• Newsletter Issue #743

    February 24th, 2014


    I suppose some are getting tired of hearing Tim Cook state over and over again that Apple is working on fabulous new products, and will be entering new product categories this year. I suppose one can feel inclined to say enough already. What new products?

    Obviously, Apple has its own timetable as to what to release and when, and it may just be that the oft-repeated statement about new product categories is subject to interpretation. But the year is young, so let’s give him his due. If nothing significant arrives by WWDC 2014, though, I suppose some might feel concerned about accepting statements that end up being little more than corporate spin.

    In any case, on this week’s episode of The Tech Night Owl LIVE, author and columnist Kirk McElhearnMacworld’s “iTunes Guy,” talked about the growing popularity of streaming TV, mentions some of his favorite shows, and speculated on what constitutes a new product category for Apple.

    IT specialist Dave Charbonneau, president of CMIT Solutions, discussed Microsoft’s dilemma in convincing users to give up Windows XP, and offered some common sense tips on preparing to upgrade — or replace — a PC.

    Yes, I did get Charbonneau to speak briefly about switching to Macs. His company’s main focus is Windows, however. But he also recognizes reality.

    Outspoken commentator Jim Dalrymple, Editor in Chief of The Loop, discussed the ideal screen sizes for the next iPhone, Face-book’s expensive acquisition of WhatsApp, an instant messaging app with hundreds of millions of users, and what new product categories Apple might enter this year.

    On this week’s episode of our other radio show, The Paracast: Gene and Chris present Derrel Sims, who is also known as “The Alien Hunter.” His official background calls Sims “the world’s leading expert on alien abductions. His 38+ years of field research has focused on physical evidence, and led to his groundbreaking discoveries of alien implants and alien fluorescence. As a former military police officer and CIA operative, Sims has a unique insight to the alien organization which he believes functions similarly to an intelligence agency.” We’ll be asking him the hard questions about his background, abduction experiences, and his UFO research.

    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.


    Speculation about Apple’s next product initiative may, according to some recent reports, not be a product at all, but a service. Let me explain.

    Yes, it is quite possible an iWatch or some wearable gadget will be introduced later this year. The tea leaves — if not any provable facts — seem to point in that direction. That’s because Tim Cook admits Apple is interested in wearables. It’s also been reported that Apple has trademarked the iWatch name, and has some 200 people working on such a project.

    Of course working on a new gadget doesn’t guarantee its success, let alone its release. Apple no doubt has lots of products under development that will never actually be produced, or won’t appear until some years have passed.

    Take the move to Intel chips, announced by Steve Jobs at a WWDC in 2005. During one of his famous keynote addresses, Jobs revealed that Apple had been secretly working on porting OS X to Intel. He even displayed a satellite photo of the building in which this project was underway.

    This was nothing new, however. There were reports of Apple developing Intel-compatible versions of Mac OS 7 as far back as 1992, under the code name “Star Trek.” With a Unix-based system, however, the work was without doubt far simpler. Indeed, the changeover, which occurred in 2006, mostly went on without incident. OS X for Intel looked and worked the same, except for speedier hardware. Some of those early MacBooks tended to run too hot, however, but standard PC hardware suffered from similar ills.

    Except for rumors, and reports from the supply chain about possible prototypes, few outside of Apple and their suppliers will ever hear about these new products. At the same time, Apple already has a service that is growing by leaps and bounds, faster than iPhones and iPads, and that’s e-commerce.

    When you first set up a new Mac, iPad, or iPhone, or reinstall the OS, you are asked for your Apple ID. That’s the identifier Apple uses to know who you are, so you can buy products and services from the company. As of last year, it was reported that some 500,000 new iTunes accounts were being added every single day, with over 600 million active accounts registered as of last summer. These accounts include a payment method of some sort, such as a major credit card or PayPal.

    That’s a lot of customers for any company.

    So even as growth may be slowing for Apple hardware — and there’s no telling how many wearables or TV set top boxes Apple will be able to sell — there’s a huge base of customers who are buying music, buying and renting movies, and purchasing apps and books.

    This is a multibillion dollar business that dwarfs many online retailers. In the last quarter, Apple reported iTunes sales of $4.7 billion. That’s no mean achievement.

    So now, amid reports that Apple continues to build out huge data centers, come suggestions that financial services may become increasingly important to Apple. They are already adding features to make it easier to entice you to buy things, such as iBeacon. And don’t forget Touch ID, which would allow you to use your fingerprint to make a purchase of any product or service offered on any iOS gadget equipped with that feature, such as the iPhone 5s.

    Working with an iPhone or iPad running iOS 7, iBeacon uses Bluetooth and Apple’s Location Services to alert you about a new product, or a sale, when you approach a display or checkout counter. Imagine, for example, you’re buying a new iPhone, and you get a notification on your iPhone about a sale on new cases. iBeacon also works with third-party apps, so it can theoretically be used as a sales tool elsewhere.

    And, yes, you can turn off Location Services under iOS 7’s Privacy settings. You can also switch off Bluetooth if you want.

    A recent story in Business Insider makes a compelling case for a fast growing business that Apple is expanding right before our eyes. So even while Apple runs out of new hardware business categories to embrace, perfecting an interactive payment structure could ultimately become a huge profit center. This is especially true if Apple lets third parties in on the action, and not just app developers.

    So does this mean there’s an Apple bank in our future? Well, there is already a bank by that name in New York, but nothing stops Apple Inc. from acquiring that name — and perhaps a few branches — to get things going.


    So it’s quite certain that people aren’t running and leaping to upgrade to Windows 8 or 8.1. The new OS is generally regarded as worse than Windows Vista, which was long perceived as one of Microsoft’s worst failures.

    All this trouble comes at a time where PC sales are declining, as more and more people hold onto their old computers, or embrace smartphones and tablets for many computing chores. I know that I don’t use my MacBook Pro, one of those legacy models with a 17-inch display, near as much as I used to. Beyond writing lengthy posts, recording and editing audio and video, I can handle many computing tasks on my iPhone 5s.

    To Apple, though, the OS is just a value added extra that is now given away free of charge. Of course, Apple earns huge profits from selling hardware, and let’s not forget iTunes. To Microsoft, however, lagging sales of Windows can hurt the company big time.

    But only a part of Microsoft’s income comes from those overpriced Windows upgrade kits sold to individuals and businesses. A hefty portion of the OS revenue comes from those $50 OEM licenses sold for new PCs.

    But there are now a published reports, from Bloomberg News and elsewhere, claiming that Microsoft is prepared to drop the price of Windows 8.1 by 70% to makers of cheap PCs. Instead of paying $50, which can mean a lot on a PC selling for $250 or less, the price will be a “mere” $15. I suppose that can make it possible for PC companies to actually earn a little profit from those cheap boxes, or reduce the selling price accordingly to move more product.

    Now the low-end PC space can be a huge problem. It’s not just the inferior hardware, but the potential competition from those cheap Google’s Chrome-books, which use a Web-based OS.

    Faced with the slow adoption rate of Windows 8.1, and declining PC sales overall, it’s clear Microsoft has to do something real fast to help boost sales. Whether clipping $35 off the OEM price of a Windows license for a cheap PC is sufficient is anyone’s guess. Overall, it will certainly have a potential negative impact on the company’s revenue, but if sales are boosted, maybe it won’t matter so much.

    But you have to wonder whether Microsoft will be forced to extend the “joy” of a cheaper Windows license to more expensive PC gear. But what about end users? Right now, Best Buy offers a Windows 8.1 upgrade kit for $199.99, which is an absurdly high price by any estimate. The regular version is $119.99, which is still excessive in today’s marketplace.

    Sure, Apple once sold OS X upgrade kits for $129, but that was long ago and far away. It became $19.99 with Mountain Lion and free with OS X Mavericks. So there’s little reason not to upgrade except for hardware compatibility, or the need to run older apps that aren’t compatible.

    Faced with a version of Windows that is widely perceived as a loser, will a cheaper OEM upgrade for low-cost PCs be sufficient? What if Microsoft halved the price for all OEM licenses, and what if they offered Windows 8.1 Pro upgrade kits to end users for $39.99, the price charged for the Windows 8 release for a short time to entice early adopters?

    Yes, that would mean a huge revenue loss for Microsoft. Going that route would seem to be an act of desperation, and that may be a premature move right now. But maybe the company will have to consider that approach for the next version of Windows if sales don’t improve.

    But right now, Microsoft’s biggest dilemma may be finding ways to convince Windows XP users to get with the program and upgrade. But with so much old hardware still out there, the best upgrade path would be to buy a new PC, a costly solution, particularly if all their apps require paid upgrades at the same time.

    Assuming that a decent number of those legacy PCs can run Windows 8.1 with adequate performance, though, may I suggest, again, Microsoft’s best solution. What if there was a Windows XP to Windows 8.1 upgrade kit for, say, $29.99 or $39.99? This would require building a special installer that would automatically handle the task of backing up your data, initializing your PC’s drive, installing the new OS and flagging potential problems with existing software.

    Perhaps hard drive makers would even sell low-end USB backup drives preloaded with the special Windows 8.1 upgrade installer. At, say, $99.99 for 500GB (more than sufficient for older PCs), this would be quite a deal. It may present a workable path for Windows XP users to upgrade without being forced to buy a new PC, though PC makers will probably object. And perhaps some app publishers could offer cheap upgrades as well as extra-value options.

    It may even make sense for PC makers to take Windows XP hardware in trade, and give you a special discount when you buy a new PC. I suppose recycling the old gear would offer some value, or perhaps they could refurbish the hardware and give it away to low-income users, or third world countries, to gain a tax writeoff.

    Meantime, if true, I wonder if this plan to cheapen Windows 8.1 for low-cost PCs is only the beginning of a forthcoming OS fire sale, a desperate attempt to sell more licenses at any cost. Is that what we can expect from Microsoft’s new CEO, and can it save the company?


    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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