I am sure, despite never having seen an iPhone, that it is a fine piece of kit, Bento. But I do so very strongly dislike Apple as a company. They sell high quality hardware it is true, but so overpriced; you pay a premium to be unable to use 90% of the world’s software without running some other complex program to do so. I hate the cutsie-coo operating system and the self satisfied “pop” when you close a window. I find the advertising unbelievably irritating, with its “Think Different” slogan, which when you think about it is a pean to its lack of market share; if they had managed to sell more Macs than PCs would they be telling us to “Carry on Thinking the Same” to make us buy more Macs? More than that, I pity the ponytailed, smug, pseudo-individualist, and above all gullible Apple fanboys, who all believe they are part of some greater social movement representing god knows what but who are in fact the victims of some corporate succubus which cares not a jot for them except how much more they can milk them. And the fanboy’s anger at the Wintel axis ignores the fact that the only thing which kept the company afloat during the dark times was Microsoft’s charity; that and the need to pretend that Windows was not in fact a monopoly.
No, Apple is the antithesis of what a Spinozist technology company should look like: closed, not open systems; overly pleased with itself and arrogant; and its advertising and brand values appeal to the grossest of the Passions: envy, pride, confusion and fear. In their defence, the flip side of their arrogance is a certain appealing audacity. The company from time to time (but not as often as we think) creates attractive and innovative products. But net net they have to go in the Stupid Cartesian bucket.
Anyway, I submit Apple may well have peaked, and it is all downhill from here. I am worried about the company and the stock, and think it might be time to call er, time on the fanboy stuff at least.
It was with No Small Joy that I read about Apple’s failure with iPhone v1.0. No matter how one spins it, a 33% price cut a couple of months after launch is not a sign of success in any hardware market. Nokia’s “pre-sponse” to the iPhone, the N95, is still selling like hot cakes at the same unsubsidised $700 price point (but it is subsidised, a crucial difference) it was launched at 2-3 months before the iPhone hit the shelves. Now, we are told the millionth iPhone has been sold, and this is ahead of the internal target for the end of September. Hooray, clap hands or rather let’s not, as Apple is notorious for giving mega-low-ball targets they will never miss, so no matter what happens they can say it is a “major triumph”. One million in the 1st 2 months after release is not a great total for the most hyped phone launch in history with a huge advertising budget, and the only reason they made it now is likely the price cut itself. Apple has still to find a European carrier desperate enough to accept the harsh terms it insists on, and has thus excluded itself from the highest value handset market in the world. No, something is smelly here, and all is not well.
Not everything is terrible either. Apple will launch a 3G iPhone, of course, and other variants. It will have a European launch, and at some point, Asia. But for the first of any line to flop is not a good sign for the descendants, and 3G is a lot harder to do properly; that version might come later than we think. And if the iPhone is merely an OK product in the end, what then? Stagnation, or at worse a money pit as Apple throws R&D and marketing at a subscale product. The iPod franchise is being attacked by cellphones with embedded MP3 players. iPhone was conceived as the counter to this, but it exists in a very different market from iPod, one which is already populated by lean, experienced kleptomaniac companies with vast scale, open software and massive distribution; 3-6 months after Apple introduces a handset innovation it will be copied and shipped around the world, patents be damned. I do not think it will be enough. Apple will be left with the declining iPod franchise, an unprofitable handset business, and the stub Mac business, which is indeed going very well. However, that business was kickstarted recently by the iPod success, the “Halo Effect” much beloved by AAPL (the stock symbol) bulls. As iPod declines, may an inverse Halo not be possible?
AAPL is not my stock; it is covered in my fund by my dear colleague and boss, who does the computing hardware part of the portfolio (I do the communication hardware and software bit, among others). So I have no real sense of the valuation. We did sell it recently; were I able to I would go further and put on a cheeky trading short, probably offset by a longer term RIMM long. Research in Motion, I decided recently, has cornered the market in mobile email. It should do well whether iPhone is a success or not, as the 3-4 operators in each cellphone market who don’t have the iPhone exclusive will be pretty desperate for something similar to sell.
Of course, I reserve the right to change my mind on this at a moment’s notice, and then to pretend I wanted to do the opposite all along, but that’s how I feel at the moment and for some reason I wanted you all to know.