Sales are up 24%, earnings up 75%, margins topping 30%, stock price up 146%. The popularity of the iPod and its snazzy young cousin, the iPhone, has lifted other Apple products, helping boost market share in personal computers in the United States from 2% a few years ago to 8% this past quarter, with Apple leapfrogging Gateway to take third place behind Dell and Hewlett-Packard. [...] Apple’s market cap is now north of $160 billion; 18 months ago, the crew in Cupertino, California, was worth a mere $60 billion. This $100 billion increase alone equals the combined value of Motorola and Sprint-Nextel.
Writes Adam L. Penenberg in Fast Company issue 121, All Eyes On Apple.
The uproar about the $200 price drop of the Apple iPhone two months after its start ripped the Apple fanboys appart, who got even more alienated when the $100 Apple Store certificate cannot be used for iTunes and has to be used in a single purchase with no “savings” – so you either throw away some dollars or give ‘em some extra cashola. Jobs’ comment: “That’s technology.”.
Another big bummer was the limited harddrive space of the iPod Touch. All joined in into the moaning, Wall Street Journal, Inc. Magazine, Fast Company, Gizmodo, … Fast Company writes:
Apple made brilliant design decisions with the iPod. So why add the iPhone’s touch screen to it–creating what should be the best iPod for video–without giving it a big hard drive? That had iSuppli senior analyst Chris Crotty scratching his head.
Quite frankly: I don’t really understand the concerns. We all have stock from Apple. We depend on a renewing hype flow as well as a renewing cash flow. When looking at lifecycles of mobile phones of consumer groups similar to Apple, we are looking at 5-10 months depending on usage scenario data vs. entertainment. That means a constant flow of device updates (and hopefully a recycling / reusing of the “old” phones).
What would happen, if Apple got it absolutely right from the beginning?
This is almost an exercise in how to keep your blue ocean blue, or at least capturing a nice blue island within a red ocean. If Apple got it right, who would buy the next model in the next couple of months? There is no real need, right? I am still using the 2nd generation iPod, by now with a new battery, but they do work longer than 6 months. So why replacing the model, if it’s perfect?
In another study of consumer behavior regarding media player on the top end I’ve monitored closely the buyer behavior with upgrades. I don’t think that Apple’s strategy for the hard drive space of iPods is simply driven by either technology costs, technology availability, or market pressure. I think they did an excellent job of alignment and control of technologies, markets, and demographics.
Only 23% of iPod “upgraders” went for the next bigger iPod model of the same generation (which 82% of these upgraders bought used or mint, and 18% new). 73% went for the next generation of iPods, or the next bigger model (from iPod Shuffle to iPod Nano, and so on). Only 39% of these upgraders had the largest iPod model available, and hence had no choice other than to upgrade to the next generation.
As we can see, Apple find a nice balance to A) keep the hype of a new product and/or form factor and/or usage flowing, and B) to constantly sell new devices, and on the other hand manages its brand and perception. Because negative consumer experience (or more directly formulated: getting screwed on the deal) would harm the stock price.
So what would happen, if Apple would get the iPod really right? Shares would finally come back to the real profits/earnings level – the Apple bubble would not burst, but falter. As long as that’s not the case I’ll keep my shares.
