clouds and off of discs.  Most of the rest of digital activity will eventually follow suit.

Here’s another couple of wild statistics on Apple from Larry Dignan based on a Rubicon survey.  First, one third of iPhone users carry two phones.  That’s kind of a toe stumper to me.  I know one iPhone user with multiple phones and that’s because he’s in the wireless business and has to demo multiple handsets.  The other phones include a Blackberry, a Windows Mobile device, and a Motorola.  I find myself relaly wondering what the survey said as these statistics are often misleading.  It is such a hassle to have multiple phones that I find it hard to believe.  FWIW, the survey said the alternates were for basic voice calling and composing e-mail.  The iPhone was being used largely as an e-mail reader.  Again, FWIW, the most common use for mine is web access followed by e-mail followed by voice.

Of the many interesting notes in the article, another that caught my eye is that 28% of respondents say they often carry the iPhone instead of notebook PC’s.  Ditto here.  It’s another reason I want my data in the clouds, BTW.  I had my iPhone with me on my recent Hawaiian trip and never missed the notebook.  Interestingly, it will increasingly be an Apple notebook that you may choose to leave behind.  Apple now sells 21% of consumer PC’s.  Certainly here in Silicon Valley, it’s cool to have fruit on your machine.  I was just at the Googleplex yesterday for lunch and didn’t see anything but Apple notebooks other than the PC I used to self-service a visitor badge.

Next up on the Apple front (sorry, this is a laundry list, but that’s how it comes to me) is their push into digital lifestryle fitness.  They’ve filed a bunch of patents accoding to AppleInsider that relate to an iTunes-like software application, hardware-based heart rate and physiological sensors, a rewards tracker, and a component to facilitate synchronous group activities.  It will be cool to have these toys from Apple (I love the idea of my phone tracking fitness info that I can use to get healthier), but I am troubled by the patents.  It’s SOP I know to patent it all, but these ideas are far from new.  My old mentor Philippe Kahn has a company called FullPower that’s been working in this area for years and no doubt has their own patents.  I’ve even got a note going back 10 years in my list of startup ideas to look at the idea of a “Sports Phone” that has calorie tracking, an accelerometer/pedometer, and a heart rate monitor.  Apple is pretty late where prior art is concerned it seems to me.

But the really BIG news is the iPhone shortage and what it means.  Folks like Om Malik and others have discovered Apple stores are basically out of stock on iPhones.  Initial speculation is that this means the 3G phones are imminent and Apple wanted to minimize the chance for obsolete inventory so they sold out.  This is not a bad guess.  I know my iPhone will be upgraded shortly after the 3G is available, and my wife will find herself suddenly with a slightly used “original flavor” iPhone.  That trickledown of the used but perfectly usable iPhones would make it tough to justify buying a new one for a while.  It will also likely mean good news for AT&T as I can’t imagine taking a working iPhone and sticking it in a desk drawer the same way I’ve done every other time I upgraded phones.  They’re just too cool to ignore like that.

Here’s an odd thing though.  Nearly all (well actually ALL that I read about in blogs) Apple stores have no iPhones in stock, but AT&T Wireless does have them.  Granted, Apple doesn’t control AT&T who may have decided to keep right on selling rather than follow Apple’s plan (if it exists).  While Piper Jaffray views the shortage as an indication there is an 80% likelihood of an imminent new model, other explanations are possible.  For example, there could be a component shortage or manufacturing hiccup.  In that case, accounting rules benefit Apple if they ship available supplies to partners instead of their own stores.  A phone sitting in an Apple store is inventory.  A phone shipped to a partner is revenue.

But there is another possibility I’m surprised none of these analysts have mentioned.  There was plenty of discussion about the economics of Apple locking up the iPhone.  They make more money when a partner like AT&T sell the phone than when someone buys the phone and hacks it to another unpartnered service provider.  Clearly if you buy the phone at AT&T, they will insist you buy their service.  So how do you get a phone without service?  Why you get it from an Apple store.  At least until they ran out.

Keep your fingers crossed on the 3G, but I don’t see the likelihood as 80%!

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6 Responses to “What’s Apple Up To?”

  1. [...] Posts Are Custom Chips An Answer to the Multicore Crisis?What’s Apple Up To?When Do The SaaS Acquisition Games Begin? (A Primer on Cloud Computing Market Segments)Apple’s [...]

  2. schlafly said

    Bob, I happened to run into a well-placed source last night, and he claimed that the iPhone 2.0 will come out this summer with the exact same hardware as the original iPhone. Well, maybe he said that it would have some extra memory. But he said that all of the original iPhone customers will get firmware upgrades with all the new features.

    So I do not think that the delay could be because of some pending 3G hardware. Your latter theory is still possible.

  3. smoothspan said

    Roger, if your source is right, a lot of people will be disappointed. The 3G has been promised for a while. Apple has already done a firmware upgrade with more features and shipped an iPhone with more memory.

    We’ll see what turns up.

    Best,

    BW

  4. schlafly said

    Bob, I am just telling you what I heard. I hadn’t see the guy in about 15 years, and he barely recognized me. But he is a salesman-type, and before long he sounded like he was trying to sell me an iPhone. He does apps for the iPhone, and was excited about how that market was exploding. He did say that the iPhone hardware was not going to change, but perhaps he meant that the API would not change. Or maybe he doesn’t care about the 3G stuff. Or maybe he is part of a Steve Jobs disinformation campaign. I don’t know.

  5. charlie262 said

    Roger’s source, a well-known Scotts Valley saxophone player, did in fact say that the upgrade would be memory only. But who knows if this source is correct. iPhone would be a fun platform to target with a oool new app, IMHO. Got any ideas?

  6. smoothspan said

    LOL, Charlie!

    iPhone is a fascinating platform. I will wait for Flash support though. Flex is currently my favorite client platfcrm.

    Cheers,

    BW

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