• Newsletter Issue #738

    January 20th, 2014


    Some members of the media, tech and financial, are treating Google’s acquisition of Nest Labs for $3.2 billion as some sort of major loss for Apple. I suppose the main reason is that co-founder Tony Fadell was a former Apple person, credited with being the “father” of the iPod.

    But that conclusion strains logic. Apple doesn’t generally buy companies that build consumer products. They buy companies with technologies that enhance their own products. Perhaps the biggest exception was the purchase of Steve Jobs’ NeXT in 1996, which brought him and an industrial-strength Unix OS to Apple.

    Go through other purchases. Siri is not a product, but a service that’s part of the iPhone and iPad portfolio. AuthenTec brought with it the technology to create a fingerprint sensor dubbed Touch ID. The existence of Apple’s “A” series processors is heavily based on technology acquisitions.

    So where’s Apple’s advantage in selling a $249 connected home thermostat or a $129 smoke/fire detector? Perhaps this acquisition makes sense to Google to enhance their ability to control your home. But I do not actually believe you’ll see ads for Home Depot on a thermostat screen when you want to crank up the air conditioning. That would be going much too far, even for Google.

    Now on this week’s episode of The Tech Night Owl LIVE, we featured Jeff Gamet, Managing Editor for The Mac Observer, who talked about the tricky subject of net neutrality and the recent decision to overturn an FCC action enforcing that measure. Jeff also discussed the purchase of Nest Labs by Google, and some of the curious contraptions on display at the CES.

    You also heard from cutting-edge commentator Jim Dalrymple, Editor in Chief of The Loop, who also covered the purchase of Nest Labs by Google, those two contradictory surveys of U.S. Mac sales in the last quarter from Gartner and IDC, and the ongoing and so-far unsuccessful search for a new CEO at Microsoft.

    So maybe no sane executive wants to get involved with the mess that is Microsoft. We’ll see.

    On this week’s episode of our other radio show, The Paracast: Gene and Chris welcome Ryan Skinner for a return engagement. Ryan has spent a considerable amount of time out in Utah these past seven years sleuthing around the Sherman Ranch and digging into the strange goings-on that are alleged to occur there. He has released an e-book called “Skinwalker Ranch : Path of the Skinwalker” that details his exploits. Here’s your chance to get the skinny from Skinner about skinnning skinwalkers and dodging secretive billionaires—plus get the latest updates from Robert Bigelow’s closely guarded ranch, etc.

    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.


    This is the press meme that plays out over and over again, that Apple lost the ability to innovate when Steve Jobs passed. Every single produce update since then has been iterative. No new product paths are being taken. It’s just more of the same ole same ole.

    But what about the Mac Pro? Well, it’s great looking and really different and all that, but it’s just a fancy and expensive toy for the well-heeled when it’s not being used as a tool for content creators. It’s still a PC. Well, actually, it’s a PC workstation, but does that distinction even matter?

    The iPad Air? Just a slimmer, lighter revision with the usual annual hardware enhancements? The iPhone 5s? Same form factor as the iPhone 5 with those annual hardware enhancements, that fingerprint sensor and 64-bit gimmick.

    Well, maybe 64-bit isn’t a gimmick, since apps that are compiled in 64-bit can deliver real performance improvements. It’s not all about having more than 4GB of RAM, which isn’t found in any smartphone or tablet, except for Intel-based tablets that are basically just PCs with touchscreens.

    And do you recall the story of how executives with Qualcomm and other chip makers reportedly freaked when Apple beat them to the 64-bit punch? But they’re all supposed to catch up this year I gather.

    But none of that satisfies the critics. If Apple doesn’t deliver that iWhoseacallit real soon now, the company is doomed, dead and buried. It doesn’t matter that other companies can’t even do as well. Do you really think the junk that Samsung piles on some of their high-end smartphones represents real innovation? What about big screen TVs with curved screens, the better to give you an IMAX-style experience in your home?

    Well, I suppose the curved scheme works all right if you sit at the right distance from a very large screen. Otherwise, it’s less useful than 3D, and we all know what happened to that feature.

    Besides, Apple’s style is not so much to create product lines that don’t exist, but to make the ones that do relatively warm and friendly. Remember, there were personal computers under development before the original Apple designed by Jobs and Wozniak. But Apple made it more user friendly for consumers. You could actually buy a fully assembled system, rather than put one together from the spare parts.

    Warm and friendly came to the fore in a big way with the first Macintosh, even though Apple wasn’t the first company to mess with graphical user interfaces. The folks at the Xerox Palo Alto Research Center had all these technological goodies, but no sense on how to put those goodies into successful consumer products.

    Apple did.

    In fact, Apple did so well that Bill Gates created Windows as a warm and fuzzy shell for MS-DOS.

    But what about the iPod? Wasn’t that a true game changer? It sure was, but it was not the first digital music player. There were others, all quite forgettable because they weren’t very useful. So Apple’s innovation here was not the mere existence of the iPod, but in making it work relatively seamlessly, solving many of the usability problems that infected other gear.

    Smartphones? Did you forget that BlackBerry ruled the roost before the iPhone? A BlackBerry was a plaything for smart executives and power users. Apple made the iPhone and its touch interface easy for most anyone to master in a short time just by touching. What could be more natural than that? But the iPhone was hardly the first smartphone, and Samsung succeeded best by aping the iPhone, although the courts haven’t been so kind to them.

    When you consider the iPad, don’t forget that Microsoft has been pushing tablets for years, but the execution of those tablets was highly flawed. Basically they were ordinary Windows PCs with touchscreens, a stylus, and the ability to rotate the display. That junk is still being sold by PC makers in a slimmer, lighter form under the Intel brand name UltraBook. But an UltraBook is based on Apple’s MacBook Air, to which touchscreens and swivels and such are added. All that junk makes them more expensive, but it’s hardly attracting more customers.

    The tablets that do succeed, from Samsung, Google and Amazon, are in the image of an iPad.

    Most recently, the media has been telling you that an Apple connected TV and a smartwatch, dubbed iWatch, are inevitable. Maybe. But smartwatches haven’t taken the world by storm, at least so far. Maybe that puts them in the same class as digital music players in 2001 before the iPod came on the scene.

    Perhaps Apple does have a solution, but don’t assume that solution is quite like the current image of a smartwatch. That’s not how Apple plays this game.

    So you can say all you want about Apple and the ability to innovate. But most of the critics haven’t a clue what Apple has really done, and how their brand of innovation was accomplished. That’s why they cannot predict what Apple plans to do going forward.


    I’m sure Apple was seriously stung when the company found itself on the losing side of a Federal lawsuit about alleged e-book price fixing. Regardless of the perceived merits of the case, and Apple is appealing, Judge Denise Cote assigned an “External Compliance Monitor,” one Michael Bromwich, to keep close tabs on the situation.

    Now this was a sort of relationship that was the polar opposite of the so-called marriage made in heaven. I assume Bromwich was trying to operate within his perception of the court mandate, but Apple claimed his presence was intrusive.

    Their complaint accused Bromwich of trying to stick his nose into Apple affairs that had nothing whatever to do with digital books and contracts with publishers. Supposedly Bromwich was demanding that executives submit to his questioning at inconvenient times, and just looking into supposedly inappropriate areas of the company in order to determine whether the court’s dictates were being observed.

    Now I wouldn’t presume to guess whether Bromwich was exceeding his mandate, nor would I care to comment on whether his bill for services was unusually high. It is reported that Bromwich, and an assistant, submitted bills totaling over $160,000 for two weeks work.

    That’s the equivalent of two people making $1,000 per hour, each, for two 40-hour work weeks. But I wouldn’t say the fee is high, since I haven’t checked into the prevailing price for a compliance monitor.

    But when I first read the story, I thought about actor Nathan Lane.

    Lane, famous as a stage and movie character actor, played a particularly eccentric court-appointed compliance monitor on a popular TV drama, “The Good Wife,” on CBS. You see, when the legal firm that is a main focus of the series went bankrupt, the court asked Lane’s character, Clarke Hayden, to be on hand to make sure that the proper steps were taken to restore profitability.

    He was there to basically give a yay or nay decision on every move the firm made and, if they failed to earn enough money to pay their debts, he apparently had the power to recommend to the courts that they liquidate.

    Of course, Apple isn’t confronting anything so serious. I have no idea how Bromwich really behaved in his encounters with Apple people, nor do I know whether or not he exceeded his authority in trying to determine whether or not Apple was pulling any fast ones on him. What’s more, I do not pretend to know whether or not Apple was given a bum rap, although the fact that publishers quickly caved when the complaints were filed doesn’t auger well for any claims of innocence.

    It also seems curious that Amazon’s attempts to take over the e-book business with predatory pricing didn’t get scrutiny. But it’s still true that the agency model to which Apple and book publishers agreed had the effect of actually raising prices for consumers. Even if it was all done with the best of intentions, the suspicion that they somehow colluded to take this move is what set off alarm bells at the U.S. Department of Justice.

    Besides, the case is not yet resolved. Sure, we have the verdict, and we have a judge who is turning back every effort from Apple to change things. The compliance monitor episode is the most serious, no doubt, but it also indicates this is a story that is not fully written.

    Regardless of who wins the appeal, it’s also possible that the losing party will request U.S. Supreme Court review. The current conservative-oriented court might even turn it back on the presumption that the case is about interference with the free market, and thus should be overturned. But if it takes a couple of years to wind its way through the courts, it’s possible new justices will be appointed who will hold different opinions.

    So, even though the current Supreme Court has views very different from Apple’s executives, if they decide to review the whole affair, they could be the company’s best friend. Stranger things have happened. Just saying.

    As to Nathan Lane, apparently he ended up actually being a nice guy on “The Good Wife,” and I always enjoy his return appearances.


    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

    | Print This Issue Print This Issue

    3 Responses to “Newsletter Issue #738”

    1. Kaleberg says:

      I’m not surprised about the decision regarding agency pricing of ebooks. After all, there was a similar antitrust decision in the 1960s regarding agency pricing of printed books that led the way to discounted book sales. This seems to be mainly a fight between the publishers who want to be able to set prices and resellers who want to be able to offer discounts. Amazon started selling books with an agency model, but it rankled. Amazon has arrays of computers and millions of lines of code for setting prices and were loath to outsource it. They even got into a pissing match with one publisher and stopped selling their books briefly. Now, Amazon does have the ability to set prices and antitrust law on their side in the matter.

      As for Apple’s compliance officer, I’m willing to believe he asked some simple question about Apple’s future book products, and Apple refused to answer, just the way they refuse to answer any questions about future products. One problem Apple has is that Apple does not work from a road map the way Intel does. They tend to make it up as they go along, so radio silence makes it easier for them to adapt. Once the monitor got the original “no”, things started to escalate. My feeling is that Apple should continue to keep its future plans under wraps, after all we all know that they aren’t going to go for agency pricing.

    2. dfs says:

      Apple not innovating? Let me come back to something I’ve written about before, Apple’s inroads on the automotive market. For the most part those communication/navigation/entertainment systems in modern cars are crap. They are klutzy to use and many of them require a driver to take his eyes off the road for too long a time, which is downright dangerous. Apple has been striking striking partnership deals with various auto mfrs., perhaps most notably Honda), so that these units can start using Apple technology (Siri comes rapidly to mind). Now, since these inroads require a series of deals with different companies we’re never going to get a splashy news conference at Cupertino and it’s going to be long time before analysts and the press — or Apple’s competitors — to grasp what’s going on. But this development is happening right now and its fruits will become more visible when cars benefiting from these arrangements start rolling off the assembly line.

      Gene, I’ve noticed a certain tendency of yours to play this down as “licensing.” Well, sure, it mostly is and will continue to be. But a.) such licensing has the potential to generate a huge revenue stream and b.) who’s to say that Apple won’t eventually become a supplier of actual components? And, if they are true, rumors that the next version of iOS will somehow be auto-friendly suggests that Apple has something more ambitious than technology-licensing in mind.

      Meanwhile,of course, Apple’s competitors have not yet developed any sense that automobiles constitute a potential market for their products. As usual, they will be caught flatfooted and then, as usual, will make clumsy and at best semi-successful attempts to get in the game

      So any attempt to accuse Apple of losing its knack for innovation is just plain silly.

    Leave Your Comment