• Newsletter Issue #701

    May 6th, 2013


    When the CEO of a major tech company says something dumb, you wonder if it’s just a misstep, or whether that person is in over his or her head. Consider the recent comments from BlackBerry CEO Thorsten Heins that tablets aren’t profitable. He certainly wasn’t the first CEO to denigrate a product category in which a company failed. Since BlackBerry couldn’t produce a successful tablet, nobody could.

    Part of the problem is that the media isn’t asking these people serious questions, such as how can he make a claim like that in light of the success of the iPad? Can he dismiss a product that is growing by leaps and bounds?

    Now when it comes to starting a new company, not everyone gets a fat wad a cash from the capital markets. Sometimes it just takes persistence, luck, and getting a few breaks along the way, especially in the face of severe cross winds. On this weekend’s episode of The Tech Night Owl LIVE, we presented a real rags to riches story from Tim Angel, owner of ZooGue, a company that manufactures cases for iPhones, iPads and other mobile gear. A high school drop-out, Tim was unemployed when he hatched the idea for a new iPad case, and, with lots of work and finally a little financial help along the way, began a successful peripherals company.

    You also heard from tech journalist Rob Pegoraro, a weekly columnist for USA Today, who reported on Samsung’s latest flagship smartphone, the Galaxy S4, why Wall Street has gone insane over Apple, the worth, or lack thereof, of Face-book Home, and the Electronic Frontier Foundation (EFF) and their “Who Has Your Back?” summary of how major sites defend your privacy from government intrusion.

    Next up on this week’s show, cutting-edge commentator Daniel Eran Dilger, from Roughly Drafted Magazine and AppleInsider, talked about those peculiar comments from BlackBerry’s CEO that tablets will be a non-factor within five years, and have never made profits, despite the evidence of the iPad’s ongoing success. Daniel also continued his evaluation of the mobile platform wars, and why tech and financial pundits continue to misunderstand Apple.

    On this week’s episode of our other radio show, The Paracast: Direct from the Citizen Hearing on Disclosure, held at the National Press Club in Washington, D.C., Gene and Chris present an extensive back and forth discussion of the proceedings, which involved dozens of mostly top-flight UFO researchers and witnesses speaking to former members of the U.S. Congress. The key issue, above all, is whether the conference will actually expand government and scientific interest in the subject.

    Now Shipping! The Official Paracast T-Shirt! We’re taking orders direct from our new Official Paracast Store, where you can place your order and pay with a major credit card or PayPal. The shirts come in white, 100% cotton, and feature The Paracast logo on the front. The rear emblem states: “Separating Signal From Noise.” We’ve also added a huge selection of additional special custom-imprinted merchandise for fans of our show, along with a redesigned storefront.


    Apple is legendary for having a strong penchant for secrecy. The game plan is simple: Until they are ready to announce a new product, you won’t hear anything about it. Well, at least officially, yet in the weeks before the launch date, there will be a lot of rumors and speculation about what’s going to happen.

    Now most of those rumors are nothing more than that. Or people are making guesses, some good, some bad, based on Apple’s previous behavior. That allows them to predict when a product might be refreshed. Looking at Intel’s processor roadmap, it’s very possible to choose the likely chipsets for a new Mac, although delivery dates might vary.

    Apple did sort of quash the timeline for new iPads last fall, upsetting the annual cycle, so there is now talk of a fall refresh for both models. That Tim Cook already announced that new products would arrive this fall would seem to set the delivery dates in stone. At least that’s what it seems.

    But that doesn’t mean all product intros won’t happen until September or later. Intel’s new Haswell processors are due to ship in June, which means that updated MacBooks, iMacs and Mac minis could appear that month to fill the retail chain and boost Apple’s profits for the June quarter. But they’d simply be product refreshes, new models essentially the same as the existing models with more powerful parts.

    The announcement might even be made at the WWDC, but such changes normally would be heralded with a press release and a handful of media interviews with key Apple executives. Nothing significant about that.

    We also know, from Apple’s pre-WWDC chatter, that the next versions of iOS and OS X will be demonstrated. This appears to mean that developers will get prerelease copies, and have two or three months to get their stuff compatible before the actual release dates. Somewhere close to fall, give or take a few days, would fit with Cook’s timeline.

    There are also published reports that Sir Jonathan Ive has pulled engineers from OS X to finish up iOS 7. The delay was occasioned by the decision to do a major overhaul of Apple’s mobile OS. This is in keeping with the appointment of Ive to manage the software interface, and his insistence on minimalist design, and perhaps a desire to make iOS more consistent and enhance key features, has made the project that much larger and more difficult to complete.

    With OS X, delaying the introduction of 10.9 from the expected July timeframe to September doesn’t seem to be a serious issue. It not as if Apple will sell fewer Macs as a result, whereas iOS is the glue that holds together the company’s most profitable products. You expect a new iPhone to arrive this fall with iOS 7, so it makes sense for Apple to do what’s necessary to meet the deadline without releasing a supremely buggy product.

    To be sure, the public outcry over the faults in Maps last year have no doubt encouraged Apple to double down on proper testing. With the decision to allow the hardware and software teams to collaborate, it means that there will be less working in vacuums, which should make product development more efficient. Or more cumbersome unless Ive makes sure all those extra cooks don’t slow things down. That’s where good leadership comes in.

    But the real question is whether all this chatter about Apple moving OS X engineers to iOS, and the new features you should expect in iOS 7 and OS 10.9, can possibly be true. After all Apple has said nothing about it, though thousands of Apple employees and perhaps a few selected third parties already have access to the prerelease software.

    I suppose it’s possible some loose lips are responsible for at least some of those apparent leaks. But that makes less sense with software. When it comes to hardware, Apple is dealing with a number of component makers, any one of whom might accidentally or deliberately reveal something to the press. When Apple is paying a company hundreds of millions of dollars to build custom chips, they can’t just go down the street and pick another company to get the job done. Even if it was possible, it would take months to whip production lines and chip fabrication facilities into shape, so Apple has to expect some information leakage.

    However, when mainstream journalists are reporting about the goings on inside Apple, it’s fair to expect that you might be reading about an official leak, information key executives are presenting on deep background. Since Apple hasn’t announced anything, there’s plausible deniability. They don’t comment on unreleased products, but the truth is out there anyway.

    Obviously, we’ll all know the answers in a few weeks, at least from the software side of the equation. It’s also reasonable to assume WWDC will bring news about refreshed Macs, and perhaps the next version of the Map Pro, but I don’t claim to have any inside sources. And if I did, I probably couldn’t tell you anyway.


    The common story these days is that fewer people are buying iPhones, Samsung is virtually locking up the market, and that Google’s Android OS is rapidly gaining market share against iOS. But common stories don’t always add up to common sense, or even facts.

    While it’s true that Android remains dominant around the world due to the fact that so many cheap smartphones run Google’s OS, that doesn’t mean Apple is really suffering.

    Even though profits were down this past quarter, Apple still makes more than other companies. More to the point, Apple remains top dog in the U.S. smartphone market, according to a ComScore survey. In sales, Apple took 39 percent of the market, compared to Samsung at 21.7 percent. The rest were also-rans. Apple also gained against Android, although Google’s free OS still held 52 percent.

    I suppose Samsung has the advantage this quarter with the introduction of the Galaxy S4, which I’ll be reviewing shortly. HTC will probably also do well with the newest version of their One smartphone, which has also received some pretty positive coverage.

    One way Apple is competing is to just make the iPhone available in more places. T-Mobile has been running a big TV ad campaign proudly announcing that they are now offering the iPhone, and Apple has also inked U.S. Cellular. This combination should add a few million iPhone sales this quarter to help counteract the expected downturn.

    Android’s biggest advantage is overseas, particularly in emerging markets where there are loads of cheap smartphones that really undercut the iPhone. This is fuel for demands that Apple must enter the low-cost market, something the company continues to resist with the argument that they won’t build junk. But that doesn’t mean less expensive gear must be junk. Certainly the iPod shuffle and the Mac mini aren’t junk. They are well made and affordable.

    Apple can point to the fact that you can buy an iPhone 4, a 2010 model, free with a two-year contract. But in countries where people don’t buy subsidized handsets, that’s a non-starter. During the most recent quarterly call with financial analysts, Cook did hint at more aggressive pricing for the older iPhones, which seems to indicate a potential for an entry-level iPhone. It all depends on how Apple would handle such a product.

    Some pundits are claiming Apple will release such a device in limited quantities and focus distribution strictly in the third world. But that hardly makes sense. The cheap iPhone will only become truly profitable with high sales. I suppose one concern is whether mass distribution of a cheaper iPhone would somehow cannibalize sales of the more expensive model. But half of the iPhones sold now are not the flagship iPhone 5, so does it really matter?

    If Apple makes conquests against Android with an up-to-date but more affordable iPhone, that could, I suppose, greatly expand the market. And if the price is reasonable, Apple still earns a decent profit. Indeed, some suggest that a cheap iPhone is a mid-priced smartphone to the rest of the industry. But since it has the Apple logo on it, it becomes an aspirational device that might attract customers even if they had to pay more to get one.

    Indeed, it does appear that the iPhone 4 has already made the argument for an iPhone mini, or whatever Apple chooses to call it. To those who think it won’t happen, consider the iPad mini. Sure, sales of the larger iPad suffered, but the potential market was also expanded.

    Unfortunately, it’s hard to know actual global market share. The recent IDC report had it that the iPad had gone below 40%, but since other companies report shipments into the channel rather than actual sales, as Apple does, it’s hard to know how many are still sitting unsold in warehouses or on dealer shelves.

    But when you look at Web metrics, Apple dominates. You almost think that people who own smartphones and tablets from other companies don’t go online, or keep them in the desk drawers. Or maybe most of them are still boxed in warehouses and stockrooms, because they were never actually sold, despite what IDC reports.


    The Tech Night Owl Newsletter is a weekly information service of Making The Impossible, Inc.

    Publisher/Editor: Gene Steinberg
    Managing Editor: Grayson Steinberg
    Marketing and Public Relations: Barbara Kaplan
    Worldwide Licensing: Sharon Jarvis

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    3 Responses to “Newsletter Issue #701”

    1. Peter says:

      Apple’s iPhone 5 sales will be dropping over this quarter and the next, as people wait for the iPhone 5s. Or so we’ll be told over and over–“Yeah, sales are down this quarter, but wait ’til Apple releases their new iPhone 5s!”

      Yet, Samsung was releasing the S4 so I would think that would have an effect on S3 sales, huh? Perhaps that explains Apple’s market-share climb?

      • @Peter, And in the December quarter? It was iPhone 5 against Galaxy S3, both of which had been introduced earlier in the year.

        Did the release of the S4 impact the S3? Well, the launch didn’t come until the middle of March, and the S4 didn’t go on sale until late April. So the impact may not have been that much. Besides, carriers quickly reduced the price of the S3 to move product, and it’s clear that the upgrade is not regarded by most reviewers as particularly compelling beyond the software bloat. But I haven’t delivered my verdict yet.


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