Just this week, the estimates came out about how well Apple did in January. According to Piper Jaffray, which has been frequently known to get their figures wrong, Apple is on track to sell between 2 million and 2.2 million Macs for the first three months of 2009, compared to 2.3 million for the same period last year.
Now in this shaky economic climate, I suppose you could say that’s pretty good news. Other PC makers should do as well, and, despite the first drop in Mac sales in quite a while, if that sales rate sustains itself, Apple will probably earn a decent profit. All well and good.
But can you believe Piper Jaffray?
Well, according to the NPD Group, which I regard as having a pretty good degree of credibility, Apple’s retail sells fell 6% in January.
However, it seems that Apple is notorious for exceeding the expectations of analysts in their quarterly statements. “Beat the Street” is a common refrain repeated, even if the stock market doesn’t always approve of the actual numbers.
In any case, you have to wonder just where Piper Jaffray is doing its surveys to come up with its numbers. Do they examine the sales at Apple’s own retail chain? Well, not exactly, since Apple doesn’t just hand out that information. What about NPD? Well, according to analyst Stephen Baker, whose been a guest on The Tech Night Owl LIVE, “This is the first time in a long time that Apple has underperformed the market.”
All right, folks, I’m not the sort of person to require that the news about Apple always be favorable. With sales tanking in nearly every market segment, except, perhaps, for McDonalds and Wal-Mart, I suppose there’s nothing particularly unusual about Apple’s current predicament. Things could even get worse, since there’s no telling whether the current recession has bottomed out yet or has a ways to go.
Certainly when just paying for the necessities, such as housing, utilities and food, may be difficult, it’s not reasonable to expect people would still be as willing to shell out upwards of $1,000 to buy a new Mac. That they are still doing so in reasonable numbers is surely a tribute to Apple’s stellar success in convincing customers that the Windows way is the wrong way, and that they have a better answer to personal computing for regular people.
It’s also not the first time Apple has encountered a sales downturn. More to the point, even if sales at the end of the quarter are still below last year’s levels, it doesn’t mean that profits will turn to losses. Apple, courtesy of their COO Tim Cook, maintains extremely tight controls on inventory. If sales of particular products aren’t going as well as expected, they will simply turn down the spigots so they aren’t saddled with lots of unsold product. That means there’s still a possibility for reasonable profits when the financials are released.
Even if profits are near-nonexistent, don’t believe anyone who says that Apple is poised to return to the dark days of the mid-1990s, where red ink nearly did the company in. They have over $28 billion in the bank (and we hope it’s a bank that’s still solvent), and they could certainly access those funds if necessary to cover a deficit. Indeed, they could survive for quite some time in this fashion without having to go into debt.
Indeed, Apple remains debt free, and in this particular questionable economic climate, that’s a great place to be. More to the point, they have a market cap that’s way higher than all the American auto companies combined. You could certainly call Apple prosperous.
In any case, the next question is whether Apple is just going to wait out the financial downturn or wow us soon with more trend-setting products in an attempt to fuel sales. This takes us to an area that’s way beyond my pay grade. I couldn’t begin to suggest whether a major media event with some cutting-edge gear would be sufficient to improve sales way beyond where they’d be otherwise.
My suspicion, however, is that Apple isn’t going to cut back on new product introductions, despite the situation. Steve Jobs has said, in the past, that the company will always innovate out of recessions, as they did several years back in a lesser economic downturn. There’s little doubt they’re going to do so this time too.
The only issue is, of course, when the next new product announcement will come, and what sort of products will be presented. It could simply come in the form of a basic press release, which might suit for a simple iMac or Mac mini refresh. But with Apple, I’m not about to do any guessing.
But I will continue to explore those sales reports, even if they don’t necessarily reflect the entire picture. You’ll just have to wait till April for the answers.
- 2014 — The Year the Sky Didn’t Fall for Apple At the start of 2014, even the most diehard Apple fanatic might have wondered about the future prospects of their favorite fruit company. Sales didn't always meet Wall Street projections, and profits were flattening. The stock price was way down from historic highs. To no surprise, some members of the mainstream media were calling for CEO Tim Cook to take a hike. Could it be that Steve Jobs' handpicked successor was a monumental screw up, or was there a long-term plan in place that would set things right before long? Questions, questions. Many of the particulars are ably recorded in a no-holds barred editorial from Daniel Eran Dilger, a frequent guest on The Tech Night Owl LIVE, over at AppleInsider. So I will be brief about some of the details. Now understand that the perception that Apple was on the rocks was largely manufactured. When Steve Jobs introduced iterative upgrades to Apple gear, that was part of the standard upgrade cycle. When Tim Cook did the same, there must be something terribly wrong with Apple's mojo, and the company clearly lost its power to innovate. After all, Cook was the supply chain expert. What right did he have to operate a company known for its amazing innovation? You'd think that Apple was supposed to upend a market every year. The critics forget the years that passed between the first iPod, the first iPhone and the first iPad. Miracles don't come every day, but where were the trendsetting products from Tim Cook's Apple? This didn't stop iPhone sales from climbing, at a time when Samsung's sales began to falter. The claim that Samsung had it all over Apple when it came to high sales and meeting the needs of a variety of customers was shown to be shaky. Yes, Samsung still sold loads of mobile handsets, but far too many were cheap, with little profit. While Apple continued to make huge profits from iPhones, Samsung's margins continued to shrink. Tepid response to the latest Galaxy series didn't help. Apple moved far more iPhones. Amid rising sales, Apple's first maneuvers for 2014 were financial. Stock buybacks and the seven-to-one stock split pleased Wall Street. But was Apple just stalling, avoiding the question of what innovative products were in the pipeline? Yes, Apple made promises, but when were they going to deliver? WWDC came, as usual, in June. The critics said it was all about the software, but Apple added an amazing number of new features to iOS and OS X. The bill of particulars was far larger than what Google and Microsoft were promising. True, some suggested Apple bit off a little too much this time, but the bugs are being vanquished, and the end result presents many new opportunities for developers to make a profit and to benefit customers. For regular people, the real significant event came in September, with the introduction of the iPhone 6 and the iPhone 6 Plus, a phablet with a 5.5-inch display. The critics had been long clamoring for Apple to enter the larger smartphone space, but Apple, as usual, took its sweet time about developing the right product. Certainly the public embraced the new gear, with record sales the very first weekend and chronic shortages through most of the holiday season. But some people realized that the romantic ideal of the larger smartphone wasn't quite so compelling after you spent a little time with one. One-handed operation meant something, and the larger handsets could be difficult to fit in a smaller pocket or purse. And don't forget Apple Watch. An early production model was demonstrated, and delivery was promised in early 2015. October brought new iPads, but the flagship model, the iPad Air 2, thinner than its predecessor, was the lone compelling upgrade. The iPad mini 3 was little different from its predecessor aside from Touch ID, and it still cost $100 more. It wasn't such a great deal, and the jury is out how well tablets sold this holiday season. But the iPad Air 2 is, as my friends across the Atlantic are apt to say, a marvelous piece of kit. It will be hard for my wife to give up the one she is using when the Apple editorial loan expires in February. The other product intro in October, the iMac 5K, was simply stunning, particularly the picture and the technology that makes it happen for a price that even Dell couldn't match. Last I checked, Dell's 5K display is just about the same price as the 5K iMac, but Apple gives you the computer as part of the package. None of this means everything went perfect for Apple. Don't forget the missteps — or alleged missteps — depending on your point of view. So those celebrities whose nude photos, stored in iCloud, were hacked and circulated online have only themselves to blame for poor password choices. Why did they have those pictures there in the first place? But the iOS 8.0.1 update was the worst sort of failure, fixing most iPhones, but causing some to lose their cellular connections and Touch ID capability. Apple pulled the update in little over an hour, and released a fixed version the very next day, but the publicity fallout continues. Yes, Microsoft has done worse, far worse, but this is Apple. Please don't get me started about iTunes 12. The complaints haven't been stilled, and I wonder whether Apple needs to get back to the drawing board to sort things out. Some alleged scandals were just nonsense. An iPhone 6 Plus was no more prone to bending than other large mobile handsets. No, Apple didn't suddenly out of the blue sneak a security update onto Macs with OS X Mountain Lion, Mavericks and Yosemite. That particular update came using the App Store update mechanism, the successor to Software Update. Where there's an automatic install option, as there is in Yosemite, you can switch it off. Besides, the NTP security flaw, impacting the time syncing feature of OS X, Unix and even Linux distributions, could allow a remote attacker to gain control of your computer. Even the U.S. Department of Homeland Security got in the act to report the danger, so was it wrong for Apple to protect you in a way that did no harm? For 2015, we know the Apple Watch is coming, but there is no consistency on how well it'll do. And what about the fate of Apple TV? Is there an Apple TV set on the horizon? An iPad Pro, a version with a display that's 12 inches or more? Is there something out of the blue in store? And what will Apple do to flesh out the features for iOS 9 and OS X 10.11? And I will not speculate on the code name for the next Mac OS.
- Apple and Product Saturation Once upon a time, it was a very rare thing to see anyone with an Apple product. Consider all those years where the Mac barely made a dent in the PC business, and many people who did use Macs were often regarded as being just a little weird. Well, maybe I just took it personally, but it was a lonely world out there when I visited friends and family and found computers that, to me, were more than a little alien. Now even though Apple owns the premium PC market nowadays, and the overall market has seen better days, it appears that there’s still plenty of room for the Mac to grow. Apple clearly isn’t following Microsoft’s playbook — to merge desktop and mobile platforms — and there still appear to be a fair number of people for whom a tablet is not a PC replacement. In other words, there are still untapped markets for Apple to sell more Macs, at least so long as PC demand remains fairly decent. But if it continues to fall at the current rate, Apple will be playing in a smaller and smaller market. In the mobile universe, smartphones and tablets have grown really fast. It’s hard to find anyone nowadays who doesn’t have one or the other — or both. Even folks at the low end of the income scale can get a smartphone free or at a really low price with a fairly cheap wireless plan. Tablets can be had for $50-$100, although I wouldn’t say much about the quality. And I suppose if a smartphone does a decent job of handling phone calls and texting, that may be all that some people actually need. Regardless, smartphones dominate, so it seems that fewer and fewer people don’t have one. This means that the handset makers, and that includes Apple and Samsung, are fighting to make new sales in a smaller and smaller pool of customers who don’t have one of these gadgets. In the U.S., the wireless carriers have made sales a little more difficult by lengthening the time before they allow early upgrades. Well, that’s one excuse Apple CEO Tim Cook gave for fewer iPhone sales. But he ignored the fact that the largest wireless carriers were also busy advertising extra-cost schemes where you could upgrade your mobile handsets more frequently. What this means, though, is that a large portion of customers for current smartphones are upgraders. It’s not their first purchase, so sales growth is being reduced. If the upgrade cycle lengthens, as it has with the PC, it also hurts sales, and it’s clear Apple isn’t the only tech company to see reduced growth. Apple, however, shows no inkling of moving down-market. The iPhone 5c, which may or may not have been successful — depending on whom you ask — was simply a repackaging of the previous year’s technology for $100 less. Apple clearly intends to play in the most profitable segments, as they’ve done with Macs. So will Apple have to accept growing sales at maybe a few percent a year, which is typical for a large company serving a saturated market, or are there different ways to go? One way is to succeed in emerging markets where a growing middle class will aspire to more expensive gear. This is the logic behind Apple’s expansion into China. If Apple’s efforts to gain traction in China, India and elsewhere succeed, sales may grow at a faster rate, but probably nowhere near the levels achieved in the early days of the iPhone and iPad. So what is Apple to do? Well, the financial community demands new products in new categories, and Tim Cook keeps claiming they are planning just that. In fact, he’s said it again and again, and I can well understand why some media pundits might just be a tad skeptical. But it’s also true that the refreshed Mac Pro clearly demonstrates that Apple still has it in them to innovate in surprising ways, although that product obviously didn’t create a new product category. So if the pressure was high in 2013, it is far higher in 2014, particularly after releasing financials and guidance that the investment community regards as underwhelming. But what are the new product categories that Apple plans to enter? Cook says more than one, so where does Apple go next? Clearly Apple won’t tell you, although it’s possible, I suppose, for increased pressures, particularly from the investment community, to force disclosure of at least a few hints. Up till now, Apple hasn’t listened to Wall Street because, frankly, financial analysts have never understood the company. That may not change now, but if the hopes and dreams for new product initiatives don’t play out by spring or summer, increasing skepticism from the media and Wall Street could force a different response. But there’s clearly precedent. Remember that the original iPhone was announced months before it was actually released. There was no product to make obsolete, of course, and it’s also true that FCC testing would have revealed its existence before long. Certainly one excuse Apple gives to withhold information on a new product is how it would impact sales of existing models. If those existing products are made by other companies, of course, Apple could still stage an early preview, build demand, and, in turn, possibly kill sales of the competition as customers wait for Apple’s solution. This could play out nicely with a smartwatch, the rumored iWatch. If Apple plans a connected TV set, a surprise demonstration might really spook the rest of the industry, particularly since most competing products were already presented at the CES earlier this month. Sure, Apple usually doesn’t spill the beans on future products, except, of course, when they do. Maybe it’s time for Cook to rethink the strategy, not just to satisfy Wall Street but to tempt millions of potential customers. There’s a lot to be said for building demand early, particularly if Apple has a real hit or two in the wings.
- Apple, the WWDC and the Wacky Run-up After quite a run, and ahead of a 7-to-1 stock split, Apple's stock price had declined slightly before the WWDC keynote on Monday. I suppose this was to be expected. The event was presaged with optimism, skepticism and silly claims about what the company must do to survive. Some weeks back, for example, one online pundit who doesn't deserve to be named or linked suggested that the company would be toast if the iWatch wasn't released in 60 days. When that date passed, and Apple was still here, it merely represented yet another example of commentators lying through their teeth or making downright foolish claims to generate online traffic. Having a respect for facts and logic played second fiddle. There was also the "Apple must" meme, that the WWDC keynote must be filled with new hardware and new product categories, even though it was ostensibly for developers. Thus, we know there would be news about iOS 8 and OS 10.10 because Apple said as much. But expectations that there would be new hardware weren't met. There was no Apple TV or iWatch demonstration for developers, but the people who build apps for Apple gear still got plenty to consider, including a new simplified programming language known as Swift. But OS 10 Yosemite? What about that Looney Toons cartoon character? Clearly Apple isn't taking that into consideration with OS 10.10, which will sport the rumored flatter look and feel, reminiscent of iOS. The improved transparency effects and cleaner text and windows seem interesting enough if a new OS X skin appeals to you. While Mavericks was heavily laden with hardware improvements to use RAM and power more efficiently, Yosemite is heavily disposed towards improvements for Mac users. Front and center is Continuity, which greatly simplifies the passage from Mac to iPhone to iPad, and back again. Email and messages can begin on one, and be completed on another. You can also use your Mac or, with iOS 8, your iPad to make and receive phone calls on your iPhone. Of course your iPhone has to be active on the same Wi-Fi network for this Handoff process to work. SMS messaging is also supported; again with a networked iPhone. You can also use your iPhone to set up an Instant Hotspot, though that would appear to require support from your wireless carrier, as Apple indicates on their site. Clearly Apple's critics will complain that Continuity is yet another way for Apple to rope you in to depending on their ecosystem. But there's nothing wrong with that. Other companies and their sycophants in the tech media are probably jealous. So iCloud becomes iCloud Drive, since you can now use it as an online repository for all your files, and even set up a traditional file/folder hierarchy that can be accessed on all your Apple gear, including your iPhone and iPad, along with a Windows PC. In a sense, Apple is going after Dropbox and the cloud storage systems from Microsoft and Google to set up seamless ways for you to store and easily transfer larger files. Mail for Yosemite, with the promise of greater speed and efficiency, has a new feature, dubbed Mail Drop, which lets you use your iCloud Drive as an intermediary for file attachments of up to 5GB. This will help you avoid the usual problem of sending large files to a recipient. Email services traditionally limit attachments to less than 20MB. Windows users will simply receive a link in their email to retrieve the file, which definitely rains on Hightail's parade. Since iCloud now plays a larger role in storing your stuff, new storage plans are coming. You'll still get 5GB free, but 20GB is just 99 cents per month, and 200GB is $3.99 per month. For small businesses, or families with loads of photos and other files to store and back up, the latter plan is the sweet spot. You'll be able to get up to 1TB of storage once all the options are in place. Spotlight has been enhanced to include both online and local searches, which is something you can already do under Windows. I suppose Apple is hoping you'll move away from Safari searches and rely on Spotlight to find everything. Here's why: While Google search is still supported and remains the default on Safari, Spotlight uses Microsoft Bing. I wonder how Google will react when they get the memo. As with Mavericks, OS X Yosemite will be available this fall, probably between late September and late October, as a free download and is reportedly compatible with the very same Macs that can run OS 10.9. While developers are already downloading the first Yosemite preview, up to one million Mac users will receive access to Yosemite betas this summer. So be prepared to sign up as soon as possible. I expect they will want to get a few releases out before letting non-developers gain access to the seeds. While iOS 8 also comes across as a compelling release, Apple has yet to say anything about side-by-side multitasking for iPads. I suppose that could come later. Meantime, in addition to the Swift development language, Apple is moving towards giving developers more flexility in building and selling iOS apps. There is, for example, support for Touch ID and third-party keyboards. So, although the new QuickType predictive keyboard scheme may appeal to most users, those who want a Swype or another third-party keyboard to replace Apple's will get full system support. Would that were true with other apps, and it would be nice to be able to pick something else as the default for such tasks as email and browsing. As predicted, HealthKit will be designed to allow developers of health and fitness apps to seamlessly communicate with your iOS device and the new Health app. Such major medical institutions as Mayo Clinic have announced full support, which means you'll be a tap away from monitoring your physical condition, and your doctor can receive immediate updates should test results require their attention. Apple, by the way, promises what appears to be bulletproof security for Health and also for HomeKit, a tool for developers to build apps to better integrate your connected home. The HomeKit feature is called Secure Pairing, which supposedly means that only a registered iOS device can unlock your home, adjust the lights, turn on the microwave, or perform many other functions in your home. Developers will be able to bundle apps at a special discount and offer beta testing functions via the App Store. A new "Explore" feature will make it easier for you to discover the more than 1.2 billion apps now available for iOS users. While iOS 8 won't look altogether different from iOS 7, and thus isn't apt to be quite as polarizing, that can't be said for Yosemite. Right after the initial announcement appeared in the tech media, one of my friends, who has already had a love/hate relationship with Mavericks, responded with just one word, "YUK!" Her concern is that it looks more like iOS, but I reminded her that it's still OS X and her Mac will still run like a Mac despite the changes. Oh, and by the way, the iPhone 4 is not on the iOS 8 compatibility list. It was hit or miss with iOS 7, so it makes sense it has been retired from future iOS updates. In any case, Apple's stock price resumed its upward climb Tuesday morning. Evidently Wall Street was impressed.
- Waiting for Tim Cook to Fail You'd think that Apple CEO Tim Cook is the enemy based on some of the comments spewed forth in recent weeks from so-called tech and financial journalists. I suppose part of it is that he's a numbers and inventory person. He even has an M.B.A., which means he's just a professional manager, right? Isn't that what's wrong with all those other companies? Against this skeptical backdrop, Cook clearly has to work that much harder to prove his mettle. Every single product introduction so far has been viewed with disbelief. It wasn't changed enough, it's too expensive, Apple has lost its flair for innovation. Might as well give up on them now before it's too late. Certainly Wall Street is concerned. Apple's stock price has been on a downward slope for weeks for the most part. This despite the fact that Apple's mobile gadgets remain amazingly popular. The iPad mini, introduced to skeptical commentators in October, remains backordered amid analyst estimates that Apple might have sold between 10 and 12 million of them during the last quarter. The full-sized iPad continues to gain in the enterprise, and Mac sales seem to have held their own. A recent NPD survey showed somewhat lower sales of Mac notebooks in the U.S., which might possibly be compensated for by overseas sales, where Apple continues to have stellar growth. Certainly the slow roll-out of the new sleeker iMac desktops didn't help. You still have to wait up to four weeks for the one you want. But PC sales appear to have fared far worse, and the ongoing skepticism about Windows 8 appears to have been borne out. People just aren't buying, so maybe Microsoft will make those loud TV ads even louder to get your attention before you hit the Fast Forward button. Just before writing this commentary, I read an article from a financial writer that will go unnamed suggesting that "The magic is gone, replaced by a focus on margins and old products in new colors." So, then, the iPhone 5 was just an iPhone 4s with a different color? Well, I suppose that 4-inch display and the difficult-to-build cutting-edge design weren't real. I suppose the iPad mini didn't sport sophisticated construction techniques either, though I agree you could complain about the fact that it didn't have a Retina display. But Apple doesn't blow its wad with the first version of any new product; it'll come, maybe by spring. But Apple has to first catch up with demand. In any case, it's quite likely that all the new Apple products you saw in 2012, and perhaps for the next year or two, received the approval of Steve Jobs in his final days. Apple continues to execute on those products, though it's up to Cook and his team to do the fine-tuning, and develop the marketing plans. You can argue that Maps was released prematurely, but you can't dispute the fact that the app's early development occurred under the watch of Steve Jobs. And don't forget .Mac, MobileMe, and even iCloud, all of which have been troublesome. But perhaps the largest degree of damn-foolishness in that article is the comment that, "Until Cook can prove Apple's prior success was a function of the team and not just Jobs, the stock won't get credit for being the Apple of old Old Apple." Doesn't that sound incoherent to you? Remember that Jobs may have been a great product editor-in-chief for Apple, but I can't imagine that anyone believes that he did all or most of the product development by himself, and just pretended Jonathan Ive and tens of thousands of other Apple workers did the heavy lifting. The commentator in question wonders whether Apple "lost its genius." Well, maybe one genius, but there are lots more, and there's no way Apple would have survived without all those brilliant OS and hardware designers, not to mention Ive, Schiller and loads of other executives, including one Tim Cook. Sure, Apple could fail big time over the next few years, just as it was very possible when Steve Jobs was in control. Remember that the iPod, iPhone and iPad were all huge risks that paid off despite lots of skepticism from some portions of the media. The iPad mini might have done badly as well, because it was perceived as expensive compared to the Kindle Fire and Google Nexus 7. But Apple didn't scrimp on great design, and a careful attention to detail, and it's very possible the iPad mini will become the mainstream iPad before long. I suppose Tim Cook is inclined to pay closer attention to the bottom line, but there's no evidence he's somehow hurting the company. The financial community ought to be looking not just at Apple's quarterly sales figures, which will be released later this month, but at the product intros as they happen throughout 2013. Will it all just be iterative, as some suggest, or is there some more revolutionary gear in Apple's test labs that will see the light of day in the months to come? Apple has confounded the critics before, and they are fully capable of doing again. Unfortunately, stories of that sort don't play to the doom and gloom mentality of some commentators.
- Do You Really Want to Drive an Apple Car? Recently I spent several hours fiddling with the audio settings on my Kia's sound system, such as it is. I've had a lot of cars over the years, cheap, mid-priced and expensive, and never had the audio hardware that just worked without some manual labor to fix the tonal balance. Not once. The default settings were usually at the extremes of what I can tolerate. Car audio is notorious for boomy bass, and sizzling highs. Impressive in the showroom, but not so impressive when you have to live with those systems day in and day out. Maybe it needs an Apple solution, but why just the audio system? So there are reports that Apple is making a huge push into getting more involved in the auto industry. A Wall Street Journal report mentions several hundred engineers being involved in an Apple project that's code-named "Titan," which may be working on an electric car, shades of Tesla. There are even reports that Apple and Tesla are busy plucking employees from one another, although there's a natural affinity in a few areas, such as advancing battery and infotainment system technology. With $180 billion on hand in banks and investments, it's not that Apple doesn't have the cash to create a new car. Typically it costs an auto maker $1 billion to design a new vehicle and bring it to production, although many of the components may be lifted from other models. But they also have the factories and supply chain sourcing to turn the concept into a finished product. Apple certainly has the contract manufacturing resources to build Macs, iPhones and iPads, among other things, but not an entire motor vehicle. At least not yet. One auto magazine, which I shall not name, suggested Apple didn't have the engineering expertise to understand how to make the 10,000 working parts of a new car operate properly together. Other than Tesla, and there are still question marks about its long-term prospects, there hasn't been a successful new car maker in years. It's mostly about mergers and acquisitions, and building new versions of existing cars at various price points. So we have a fancy Toyota becoming a Lexus, or a fancy Honda becoming an Acura. It's as much about repackaging and extending existing hardware platforms as creating new brands. Sure, they said Apple didn't have to expertise to build a smartphone several hundred million units ago. But that's nowhere near as complex as selling a product that, today, has an average transaction price of $31,252. It's not that Apple couldn't do it, but the betting is that it would take years to accomplish. Even if Apple were to build a new car, there'd be the matter of setting up production lines, or paying contract manufacturers to handle the chores at the start, and establishing showrooms. It couldn't just be an expanded version of Apple Store, but a new concept in auto retailing. Apple doesn't take the sales experience casually, and the usual car buying experience, involving endless haggling and time-wasting nonsense that takes you through several steps from sales to finance, is downright unpleasant for most of you. It is for me. Again, Apple could surely build the best car on the planet, though you wonder how much it'll cost to design, and overhaul the manufacturing, purchasing and service experience. There's more than enough cash to fund such a project, and Apple does think long-term, so taking such a venture from concept to fruition wouldn't try their patience. But I don't see why they need to go there. As with TVs, the auto industry is a cutthroat business, and profit margins are far lower than iPhones, iPads and Macs. Is all that pain worth the gain? One other possibility is that Apple isn't so much going after the motor vehicle as the motor vehicle's dashboard, the brains. If the entire driving experience, from ignition to navigating to a vacation spot in another state, could be controlled via an Apple designed interface, that might have a sizable impact on the industry. Apple has already taken the first steps with CarPlay, which is essentially AirPlay for autos, since it lets you dock your iPhone with your car, which allows it to become the face of the infotainment system. There have also been periodic rumors about Apple buying Tesla. Technology synergies might seem logical, with Apple gaining control over the Tesla's sophisticated computer systems to control the entire driving experience. As the company prepares to build reasonably affordable models, such a merger might seem sensible. It would certainly shortcut the process of entering the car market by a number of years, assuming Apple wanted to go in that direction. As of the time I wrote this article, Tesla's market cap was roughly $25 billion. Assuming Apple paid twice that, $50 billion, for this transaction, it would consume a sizable portion of those cash reserves, but Apple would still have $130 billion left. The question, of course, is why would they bother? What changes would Apple have to make, if any, to make the Tesla conform to their vision of the ideal car? It's not that Apple doesn't buy other companies, though it's mostly for technology, with Beats being a rare exception. But a car company is something else entirely, and I'm not altogether convince this is a sensible direction for Apple. It may well be that Apple is planning on building some car prototypes with which to test dashboard-related technologies. That might be the true source of those rumors. At the end of the day, a new car design could emerge from this rumored project, but I wouldn't bet the farm on such a prospect.
This article was posted on Wednesday, February 18th, 2009 at 6:30 PM and is filed under News and tagged with: cash hoard, Credibility, decent profit, deficit, downturn, Economic Climate, First Three Months, Mac Sales, Macs, market segment, Mcdonalds, necessities, Npd Group, Piper Jaffray, predicament, quarterly statements, Recession, Red Ink, Retail Chain, stephen baker, Stock Market, Tim Cook, Wal Mart.