Sunday, July 31, 2011

Apple Profit Share Revisited: Phone Revenue Rocks

As previously discussed (regarding both notebooks and smartphones), Apple's profit share exceeds its market share. This is a result of choosing to compete in market segments where it can command a premium, and ceding undesirable share to commodity vendors.

Recently, asymco's Horace Dediu reported on vendors' profit share in the mobile phone market. According to the article, Apple holds 2/3 of the profit among carriers with substantial market share. The asymco graphs drive this home nicely, with Apple's widening wedge of profit share squeezing everyone else into a shrinking slice of the available profit. The good news for these vendors is that in a growing market, they can still theoretically make a profit.

Of course, Motorola – whose leadership said that making cell phones was hard, and that Apple was not going to succeed as it imagined – has been pushed pretty much off the bottom of the graph since then. And the history of other handset manufacturers who tried to use Microsoft's platform in phones hasn't been much better. Apple's success hasn't been what Apple said it was hoping to achieve – 1% of the cell phone market – it's been much greater. There are complaints to be brought against Apple's products, to be sure – and these will increase in volume as Apple's success grows – but so long as Apple's products are so attractive to users we should expect to see

Friday, July 29, 2011

And You Thought Using MSFT Products Was Bad Enough Already

You might have thought that Microsoft's customers had enough to worry about with bloatware, viruses, undocumented file formats, vendor-lock-in, unexpected network activity of word processors (for example, MS-Word opens network connections to phone about the LAN to see what license numbers other copies of MS-Word are using), and other irritations from the products themselves. New Aptiquant research suggests (as discussed on CNN) that there may be a problem with Microsoft's customers themselves: its Internet Explorer customers are reportedly also less intelligent than average.

Apparently Microsoft has had trouble getting customers to upgrade off broken and obsolete browsers it no longer supports, suggesting that there may be something to the thickness of Explorer users. Of course, with Microsoft seemingly unable to keep its own systems patched, maybe the issue is something one catches from the products ....

Monday, July 4, 2011

iPad : Tablet :: iPod : MP3 Player

Another tablet launches, and hit-hungry web "journalists" ask breathlessly whether the iPad is finally done for. According to AllThingsD, the newest HP tablet uses an LG display akin to that of the first-generation iPad and lacks a GPS, allowing it to trim cost to $306.65 for the version it retails for $499. Electronista reckons that this puts HP's current product's parts costs (not including marketing, assembly, licensing, etc.) at $17 less than that of the iPad2. The device is a bit thicker, lacks the breadth of available applications, doesn't support HD video capture, hasn't got a rear camera, and the top user review at cnet reports the device "freezes often [but] otherwise [has a] nice interface". But the most damning indictment of the new tablet isn't something one can cure with a product refresh: it isn't an iPad. John Paczkowski of AllThingsD went beyond JadedConsumer's previous comparisons between Apple's iPad strategy and its prior success with the iPod in declaring that Apple has already succeeded in redefining the tablet product category to the point that consumers want iPads (instead of "tablets") in the same way they began shopping for iPods (instead of "MP3 players").

If Apple's steady state in the iPad market – ahem, sorry, the tablet market – comes to rest north of 70% as it did with the iPod mark– so sorry, I meant the music player market ... then Apple will be sitting pretty on a high-margin and huge-growing consumer segment with international appeal. And Apple's tech is uniquely suited to meeting international demand by supporting international needs of developers. The things that made Apple's iPhone easy to sell internationally make its WiFi and 3G-capable tablet-market-redefining iPads a cinch for international sales. DisplaySearch's forecast suggests Apple's touch screen supply control will leave it in control of the tablet market through 2011. Control of the tablet market didn't mean much a few years ago, but since the launch of the iPad the segment is looking to eclipse notebook computers in worldwide unit volume, according to UK researcher Canalys – with every two tablets costing notebook makers a unit of lost sales. So strong is this trend that Gartner has lowered PC growth forecasts based on tablet cannibalization. Counting tablets as PCs as Canalys does, Apple has grown the market and has become the fourth-largest PC vendor by worldwide unit volume.

I've got a friend who's never synched either of her family's iPads, and a few months ago I sat agape wondering what century she lived in. Yet, with the iCloud announcement, Apple has signaled the view that she isn't expected to, need not be inconvenienced to do so, and should never have to bother to do so except wirelessly from the device itself. Between Apple's online application store, cloud services, and computer-free device synching, Apple stands to improve the stickiness of its products and the value they offer customers in the form of convenience.

Apple is owning this market.