Apple is likely to hit serious headwinds rolling out two innovations

Update: as of Monday morning, October 27, 2014, Bloomberg reported CVS had joined Rite-Aid is nixing Apple Pay

Apple doesn’t appear to have a lot of history successfully accomplishing change management campaigns, but, in this writer’s opinion, two recently debuted Apple iPhone and iPad innovations — a software reconfigurable SIM card, and Apple Pay ™ — will need change management to deliver on their promise.

It’s only been a a couple of weeks since the last of Apple’s big annual events, the presentation of new iPads in advance of the holiday buying season, but negative industry feedback has already hit the press for both of the above mentioned innovations. Rite-Aid corporation, which, currently, maintains a US network of 4.6K retail locations recently announced its intention to block consumers from using Apple Pay at the check out counter. AT&T also just announced its intention to stop its mobile smartphone subscribers from using the SIM reconfigurable feature built into the iPhone 6 family of smart phones and the iPad Air ver 2 mobile-connected tablets.

But both of these features are truly innovative, right? So what’s the problem? Perhaps adding some definition to the worn-out abstractions “innovative” and “innovation” helps here. Arguably products, services and even solutions cannot be judged to be “innovative”, or examples of “innovation” if they fail to streamline what this writer would refer to as the “total 360 view” of how they might be applied, implemented, and even planned for.

Apple’s software reconfigurable SIM card, and its NFC Apple Pay ™ hardware actually amount to a stake in the ground into two markets product marketing may not have planned for Apple to enter — mobile telecom, and retail point of sale (POS). But neglecting to plan for these points of entry can lead up to the kind of abrasion the public is witnessing, given the press announcements from AT&T and Rite-Aid. The phenomenon is a bit like Tesla’s changing fortunes as it finds itself dealing not only with issues familiar to automobile manufacturing, but the broader issues of employment, and the actual sales structure for satisfying consumer needs for the automobiles produced through the manufacturing effort. Tesla’s issues arose when it decided, and publicly announced its intention, of selling automobiles direct to the public, leaving out the car dealer middlemen used by every other automobile manufacturer.

In this writer’s opinion, the apparent holes in Apple’s product plan for these two new features of both its smart phone and tablet offers represent a breakdown in innovation. The holes should be filled in before Apple proceeds further. Disrupting industries and supply chains requires a lot of change management. If nothing else, these issues point to a big, new, opportunity for adoption champions to help Apple fill in the above mentioned holes.

Ira Michael Blonder

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


When features reverberate from product to product, consumers are likely to become indifferent while markets take the on ramp to commodities

Over the last year, or more, the same computing hardware feature set — very thin portable computers with ultra sharp displays, light weight, and rapid boot times — has reverberated across devices from different manufacturers targeted to the same market. This type of condition is a harbinger of product marketing producing commodities, leaving little room for brand differentiation. It’s time product marketers did their homework. Consumers are not likely to be lulled into complacency and just continue buying new versions of devices they already own.

Apple’s recent debut of the “new” iPad Air 2 is a case in point. The web site promotion for this device emphasizes features already claimed by Apple competitors, principally Microsoft, for its Surface Pro 3 2-in-1 computing devices.

But if I’m someone who recently bought a Surface Pro 3, does Apple product marketing really believe I’m going to chuck my investment of somewhere between $1 and $2K, or more, to buy yet another product claiming to be the thinnest device ever? If they do, I’m afraid they’re not likely to successfully achieve their objective. As Dr. Michael Porter has illustrated, competition to be the best is a comparatively low profit, zero sum game.

What the Apple iPad Air 2, and Microsoft Surface Pro 3 MARCOM illustrates is a disconnect between personal computer product marketing and its targeted customer base. To be fair, the video included with Microsoft’s Surface Pro 3 debut did include several portraits of how customers are actually using the first and second generations of Microsoft’s Surface. Post Surface Pro 3 launch, Apple purchased a series of online ads, which were displayed on the New York Times web site, providing much of the same information about organizations using iPad tablets. But connecting with your customers and coming to market with inherently unique products, which, in turn, deserve a fitting MARCOM statement conveying what’s unique, and different about them, is something altogether separate from a set of portraits of how customers are using your light, very bright, and thin ultra portable personal computers.

Actually, connecting with customers, as a short video presentation titled Managing the Uncertainty of Innovation illustrates, is the kind of high-value activity early stage ISVs can and should use to mine for truly unique product notions.

No doubt the iPad Air 2 has some truly unique capabilities, which can be compelling for a specific audience/market, but the current promotion about the product isn’t getting this message across. The same opinion covers current promotional efforts for the Surface Pro 3, and even very high ticket software — Microsoft’s Delve, IBM’s Watson, and Salesforce.com’s entry into the same space.

Bottom line: “the same space” is a mirage. No two “spaces” are ever the same. Product marketers need to find out just what “space” they want to target and then go for it.

Ira Michael Blonder

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


IBM Debuts BI Applications Powered by Watson Running on an iPad

On September 6, 2014, the New York Times published an article written by Steve Lohr on, arguably, a new look for IBM’s Watson machine learning solution, which is, apparently, an ambidextrous tool. This time Watson was said to be powering a rich set of BI dashboards displayed on an iPad. The article is titled IBM Offers a Data Tool for the Mainstream, With Watson’s Help.

The image displayed on the web page presenting this article says a lot. A woman holds an Apple iPad tablet computer, which is exposing a set of Business Intelligence (BI) charts, dials, and the rest of the usual accoutrements of what are commonly referred to as “dashboards”. Presumably the woman holding the tablet is an example of Gartner’s notion of a “citizen developer”, meaning the type of power user targeted by this marketing effort for Watson. For readers otherwise unfamiliar with the notion, a “citizen developer” is an enterprise business user, with some authority, who maintains a voracious appetite for technology, but can’t write software, and has little interest in learning how to code. These people devour so-called “no-code” applications built on workflows.

By “says a lot”, this writer means the notion of someone (like the woman depicted in the image, who is enthusiastic about technology) high on energy, but low on computer programming skills, successfully creating a full-featured dashboard of data, without recourse to developers, points to a direct, head-to-head competition between Apple/IBM and Microsoft for the same market, namely enterprise customers looking for “no-code” solutions and lots of BI.

The product on the table on the Microsoft side, in this presumed comparison, is Office 365 and the suite of BI solutions included in the Power BI Excel offer. IBM certainly has the position in the enterprise computing space to represent a serious, credible threat to Microsoft’s dominance. The fact the dashboard is depicted running on an Apple iPad, rather than a Microsoft Surface is, as well, something to think about.

This competition is nothing new. IBM and Microsoft have fiercely competed for BI business before. IBM’s Cognos has traditionally owned a large piece of the market, with Microsoft challenging via a combination of SQL Server, SharePoint, and efforts of some prominent partners — notably Neudesic. What is different about the potential challenge represented by the combination depicted in Lohr’s article, is the dramatically lower cost of acquisition likely for the kind of solution we see running on the lady’s iPad. Redmond will likely get the wake up call.

Ira Michael Blonder

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


Even Apple Listens When Microsoft Debuts New Themes for Product Promotion

For several days in August, 2014, the online New York Times web site ran a front page advertisement for Apple’s iPad tablet computer. This ad presented readers with a short success story illustrating how tablet consumers have been using the iPad for some real work, and not the leisure activity more often used for a promotional opportunity like this one.

The same type of marketing communications content filled up the middle portion of Microsoft’s online, audio and video webcast debut of the Surface Pro 3, which was originally published on May 20, 2014.

But Apple’s attention to Microsoft’s style of product promotion for the Surface Pro 3 evidently didn’t just stop with providing its audience of potential consumers with its own examples of business applications for its tablet computers. If rumors about Apple’s product development plans can be taken as a reliable indicator of where the iPad is headed, this attention appears to have also permeated the actual design of the new iPad. On August 26, 2014, Daisuke Wakabayashi published an article for the online Wall Street Journal titled Larger iPad Heralds Blurring Among Apple Devices.

With a rumored screen size of 12.9 inches, the new iPad will be larger, by nearly one inch, than the Surface Pro 3 (which has a 12 inch screen). But of even more importance, Wakabayashi’s contention about the new iPad and a “blurring among Apple Devices”, if it proves accurate, places Apple in lockstep with Microsoft along a path of positioning its tablet as a laptop competitor.

If readers remain skeptical about Apple following Microsoft’s lead, it may be helpful to reflect on what segment of the consumer market for tablets likely remains “untouched”, despite nearly 4 years of heavy marketing of this product. The remaining segment at the top end, one can argue, is largely made up of enterprise business consumers, and their siblings in the public and not for profit sectors. For these markets, the entertainment features of tablets are “nice to have”, but not “mission-critical” capabilities. Given Microsoft’s position in these consumer markets, it makes complete sense for Redmond to be leading Cupertino around the neighborhood.

Ira Michael Blonder

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


Writing About Better PCs While Focusing on Macs

In a manner emblematic of the times, on Saturday, July 26, 2014 Barrons published an article written by Alexander Eule on the topic of the resurgence analysts have recently noted in consumer interest in PCs. But, with the exception of a paragraph or two about Intel, and the evident success of its 3 year old objective of re-architecting CPUs for thinner, lighter laptops, the rest of the article is entirely about Apple iPads and Macs.

This article, titled What Comes Next in the Post-PC World? Better PCs, begins with some remarks about the troublesome sales plateau Apple’s iPad has apparently reached, at least according to its latest quarterly earnings report. Eule attributes diminishing consumer interest in iPads to “tablets [getting] squeezed out of the picture”. He suggests Apple may be looking to “cannibalize” its own position in the tablet market by introducing a larger iPhone in the fall.

But, despite quoting Gartner analyst Mikako Kitagawa, who reported (within a quarterly review of global PC sales) “‘[t]he availability of affordable thin and light notebooks have drawn consumer attention'” along with, perhaps, renewed interest in touch O/Ss: “‘Touch-enabled devices are also widely available with decreasing price premiums compared to a year ago'”, there is absolutely no mention, whatsoever, of Microsoft’s Surface 3 hybrid tablet/laptop.

Given Kitagawa’s comments, and Eule’s report on the success of Intel’s project to re-architect its PC CPUs for thinner, lighter, battery-powered devices, omitting mention of the Surface 3 is at least curious, and maybe a lot more.

This writer visited a local BestBuy in the metropolitan New York market recently and spoke directly with floor sales staff about the Surface 3 and the level of customer interest in the product. What he heard was very positive. While he was in the store he noted a lot of floor traffic interest in the Surface pavilion, as well as a lot of effort by sales staff to point prospects to these very thin, but very powerful computing devices.

When these same sales personnel were asked to characterize the type of customer moving to one of the Surface Pro 3 models, there was no mention of Macbook Air converts. Rather the Surface Pro 3 appears to be taking market share from laptops.

Ira Michael Blonder

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


Will Microsoft Add Some Definition to the Implications of Intel’s Guidance Announcement for the Broader PC Market?

In the aftermath of Intel’s Guidance announcement of June 21, 2014, thousands of words have been written by what looks like an ever growing list of analysts about what the import of these numbers actually mean, not only for Intel®, but for the overall PC market.

Three themes run through most of the commentary:

  1. The improved demand for PCs is a temporary phenomenon, largely the result of increased sales of PCs to businesses
  2. Business demand can’t be counted to last as the driver is the end of product life for Microsoft® Windows XP
  3. Some of the increase in sales can be found in more interested consumers purchasing “2 in 1” computers, which can be used either as a laptop, or as a tablet

There are some issues with each of these three themes:

The first theme underestimates the importance of improved business appetite for PCs, and includes a prediction about how long this improvement will last. There are few tablet computers on the market today (with the notable exception of Microsoft’s Surface Pro 2 and 3, but more about these later) with attractive street prices above $1,000.00. But there are quite a number of PC options for desktop computers, laptops, and, especially, servers carrying a price about the $1K number. So improved business appetite for comparatively higher priced computers will likely be a good thing, not only for Intel, but for its OEMs, the businesses manufacturing other parts for these computers, and more.

I don’t believe there is enough data, at least as of yet, to produce a reliable prediction as to how long this improvement can go on. No one has factored in the possibility of a change in consumer sentiment about the safety of cloud computing. If one agrees with a notion about consumer appetite for tablets (but this notion can also be applied to smart phones and even home entertainment computers/game consoles) based around the usefulness of these “portable screens” as superior viewers for e-reading, movie watching, games, and television, then cloud SaaS products are going to be more important for this segment of the computing market than would otherwise be the case for PCs. If the present market potential for these devices is approaching saturation, and the threats represented by the never-ending string of successful cloud computing hacks grow more intimidating, then it may be the case the improvement in the PC market may have greater longevity than analysts have planned upon.

As to the 2nd theme, as I wrote in an earlier post to this blog, perhaps a driver is an improved consumer perception of Microsoft’s Windows 8 operating system. Microsoft formally announced the end of life for Windows XP last year, and the actual due date, in April of this year, will soon be a quarter behind us, so I’m not sure migrations to new computers replacing Windows XP is a big driver, any longer.

Finally, and this is a big point, hasn’t Microsoft maintained a very consistent approach to the tablet market, all along, to present the Surface product line as the best method of improving productivity, while, at the same time, supporting consumer needs for great e-readers, movie viewers and portable game consoles? In sum, isn’t the Surface tablet a great example of one of these “2 in 1” computers? But with the name tablet?

Since the Surface Pro 3 announcement last month, which included a video presentation about how some customers have been using the Surface tablet to enhance productivity, the New York Times web site has featured what looks to be a daily ad from Apple presenting precisely the same type of information about some prominent consumers of iPads. Is it safe to assume, then, some traction for Microsoft’s tablets as examples of these “2 in 1” computers. If this assumption is reliable, then doesn’t the argument end up in the circular file? After all, the Surface is a tablet and not, per se, a PC.

Ultimately, when Microsoft either next reports earnings, or, potentially, announces a change in its own guidance (and I have absolutely no indication whatsoever of its plan to do so), we should get some more useful color on this point, right?

Disclaimer: I’m long Microsoft and Intel. I am not invested in Apple. Neither am I invested in the New York Times

Ira Michael Blonder

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


Are Product Marketers Changing Direction on Tablet Computers?

Anyone watching the webcast of Microsoft’s debut, late in May, 2014, of the Surface 3 Pro computer would think tablet consumers are really after more traditional computers, but with an enhanced set of features for mobile work. But this view isn’t consistent with the opinion of some analysts, at least up to now.

In a review of this new hardware device from Microsoft®, titled Microsoft Surface Pro 3: A Tablet That Desperately Wants to be a Laptop, which was written by Joanna Stern, and published on the Wall Street Journal website on May 27, 2014, Ms. Stern expresses her opinion on tablet computer product marketing. Pointing to the Apple iPad, she notes: “Microsoft is clearly going after its original vision of the tablet here (stylus and all), rather than Apple’s more limited—but more successful—approach”.

While her review does not include a clear statement about tablets, and why they should provide consumers with a superior electronic reading experience, and a great method of viewing movies, she does state: “You can’t hold the Surface Pro 3 for hours, reading in bed. Its weight and cumbersome size wear out your arm, and the back corners of the tablet can get quite warm.” So, perhaps it’s safe to surmise she’s content with the tablet benefits statement Panos Panay summed up at the Surface Pro 3 debut – tablets are great for reading ebooks and great for watching movies, but not much more.

But, if these are the sole benefits consumers realize from their tablet computer purchases, manufacturers should plan on selling fewer of them, going forward. Once again, anyone following IDC’s periodic forecast for global tablet sales will note a recent revision downwards: IDC Lowers Global Tablet Shipment Outlook by 5.9%.

Since there are few PC manufacturers who would be pleased about the future prospects of a progressively diminishing world wide market for hardware, like the IDC report on tablets presents, Microsoft’s product strategy for the Surface Pro 3 may make a lot of sense.

In fact, anyone reviewing the press releases coming out of Apple’s world wide Developers’ Conference, 2014, will note efforts to closer align Mac OS X Yosemite with the iOS experience, kind of like the Surface product strategy, but in reverse.

As to the remaining major player in the tablet O/S arena, Android, clearly Chrome is Chrome, is it not? Whether one consumes the Chrome computing experience on a Chromebook, or on a Nexus tablet, or even a Samsung smart phone (but Tizen may be just around the corner), the bottom line is still the same — a lot of Apps and a set of variants on the same browser (Chrome).

So, in my opinion, Tablet product marketers are looking for opportunities to win market share from laptops, and vice versa. If they cannot succeed in this effort, there really isn’t much of a future for them, unless they plan on going head-to-head with the television set.

Disclaimer: I’m long Microsoft and do not have a position in either Google or Apple

Ira Michael Blonder

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


Is Apple Overvalued?

On Wednesday, April 23, 2014, Apple reported Q2 2014 earnings after markets closed for the day. Net profit for the quarter posted a comparative increase, and exceeded analyst estimates. Sales, which were generally assumed to be flat, comparatively, actually increased by approximately 5%.

Despite these results, which can only be fairly called subdued, investors drove the stock price up by over 7% after hours. Does this activity make sense? Or are investors basing their share purchases on a set of possibly suspect assumptions?

Anyone positing some future performance for Apple will want to research the performance of the iPhone product line. The iPhone is the biggest money maker for the business, so any further improvement to sales and/or profitability will likely depend, to some extent, on the performance of this product.

Where is there room for iPhone smart phone sales to grow further?

There is ample indication of a saturated market for smart phones, at least in the U.S. and western European markets. Carriers, who, in the past, opted to subsidize the cost of these devices for consumers are abandoning the strategy (T-Mobile appears to have lead the U.S. carriers in this new direction. AT&T has taken a similar path and reported some results in its latest quarterly earnings report. Verizon has announced similar plans. Sprint is likely not to be far behind).

If surveys are credible, smart phone consumers are tired. Handset manufacturers (including Apple) announce new features, which amount to subtle improvements in operation, or performance. A major breakthrough in technology is needed, but there isn’t any indication any of the manufacturers will announce one anytime soon.

So the room for growth in this market, in my opinion, is to be found in emerging markets and at the low end of the acquisition cost for these phones. The present iPhone is not a contender in these promising markets. Therefore, it doesn’t make sense (at least for me) to forecast a substantial increase in sales for this product anytime soon.

One last word on this product: Consumers are likely to value any substantial enhancement to Smart Phone speech features. Drivers include law enforcement, and a host of factors specific to mobile device operation. It’s simply not possible to operate even a touch screen while navigating a turnstile to board a train, etc. But managing the device via a spoken command does make sense.

In my opinion, consumer appetite for a full featured set of audio commands can justify an increased market, even at the high end. But it may be the case Microsoft® has assumed the position of market leader in this space, based on public announcements made at its recent, annual “Build” conference, held this year in San Francisco.

Tablet Sales are Growing Rapidly, Apple is the Leader and Looks to Maintain Its Dominance

The market for tablet computer is growing rapidly, perhaps at a faster pace than the smart phone market. Apple dominates this market. The iPad Mini is a strong sales performer, ostensibly as the result of its convenient size, Retina® display and cost to the retail consumer. Perhaps this market presents Apple with a solid opportunity to build some of the enormous growth in sales and earnings to justify further increases in its valuation.

But Apple has not announced any new features for the iPad likely to be received as something “really new”. On the other hand, major competitors like Samsung, with tablets running on the Android O/S are determined to capture market share; so they continue to innovate.

Certainly Microsoft’s recent announcement of Office availability for the iPad is a positive development for Apple. But Intel’s Atom Bay Trail CPU and chipset has started to make sense for big enterprise PC OEMs (including HP). It may soon make more sense for enterprise customers to opt for Windows Tablets than to continue to purchase iPads with Office. Note: Microsoft wins either way.


Based on the above points, I think Apple is over-valued at its current stock price.

Disclaimer: I’m long Microsoft and have no position in Apple

Ira Michael Blonder

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


Are App Stores a Looming Cash Machine?

Consumers opting to buy a Microsoft® Surface 2 will receive a $25.00 coupon in the box, along with some other promotional offers. This coupon can only be used to purchase an item offered in the “Store” feature of the Surface 2 Start Screen. But using this coupon can be a challenge. My review of the Apps offered didn’t produce much in the way of productivity. I noted lots of games, and lots of free Apps.

So why is Microsoft including the coupon in the retail customer product package? Anyone listening to Apple’s Q1 2014 webcast Earnings Call will hear Peter Oppenheimer sum up a very large business for Apple — it’s App Store. Oppenheimer estimates “[t]he App Store now offers 1,000,000 Apps in 24 different categories, and cumulative downloads have surpassed 65 Billion”. (quoted from the Apple webcast, a link to which has been provided in this post)

These numbers are not insignificant, especially for a company like Microsoft, which, historically, has always maintained a healthy developer ecosystem. Indeed, one can argue much of Microsoft’s success across the early days, following the launch of Windows, depended almost entirely on the third party developer community and the applications they brought to the public for the platform.

Oppenheimer goes on to present an even more important number: “Our App developers earned $2 Billion from sales of Apps for the quarter”. With an annual run rate of $8 Billion, any 3rd party business simply building Apps for Apple’s App Store might be looking forward to a very promising future.

Certainly Microsoft has not been slow to learn this lesson. The $25 box stuffer coupon makes sense as a means of driving customers to pump up the Store feature of the Surface, and the Windows Phone user experience. There are challenging impediments to Microsoft successfully kick starting this business, not the least of which being the small footprint of Microsoft’s mobile devices across the broad market when compared to Apple’s iOS. So a rapid, successful ramp up in phone and tablet units sold is a mandatory requirement of launching the Windows store App effort.

Ira Michael Blonder

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


What Impact will the Apple iPad 3 have on Fortune 500 Desktop Computing?

This blog has not served as a discussion forum for computing platforms actually used by IT organizations within the markets where we have an interest (which are, specifically, fortune 500 businesses together with comparably sized organizations in the public sector); rather we talk about marketing and sales strategies and tactics for tech innovators with products targeted to these markets. This post is not meant to set a precedent; however, we recently learned (via Bloomberg “InsideTrack” television show aired on Wednesday, March 7, 2011 and an interview with Joseph Beery of Life Sciences Corporation) of a claim that a staggering 95% of IT organizations within Fortune 500 businesses are testing Apple’s iPad tablet for approved device status. If this claim is correct than a major shift in business computing may be at hand. Of course, any/all potential changes in market realities must be thoroughly evaluated by technology vendors as quickly as possible. Hence this post.

First, we should note that the individual who voiced the claim was none other than Erik Schatzker, the show’s moderator. Mr. Schatzker provided no references to support his claim, therefore we plan on looking further into this claim to verify its credibility. Assuming for discussion purposes that his claim is valid, then the question becomes what should technology innovators do about it as they sell into this market segment. We are not concerned here with the technical steps that ought to have been taken quite a while back to ensure that application portability to the Apple tablet computing platform ought to have been included in any product plan; rather, we are more interested in what changes widespread adoption of the iPad 3 computing platform may have on how business computing will be handled by our specified market. Our bet is that any money pot at the end of an iPad 3 rainbow for our tech innovators will be found around the new form business computing will take with greater access to lightweight portable tablets with long battery life and all sorts of network connectivity, not to mention high definition graphics.

Short term we don’t see much change in the offing for business computing paradigms. As long as mandatory daily attendance at a specified workplace remains the norm for the vast majority of businesses, then a wave of purchases of Apple tablets will simply mark a shift in the operating system of choice for desktop computing (PCs and laptops morph into Apple tablets). Once again steps ought to have been taken quite a while back, as required, to port any/all applications to this platform. If the portability question has not yet been addressed then, yes, certainly address it now. As well, plan for the fact that you are absolutely late to this game.

It’s the longer term implications that catch our eye. If tablets facilitate an explosion in remote computing, then all sorts of opportunities will be on the table for new applications that exploit a business user class empowered with computing anywhere capabilities. We maintain a high interest in this topic. Please don’t hesitate to contact us if you care to further the discussion. Please call me, Ira Michael Blonder, IMB Enterprises, Inc at +1 631-673-2929 to further a discussion.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved