No one understands Apple's customers and the company's sales figures better than Tim Cook. No one understands the build and inventory process better than Tim Cook. And yet, many seem to be flowing with the technical currents sweeping the Internet. The disconnect couldn't be greater as Tim Cook continues his attempts to instruct us.
At the end of Apple's earnings report on January 23, Tim Cook said something remarkable and subtle. He was asked by an analyst about the apparent strength at the low end of the product line. For example, Apple couldn't meet demand for the iPhone 4 in the last quarter. "There seems to be a lot of demand at lower price points for the iPhone," he asked. "Why not move down market in the iPhone business?" Here's what Mr. Cook said.
[Very, very long pause to reflect.] I'm not going to go into our pricing strategy, but we feel great about the opportunity of getting product to customers, and a percentage of those buying other Apple products. We've obviously seen evidence of that throughout our history and continue to see evidence of that today."
This was a remarkable exchange. The analyst presents a question, apparently derived from group think, perhaps fanned by the flames of Internet conventional wisdom, and Tim Cook directly contradicts him by pointing out:
- Lower cost iPhones (4, 4S) are already available and selling so briskly that Apple can't keep up with demand.
- Apple has observed (and reiterated previously in that session) that when a customer buys an iDevice, it's very likely they'll buy another iDevice in the future. This, in turn, fuels more sales.
So, in other words, if you reduce the price of your flagship product, all you do is push all the prices down across the board, leave money on the table and detract from your reputation as a premium brand.
Along with that money making strategy, Apple has also found that getting one iDevice into customer hands invariably leads to them buying another Apple product, the well-known halo effect, making additional money for Apple in a way that isn't commonly connected to the pricing scheme.
It's clear that an understanding of who is buying Apple products and how they buy them has led to a pricing strategy that Apple favors. In fact, it's so nifty that Mr. Cook declined to get into the details, probably for competitive reasons. What's clear from the exchange above is that these simple, armchair quarterback ideas about how Apple should price and sell its products are at variance with Apple's internal strategies that are working so well.
How well? Apple can't keep up with demand for iPad minis, iMacs and iPhone 4s. Mr Cook explained that the iPhone demand also exceeded supply early in the quarter, and as supply increased, sales increased. Even so, iPhone 5s flew of the shelves to the tune of almost 48 million sold in 13 weeks. How does lowering prices improve upon that?
The only logical conclusion to draw is that Apple has developed a product and pricing formula that takes into account how its customers perceive and buy the first Apple product, and then the second, and so on. We should all key in on these remarks.
And yet bloggers, tech columnists and at least one major analyst has decided that simple minded ideas about lowering prices to increase demand and market share are more insightful that Apple's own internal knowledge of its business operations.
It boggles the mind.
Tech News Debris
This week I found two very good articles that explain, in interesting detail, the key differences between the business models and motivations of Amazon, Google and Apple. In the first article, Google's Larry Page provided his views on the Google-Apple rivalry. "What Google Does Best Is A Stark Contrast To Apple, According To Larry Page."
In the second article, a former Amazon manager explains, in contrast to the conventional wisdom, why a low margin business is good for Amazon and makes life difficult for competitors. It's a long but fascinating article, full of juicy tidbits of wisdom from a fellow who fought in the trenches at Amazon. "Amazon, Apple, and the beauty of low margins."
We often talk about the loss of privacy nowadays, but there is an interesting angle on that. One path to protecting information is "practical obscurity," that is, information that's available to the public, "but could only be found by spending a burdensome and unrealistic amount of time and effort in obtaining it." This applies in many areas, and a thoughtful, enlightening discussion of it is found in: "Obscurity: A Better Way to Think About Your Data Than 'Privacy'."
Has cyber warfare crossed the line? Will it end up being something like chemical warfare, some thing that humanity has to pull back from? Moreover, as the article states, "In human history ... we sometimes had to stop using new technologies like the airship or the Concorde after major accidents. What if the threats on our cyber systems lead us to have to quit using some forms of IT and store government data on paper again?" All this and more is explored in: "Eugene Kaspersky And Mikko Hypponen Talk Red October And The Future Of Cyber Warfare At DLD."
Lots of people have their opinions of the Surface RT and expectations of the Surface Pro. But you're not fully informed until you've read Anand Lal Shimpi's technical assessment at AnandTech, and I urge you to do so. "Hands on with Microsoft's Surface Pro, Available in US & Canada on February 9th."
Not every company that has catered to business and then had designs on the consumer market has had a successful venture. Sometimes, the structure of a company and its business practices just can't be modified to meet the demands of the consumer market place. Or perhaps the company finds that it just doesn't enjoy dealing with consumers -- that isn't in its DNA. Here's one such story. "Cisco’s Flirtation With Consumers Is Over, as Belkin Buys Linksys Unit."
We know that Corning is doing an amazing job with its Gorilla Glass used in consumer electronics. The thing is, once you get very good at one aspect of a technology, often, new opportunities arise. Here's a fascinating story about Corning's Willow Glass.
Could we see that, someday, wrapped around our arms or legs, perhaps in the style of Kiera Cameron's devices in Continuum? It's fun to ponder. (I couldn't find the Continuum photo I wanted, so here it is, synthesized, in two parts.)
(L) Rachel Nichols in Continuum (NBCU/SyFy) and (R) concept via lirenshuai
Finally, following up on that, I can see two technologies that could become the next generation of technology beyond four ounces of smartphone aluminum and silicon bulging in one's pocket. The first is curved glass, mentioned above, that could be worn on the forearm.
Image credit: Google
The second is Google Glass and, incidentally, Goggle is setting up an event for Google Glass developers called the Glass Foundry. The company is keep strict wraps on the technology, but ReadWrite found out some of the details. "The Super-Secret NDA For Google's Project Glass Event Next Week."
That boggles the mind as well.