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  • Welcome to the Silly Season: Spring 2009 Edition

    May 5th, 2009

    It’s fair to say that there’s not a whole lot of news is coming out of Cupertino, CA these days from Apple. There weren’t any new product introductions in April, and there may be another vast wasteland between now and the WWDC in June. That’s where most of you no doubt expect a firm release date for Snow Leopard and the next iPhone.

    Sure, there may be some software updates, such as the recent firmware fix to address freezing and other issues involving iMacs equipped with the Radeon HD 4850 graphics processor. There are even suggestions that Apple is readying a 10.5.7 update, but don’t expect anything official until it happens — if it happens.

    Without much solid information to go on, beyond Microsoft beginning its planned layoff of 5,000 employees of course, rumors and speculation are front and center. Certainly some of the rumors make a lot of sense, but a few more don’t survive the logic test.

    Take Twitter — please! Seriously, it’s a fun place if you can get into the rhythm of writing regular 140 character blogs or diary entries about yourself and post them for the edification of anyone who decides to follow you. We use it, actually, but avoid some of the more tasteless topics, such as recent bathroom or dental visits.

    Now there’s a story that suggests Apple is in heavy negotiations to acquire the fast-growing socializing network, founded in 2006, for $700 million. This comes after other rumors suggested that Google was also after Twitter. If Apple inks such a deal, the transaction would be made official around the time of the WWDC.

    However, it’s fair to say that, despite the massive hype, Twitter has not yet been shown to be a profit-making company. They are still paying for their server farms out of venture capital. True, there are tens of millions of users, including notables from the world of politics and show business. Indeed, it has become the place to be — but how are they going to monetize this service?

    Sure, Apple has plenty of spare cash, so buying up Twitter would, to them, be a drop in the bucket. The larger question is how it would be integrated into their existing products and services and whether it could yield some positive cash flow for the company and its shareholders. If that’s not possible, buying a company like Twitter wouldn’t make one bit of sense.

    I’m not saying it won’t or can’t happen. Stranger things have occurred, but a social network would seem a better fit for Google, Yahoo! or even Face-book. Am I wrong? More to the point, it would seem to me that Twitter would work best as a value-added service to an existing social network, one that would enhance the overall value. That way the core Twitter service doesn’t have to deliver financial benefits of itself, but integrating it with other services might bring more visitors and hence encourage advertisers to pay higher fees.

    So Apple and Twitter doesn’t pass the smell test, at least to me. Maybe it will happen, or maybe Apple is just talking about some sort of loose partnership rather than an outright purchase. We’ll see.

    The other rumor afoot now is that Apple is poised to address flat sales of new Macs by cutting prices. Yes, I can see this as a possibility, assuming Apple is willing to sacrifice short-term profits in the hope that volume will make up for the difference. But I’m skeptical about the long-term strategy, since restoring prices to their former levels might end up hurting future sales. Remember, this is a company that doesn’t look at its business strictly on the basis of one or two quarters.

    A sensible possibility might just involve making available a 17-inch version of the iMac for the consumer market. Since the low-end 20-inch model costs $1,199, you’d think that Apple could offer the smaller edition for $200 or $300 less. That would put it into closer contention with mainstream PC hardware.

    Some are suggesting that Apple ought to make a bigger push to move the iMac, maybe even find a way to reduce the price some without hurting the standard equipment. Again, this is a questionable move, because it goes against the grain for a company that won’t sacrifice short-term profits in the hope of moving more product.

    Remember, also, that we’ll probably soon see those standard back-to-school specials for students, where they can get a free iPod along with a new Mac. That can certainly boost sales, particularly if the economy stabilizes over the coming months. It wouldn’t involve anything unique, since that simply reflects an ongoing marketing strategy.

    Yes, I’d like to see cheaper Apple hardware, but as they say themselves when confronted with cheap PCs, what’s the good of paying less for a computer if it doesn’t do what you want? Apple can certainly remove standard features from their products, but that goes against their DNA. Moreover, whether or not it has iLife on it is irrelevant from a cost standpoint, since that simply involves a disk image used in manufacturing, and iLife represents a significant usability advantage for a Mac.

    Sure, you never know what Apple really plans to do, but if you’re going to speculate, it’s always best to try to do so with a least a modest grip on reality.



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    5 Responses to “Welcome to the Silly Season: Spring 2009 Edition”

    1. Mr. Haney says:

      I’m waiting for the rumors to begin that Apple is going to buy Hormel so they can corner the market on Spam.

      Sheesh.

    2. Richard says:

      Yes, volume does matter. It spreads out development costs which aid the bottom line and we all know that Apple’s starting price point is on the high side which limits the number of people who even consider an Apple product when they are purchasing a computer. Growth matters, too. Not only is Apple able to cut better deals when they purchase more components & etc, but growth leads to greater acceptance in the market place as a viable option.

      It isn’t as though Apple needs to put out a $359 paperweight to compete with the absolute low end. They simply need to have a broader spectrum of products with price points where there are people shopping. It needs to happen at several levels. The one most often overlooked is the Mac Pro lineup. There really does need to be a more realistically priced option for a “tower”. This is not to slam the iMac lineup, but it is not everyone’s cup of tea. A well designed tower (meaning one that is not one of the no space left for anything else variety) offers greater flexibility to people who want it than an iMac.

      Apple have continually passed up opportunities to grow the company in the apparent belief that they are happiest living in a small pond. I wonder what the shareholders would have to say about the foregone opportunities for additional profits? Surely not all of them are in the trance of Mr. Jobs.

    3. DaveD says:

      Gene,

      “Sure, you never know what Apple really plans to do, but if you’re going to speculate, it’s always best to try to do so with a least a modest grip on reality.”

      What a great statement.

      I thought Mac OS X 10.5.7 would be released last week with Tuesday being the earliest. Mac|Life stated that it will be this Friday. So, is this going to be the last update to Leopard?

      After seeing the commotion stirred by rumors of Apple and Twitter. Two words came to my mind. What! Why? Same reaction to Rupert Murdoch’s News Corp gobbling up MySpace. We can see where MySpace is today, sinking slowly off the web.

      Richard,

      “I wonder what the shareholders would have to say about the foregone opportunities for additional profits?”

      If I were an Apple shareholder seeing my stock grow in value, the company in the black, and $29 billiion in the bank. Why would I complain? It too bad that I don’t have any stock. In Apple’s eyes it’s about being the best not the biggest. I don’t see anything wrong with that. When there are examples where big doesn’t equate to better. Ahem Microsoft, what have you done lately to better our lives or provide more value to your shareholders? Laying off a total of 5,000 is still not enough. What is a company of 90,000 employees doing besides a Windows/Office retread? Remember this a company willing to fork over $40 billion for Yahoo!.

    4. Richard says:

      DaveD,

      You miss the point, unfortunately. Did I say that Apple has done badly? No. I said that they missed opportunities to do better. Who does not like “better”?

      Although M$ really has nothing much to do with my comment, their problems represent an opportunity for other operating systems. For example, just look at their shenanigians with the netbook market. Vendors are looking to alternatives even in a market that is overwhelmingly predisposed to want “M$ inside”.

      Should Apple shareholders be pleased that the company is doing well? The question suggests the answer, but the directors’ job is to maximize shareholder value, not sit on their hands.

      Cheers

    5. DaveD says:

      Richard,

      Yes, I did miss your point. Sorry.

      There was a time when Apple had too many desktop models and losing money badly. Steve Jobs came in 1996 and began to clean house dropping unprofitable lines and killing the clones. Tim Cook got hired to manage the manufacturing supply/demand component.

      Managing supply to demand with just a single model may be easy to do, but I would think that the situation get complicated as the number of models grow. I can see where a mid-size desktop would be nice to have. I can only guess that in their planning meetings that the demand may not be there in order to be profitable. Mistakes have occurred such as the G4 Cube that died due to (besides hardware issues) lack of demand.

      HP or Dell have many, many models, but I believe that it is supportable due to bulk of revenue coming from corporate sales of PCs and Servers.

      IBM got buyers for their PC and hard disk drive lines. Apple dropped “Computer” from their name.

      I wholeheartedly agree on M$ meddling with netbooks. BTW, what ever happened to the Pocket PC?

      Best Regards,
      Dave

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