• Newsletter Issue #740

    February 2nd, 2014


    When I heard that hackers had stolen some 40 million credit card numbers from Target (the real figure may be two or three times higher), I took a deep breath and pondered my situation. While I wasn’t a frequent shopper at that retailer, I did make small purchases there from time to time. So you can understand that I checked my bank debit card statements very closely to see if anything was amiss.

    Worse, it seems that the Internet thieves who purloined that data wouldn’t ordinarily use it right away. Sometimes the phony credit card charges won’t be made until months after the original crime. Some banks took the precaution of giving customers new credit and debit cards, and I made sure mine was replaced, once I discovered a questionable transaction that may or may not be related.

    So on this week’s episode of The Tech Night Owl LIVE, we introduced Charles Tendell, a Certified Ethical Hacker and co-host of the Computer America radio show. Charles gave you insights on the huge security break-in at Target, Neiman Marcus and other retailers, where the raw details of tens of millions of credit and debit cards were stolen by online criminals. He also discussed Bitcoin, the online digital currency, and security issues impacting Mac and Windows PCs.

    When it comes to Bitcoin, it sounds really tempting. I’ve already added a Bitcoin donation button to The Tech Night Owl’s site, so we’ll see how it goes.

    We were also joined by John Martellaro, Senior Editor, Analysis & Reviews for The Mac Observer and a columnist for The Street, who focused his conversation on Google’s decision to sell its Motorola Mobility handset division, at fire sale prices, to Lenovo, the large Asian PC maker. You also heard him explain why Wall Street doesn’t understand Tim Cook, the future of the Mac, and an illuminating encounter with a disappointed Microsoft Surface RT customer.

    On this week’s episode of our other radio show, The Paracast: Gene and Chris present that outspoken blogger on the paranormal, Red Pill Junkie. Under his online name, he is a regular contributor for The Daily Grail, Mysterious Universe, the Intrepid Magazine blog. He also collaborates frequently with The Grimerica Show podcast and also lends a little hand on The Gralien Report radio show. He says, “But my true forte is that I like to comment on things…a lot.”

    Coming February 9: Gene and Chris present veteran UFO investigator and photographic expert Dr. Bruce Maccabee. The controversial Gulf Breeze UFO flap of the 1980s and 1990s is one of the main topics on the agenda, but we’ll be covering his other work in the field that focuses mainly on UFO photos and accompanying evidence.

    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.


    If you’re not a baby boomer, you may not recognize the name RCA, but even our younger readers know something about Motorola. Despite this, both companies have long histories, but nothing is forever.

    So RCA Corporation, originally known as Radio Corporation of America, was founded in 1919. Among its achievements was the NBC network, which it founded in 1926 as the result of the acquisition of several radio stations. Just three years later, after the purchase of the Victor Talking Machine company, RCA become the world’s largest manufacturer of phonographs.

    Phonographs? Yes, you remember them, right, and don’t forget the record company. Indeed some of the world’s most famous recording artists, including Elvis Presley, had their music released under the RCA label. So you see we’re talking of a company with a pedigree, although various mergers and acquisitions essentially undid the company’s core in the 1980s.

    Today, the RCA music division is owned by Sony BMG. The various RCA hardware product lines, such as TVs, audio equipment and home appliances, are now owned by different companies around the world such as Audiovox and ON Corporation. The NBC radio and TV networks, which include such cable channels as USA and Syfy, are owned by NBCUniversal, a division of Comcast, the USA’s largest cable provider.

    And that’s just a brief overview. The specifics are far more complicated. ABC, now owned by Disney, is the outgrowth of an FCC order for NBC to divest itself of one of its networks because of its dominant position in broadcasting. You see, complicated.

    But what about Motorola?

    Well, Motorola was originally begun in Chicago as Galvin Manufacturing Corporation in 1928. The Motorola name came to be in 1930.

    Eventually Motorola was involved in building both consumer and industrial products, ranging from TV sets, to government and defense gear. Their semiconductor division, famously, built the original generation of processors for the Macintosh. Not so long ago, Motorola was the largest mobile handset maker until it was overtaken by Nokia in 1998.

    According to the Wikipedia entry on the company’s history: “In 1969 Neil Armstrong spoke the famous words ‘one small step for man, one giant leap for mankind’ from the Moon on a Motorola transceiver.”

    Once again we have a company that split itself apart or sold off assets to focus on core businesses. The radio and TV manufacturing division, which included Quasar TVs, was eventually acquired by Matsushita, now known by its most famous tradename, Panasonic.

    In our corner of the world, the 2011 spin off of the Motorola Mobility mobile handset division was followed within seven months by its sale to Google for $12.5 billion.

    Unfortunately, Motorola mobile handsets haven’t sold so well in recent years, and Google was faced with a money-losing division and a bunch of patents, designed to protect the company over possible lawsuits over Android, which didn’t accomplish much in resolving all those intellectual property disputes among the big players in the tech industry.

    Well, Motorola continues to be a loser, despite new products that have gotten decent reviews, such as the Moto X, which is advertised as the only smartphone assembled in the USA, although that singular fact hasn’t made it any more popular.

    So Motorola Mobility is now on its way to another adopted home, that of Lenovo, a Chinese electronics maker that became famous in this country as the result of the 2005 acquisition of IBM’s personal computer division. The newly announced deal is pegged at $2.9 billion, a huge loss for Google. Meantime, Lenovo is proudly boasting that, with the Motorola brand on the way, it will be able to beat Apple and Samsung in mobile handset sales. If you believe that, there’s that bridge in Brooklyn that I can sell you at a bargain price.

    Are you with me so far?

    Now what we have with Motorola and, before them, RCA, were large companies that probably got into too many markets and, as customer tastes changed, slimmed down mostly to their core businesses.

    Withy Motorola Mobility is moving into new hands after less than three years at Google, does that mean anything in the wireless handset market? People stopped buying Motorola gear before Google took over. Google’s ownership didn’t change much of anything. Maybe Lenovo will have better marketing ideas, or maybe they will simply take their existing smartphones and put Motorola labels on them. But if the trend continues, cheaper and cheaper gear will sport that name, which is not likely to have much impact on Apple, though Samsung might suffer some since most of their handset sales growth is at the low-end of the market.

    It does appear, though, that this deal will allow Google and Samsung to work together more closely, in the wake of a recent cross-licensing deal between the two companies. Perhaps this means that Samsung will no longer distance itself from the Android name, and will phase out development of apps that compete with the ones Google supplies. That would make a Samsung smartphone better and easier to use.

    Faced with declining earnings, Samsung might use the occasion to shore up existing product lines and not worry about wasting money setting itself up as a rival to Google.

    Meantime, Motorola may go the way of RCA’s consumer electronics products, flooding the low-end of the market that Apple continues to avoid because there are simply no profits to be made there. Some tech pundits are claiming Apple might be in trouble unless they move downmarket. At the same time, they fail to come up with a compelling reason to do so, other than selling more gear and making less money from each sale.


    So let’s put a few obvious facts on the table. Building cheap consumer electronics gear is seldom profitable. Manufacturers hope to make up the difference with volume, but does it ever play out that way? Those who make the huge rush to the bottom of the market ultimately end up in a Catch-22 situation.

    Making things as cheaply as possible didn’t quite help the American auto industry either, as customers, disappointed with poor build quality and reliability, decided to pay a little more and buy motor vehicles with a foreign brand name. A greater focus on quality and fair pricing, and sometimes really nifty designs — not to mention a Federal bailout — ultimately helped save Detroit; the auto industry, not the city.

    Well, the obvious facts haven’t stopped tech and financial pundits from complaining that Apple is focusing too much on the high end of the market, while Samsung and other companies push out ever cheaper and cheaper gear. Why pay $649 for an unlocked iPhone 5s when you can get a decent Motorola smartphone, the Moto G, for $179 unlocked?

    Of course that ignores the cheap extended payment plans and the various contract subsidies offered by many wireless carriers.

    In any case, it’s not that Apple has been secretive about their approach to design and marketing. Tim Cook and other Apple executives have made the point crystal clear over and over again. Apple doesn’t make what it perceives to be junk, meaning that the company won’t rush to the bottom of the market where there’s a flood of low-cost gear. If you want cheap, Apple is the wrong way to go.

    Besides, if Apple built cheap Macs, iPhones and iPads, you can bet Wall Street would complain that the company was destroying its hard-won reputation for building high quality gear that delivers high profits. You can’t have it both ways.

    This doesn’t mean that Apple isn’t trying to expand the market for current products. The recent deal with China Mobile, the world’s largest wireless carrier, won’t mean tens of millions of sales of iPhones and iPads right away. But it will mean that sales will grow more rapidly, particularly as China’s middle class expands and customers seek aspirational products. The same is true in other parts of the world.

    Sure, the market for premium smartphones are becoming saturated in the U.S. and other countries. But the solution isn’t to go downmarket and make an Apple gadget as generic as anything else.

    Consider the dilemma Lenovo will face trying to grow Motorola. The name doesn’t count for very much anymore, and Lenovo, despite being a big player in the PC business, is a brand with no sex appeal whatever. It’s hard to believe that Motorola will suddenly become a relevant brand again, when the previous owners failed to jumpstart sales.

    The same could be said for Nokia, which has also seen better days. Even if the brand name disappeared, and the handsets were called Microsoft smartphones, would that magically turn things around?

    As for Apple, it’s pretty clear the company expects to remain profitable, but don’t expect a cheap iPhone, cheap iPad or cheap Mac. The last time the company delivered relatively inexpensive gear, in the days of the dreaded Performa series, the company was on life support. Doesn’t anyone remember?

    That situation, however, will not stop the usual suspects from telling you what Apple is doing wrong and what Apple should do to set things right. The company is still judged by a different set of rules, though. Samsung, Google and Amazon all delivered underwhelming financials for the last quarter of 2013. But it seems that Apple got dinged worse despite reporting record sales for the iPhone and iPad and, in fact, meeting corporate guidance.

    But there may be hope for a dose of realty. Consider Amazon, where Wall Street appeared to come to its senses when the stock price went down sharply over concerns that the last financial statement wasn’t quite as good as expected. Then again, Apple has traditionally delivered far larger profits than Amazon, not that it did any good as far as the financial community is concerned.


    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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    4 Responses to “Newsletter Issue #740”

    1. James Katt says:

      Apple’s customers do not want cheap. If they perceive it is the cheaper of two choices, they want the more expensive top of the line Apple model.

      When Apple built the cheaper iPhone 5c it clearly flopped with consumers. Consumers wanted only the best Apple products such as the iPhone 5s – and make it in gold.

      • @James Katt, While Apple got the product mix estimates wrong, that doesn’t mean the iPhone 5c was a flop. It clearly did better than last year’s comparable model in the line, the iPhone 4s according to the information dropped by Apple at the quarterly conference call.


    2. dfs says:

      Well, James, I want the Apple products I buy to be as inexpensive as they can possibly be. But I don’t want them to be cheap, and there’s a world of difference between the two. I’ve seen a quote by, I think, John Quincy Adams to the effect that “there’s thing a person can make that can’t be made cheaper and nastier by somebody else,” and that pretty much sums up the difference between Apple and the competition.

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