July 22, 2008 | posted by Michael Baxter in New Media | comments (0) |

At times like these, investors, it appears, look for bad news. Yesterday it was Apple’s turn to release its latest set of results. For so long this company has dazzled investors with one period of stunning growth following another. And the quarter just gone was no exception.

Profits in the company’s latest quarter surged 31 per cent, with the company enjoying its highest ever quarterly sales of Macs.

In all, profits came in at $1.07bn, the second best quarter in the company’s history, second only to the Christmas period seen at the end of last year.

At a time when banks and retailers seem to be taking it in turns to outdo each other in disappointing markets, you would have thought they would be ringing the bell and singing out in exultation to Steve Jobs, as once again he does it.

But, on this occasion, the markets were worried.

First of all, there’s Job’s gaunt appearance. His rapid weight loss has been a subject of speculation for a while now. Yesterday, the New York Post ran a story speculating on Job’s health and whether his cancer had returned.

The topic of the boss’s health came up at the Apple press conference yesterday, but all Peter Oppenheimer, Apple’s CFO would say was, “Steve loves Apple and serves at the board’s pleasure. He has no plans to leave Apple and Steve’s health is a private matter.”

That got markets worried.

Then there was the matter of the company’s expectations for the next quarter. Never mind the quarter that has just been, Apple’s predictions for the three months to follow were less than expected. Much less.

With US consumer confidence already fallen of the edge of a cliff, there are increasing fears that even Apple sales might be affected. With the new iPhone half the price of the original model analysts are also worrying about reduced margins on the product.

Then again, you can’t have failed to notice the hype surrounding the latest Apple product. This is a product that seems destined to sell in droves, whatever the economic climate.

And while it is true, the IPhone is just one contender in a battle that sees such major players as Nokia with its Symbian operating system, Google’s plans for Linux based mobiles, and Microsoft, it would nevertheless be a brave investor who writes Apple’s chances off.

No golden run lasts for ever, but Apple has a sufficient range of innovative ideas aimed at an exploding market-place, that even in time of a credit crunch the opportunity is impressive indeed.

The health of Steve Jobs is of more serious concern. In the 1990s the company showed how badly it needs its founder at the helm. Apple’s weakness is its reliance on its boss.

June 25, 2008 | posted by Michael Baxter in New Media | comments (1) |

It is difficult to think of more a formidable product in the consumer electronics arena than the iPhone.    It combines Apple’s superb knack for design, a proper Internet browser,  the iPod, the video iPod, and one more thing, what was it? Yes, that’s right, a mobile phone.

Can you think of a product, or a company, that could possibly outgun Apple’s iPhone?  Well, how about this one: Microsoft; keen to promote its Windows operating system onto mobile phones, and is prepared to put an awful lot of bucks behind it.   Microsoft’s’ big advantage over Apple, is that its operating system is for all.  It is not a proprietary product like the iPhone.  So Apple might have the coolest piece of kit in the world, but can it really take on everybody?

But even Microsoft has got its work cut out. How about this for formidable opposition?  Google, the world’s most valuable brand.  Google isn’t all about a specific phone either; like Microsoft, it’s a standard it wants.  It wants the world’s consumer electronics makers to make phones supporting its standard.   Google has one big advantage over Microsoft, it gives its operating system away for free.  And what is more, its operating system is Linux based.

What’s good about Linux is this: it is an evolving product.  There are hundreds, maybe thousands, of programmers out there working on Linux features – only the best are accepted. 

Google, of course, has the big advantage that it makes money on advertising, so it has a wonderful business plan; give the product away for free, and still make billions of dollars.

So that’s the three titans then: Apple, Microsoft and Google.   There’s a fourth player, little old RIM with its Blackberry.  Such is the following this product has that it is a possibility it will win out, but surely it is more likely to get drowned by the cacophony from the big three.

But, wait a moment.  Did you hear that?  There’s another tune playing, and this one could even outgun the west-coast of America trio: for the fifth player is made up of Nokia, Vodafone, Sony Ericsson, Motorola, NTT DOCOMO, AT&T, LG Electronics, Samsung Electronics, STMicroelectronics and Texas Instruments. That is a group which must have even Microsoft and Co quaking.

Mind you, it all boils down to Nokia, really. For the Finnish company has bought out Symbian Limited, the mobile phone operating system initially launched by Psion. Why buy it out? Well, Nokia wants to turn Symbian software into a kind of Linux basher – free, open and everywhere.

This is what Nigel Clifford, CEO of Symbian, had to say: “Ten years ago, Symbian was established by far sighted players to offer an advanced open operating system and software skills to the whole mobile industry.  Our vision is to become the most widely used software platform on the planet and indeed today Symbian OS leads its market by any measure. Today’s announcement is a bold new step to achieve that vision by embracing a complete and proven platform, offered in an open way, designed to stimulate innovation, which is at the heart of everything we do.”  Ummm, heavy stuff.

Nokia says that mobile devices based on Symbian OS account for 60 per cent of the converged mobile device segment, and to date, more than 200 million Symbian OS based phones have been shipped, over 235 models, from 8 vendors and on more than 250 mobile networks around the world.  More than 4 million developers are engaged in producing applications for Symbian devices. 

Or to put it another way, Symbian has got off to a good start.

It all smacks a little of Isaac Asimov, because Nokia has started talking about a Symbian Foundation, made up of all those formidable players listed above. “Establishing the Foundation is one of the biggest contributions to an open community ever made,” said Olli-Pekka Kallasvuo, CEO of Nokia. “Nokia is a strong supporter of open platforms and technologies as they give the freedom to build, maintain and evolve applications and services across device segments and offer by far the largest ecosystem, enabling rapid innovation. Today’s announcement is a major milestone in our devices software strategy.”

It is an interesting thing but Nokia wasn’t always like this.  Time was when it was a manufacturer of gun boots.  Its decision to diversify seems to have paid off handsomely.  Now it is gunning for the world – or at least gunning to stop dominance by any of the big three US firms.

Joseph Schumpeter, the Austrian economist who was Keynes’s main rival for the epitaph of greatest economist of the 20th century, used to talk about Great Gales of Creative Destruction.  Schumpeter was a fan of monopoly.  He used to say only a monopoly, or a company with designs to become a monopoly, has the money to innovate in the modern world.  But, he said, monopolies fall, in waves of creative destruction.

Microsoft is an obvious example of a monopoly under threat from this new wave of creative destruction.

To the victor goes the spoils of becoming a new monopoly.  The thrills of dealing with anti-trust regulation, and the challenge of fending off the next wave of creative destruction.

April 24, 2008 | posted by Michael Baxter in New Media | comments (1) |

The High Street might be in trouble, but there is one new fixture that still seems to be bringing in the crowds.  It’s those Apple stores – full of those products that double up as computers and items of furniture. 

Has the Apple store become the coolest place on the High Street.   These stores are not for nerds, their typical customers seem to be trendily dressed – they are pulled in by Apple’s style – it’s become a kind of aspirational shop.

And that in a nutshell tells the story of Apple.  A few years ago there was talk of a halo effect, that people were so chuffed with their iPods they made their next computer purchase a Mac.  But now, the image is promoted by these fancy stores – and oh, yes, there’s another product too, the iPhone.

Yesterday was the occasion of the unveiling of Apple’s latest results.   Once again, the company raised the roof.

This time, profits hit $1.05 billion.  It has done better than that before, but only once and that was in the previous quarter, which included Christmas.

To put the profits in perspective, in the same quarter a year ago it made $770 million.  In 2006 the company was hailed as a wonder company when profits hit $410 million.

It seems like hype – but the fact is Apple’s performance is extraordinary – plain and simple.

It seems a tad churlish to look for negatives – but hang it, let’s be churlish.

There were two downers.    Firstly iPod sales were just 1 per cent up on a year ago – the clearest indication yet that the market could be reaching maturity.    The much heralded tie-in with the Beatles could be the only way the company can lift iPod sales in a hurry. 

The other downer was that the company’s guidance for the next quarter was less than market expectations, so the share price fell.    But then Apple is known for making conservative forecasts, so maybe you can’t read too much into that.

Maybe there is room for slight concern over the iPhone.  The product has only been on sale for three quarters – so it is early days – but, after an impressive start, the sales growth seems to have tailed-off somewhat.    Just over 1.7 million iPhones were sold, compared to 2.3 million in the previous quarter and just over a million in the first quarter the product was available.  More worryingly, reports have recently suggested the product is not quite the hit in Europe that it was in the US.

On the other hand 2,289,000 Macs were sold during the quarter, representing 51 per cent unit growth and 54 per cent revenue growth over the year-ago quarter.

Nothing lasts for ever, and sooner or later Apple’s extraordinary run of growth will slow, but as Internet TV becomes more popular, there are plenty of opportunities yet for the company.

Even so, with a PE ratio of 35.73, shares are expensive – and Apple remains so very reliant on Steve Jobs.  Mr Jobs may be able to walk on water – but he is not immortal, his energy finite.   So looking forward the question still remains as to whether the Apple followers will keep their faith when Mr Jobs is no longer preaching to them.

February 25, 2008 | posted by Michael Baxter in New Media | comments (0) |

Talking of adapting, spare a thought for that old codger Steve Jobs. Poor old Steve. He maybe a one-man hurricane, a creative genius – but is he just too old and busy to get it?

An interesting blog, written by Peter Magnusson, has suggested that the new iPhone falls short, not because the product isn’t in any way a triumph of design, rather because the product isn’t designed for the latest big think – social networking.

Mr Magnusson says, “Apple can only do really interesting products if Steve Jobs understands the end user. And Jobs does not understand the 21st century computer usage paradigm. In this century, people don’t send memos to each other. And that’s what email is – electronic memos.

“Today, people chat; they blog; they share multimedia like pictures, video, and audio; they flame each other on forums; they link with each other in intricate webs; they swap effortlessly between different electronic personae and avatars; they listen to Internet radio; they vote on this that and the other; they argue on wiki discussion groups.

“At its heart, the iPhone is a projection of the original vision of bringing clunky desktop applications like email, contact databases, to-do lists, telephones, note taking, and web browsing to the palm of your hand. Because that is essentially Steve Job’s generation – transitioning from the mainframe office environment to the PC-based office. Jobs can’t quite get rid of the notion that a mobile device is nothing but a really small personal computer.”

Mr Magnusson went on to list the features the iPhone should have, including “location-aware signalling would be built it. The phone would sense if you were in your favourite coffee shop and flag that to friends.” He said the product should have supported dozens of social networking concepts from the get-go. iTunes would have been expanded to take your user name and passwords for major social networking services, and then it would just suck down all the meta data it needs for the corresponding functions to work on your device.”

In a way, though, the problem that Jobs faces is almost identical to the one challenging Bill Gates, described in the article above.

Maybe, you don’t want all your friends to know where you are, maybe all the latest social networking ideas won’t last.

It is not that Steve Jobs doesn’t understand the 21st century computer usage paradigm, rather it’s that he may not understand one possible paradigm that will dominate for the next few years.

Apple’s weakness is that it is reliant on the design expertise and creativity of a handful of very clever men and women.

The company’s challenge is to ensure its latest big products work with the latest fad – and ensuring it gets that right over and over again, is a huge challenge.

iPhone’s missing killer app: social networking

January 23, 2008 | posted by Michael Baxter in New Media | comments (0) |

Last week we told how Apple’s shares suffered despite an impressive new range of products. The falling shares had nothing to do with the announcements, we said, the markets were just glum, and any news was interpreted as bad.

Well it has happened again.

Profits at Apple soared, breaking the previous record by 58 per cent. In total, profits came in at $1.58 billion, in their most recent quarter. A year ago, when the company set its previous record, profits were $1bn, on the dot.

Sales went though the roof. Mac sales came in at $2.3bn, compared with just $1.6bn a year ago, and a mere $1.2bn the year before that.

As for the iPod, sales were worth $2.2bn, again marking the best-ever quarter – although a year ago, sales were only slightly lower at $2.1bn.

“We’re thrilled to report our best quarter ever, with the highest revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s famous boss.

Yet, shares in the company fell. Investors uttered something about how the company’s predictions for the next quarter were down on what had been expected.

The truth, though, is that Apple, alongside Google, stands as testimony to the power of US optimism. These two companies have startled, and put in performances that simply could not have been produced anywhere else in the world. They believed, they dared – and they won.

But right now, the mood on Wall Street is mean. If your child asks for a favour the moment your computer crashes, and you lose 4 hours’ worth of work, you are more likely to say No. Wall Street’s reaction to yesterday’s news was just like that.

January 16, 2008 | posted by Michael Baxter in New Media | comments (2) |

“This morning,” wrote Nassim Nicholas Talen in his book ‘Fooled by Randomness’, “I…asked the hotel concierge how long it takes to go to the airport. ‘40 minutes?’ I asked. ‘About 35,’ he answered. Then I asked the lady at reception if the journey was 20 minutes. ‘No, about 25,’ she answered. I timed the trip: 31 minutes.”

In this anecdote, Mr Taleb, who, by the way, also wrote ‘Black Swan’, a book which has been drawing praise from all quarters of late, was trying to illustrate a point. We are irrationally influenced by irrelevant data.

Now transpose that idea to yesterday’s markets and Apple computers. Apple CEO, Steve Jobs, is corporate America’s resident miracle worker. He is also a dab hand at wowing his audience with presentations. And yesterday was his annual moment. It was his keynote speech at Macworld. Last year he chose the occasion to unveil the iPhone, this time around analysts waited with baited breath.

And for Jobs, a man who holds his audience in thrall, yesterday must have been quite a shock; for while his 90-minute speech was still running, while his audience were oohing and aahing, shares in Apple fell 10 points.

Investors, it appeared, were not impressed.

Mr Jobs chose the occasion to reveal a new stand-alone TV which can download movies and songs from the Internet without reference to a computer. He also waxed lyrical on the imminent launch of a catalogue of 1,000 videos available for download on to PC, Macs or iPhones.

This announcement alone drew rave praise. Fortune magazine, for example, quoted Jupiter Research analyst Michael Gartenburg as saying, “This could do to Hollywood what the iPod and iTunes did for the music industry.”

The consummate salesman provided further lubricant to the atmosphere of anticipation when he said, “I’m still stunned our engineering team could pull this off,” and promptly revealed an interface mechanism for the Mac which ehoes the iPod’s famous touch-sensitive trackpad.

But, impressive though that line-up was, you havn’t even heard the best bit yet. For Mr Jobs also wowed the audience with thin Air. Only Jobs could do it, but thin Air was the star of yesterday’s spectacular. To be precise, it was a product called Air, and it’s the the world’s thinnest laptop computer – at its thinnest it is just 0.16 inches thick, and at its fattest, 0.76 inches.

So that’s a line up and a half: revolutionary new interface, a genuine attempt to reveal a product and catalogue of videos that could turn Hollywood upside-down in much the same way the company turned the music business upside-down, and a laptop computer you could almost slide under the door.

And shares got a panning. Scour the net, and you wil see a line-up of critics all trying to put their boot in, a proper job, as it were, on Jobs.

Why so much angst from investors and techies, when yesterday’s line-up was so impressive?

Well the answer is simple. It’s the mood. Citibank also chose yesterday to reveal another huge loss. Bad news on Wall Street is piling high, and no amount of thin Air, no matter how fresh, can alleviate it.