3
Feb

People buy iOS devices for more than their impact as status symbols

2-Color-Design-Hi-Res-100px-widthMuch has been written about the journey Apple’s promotional efforts for iOS devices have taken from functional feature presentations to depictions of a luxurious life style. “Luxury tech” may be Apple’s market message of the moment, but let us not forget the rationale for consumers buying these devices in the first place — for many people they simply work better.

We recently purchased an iPad 2. Our reasons for purchasing this tablet amounted to a need to fill in some functionality not available with either of our other tablets:

  1. a Microsoft Surface 2 RT
  2. and a Samsung Galaxy Note 2.1 10.1 running Android JellyBean

We continue to be impressed with the performance of the iPad2. Three features of mobile computing on a tablet device:

  1. Battery life
  2. Display
  3. and, finally, a high quality tablet experience without recourse to an external keyboard

meet our requirements. We routinely experience two day operation between charges. The display, while bright, is not shiny (unfortunately this is the case with our Surface 2 tablet). The virtual keyboard works very well, in particular the text highlighting feature works great.

So why all the talk about “luxury tech”? Perhaps the driver for this new promotional theme is an effort to convince consumers already outfitted with an iPad to purchase a new one. Repeat-buy customers are rarely motivated to purchase new product based on the compelling features driving the initial purchase. There has to be something new. Better yet, there should be a feature consumers always consider “new”. There is no better example of this category of feature than device as status symbol.

But the bad news is the indication this strategy reveals of market saturation. There are simply no more new consumers to whom Apple can look to further increase device sales volume. The only recourse is to cannibalize its current customer base. By opting for the “luxury tech” moniker, Apple, I would argue, has achieved a graceful method of achieving its objective.

In contrast, manufacturers on the lower end of the product spectrum (I include Samsung in this group), out of necessity need to implement comparatively more risky methods of motivating consumers to step up and buy new product. For these unfortunate companies, the only option is to abandon any effort to support their customers when something like Google’s decision to walk away from supporting Android Jelly Bean and earlier versions of the Android O/S arise. Nobody likes to hear a vendor tell them to take a hike when a product with some financial heft to it is no longer usable. But for Samsung, et al, this is the only recourse. Ugh.

The result of all of these efforts is the present hierarchy of mobile device manufacturers, with Apple at the top. Because the iPad 2 is actually a market-leading product, it is unfortunate to see “luxury tech” as the primary product promotional theme. But one can understand why this is the case, given the extent to which the available market for these products has already reached saturation levels.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2015 All Rights Reserved

6
Jan

Promotional content for tablets running on Intel processors still comes up short

2-Color-Design-Hi-Res-100px-widthIntel® announced the availability of a set of 17 new CORE microprocessors at the CES 2015 event this week. The specs on these CPUs are impressive. Perhaps Intel OEMs can accompany the debut of these new chips with substantially more effective marketing communications than has been the case in the past.

Readers may wonder about the gap. Just how has the editorial branding of tablets, smartphones and even laptops, notebooks and 2-in-1 small form factor mobile computing devices powered by Intel missed the mark? Where Intel’s technology has been used to power mobile computing devices running a Microsoft operating system, the promotional content presented to consumers, in my opinion, has been calibrated too tightly to speak to the needs of the low end of the market. This rigidity may be a reason for comparatively low sales volume for these devices. Windows tablets are something different from desktop PCs. Then again, they are also something very different from Android tablets

There are 2 big reasons why any consumer should seriously consider purchasing a tablet running Microsoft Windows 8.1 vs a comparably priced tablet from, for example, Samsung, running Google’s Android O/S:

  • There will certainly be an update path on the O/S, which is likely not going to be the case for the tablet produced by Samsung
  • The computing experience will be consistent with any desktop computer running Microsoft Windows 8.1. This cannot be said of the Samsung device. I own a Samsung Galaxy Note 2.1 10.1, which is less than 2 years old, but is, nevertheless, entirely obsolete. The device does not support a web browser useful for highlighting and copying text, ets. The $700, approx, paid for the Samsung product amounts to a throwaway

But the marketing communications hasn’t spoken to these points. Instead, the typical marketing communications campaign for a tablet powered by Intel, running Windows, is built around an effort to highlight features directly competitive with Android and iOS powered tablets. This is a big oversight and one which should be corrected as soon as possible, if this new line of CORE processors is to perform better for the OEMs making the investment required to build them.

After all, no one likes losing money, so if consumers are better informed before they proceed down a dead end as they will should they opt to purchase an Android tablet as I did, OEMs can rest assured their change in editorial direction will benefit everybody.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2015 All Rights Reserved

3
Dec

Consumers likely to maintain a healthier appetite for new PCs for the near term future

PC manufacturers, across the board, including Dell, have reported better sales results over the last several quarters. We think this trend will continue for the near-term future (meaning at least through to Q2 2015). We see four factors at work, which promise to continue to drive new PC purchases:

  1. the debut of ultra low cost PCs, price competitive with Google Chromebooks
  2. an improved Windows 8.1 O/S, complete with better integration of tile/app and desktop computing environments
  3. consumers hungry for storage and computing speed, exhausting upgrade efforts and buying new hardware
  4. developer community acceptance and implementation of Microsoft’s API and SDK strategies, which will deliver more computing features to PC owners, thereby narrowing the feature gap between Windows, OSX, and Android PCs

Here’s some point by point detail: 1) with the 2014 holiday buying season, consumers are finally able to purchase PCs powered by Windows 8.1 at price point parity with Google Chromebooks. At $199.99 the HP Stream is, arguably, an affordable option for the widest possible consumer segment requiring a Microsoft Windows computing experience. In what we can only call a major achievement for Microsoft, HP’s low end Chromebook entry, the HP Chromebook 14 carries a street cost nearly 50% higher than the HP Stream 11.

Now to the second of our four points: The difference in computing experience quality between Windows 8.0 and Windows 8.1 is substantially. It is not likely enterprise buyers have satiated their appetite for new PCs. Further, another year has passed on the PC lifecycle, so even more older PCs will have to be upgraded. Windows 8.1 resolves many of the Windows 8 issues enterprise buyers complained about, so it is likely the uptick in PC buying will continue for some more time to come.

Consumers looking for a better PC computing experience at a reasonable cost still have the best opportunity to meet their objectives with a PC running Microsoft’s Windows O/S. So the mid to high end of the PC market, meaning the segment requiring solid state drives, HD monitors and matching graphics, etc, are more likely to stick with Wintel than to gravitate to OSX PCs.

Finally, Microsoft’s decision to release a number of APIs and SDKs empower app developers to build Office 365, and even hooks to Azure into their solutions. As developers consume these new tools, consumers should be able to use Wintel PCs to consume a lot of the apps, heretofore, only available via Android, or iOS devices. Effectively the feature (and, one can argue, the entire computing experience) gap between device architectures should narrow, which should further pump up PC sales for sometime to come.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

1
Dec

Reading between the lines of Black Friday, 2014, data points, have consumers satisfied a lot of their appetite for new Apple iOS devices?

On Friday, November 28, 2014, Barrons reported on some numbers coming out of IBM on Black Friday online shopping. In an article titled Apple Makes Up Third of Black Friday Online Buying, as Wiis, Xboxes, and iPads Fly, Tiernan Ray refers to some data coming from IBM and opines on the portion of sales made via devices running Apple’s iOS O/S. This segment, per Ray, looked like “31% of total online traffic”. Barrons goes on to note this portion “more than double[s] devices running Google’s Android software.”

Pretty impressive numbers, right? Not so fast. When these numbers are compared to the numbers published by IBM about the same type of consumer buying activity merely a year before, on Black Friday, 2013, a lot of the air comes out of this dirigible. On November 30, 2013, Jay Yarow published a similar article for Business Insider. This time titled Here’s A Problem With The Theory That Android Is Taking Over The World, Yarow summarizes IBM’s conclusion as follows: “iOS traffic reached 28.2 percent of all online traffic, compared to 11.4 percent for Android. iOS sales reached 18.1 percent of all online sales, compared to 3.5 percent for Android.”

When the Black Friday, 2014 stats are seen in perspective with the same data for the previous year, iOS penetration of the total online consumer market merely increased 9.9%. As well, Android may actually have increased its portion of the market segment (I can’t make this claim as the numbers Ray provides in his article are approximate, whereas Yarow provided more specificity in his piece for Business Insider).

So one could easily recast Ray’s presentation into a recount of how online consumer markets are actually stabilizing and, despite reports of feverish consumer appetite for the new 2014 iOS models, Apple only grew its segment in the high single digits, etc.

Ray, in fact, takes a break from the otherwise glowing recount to note a telltale sign things may not be as sanguine as they seem: “That growth is actually below a 13% growth projection that Piper Jaffray’s Gene Munster had attributed to IBM as a forecast heading into the day.” Munster appears to be pointing to the total size of the online consumer buying experience for Black Friday, 2014 as a little more than half as large as IBM had originally predicted it to be. So much for predictive analytics, right?

Bottom line: Black Friday, 2014 wasn’t as much of a coast for Apple as Ray seems to be portraying it to be.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

13
Nov

Microsoft’s recent announcements of free Office apps for iOS and Android make sense as a driver for developers to use its Office 365 APIs and SDKs

Microsoft looks to benefit on multiple fronts from its recent announcements of free Office apps for iOS and Android mobile consumers. But one in particular looks especially promising. Developers will be much more likely to implement its Office 365 APIs and SDKs when consumers, recently hooked on free versions of Word, Excel, and more, with limited functionality, present a burning need for these tools.

In an earlier post to this blog, titled Don’t forget the cyclical nature of trends in Software development, this writer voiced his support for the notion of an “API Goldrush”, which Brian Proffitt articulated in an article published on the ReadWrite back on April 24, 2013. Proffitt’s points look to be highly accurate given Microsoft’s recent announcement, Developers now have new Office 365 APIs, iOS and Android SDKs, app launcher.

Flipping an old attempt to encourage developer interest into a winner by publishing a set of APIs and SDKs may look like a correct strategy for Microsoft to pursue, at least on paper, but if consumers haven’t articulated a significant need for the tools developers can bolt onto their mobile apps with these extensions, then the end result will, unfortunately, be a comparable low level of interest. In other words, developers will have little incentive to implement APIs and SDKs for Office 365 without consumer demand.

The announcements of free, albeit limited versions of Word, Excel, PowerPoint, and other Office apps looks perfectly designed to prime the need pump. At the same time, Microsoft’s recent announcements of partnerships with DropBox, and a few months back, Salesforce.com, which provide these ISVs with a path into the Office 365 ecosystem, look just the same; in other words, a method of driving developers to build hooks to Office 365 into their mobile apps.

As C|Net published on November 7, Microsoft Word mobile app shoots to top of Apple’s charts. So Microsoft seems to be on targed, at least for now. This is no small achievement, and precisely the type of interest Microsoft needs to push developers in its direction.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

19
Aug

Microsoft Provides Incentives for iOS and Android App Developers to Implement Xamarin with Visual Studio as their Platform

iOS and Android App Developers comfortable building solutions with C# should consider adopting Xamarin with Visual Studio as their coding platform. Microsoft is offering some financial incentives for these early stage ISVs to adopt Xamarin. Additional information about these incentives can be found on a page of the Xamarin site, titled “MSDN”, which publicizes the Microsoft offers.

Xamarin is one of a number of cross platform development offers. The biggest difference between Xamarin and its competitors, in this writer’s opinion, is the role C# plays for the Xamarin solution. C# sits at the center of the Microsoft application development paradigm. But from the promotional content on Xamarin’s site, one would also think C# is the best method App Developers can implement to maximize the value of App architecture by reducing the time required to implement the same App functionality for iOS, Android, and Windows.

The Mono Open Source implementation of Microsoft’s .NET framework is also sponsored by Xamarain, so the role Xamarin can play for Microsoft, should they magnetize critical mass across the App developer community, should be very clear. Without developers it is not likely Microsoft will successfully capture more of the mobile App market than it currently has (generally acknowledged as somewhere under 5% of the global market).

Xamarin appears to be winning over some important adopters. A quick glance at the corporate icons on the bottom of the first page of the Xamarin site attests to adoption from some very large enterprises, including Dow Jones, Kimberly Clark, McKesson, Bosch Siemens, and NBC Universal. Quick adoption on the part of enterprise business and comparably sized organizations in the public sector would make sense given the dominance of the “Microsoft stack” across these organizations.

Of course, magnetizing significant numbers of App developers from IT, and their partners servicing Line of Business (LoB) units within the same enterprises with Xamarin may ultimately prove to be good news for Microsoft’s latest product with a claim to a fast launch — the Enterprise Mobility Suite.

At a minimum, anyone harboring deep skepticism about Microsoft’s chances of establishing a legitimate position in the mobile App market may want to re-think his/her position.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

4
Feb

The March, 2014 Quarter Doesn’t Look Rosy for Apple

Kate Huberty of Morgan Stanley opened the Analyst Q&A for the Apple Q1, 2014 Conference Callwith a big one: “Revenue guidance embeds a sequential decline that’s bigger than the decline in the March 2013 quarter and, I think, implies iPhone units may not grow [year over year]” (quoted from the Apple Q1 2014 webcast, a link to which has been provided here).

Peter Oppenheimer, Apple’s CFO answered Huberty’s question as follows: “The biggest reason for the largest sequential decline in revenue relates to changes in channel inventory, and I’ll go through some detail, but let me, actually, go through somethings about the underlying [assumptions] about our guidance to indicate that our business is stronger than the guidance would imply”. (ibid)

Oppenheimer goes onto explain how Apple’s iPhone channel partners, AT&T Wireless, Verizon Wireless, T-Mobile, Sprint, etc, all “overstocked” inventory in the prior quarter. I think this topic is a big deal and indicative of the lackluster performance of high speed wireless data services, as a product, for wireless carriers.

Of course there is another reason at work here, as well, namely intense competition within Apple’s target market segment for smart phones — the high end. Nokia wants this business, as does Samsung, and Motorola.

The intensity of the competition for this market segment is so high as to, in my opinion, prompt Google to rethink its interest in 1) hosting the Android O/S, while 2) also playing the role of a major Android OEM.

So Apple’s guidance is fairly forecasting a substantial drop in revenue for iPhone sales for the March, 2014 quarter.

Let’s get back, for a moment, to the question of the actual profitability of wireless data services for carriers. Indicators including this forward-looking guidance from Apple’s Q1 2014 webcast, AT&T’s recent announcement of a decision to drop pricing on family pooled data plans, etc, all point to two important factors investors might want to keep in mind:

  1. Carriers like the recurring higher dollar revenue model of long term smart phone subscribers. They each have built versions of the same product model, subsidizing the cost of smart phone purchases, for consumers, in exchange for long term service contracts. Consumers are very challenged to break these contracts (largely as the result of contract features built in by the carriers), but, as of late, are going the distance to break them, as they require, to pursue better deals
  2. But the giveaways, service discounts, etc., which are required of each of the carriers, to prod consumers to move forward on offers, are quite pricey. These incentives have taken a toll on carrier profits. Per this quarterly webcast, evidently a number of them are pulling back on their enthusiasm and cutting orders for smart phones.

I hope the changes in the net neutrality ruling will change this picture, as carriers gain the freedom to charge higher fees of services requiring faster pipes. But recent comments from the present administration indicate a determination to revisit the ruling.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

29
Jan

Comments on Apple Q1 2014 Earnings Report

Peter Oppenheimer’s lengthy presentation at the start of Apple’s Q1 2014 Earnings Report left me with some thoughts perhaps worth consideration by some readers:

  1. Mr. Oppenheimer’s remarks, from a rhetorical perspective, are built to argue for Apple to be seen by the investment community, not as a niche player looking for the very top of the available consumers in the smart mobile device market, but, rather, as the leader in the North American market for smart mobile devices
  2. Numerous examples of enterprise business customers, and Apple customers from comparatively sized organizations in the public and the not for profit sectors are included in the preface remarks by Mr. Oppenheimer. Are they included to convince the analyst community to take Apple seriously as a vendor to the same enterprise customer base once owned by Blackberry? I think so. Readers should also note how Mr. Oppenheimer included IBM® in his remarks, much like an appeal to an authority. Perhaps IBM should take a look to ensure rigor mortis hasn’t kicked in, and the continued presence of “fire in the belly”.
  3. His remarks included comparative statements about Apple competitors, but included no mention of Microsoft® within the first 14 minutes of the webcast. Rather, his comparison about contenders in the smart phone and tablet markets were focused on Android
  4. Mr. Oppenheimer cited the IDC mobile device market report, which was published coincidental with Apple’s quarterly report. Nevertheless, the news about the IDC report (I’ve not read the report as of the publishing date of this post) includes some points at variance to the dominant position Mr. Oppenheimer claims Apple “owns” in his remarks

Here are some quick thoughts on each of the above points:

  1. In response to point 1), above: Perhaps Mr. Oppenheimer’s remarks are correct today, January, 2014 as far as the reach of Apple devices into the mainstream of the North American market for what I refer to as “small, smart, mobile devices”, But I don’t think we will listen to Mr. Oppenheimer make the same claim a year from now. From what I’ve read of the IDC report, Android devices are the fastest growing segment of the worldwide mass market for smart phones. The ultra competitive price point for Google’s Moto G smart phone, together with Microsoft’s soon to close acquisition of Nokia (and the changes in strategy and likely new attention to the lower end of the world wide market for smart phones) will certainly have a negative impact (the extent of which will have to be determined over time) on Apple’s claim.
  2. In reponse to point 2), above: Certainly Apple must be taken seriously as a vendor of choice for enterprise business customers — but only for small, smart, mobile devices. As far as the software they now ship to enable enterprise customers to manage large communities of mobile device users, I would keep my eye on Blackberry (as Citron Research has pointed out) as a real contender in this space, with the footprint required to perhaps deliver a crushing blow to Apple’s aspirations to control this market.

    I would also neither count IBM out of the market for MMS requirements, nor scoff at the improvements in market share Microsoft has likely achieved with the new Surface 2 products and the high end Nokia Lumia smart phones.

  3. In response to point 3), above: I refer, once again, to the IDC report, which notes a very strong force behind small, smart mobile devices powered by Android, world wide. I’m certain Mr. Oppenheimer has not fudged his numbers, or inflated his claims, but the future doesn’t look as promising as some of his audience might think.

    I also think Google’s Moto G is a very strong contender to both Apple and Microsoft products in the same category. The price point is “too good to be true”. I eagerly await some word from Google as to how this product is selling in the North American market.

  4. In response to point 4), above: I have more confidence in what I’ve read about the IDC report than I do in the importance of the points Mr. Oppenheimer has framed around his reading of the results. I don’t think it makes much sense to argue for Apple as the leader in the mass market for these devices. All of the steps the company has taken (at least as written about in the news) are to fortify a position as the dominant device in the very high end of the market, which makes more sense, especially over the long term, at least to me.

Disclaimer: I have no position in Apple, but am long Microsoft.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved