The Network Garden - Mark Sigal's Blog

The End of the Beginning

"Is That All There Is?" - Peggy Lee

Perspective changes everything.

Looked at up close, Apple is boring, Facebook is in decline, and Silicon Valley is more about serving up mouthwatering perks and "F-U" liquidity events than real innovation.

Yet, with a bit of perspective, we see how in a 30 year period, Apple has given rise to the PC, reinvented the phone, broke the hegemony of old media and telecom, and launched the Post PC era.

In fact, Apple is still growing so rapidly that in the last year alone, they generated three Fortune 500 companies worth of new income.

Now, the rumors are that they're launching a new payment system to take advantage of the 500 million iPhones and iPads in use today (many/most with a valid credit card on file).

iBeacon anyone?

Apple CEO Tim Cook has hinted at a new category. It could be anything from a personal monitoring 'companion' device to a set-top box for the living room. 

But, that's boring (conventional wisdom narrative), and Apple must be repeatedly punished for it.

Meanwhile, Facebook is the proverbial case of, "Nobody goes there anymore. It's too crowded."

I still remember when ten million users represented an insanely large base for any service.

In fact, AOL, the gorilla of the early online era, never passed 30 million subscribers.

By contrast, Facebook has 1.2 BILLION monthly active users. That's 60 Floridas!

Despite all of the talk that Facebook's dominion dies with the desktop, 77% of its users are accessing the service from mobile devices, generating over half of their advertising revenue.

 

Is Innovation Dead?

Now, of course, growth and money do not equate to insanely great.

So, is innovation dead? Are we doomed to a decade of Snapchat clones and Instagram wanna-bes?

Up close, it may seem like it, but with the benefit of some perspective, you realize how we are really at the end of the BEGINNING of the next wave.

Want some perspective? Consider this thought-provoking interview with Kevin Kelly, who helped launch Wired, and is one of the sharpest thinkers of our time.

Here's his take:

"If we were sent back with a time machine, even 20 years, and reported to people what we have right now and describe what we were going to get in this device in our pocket—we'd have this free encyclopedia, and we'd have street maps to most of the cities of the world, and we'd have box scores in real time and stock quotes and weather reports, PDFs for every manual in the world—we'd make this very, very, very long list of things that we would say we would have and we get on this device in our pocket, and then we would tell them that most of this content was free. You would simply be declared insane. They would say there is no economic model to make this. What is the economics of this? It doesn't make any sense, and it seems far-fetched and nearly impossible."

Of course, he's right.

What we take for granted as obvious and inevitable, was heretical just twenty years ago.

Doubt this assertion? Do a google search on "silicon snake oil" or "clifford stoll" and see what I mean.

Today, Stoll's opinions sound as ridiculous as witch burners in the time of Salem's Lot.

But then, it was conventional wisdom.

This gets to the nut of Kelly's perspective, which he espouses in great detail, and brilliantly, in his book, 'What Technology Wants.'

What Technology Wants envisions the rise of machines, networks, robots, sensors, systems, data and intelligence EVERYWHERE to the point that they become part of the fabric of life itself (Kelly calls this the Technium).

In other words, you aint seen nothing yet.

As Kelly puts it, "The next twenty years are going to make this last twenty years just pale. We're just at the beginning of the beginning of all these kind of changes. There's a sense that all the big things have happened, but relatively speaking, nothing big has happened yet."

The Uber experience is a revelation today. Dropbox delivers constancy. Amazon amazes. Google Maps is simply magical.

But twenty years from now, every industry and almost every aspect of life will have been uberized, and we will have embedded this logic into our very fabric.

As this organism, the technium, begins to breathe, it will etch new paths, launch new vehicles and drive a new economy.

The future awaits, my friends, but we'll be ready. 

Related

1. Understanding New Mediums: Why Post PC is Not Merely the Web with a Native Wrapper
2. Progress Waits for No One, and Other Harsh Truths
3. 9 logical applications for iBeacons
4. Retail Needs a Reboot to Survive
5. How Uber is like Southwest Air - The Art of Reinventing an Industry

Reading the Tea Leaves of Apple's Q2, 2013 Earnings Call -- Four Takeaways

"It's not real, you know, the fame thing."- Anna Scott (Notting Hill)

The hardest thing for the beleaguered Apple investor to wrap their head around is the fact that Apple exists on a schizophrenic plane like no other.

On the one hand, there is 'THE STOCK' -- i.e., the broken stock price.

It rests in the same Bargain Bin as Dell Computer, a company selling undifferentiated offerings in a commoditized segment that quite literally shrinks by the day.

On the other, there is 'THE REAL COMPANY,' an innovating, selling, marketing, leverage and cash-generating machine that has now dropped almost $100 billion dollars in revenues and $22 billion dollars of profits in just the first two quarters of Apple's fiscal year.

That this engine has fattened the company's coffers to the tune of $145 billion dollars (another $12.5 billion added this quarter) does not satisfy.

That this harvest comes from six different multi-billion dollar product lines (iPhone, iPad, Mac, iPad, iTunes & Services, Accessories) manages little more than an acknowledging shrug.

That the company has repeatedly proven its ability to create massive new markets in a quasi-predictable, highly-levered fashion (now known simply as the iOS platform), yields but a yawn.

"Where's my divvy," bitch the disappointed investors, seemingly ignorant to the fact that not only have spirtual peers, Google and Amazon, never offered up a dividend, but they've never even let the topic so much as brush the top of the table. 

"Apple has an identity crisis," utter the dumbest of the dumb media, blind to the power of Apple's unique position in the market as an integrated hardware, software, services, media, tools and marketplace solution provider.

Ever clear on their North Star - i.e., delivering great consumer experiences that change people's lives - Apple has neither changed their identity, nor lost their focus, as evidenced by the best customer satisfaction and customer loyalty ratings, and consistently, the industry's highest profit margins.

Know this. If it was even remotely easy to approximate the 'Apple Way,' we'd be talking about the multiple multi-billion dollar product lines that Apple's competitors have created; we'd be talking about the breakout success of the Apple Retail Store copycats; and we'd be talking about the multitudes of developer success stories that have dropped out of the Google, RIM or Microsoft mobile ecosystems.

We aren't, and it's not (easy).

It's with this fundamental schism between THE REAL COMPANY and The STOCK that I attempted to make sense of the takeaways from Apple's earnings call.

There are four conclusions that stood out to me:

1. Tim Cook wants Apple to be Liked by Investors in a way that Steve Jobs never did: In the call, Cook had an almost apologetic tone with respect to how Apple has failed to beat the guidance, growth and margins expected by analysts and media. In increasing the dividend and upping buybacks, the tone was more akin to "we're trying harder" than "get on the bus or get left in the dust." By contrast, even when Apple's stock was cratering into the $80's following the crush of the 2008 financial crisis, Jobs embodied a healthy irritation for the capriciousness of investors, and the ignorance of many analysts and the media. The truth here is that no good deed goes unpunished, and far from appreciating Apple's olive branch to investors, the narrative is likely to be spun as Cook's Apple is trying to buy time, and is in defensive mode. Me personally, I wanted a bit more "F-U," and a bit less, "we're sorry."
2. Margins will Remain Contracted for the Foreseeable Future: If there are two product-related narratives that stood out for me, they are: 1) iPad mini unleashed an absolute torrent of first-time tablet device buyers (personally, it's their best tablet device), and if the sacrifice is lower margins (relative to the larger iPad), it's worth the trade-off. If the tablet is the replacement device for many a 'job' that users previously hired PCs for -- as I believe it is -- then any way that Apple can capture this market share is a zero-sum type of win that they must secure. Here, Cook and Apple CFO Peter Oppenheimer were quite clear that Apple executed a similar strategy in winning the media player market with iPod, so what's past is prologue; and 2) iPhone 4/4S is the smartphone device that Apple is counting on to capture market share outside of the US with first-time smartphone buyers. Unsurprisingly, these devices may be where the highest volume comes from on iPhone (especially, until the next iPhone comes out), eroding margins in the process. The alternative is to give that ground to Android based devices, a calculus between market share, revenue, user experience and the bottom line that the company has repeatedly shown the acumen to manage through. Honestly, I am not even remotely concerned that they will find the right balance here.
3. The New Product Pipeline will Likely Remain Dry until Fall at the earliest: Given the extreme secrecy by which the company launches new products, and manages expectations around same, Cook spoke with a metaphorical bull-horn in flatly stating that new product **categories** and new services are not expected until this Fall and throughout 2014. Needless to say, the absence of new products combined with the absence of seasonal catalysts, explains why Apple's outlook for Q3 was a flat quarter, and why the quarter behind that may not be much better.
4. iOS Usage Rates are Staggering in their Differential relative to Competing Platforms: If the downside of the current Apple story is absence of true catalysts to carry it aloft to new heights, the upside is that iOS stands alone in generating 75 cents of every dollar of ecosystem commerce in the mobile universe. Simply put, Apple is paying developers $1 billion dollars in revenue share every quarter, iTunes is on a $16 billion dollar run rate, and the actual usage of these devices in terms of web traffic is of a different degree than the competition. Keep that in mind next time Google touts generic Android unit count numbers. Again, that's not to say that there aren't clear scenarios where Apple gets attacked on the margins, but their core differentators, and the depth of engagement and loyalty with users is unlikely to be threatened any time soon. That's the bottom line.

So, netting it out, should you Buy, Sell, or Do Nothing? And what will Apple stock do in the intervening months ahead?

This, unfortunately is a riddle without a clear answer, a stark reminder of the famous quote that the market can stay irrational far longer than most investors can remain solvent.

Related Posts:

1. Cry Babies: The Strange, Confusing Path of the Apple 
2. Apple's North Star: Four Takeaways from Apple's Q4 Earnings Call
3. OMG, WTF is going on with Apple Stock
4. What is Apple Worth: The 'Gold Standard' Thesis
5. Get ready for the Apple + iPhone backlash

PCs, Media Devices and Mobile Devices: Before and After Apple

If there is a truism about Apple's approach to innovation, it is this.

They find segments for which the existing solution is complex and kludgy, and make it simple and unified.

In doing so, they bring it to the mainstream.

There is nothing elitist in this approach. Quite the opposite.

Most would concur that after Apple, access to computers, music, and mobile computing was more broadly accessible, not less. 

For every door they close in the open vs. closed debate, they open ten others. Most would concur that both the mobile web is better for the platform that Apple created, and the native app ecosystem is richer for it.

Haters are gonna hate, and it's in our nature to tire of winners winning all of the time.

But let's not confuse the essential truth of what Apple has built and continues to build.

We need more companies like Apple, not less, and we should celebrate their success, not pillory it.

Related:

1. Cry Babies: The Strange, Confusing Path of the Apple Investor
2. OMG, WTF is going on with Apple Stock
3. What is Apple Worth: The 'Gold Standard' Thesis

Post-PC Dividend: Average household spend on Apple products was $444

Oh, and that number has grown prodigiously since 2007:

In 2011, the average amount U.S. households spent on Apple products was $444, according to Morgan Stanley analyst Katy Huberty. That figure has been rising smartly every year. In 2010 it was $295. Back in 2007, it was only $150.

(via Daring Fireball)

The Jobs Engine: On Indivisibility and Integrated Systems (GigaOM)

There is a looming sense, a dark narrative that America’s best days are behind it. Why? A clash of civilizations. A sense in many pockets of the country that we are living in a time of anomie, inequity and worry.

Everywhere you look, there is disaster. At ground zero are the remnants of a 100-year flood known as the 2008 financial crisis; it’s a flood that never completely receded.

Put another way, whether you are politically right or left, believe in trickle down or trickle up,  the hard truth is that there are few catalysts for significant job growth in America right now.

Take a look at that one great wonder and power of our age, broadband internet. In many ways it has been an engine of growth and created whole new industries. Yet it has also set off a wave of painful disruption, through the triumvirate forces of:

• Digitization: Anything that can be turned into bits, will be.
• Globalization: Where location can be rendered moot, it will be.
• Commoditization: When bits and logistics can commoditize, they will.

In its wake it has permanently broken or even destroyed multiple industries. In fact, Bureau of Labor Statistics data shows quite clearly how such industries that were rocking and rolling prior to broadband are now sucking wind, including electronics stores, book stores, electronic components, employment services and information services, to name a few.

Less obvious, but equally troubling, is the fact that when these industries break it also disrupts the ecosystems that surround them as well, cascading in a domino effect. 

Here’s how it works: When an industry like print media goes sideways, not only do publishers and the employees housed within them go away, but so too do printers, production houses, delivery trucks, book stores, newsstands, book reviewers, sales reps and publicists. Worse, this hits regional hubs especially hard. And we now know those jobs are not coming back. Ever.

The immutability of this dynamic hearkens to a signature line in Oliver Stone’s ever timely, ‘Wall Street,‘ when broken trader Bud Fox (Charlie Sheen) asks corporate raider Gordon Gekko (Michael Douglas), “Why do you need to wreck this company?” Gekko retorts, “Because it’s wreckable, all right?”

Read the full post HERE.

UPDATE 1: Kevin Kelly, author of 'What Technology Wants' (one of the more thought-provoking books of recent years), and long time Wired writer, has written an excellent article on what he calls 'The Post-Productive Economy.' Most fundamentally, he argues that sustaining growth waves take decades to reach full bloom, yet our measures are tailored to both the wrong kinds of metrics and the wrong sense of periodicity. I think that it further underscores the truth that the strongest counters to Commoditization, Digitization and De-Localization is Integration.

Related:

1. Retail Needs a Reboot to Survive (GigaOM)
2. HP, Dell and the Paradox of the Disrupted (GigaOM)
3. Assessing the Internet: Great Creator or Better Destroyer (GigaOM)
4. The Great Reset: Why Tomorrow May Not be Better than Today

Apple Event: It's Time for Evolution + Keeping Foot on the Pedal

This was a really excellent and interesting event, showing how Apple sees itself post Steve Jobs, and the role of different voices within the compay.

There was the basic message that, we are an execution machine. And this was BEFORE Apple actually got around to what they were announcing.

Then there was the usual table setting around a converged Mac + iOS Universe:

• 3M iPods sold since launch (includes Shuffle Nano, Touch)
• 200M devices running iOS 6
• 300B iMessages sent this year (28K per second)
• 160M Game center accounts
• Shared photo streams (I love this feature): 70M photos shared
• 700K apps (275K iPad apps)
• 35B app downloads
• Mac outgrowing the PC six years straight (#1 desktop + #1 notebook in US)

Evolutionary thinking

But, factoids aside, Apple is a company that can hang their hat on visionary thinking, great design and a strong execution culture focused on the customer and rapid evolution.

I loved Phil Schiller's sermon on how iMac's evolution is representative of how Apple embraces, then iterates, markets. Not a bad lead-in for announcing the next generation of the incredibly cool iMac.

It's fascinating to see the role of polymorphism within the company. Consider the Retina screen, which now serves two different MacBooks Pro segments, the iPhone, iPod touch and iPad.

Look at the evolving relationship between iOS and OSX and the natural symmetries between iCloud, iMessages and iTunes.

Case in point, it seems that the catalyst for the new iBooks App to gain continuous scroll is to better serve iPad mini users. 

I love how Apple is baking sharing into everything, and books are a natural for this.

I am happy to see them supporting iBooks Author, as I think that there is yet to be a desktop publishing equivalent for the post pc era. 

I would be remiss if I failed to mention the Fusion Drive (marries HDD and Flash) in the new iMac. If it works, it could really up the user experience.

Controlling all facets of the system, as Apple does, is what can make such a robust storage service truly standout.

iPad mini AND iPad 4!?

This was a shocker and also makes a lot of sense. Moreover, it sets up an interesting inflection, which I will get to.

Apple has now sold 100M iPads in just 2.5 years, which is faster than the rise of iPhone. iPad accounts for over 90% of the web traffic from tablets. Apple is very well positioned in education, which happens to be where the next generation is growing up.

When Tim Cook said, "We are not taking our foot off the gas," he wasn't kidding. It was a two-fecta. A new form-factor in iPad mini, and the newest iPad in time for Christmas.

This says something since heretofore, there was the March event to announce the new iPad.

To give that up (they have to, right?), they must: A) Recognize that the market is at a point of maturity and imminent competition (maybe); B) Be factoring that the competition aims for the holidays to release their newest gear, and not want to disappoint the 'new-seeking' customer; and C) Figure that since Apple's holiday quarter is generally nuts, why NOT swing for the fences?

Some takeaways:

1. iPad is 9.7" vs. the iPad mini at 7.9" diagonal. But since both devices share the same pixel count (1024 x 768) all software for iPad and iPad mini will work without modifications. As a developer, I can tell you that this is huge. We gained another BIG segment for free.
2. Apple gave Android a bunch of air time in the early portions of the call. As someone on Twitter noted, that doesn’t feel confident.
3. iPad mini is the first iPad that you can operate using one hand. Logical segments: education; women with handbags; porn. I jest.
4. I was a bit surprised that they didn't price the mini below $300 ($299). That seems to be a logical segmentation point for the market, right? Why leave a wedge for Android? Noneteless, this will kill during the holidays. Not Retina, though.
5. The fact that Apple killed the spring iPad event, to me that means Apple is planning to announce a NEW product that they feel is worthy of that calendar spot. Otherwise, they will disappoint the market, who has been spoiled to expect a spring event, g-d dammit!

Related:

1. If Apple is all about the devices, Amazon is all about the services (GigaOM)
2. HP, Dell and the Paradox of the Disrupted (GigaOM)
3. Apple vs. Google: Lessons from Bill Gates' playbook (GigaOM)

 

Pink Elephants, Zombie Software and the App Store

Man, I hate when valid macro arguments (there **is** lots of zombie software in the App Store) are mucked up by clear bias and self-interest.

Writing in GigaOM, David Meyer, quotes a startup analytics founder's assertion that an estimated 400,000 out of 650,000 apps in the App Store are zombie software. Why so many zombies, pray tell?

“This is based on Apple’s closed system — it’s tough to discover those kinds of apps. You don’t have proper search, so the only way to discover new apps is through the top listing,” says Adeven CEO, Christian Henschel.

Really? This is based on Apple’s closed system? What data supports that conclusion? The greater success of apps in other more 'open' app stores?

I mean is there even a scintilla of data that suggests less zombies on Google Play or the Amazon Android app store?

Let's get real. More probably, app store economics are stilted towards few big hits, and the longer tail pool of utility & productivity perennials that get updated, cared and fed for, marketed beyond the app store, etc.

Think: Instapaper, GoodReader.

Everything else either has an orthogonal business model, venture funding, or both (e.g., Dropbox, Yelp, Path, Instagram).

Beyond that, it's debatable whether the preponderance of zombies is a BUG or a FEATURE of App Store economics.

After all, with 650K apps, 90%+ will ultimately fail, just as 90% of businesses in the real world fail, right?

The larger question, what I refer to as the pink elephant in the room in my O'Reilly Radar piece, 'The iPhone, the Angry Bird and the Pink Elephant,' is whether ANY form of app store economics support the kind of vibrant software industry that promulgated during the PC era, and even during the web era.

Let's talk about pink elephants, and not so much about personal biases, is my take.

Is Netflix for eBooks a Winning concept?

Mike Shatzkin has written an excellent post evaluating subscription models in the ebook space, concluding that they make sense more for ebook niches (i.e., specific segments) than as a general offering.

His main point is that in contrasting the success stories at Spotify and Netflix with the prospects for eBooks, one has to look at the concept of granularity; namely, the fact that there are far fewer total movies and songs produced each year (measured in the thousands) than books (measure in the hundreds of thousands).

Read the whole piece, as it covers the history of such business models in the book space, success stories, and how the evolution of online has changed the equation.

My core actionable takeaways from the piece are three-fold: 

1. MEDIA MATTERS: The distinctions between different media types drives their consumption patterns, which in turn drives monetization paths. After all, it was an easy evolution to unbundle the song from the album because the unit of value still worked (arguably better) at the level of the song. Even watching a movie is only a two-hour commitment. Both of these exercises naturally occur in lean back mode. By contrast, reading requires an engaged user, and a book takes days-to-weeks to consume, constraining the types of users and use cases where subscription is compelling. 
2. UNITS OF VALUE: With books, the challenge is to define the unit of value whereby the whole book can be 'systemically un-bundled' into smaller units, and then aggregated into a larger library so as to create the kind of deeper value that supports a subscription model. Reference books are logical places for these things, as are segments like education and business where there are new types of media/engagement units that can be cobbled together to create value (e.g., cliff notes, best practices 'recipes,' quizzes, etc).
3. CATCH-22: The challenge for most publishers contemplating this path is that there is both a material cost to re-factor content AND an income risk that new ventures in this arena don't cost-justify. As such, it's a bit of a Catch-22 for these folks. Why? On the one hand, the clear trend is for publishers to get increasingly squeezed by Amazon (especially if/when there is no more B&N). On the other, the individual stakeholder at a publisher who goes out on a limb to make this type of investment has to fight internal friction to play it safe, and thus faces career risk if things go awry, doubly challenging in an industry where lateral moves are scarce.

Such truths favor upstarts over incumbents (or Amazon, of course), but this is one story whose book has not yet been written.

Related:

1. The Five Keys to a Successful eBook Production: The Story of Spot the Dot
2. Anatomy of an eBook App (O'Reilly Radar)
3. Creating a Top 10 eBook with Corona (Ansca Website)
4. Rebooting the Book: One iPad at a Time (O'Reilly Radar)
5. Ruminations on last week's Book Expo America: What it means for the Book Biz

Pattern Recognition: Connectors; Winning; Facebook's Growth Team

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Brands Should Target Connectors Aggressively: This week, I was in NYC on business. As it was raining, I asked the doorman at my hotel if he could hail a cab for me. While we were waiting, he pulled his new Samsung Galaxy Note out of his pocket, and starting checking the news. Having never actually seen someone using a Galaxy Note, I asked him if he liked the device. Almost apologetically, he told me how he's a long-time Apple gadget lover but had needed something a little bigger than an iPhone, as a lot of the time, guests of the hotel ask a question, need directions and what not. In fact, he was quite happy with the device. This got me thinking. A hotel doorman must find himself in dozens of (potential) like encounters every day, all the while in a mode that puts a device like the Galaxy Note in a favorable light. Given the natural position of such connectors to spread the good word about a product relevant to doing their job, this sure seems like an argument for brands aggressively targeting key connectors in relevant segments. They are the ultimate influencers when the context is right. To be clear, I am sure some brands are doing this; I just don't believe it's a standard part of many companies' market penetration strategies.
2. Staying in the Game: Being in the tech business, I constantly marvel at the number of companies who despite mediocre products and dubious customer adoption in the early stages of their life, somehow manage to 'hang around' until they achieve victory. By victory, I mean: A) outlasting the competition; B) finding a market; C) achieving product maturation; or D) realizing a successful M&A event. To me, this suggests that winning is as much a product of finding a way to 'stay in the game' as it is about pursuing greatness or building a dominant market position. Sometimes what separates the winners from the losers is the conviction that you simply won't be defeated, and the unyielding drive to keep moving towards the goal line in the face of doubters, defectors and hard data. Mark Suster delves into this topic in an effective post called 'What to do about that chip on your shoulder,' and I love how Facebook challenges its rank and file to ask themselves, "What would you do if you weren't afraid?" Sometimes, when we're feeling against the wall, we let fear and a sense of doom drive us into the crash position. Winners ignore such facts, as the KNOW their destiny is otherwise. Paradoxical, to be sure, but such is life.
3. Facebook's Growth Team: Probably the most impressive thing that I read this week was the response on Quora to the question, 'What are some decisions taken by the "Growth team" at Facebook that helped Facebook reach 500 million users?' Read the whole piece as it spotlights how a company goes about institutionalizing growth in the same way that Apple, under Steve Jobs, insitutionalized the process of creating insanely great products. It's indicative of how fundamentally different business CAN be in the age of the Internet Economy, and one gets the sense that Facebook is absolutely dogmatic in their approach. This truth is best framed by the following snippet from Andy Johns, who worked on the Growth Team at Facebook, "Growth was a horizontal layer across product like engineering/ops is a horizontal framework behind product. Not only would someone ask 'What's the performance impact on site speed or stability if we build and ship 'X'?' it became common for people to ask 'What's the impact on growth if we build and ship 'X'?'. The decision to make growth a canonical part of the product, engineering and operational discussion was a really important decision that the executives made." In the end, it all comes back to understanding your product and the value + outcomes that it delivers. This requires having both the rigor and framework to suss that truth out, then test it, and iterate tirelessly to the bullseye. This truth is underscored by the comment by Chamath Palihapitiya, who led the Growth Team, and stated, "At Facebook, one thing we were able to determine early on was a key link between the number of friends you had in a given time and likelihood to churn. Knowing this allowed us to do a lot to get new users to their 'a-ha' moment quickly.  Obviously, however, this required us to know what the 'a-ha' moment was with a fair amount of certainty in the first place." Needless to say, way too few companies know this answer with such certainty in their business, and even fewer build the systems required to optimize it, which explains Facebook's unique position in the market.

 

What is Apple Worth? The 'Gold Standard' Thesis

With Apple having shot up almost 75% since late November (from $363.57 to $633.68), the obvious question is whether the ship has sailed from an 'Apple as a Stock Investment' perspective.

My take on this one is that the so-called market professionals (analysts, media, insitutional investors) tend to bucket stocks by category, so that a company like Apple (18.03 trailing PE) is wrongly bucketed in the Dell ($DELL) and Microsoft ($MSFT) personal computers category, when in truth, the company is more of a "gold standard" type of investment for those looking to large cap and growth.

In other words, it combines bragging rights ("yeah, I own Apple stock"), buy and hold (it's a seminal stock to give to your kids) and of course, delivers earnings growth consistency (style AND substance).

This puts it in the category of the brands that everyone loves most, the companies that are most respected and the stocks that no one will ever lose their job for purchasing.

So what are those stocks worth in terms of trailing price-to-earnings (P/E)?

• Google (21.25 trailing PE)
• Amazon (141.89 trailing PE)
• Berkshire Hathaway (19.52 trailing PE)
• Coca Cola (19.91 trailing PE)
• Southwest Airlines (36.13 trailing PE)
• Procter & Gamble (19.79 trailing PE)
• McDonald's (18.71 trailing PE)
• Disney (16.36 trailing PE)
• Nike (23.03 trailing PE)

Now, when I average these out, it comes to a wacky 35.18 trailing PE, impacted by how crazy Amazon's stock is. When I back out Amazon, I get a 21.84 PE.

If I apply this PE to Apple's current price, I get a $767.59 target price.

Meanwhile, the following variables lead me to conclude that Apple getting to that price point is NOT unlikely.

One, is the simple fact that the company is still growing iPhone very well (all of the field data suggests that it's simply dominant in the US and abroad), and iPad will continue to double in the year ahead.

Two is that in both of these categories there are no competitors that are taking market share owing to perceived lack of differentiation, which means I don't see any obvious margin pressure.

Three is that the 'halo effect' for Apple is only accelerating. Their iCloud piece is increasing the rate by which families will standardize on all things Apple, which just means that the per household spend on Apple will continue to grow.

Four is that the Mac is continuing to grow for the simple reason that every PC company is leaving the business, and the core functions of a PC are so commoditized that it actually favors a great PC maker with a focused, fairly priced solution, and that's Apple.

Five is that election years are historically good stock market environments, so that favors a positive macro market in the month's ahead.

In any event, your mileage may vary, but the simple math suggests another ~21% of upside, based upon nothing more than what we already know about Apple's business and the market at large.

But, as you know, Apple is not one to rest on its laurels in terms of new product innovation and earnings acceleration.

UPDATE 1: With Apple down to $530.12, owing fully to a skittish market, this topic is worth re-visiting. Andy Zaky of Bullish Cross (he's the #1 $AAPL analyst in my book) did just that, instituting only his 5th BUY rating ever on Apple, adding that the company is trading at a near 8-yr low P/E ratio. He projects that the stock will hit $750 by end of January. 

UPDATE 2: I wrote this piece originally on April 5, so you may be inclined to say that the market has corrected, and therefore Apple's value should correct accordingly. Would it surprise you to know then, that even after the corrections (the averaged P/E for the comparison companies, net of Amazon, is NOW 19.19), Apple's implied value based upon the same logic is $788.

UPDATE 3: Jean-Louis Gassée has written an excellent piece that attempts to decode share pricing logic, and the wide disparity between Apple and Amazon. I would add another point of consideration to this equation. Namely, that no good deed goes unpunished. In other words, for all of the bashing about Apple’s walled garden mentality, it is refreshingly transparent with investors on things like unit counts, product and geo segment breakdowns, margins, virtual channel metrics (iTunes/App Store) and real channel metrics (Apple Store), to name a few. Put simply, this is a company that wants to be understood AND pays the price for it.By contrast, Amazon’s metrics are all about not wanting to be understood, and they are awarded deeply for it.I suspect this is in part because we have all been trained that the naysayers in phase one of Amazon’s life as a public company were left embarrassed, and fear of humiliation when you know that the guy on the other side of the table is smarter than you is a potent force.

UPDATE 4: As of February 23, 2015, Apple is now trading at $929 per share pre-split. Not only have they not cratered, they added a dividend, captured 95% of the profits in the entire mobile phone handset industry, cracked the code on China, and successfully made the transition from Steve Jobs to Tim Cook. The next big test is Apple Watch. 

Related Posts: 

1. It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Apple’s Q1 Earnings Call
2. Apple just became IBM of the Post-PC Era: Thoughts on Apple’s 'Q3 Earnings Call
3. Apple's Segmentation Strategy (and the Folly of Conventional Wisdom) 
4. Five reasons iOS vs Android isn't Mac vs Windows
5. Holy Shit! Apple's Halo Effect

It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Thoughts on Apple’s Q1 Earnings Call

"We thought we were betting bold. We didn't bet high enough." - Apple CEO, Tim Cook

Unless you are living under a rock, by now you’ve heard all of the platitudes about Apple’s jaw-dropping earnings that are so big, they make my head hurt. 

$46.33 billion in quarterly revenue, $13 billion in quarterly profit, and $17.5 billion in cash flow from the quarter. This on unit sales of 37M iPhones, 15.43M iPads, 15M iPods and 5.2M Macs.

In fact, in the annals of largest quarterly profits of ALL-TIME, this is #4, and Apple is the only example in the Top 20 that is NOT an oil and gas concern.

In other words, conventional wisdom that Apple can’t win is dead, and thus, it’s high time that we start to ‘think different’ about what makes for great user experiences, great products and great companies.

But first, let me shine a light on the fundamental biases that have colored Apple’s skeptics over the years:

1. Apple can’t Win: The basic premise here is that by dint of a magical asteroid hitting planet earth, Apple first stumbled upon an iPod, then an iPhone, and then an iPad. But now that the competition has figured out what they’re up to, Apple’s can’t possibly win. The conventional wisdom here is that every product is destined to become a commodity, and when it does, a company like Apple, which has built its business on creating proprietary differentiation, must lose. Honestly, this one should have been laid to rest with the other bit of conventional wisdom about consumers not buying ‘premium’ products in bad economies. If the recession taught us anything it is that consumers won’t be frivolous, which simply means that they won't buy cheap crap that doesn’t last, OR over-priced goods that don’t deliver true value. Few consider Apple products to be in the low-value category, and increasingly, Apple has learned how to deliver that value without leaving pricing overhang for the competition to outflank them, a lethal combination. Ironically, in the area where Apple most clearly lost, the PC wars, the price of winning has been death or outright market abandonment for Dell, HP, IBM and Toshiba! Meanwhile, Apple hums along with the Mac breaking all-time unit sales records and outpacing the growth of the PC industry as a whole (+26% year-over-year for the Mac vs. 0% growth).
2. Android is Inevitable: This bit of conventional wisdom is the kin of the 'Apple can’t win' mantra, and it’s driven by two fundamental bits of misunderstanding. One, Android vs. iOS is not Mac vs. Windows all over again, as so many non-thinking analysts and media types regurgitate mindlessly. Case in point, Android’s success in smartphones has hurt Apple’s iPhone business not one iota. If anything, by Android accelerating the demise of the feature phone, that catalytic event has driven more consumers, more rapidly into Apple’s arms. Further, owing to the fractured nature of Android, whatever benefits users have seen with their Android phones is NOT translating into any 'halo effect' or loyalty for that same buyer as they start contemplating tablets (where the lure of carrier subsidies do not exist). Contrast that with iOS, where entire families standardize on iPod touch, iPhone and iPad because it is a no-brainer owing to the curation of the platform, the range of both media and apps, the tight integration of services (iTunes, App Store, iBooks, iCloud) and the friction-free nature of its logistics from developer tools and distribution, to discovery, monetization and cross-pollination between devices. Put another way, if Android is winning, then Apple must feel terrific about 'losing' to the tune of 315M cumulative iOS devices, with 62M devices added during the holiday quarter.
3. Horizontal is Best: As alluded to above, it is held as gospel that the path to market success is to build just a piece of the solution, be the best at just that piece, and then look to third-parties for the rest. The sad irony is that this thinking has pushed solution providers farther and farther away from their customers, led to product experiences that are confusingly-complex at best, babble-speak at worst, and manifested in sales and support channels that are blind, deaf, dumb and stupid. Very clearly, the Apple model of innovating the big idea, building the entire solution, and then tying the entire value chain together, down to the level of retail presence, is so at odds with conventional wisdom that it simply demands that conventional wisdom change.
4. Open will Always Prevail: This little bit of double-speak has been proffered in recent years by Google who, let the record show, is open-ish in areas that they seek to commoditize, but quite happy to remain closed in the areas that they monetize (e.g., AdWords, AdSense, Search algorithms). In fact, smart folks should bucket this one with the false bit of conventional wisdom that you can’t beat free. As privacy advocates are quick to note, free is often too high a price to pay when the true price of free is someone selling YOU (and your data) as the customer to advertisers, direct marketers and the like. Hence, in the post-PC universe one envisions a world bifurcating between well-rendered, well-supported products where the customer pays for the product, but knows exactly what they’re getting; and free products, where you get what you pay for; buyer beware. In truth, customers buy outcomes: they don’t buy attributes; and open, which has many conflicting interpretations, is an attribute. Buy the full dining experience, not the raw ingredient.
5. Without Steve Jobs, Apple is toast: Like Walt Disney and Henry Ford before him, Steve Jobs is a once in a 100 years type of leader. Hence, it must also follow that once he is no longer in the picture, Apple will return to its mediocre ways. While it’s way too early to gauge the efficacy of this one, what conventional wisdom does not account for is the fact that: A) Apple (under Jobs) built a very strong, and deep management team, virtually all of whom have been indoctrinated into the Apple Way for a decade or longer; and B) With Jobs battling cancer for the last eight years of his life, the transition plan was implemented in practice on a regular basis, what with three different health-related breaks forcing the issue.

Netting it out: My hope is that in all industries, not just tech, business leaders will take the time and have the intellectual courage to reboot their sensibilities about conventional wisdom, and what they have been taught to think is the 'one right way.'

It’s time to Think Different, inasmuch as Apple has proven yet again that there is another way, and it delights customers, creates serious halo effects, leads to game-changing new products, creates institutional leverage, and makes the creator a shit-load of money.

Who wouldn't want to emulate that? Our differentiated economy depends upon it.

Closing Notes:

1. Independent Analyst Andy Zaky of Bullish Cross deserves serious props for calling this earnings blowout back in December. What I love about Andy is his analysis is crisp and clear, and unlike the folks that write 27 different position pieces, and then spotlight the two that are right, conveniently ignoring the 25 that are wrong, he writes 1-3 pieces per month. The full piece is worth a read.
2. Tim Cook has consistently asserted that the iPad and tablet market is destined to be a bigger market than the PC, noting that iPad outsold the US PC market in the recent quarter. Along those lines, he had a great comment where he noted that you can SEE how the iPad is winning in market-by-market in segments like consumer, retail, pharma, education, and financial services, and cited lots of specific use case examples to prove the point. I'm certainly seeing this playing out in my daily travels, aren't you?
3. For all of the banter about Apple’s legendary secrecy, it’s ironic that their earnings calls are so transparent relative to earnings calls at Amazon, Google and Netflix. Whereas prying metrics from the other companies is like pulling teeth, Apple seems more than happy to breakout product lines, geographies, channels, market segments and the like. You know the axiom that you can’t improve what you don’t measure. Perhaps another appropriate axiom should be that you can’t really trust what you can’t measure, and Apple is very trustworthy in this regard. No fuzzy metrics.
4. One clear change in todays call was that for the first time, Apple acknowledged that they are now in ACTIVE mode in figuring what to do with their massive pile of cash, which is approaching $100B. Nothing specific was cited, but it’s perhaps a tacit acknowledgement that they either have more cash than they know what to do with, or that they are contemplating something game-changing that will take a lot of cash (buying Comcast, DISH or DirecTV?).
5. I was heartened to hear that per store sales are rocking at Apple Retail, hitting $17.1M in the last quarter versus $12M in the year-ago quarter (up 43%), which to me suggests that the impact of halo effects are tipping into another gear, as people default to the stores and buy for their entire family, as opposed to piece meal buys just for themselves. The company tracked 110M visitors to the stores vs. 76M the year before, which translates t 22K visitors per store per week. Cited was the role of Easy Pay in enhancing the ability to handle sales of in-stock items on busy periods, and the ability to order online and pick up at retail, all of which are subtle indicators of how even in a seemingly played category like retail, Apple continues to tweak and evolve. Mind you, the holiday period is an outlier relative to the other three quarters, but Retail is a game-changer when it works, and it is working big-time for Apple. 

Related:

1. Apple's Segmentation Strategy (and the Folly of Conventional Wisdom) 
2. Five reasons iOS vs Android isn't Mac vs Windows
3. Holy Shit! Apple's Halo Effect
4. Open "ish": The meaning of open, according to Google
5. Apple just became IBM of the Post-PC Era: Thoughts on Apple’s 'Q3 Earnings Call
   
   

Existential Threats: Google v. Apple v. Amazon - who fares best?

If Apple, Amazon and Google ⎯ my tech industry standard-bearers ⎯ were each confronted with an existential threat, who would fare best, and why?

What is an existential threat? In short, it's a doomsday scenario that threatens one's very existence, changing the rules of the game for survival going-forward.

I came to ponder this topic after I read Andy Zaky's excellent analysis of Apple's stock price performance, where he convincingly argues that Apple is the single most undervalued large-cap stock in America.

Reading it, I struggled how to wrap my head around why a dollar of Apple earnings were worth only 68 cents relative to the Google earnings dollar, and a truly feeble 14 cents relative to the Amazon earnings dollar (based upon each company's price-to-earnings ratio).

Don't get me wrong, intellectually I get it, having written on investor dead zones many times over the years.

That stated, it simply begged the question of whether Apple's investors are so skittish on the company's future prospects that they are blithely willing to dismiss its current performance, especially in light of Apple's tremendous acccelerated earnings growth.

Then, I read a Wall Street Journal piece on how Google is planning to compete with Amazon Prime via a one-day shipping program to be orchestrated in tandem with third party retailers.

This brought me back to the myriad of Google initiatives over the years that while seeming to have a larger purpose in the company's core business, lack the rigor of experiential focus and more pointedly, the 'show me' factor of direct pressure to produce real oxygen in the form of sales and profits.

The juxtaposition of these two stories transported me back to a conversation I'd had years back with one of my co-founders in a company that we'd recently sold to the '800 pound gorilla' of the segment.

Ruminating on whether we should hold onto our stock from the sale or cash out, my partner raised a question that I'll never forget.

"Do you think that if XYZ (name witheld) faced a major disruptive threat, that they have the DNA, secret sauce and intestinal fortitude to re-group and rebound?"

I didn't believe that they did, and that was that.

Rise to the Challenge, or Wither Away?

The lessons of the past is that there is no 'one right way' when faced with overcoming existential threats, as evidenced by how differently Intel, Microsoft and Apple responded when faced with potential doomsday scenarios.

In the case of Intel, the strategy when confronted by the commoditization of their original DRAM business was to re-invent themselves as a Microprocessor company.

In the case of Microsoft, threats such as the emergence of network operating systems, the rise of TCP/IP as a global communications protocol and the ascendance of the Web-browser and web-based apps were reconciled via an "embrace and extend" platform-centric strategy.

In the case of Apple, the strategy was highly pragmatic. First, they shored up the 'mother ship' Macintosh business by embracing their tight integration of hardware and software, and then they leveraged this position to invent the future via a 'halo effect' approach of self-cannibalization, new product creation and derivation, coupled with managed distribution channels (e.g., Apple Store, iTunes, App Store).

Most companies, however, lack the necessary combination of acumen and ego attenuation to make such reboots, and as such, the tech industry is littered with the remains of once-great companies that are either dead or strategically irrelevant, such as WordPerfect, Novell, Borland, Nortel, Motorola, Netscape, AOL, Sony and Yahoo, to name a few.

Where do Apple, Amazon and Google Fit in this Mix?

To the extent that Apple has faced multiple existential threats in its history, and A) has emerged bigger and stronger than ever from its experience; and B) has multiple members of its management team who remember the dark days, common logic says that the company has both the DNA and culture to overcome such threats.

Similarly, the company's strong track record of R&D is anchored by a rigorous focus on only pursuing new product initiatives that have a long-term path to economic durability, which bodes well for them relative to their peers, Steve Jobs or no.

What about Amazon? Interestingly, the company has been repeatedly battle-tested in segment after segment as a e-commerce provider, each time emerging stronger than ever.

Moreover, the company has been pronounced dead by investors more than once in its history, toughening its skin, and equally important, fomenting a culture of continuously improving the core business, while expanding into new domains. 

And while the company's R&D acumen is not quite to the level of Apple, Amazon has been able to accomplish its moves in a segment where wafer-thin operating margins are the norm, shielding it somewhat from the 'fat and lazy' mindset that has undermined many a company.

Where does that leave Google? The short answer is that we don't know. The company has never faced material risk to its primary revenue-generating ad business, and even though many (most?) would agree that the core Google search service is less magical and a bit long in the tooth, there are, for the moment, no direct threats to that business either.

Simply put, the company has never been battle-tested for operating in adverse environments, and frankly lacks both the R&D proof points that they can create new product lines which generate material sources of revenue and/or a cohesive sense of how the various piece parts fit together holistically. I would, however, give them credit for getting better on that latter point under Larry Page, as I wrote about here.

Netting it out: If a company's stock is a reflection of its current performance relative to its past, measured against its prospects and risks for managing for a better tomorrow, it seems clear that Apple is the gold standard in managing through existential threats, Amazon is the silver, and Google is the great unknown.

Related:

1. Built-to-Thrive - The Standard Bearers: Apple, Google, Amazon
2. Amazon's "Prime" Challenger to iPad
3. You say you want a revolution? It's called post-PC computing

Head to Head on R&D: Amazon since Kindle; Apple since iPod; Google since Android

If you believe that the market is a discounter of all known information, then in my interpretation the market seems to be saying that Kindle and iPod are emblematic of companies operating on offense to create new sources of revenue; whereas Android, for its impressive market share numbers, is perceived as a defensive move to protect existing revenue sources.

Related:

• Built-to-Thrive - The Standard Bearers: Apple, Google, Amazon

(CHART) Head-to-Head for Ten Years: Wal-Mart, Amazon, Google and Apple

This chart is illuminating, I think. Wal-Mart is so completely instutionalized that the present, past and future seem "priced in." It's obviously a great company, but how can you argue any differently?

Meanwhile, Google is making a ton of money, is completely dominant in search advertising, and has executed their moat strategy very effectively.

Yet, when positioned side-by-side against Amazon and Apple, it too, is far removed from tremendous "upside surprises."

Netting it out: Apple and Amazon still seem to know how to pull rabbits out of their hats, and their stocks reflect it.

It's something to think about in handicapping the next stage of the media tablet market, and the respective ecosystems that will emerge, sustain or get marginalized around same.

UPDATE:Steven Cains (@cains) notes via twitter that it's not really fair to compare $WMT due to dividends (Wal-Mart pays em; Apple, Amazon and Google don't). It's an obviously fair point, but if anything, it seems to affirm the macro narrative that Wal-Mart's got predictability (in all forms) priced in.

Apple just became IBM of the Post-PC Era: Thoughts on Apple’s 'Q3 Earnings Call

 

 

"What would I do? I'd shut it (Apple) down and give the money back to the shareholders." – Michael Dell

“Amateur hour is over.” – RIM

“No one ever got fired for buying IBM.” – IT Buyer

With Apple’s stock surging towards $400 in after-hours trading, let me just say that I guess all of those 'Apple can't win' naysayers should have a cold, hard one with Michael Dell about now.

"Not open enough." "Too vertical." "It’s Windows versus Mac all over again." "The iPad is just a really big iPod touch." As if that last one is even an insult.

If anything, we are seeing the last vestiges of Apple being undervalued and under-appreciated - both as a stock and as an entrepreneurial institution - and the realization/capitulation that the company is the second coming of IBM, as in "No one ever got fired for buying IBM."

The good news in that is that the company has earned it through laser-like focus, brutally precise execution and a coordinated balance between short-term goals and tactics, and long-term planning.

There just is no other comparable in terms of this level of innovation, diversification, market penetration, corporate culture and eye on the money-making machine.

As such, like IBM in the good old days, companies big and small will want to gain access to some of the Apple magic, investors will pad their portfolios, and who knows, the next great job creation stimulus might come out of the elixir that engaging with Apple brings forth.

All that said, I like my Apple with a bit of a chip on its shoulder, surrounded by legions of skeptics, confidently, but with a bit of a bruised ego, needing to show 'em what they can't see from the highest heights.

I need good, scary competitors keeping the company hungry and lean of mind, and fear that in absence of same, sloth, arrogance and the easy path might water down true greatness.

To be clear, though, I heard zero in today's earnings call that gives me cause for pause, as these blowout numbers and jaw-dropping highlights suggest:

1. The Law of Big Numbers? Yeah right: Apple posted $28.57B in revenues for the quarter, an 82% year-over-year bump. But the company has never been one to confuse market share or even raw sales with profits and cash, and this quarter was no different. In terms of profits, Apple netted $7.31B for the quarter. That means that profit growth (up 125%) outpaced revenue growth. Imagine a quarter that drops $10.4 billion in new cash reserves (up 131% year-over-year), and you have a picture of Apple, which now has a tidy hoard of $76.2 billion. Oh, and they actually grew gross margins in accomplishing this (41.7% vs. 39.1% a year ago), spotlighting the single-mindedness of their assault. Good thing the board didn’t listen to Dell when they had the chance. I jest.
2. Victory over the Tyranny of the "One Right Way": One knock on Apple is that they are trying to do too much, and be too integrated, which is a false dichotomy in the same way that Apple winning doesn’t mean that Google has to lose, or even that the King of Old PC, Microsoft, will die anytime soon. Strategy that is well-planned and even better orchestrated is simply magical, and validates itself through measurable, repeated results. Were Apple to do nothing more than sell 20.34M iPhones in the quarter (representing 142% year-over-year growth, double the 67% growth rate of IDCs smartphone segment) it would warrant Lion-izing Jobs & Co (pun intended - it ships tomorrow). But it’s beyond shocking to see that on top of that performance they took the iPad, a product that did not even exist five quarters ago, a tweener device, and one for which there remains no viable competing solution, and sold 9.25M units in the quarter - a whopping 183% increase year-over year. Apple management was magnanimous in stating plainly that they literally sold every single iPad that they had to sell. Put another way, the iPad is now selling almost 2.5X the number of Macs sold quarterly in just its fifth quarter of life. Imagine the kid in diapers down the block, storming onto the court, and whupping LeBron James without breaking a sweat. It's that astounding. I am sure some analyst will find a dark cloud in Apple's "disappointing" Mac and iPod numbers, since the former is only growing 14% year-over-year and the latter actually contracted 20% year-over-year, but this is akin to a parent with a family full of prodigies lamenting that one of her kids was merely top of class, and not top of the world. Mac, after all, still sold 3.95M units to outpace the growth of the larger PC business by 5X, the 21^st consecutive quarter its growth has outpaced the larger PC market. And the iPod, where Apple still commands a 70% market share, is somewhat of a hodge-podge. After all, almost half of the 7.5M devices sold were the non-iPod touch variety, and thus, a long-term dead end on the street of smart devices. Meanwhile, the other half - iPod touch - is subsuming the legacy iPods on one side, and being subsumed by the god-device iPhone and the big daddy iPad on the other. 
3. When You Look Like the Safe Choice, You’re IBM: One hard takeaway throughout the call is how the one-two punch of iPhone and iPad, when combined with everything else that Apple has done right (Apple Retail, iOS unity, the SDK play, iTunes) has made Apple look like the "safe choice" in Post-PC computing. Consider emerging markets, like Asia-Pac where the iPhone business quadrupled year-over-year. Even the Mac is up 57% year-over-year there. Similarly, China, Mexico, Brazil and the Middle East were cited by Apple management as the mega-drivers of iPhone growth in the quarter.  And if you think that China is a bellwether, consider this. It generated $3.8B for Apple in the quarter, constituting 13% of Apple’s revenue. Moreover, in the K-12 educational segment, typically a laggard in new technology adoption, Apple sold more iPads than Macs in the most recent quarter. You wrap hard numbers like this with 'soft data' of iPhone and iPad pilots in the enterprise (91% and 86% of the Fortune 500, respectively, about half that amount in Global 500 companies), and the picture is clear. Apple looks like the safe choice, which history suggests has a way of becoming a self-fulfilling prophecy, as both IBM and Microsoft proved before them.
4. Masters of their (Channel) Domain: Now what’s scary in all of this is that the company is hardly at their apex from a market penetration standpoint. First and foremost, the almighty Apple Retail halo-effect creation engine, which no other device vendor has, is a business that is humming along with 36% year-over-year revenue growth, but equally important, one where Apple is seeing 20% Y-O-Y growth at the individual store level (now at $10.8M per store). Moreover, I took note of the assertion by Apple COO Tim Cook that the company is ready to move from “pilot stage” to “adoption phase” in the enterprise, something they plan to do vis-à-vis the dual leverage of: A) Piggybacking off of carrier’s sales forces that target enterprises to sell them voice and data solutions (where RIM’s inattention to their core competency, and obsession with chasing consumers will be business school fodder for years to come); and B) Building overlay sales organizations that co-sell with other enterprise solution providers (although details were fuzzy at best, and no mention was made to their recent B2B licensing programs). When you surround this gauntlet with an additional existing 115K outlets for Apple products, another 228 carriers (in 105 countries), and of course, the 225M account strong iTunes ecosystem (all backed by credit cards), and you’ve got something that is, dare I say, borg-like.

A side observation in trying to digest all of these numbers is that for all of the puffery about Apple being a "closed" company, if you compare their metrics breakouts in earnings calls to a more "open" company like Google, it’s laughable. Google, like a lot of companies, gives the flyover view, whereas Apple allows the interested to get fairly surgical in their understanding of Apple’s business.

I could go on and one, but the key point is..."Holy Crap!" And you can quote me on that. :-)

Related Posts

1. Apple's Segmentation Strategy (and the Folly of Conventional Wisdom)
2. Five reasons iPhone vs Android isn't Mac vs Windows
3. Holy Sh-t! Apple's Halo Effect
4. Is the enterprise dead as a tablet strategy?
5. Apple announces 'Custom B2B Apps for Business' Program...but there's a catch