• Reconsidering Apple’s Future

    January 23rd, 2008

    Now that Wall Street has, as usual, run off half-cocked over apparent flattening of iPod sales, the pundits are at it again. Has Apple’s luster begun to fate? Are iPod sales destined to tank? What’s Apple’s next great thing and will it arrive in time to halt the renewed  atmosphere of gloom and doom for the company?

    Or is that “thing” already here?

    Understand all this fear, uncertainty and doubt remained even after Apple reported record earnings that exceeded Wall Street estimates. You’d think they’d be rewarded for doing so well, but that’s not the way things are. Apple is, to all intents and purposes, a show business figure as personified by Steve Jobs. So the same rules apply. Today you adore them, tomorrow they are the objects of derision, whether they deserve it or not.

    Indeed, one question raised these days is whether the iPod’s existence as a cultural icon is coming to a close. Surely it was a fad, and that it sustained itself so long seems to be almost a miracle. It’s also clear from Apple’s own product enhancements that they knew this would happen and they are ready for the inevitable transition. A part of that is, of course, the iPod touch, its new “Wi-fi mobile platform” that is, in all likelihood, the true successor to the Newton. With the coming software update, the touch and the iPhone will be identical products, except for the phone features in the latter.

    Today, the iPod touch comes at a premium price, largely because Flash memory remains costly. But this is the true next-generation iPod, and it won’t be so long before you’ll be able to get one for less than $200. It will probably take a few years before the iPod classic is out of the picture, however, so long as high amounts of storage are most efficiently delivered on a hard drive, but don’t be surprised if Apple develops a touch version of this model too. That also appears to be in the cards.

    Indeed, it’s clear to me that the day of the standalone MP3 player is rapidly coming to a close, even as Microsoft attempts to gain traction in this space with the Zune. Apple’s executives know this full well, and that’s an important message analysts have largely missed from Tuesday’s conference call on the last quarter’s financial results.

    Another issue not getting the attention it deserves is the incredible resurgence of the Mac. When Apple removed “Computer” from its corporate name and delayed Leopard several months, it was felt that they didn’t care so much about selling personal computers anymore.

    However, if you look at the sales figures, you’ll see that’s just not so. More and more Windows users, sick and tired of Vista and its chronic performance and compatibility irritants, are crossing to the other side of the tracks where thing are far more predictable. Apple continues to claim that 50% of the computers sold at their retail stores are to customers new to the Mac.

    I do wonder, of course, why the analysts don’t seem to want to ask Apple how it arrives at those figures. I suppose there might be spot surveys and such, but do you know anyone who was ever asked? Then again, they don’t ask me who I want to vote for as president either.

    The final issue is far more important, however, and that’s the touchy issue of succession. Ever since Steve Jobs dodged the cancer bullet a while back, you have to wonder if Apple’s board of directors has made any effort to line up his replacement. Sure, Jobs seems to have recovered nicely, and despite claims at one time that he seemed a little out of it at one or two keynote addresses, I haven’t heard any such claims after this month’s Macworld Expo. Sure, the product announcements may not have been as trendsetting as the introduction of the iPhone last year, but Jobs seemed perfectly on target.

    But nothing is forever. It is possible Jobs will continue to savor the CEO experience for many years, well into his 70s perhaps. But that would mean that health and other tragedies don’t intervene to change the situation in a terrible way with little warning. A responsible company would plan for the eventual departure of its leader, and I have little doubt that a replacement is being groomed within the hallowed halls of One Infinite Loop.

    How would that play out? Well, as a first step towards his departure, Jobs could split his duties, remain Chairman while having someone else become the CEO and fulfill day-to-day functions. That would retain his position as the company’s main visionary, almost in the fashion of Bill Gates becoming Microsoft’s “Chief Software Architect” in his final days as a full-time employee of the company he co-founded.

    The other question is whether the well-known executives at Apple, such as Tim Cook, Jonathan Ive or Phil Schiller could, separately, fill the shoes of a Steve Jobs. Or would it require two people, sharing the leadership position?

    So who do you think can truly replace Steve Jobs? Is it possible that replacement might have to come from outside Apple?

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    3 Responses to “Reconsidering Apple’s Future”

    1. Dana Sutton says:

      What analysts (and some members of the press) can’t get through their heads is that the iPod has never been anything more than a component in a larger system: a MP3 playback device + a large and attractive library of downloadable tunes + a well-running marketing and distribution operation + a piece of software to facilitate the whole process. You can knock the iPod out of this picture as long as you replace it with other and better playback devices, and the system as a whole goes merrily chugging along. And even if playback device sales level off or even drop, as long as folks continue to download tunes the system as a whole stays nicely profitable. Now Apple has set up a similar system for video. Even if the video library isn’t equally compelling yet, and even if some of us have reservations about the current playback device, there’s plenty of room for improvement and growth, both of which will no doubt happen. And if you want to compete against Apple in music or video, you had better be prepared to match it regarding all four parts of the system, otherwise you’re not going to get anywhere.

      The what-after-Steve issue is more troubling. It’s not just that he’s a visionary (although of course he is one). It’s also that he’s ruthless enough to be able to sit on all the other would-be visionaries within the company and make them focus on a small number of projects that are most likely to be successful. Plus he has such good taste in consumer goods design. Plus he is a first-rate businessman. It’s hard to think of any other living person who combines these very different qualities. Certainly what Apple doesn’t need is another Harvard M. B. A. type who is good at “management”, whatever precisely the hell that is supposed to mean. Last time around, a couple of CEO’s out of that bag almost drove Apple into the ground.

    2. William Timberman says:

      A minor point, but in practice the iPod Classic interface is FAR easier to use, if not more innovative, than the iPhone music interface. I say that as one who owns both.

      One other thing: as a playback device, I could live with the iPhone alone, but for me, the iPod is a portable jukebox — my ENTIRE collection of music wherever I go. With a 160 GB iPod in my pocket, and something like the iPod hi-fi in the trunk of my car, I’m good to go pretty much anywhere. (My daughter used her iPod and my iPod hi-fi for all the music at her wedding and reception — well, at least until the band got set up — and even better, when the band took breaks, a click on the remote tucked into one of her maids-of-honor’s sleeves filled in nicely.)

      Maybe much denser flash memory, and a virtual interface which mimics the Classic’s would eventually allow the iPhone to perform the same task, but then what happens when it’s plugged into the speaker and the phone rings?

      Food for thought, no?

    3. StefN says:

      “Indeed, it’s clear to me that the day of the standalone MP3 player is rapidly coming to a close…”

      I hope not. The iPod Nano is an end-form for a computer. Like the desktop and laptop, the lanyard Mac has unique uses, for example, workouts. And it’s the lightest, thinnest, least visible, most portable Mac. Nike has it right: the Nano is worth investing in.

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