Apple: How to Spend $10 Billion And Make a Few Friends

| Particle Debris

Inside Apple, the executives know they're in a manufacturing war with Samsung. Exotic materials, including sapphire, plus lasers and expensive robotic milling machines all contribute to modern electronic devices like our smartphones that make the difference between first-class consumer goods and second rate junk. That war has serious consequences, and so that's where Apple is spending the big bucks.


There was a time when observers thought that Apple should buy this company or that in order to improve its competitive posture. Back in the 20th century, the idea was to buy up big competitors and dominate the market. But that creates all kinds of problems, including culture clashes. This century, the better idea is to buy technology that helps improve a company's products.

Of course, Apple buys companies, but generally, they're small and culture clash isn't a problem. Apple is after technology, patents and first-class engineers.

It's instructive and fascinating to see how Apple, behind the scenes, really does understand the stakes in global manufacturing and is making strides to seize control of critical parts of its supply chain.

Philip Elmer-Dewitt explains and introduces us to an extremely important Bloomberg article that goes into considerable detail on how Apple is planning to spend $10.5 billion on robots and lasers that build Apple products. For a glimpse of that, one need only review the equipment Apple has put in place to build the new Mac Pro. It's an amazing video.

Robot polishing a Mac Pro in production. Image credit: Apple

The Bloomberg article and the Apple Mac Pro video combine to demonstrate ways in which Apple has to innovate, just to build the products they're already shipping. It's sobering indeed. To put it into perspective, the cost of the new Gerald R. Ford nuclear aircraft carrier, exclusive of R&D, is only $9 billion, taking four years to build and three more years to commission.

U.S.S. Gerald R. Ford in dry dock, ready to be floated. Image credit: Wikipedia

And that is how Apple is smartly spending 10 billion bucks.


Tech News Debris for the Week of November 11

Various bloggers with different levels of expertise often make critical comments about Apple software. But when a former Apple executive unloads on Apple, the discussion rises to a whole new level. This time, Jean-Louis Gassée has taken Apple to task for its launch of the new iWork. "New iWork: Another Missed Opportunity To Set Expectations."

Mr. Gassée isn't buying the argument that OS X and iOS code bases needed to be on common ground before proceeding.

The logic of a fresh, clean start sounds compelling, but history isn’t always on the side of rewriting-from-scratch angels. A well-known, unfortunate example is what happened when Lotus tried a cross-platform rewrite of its historic Lotus 1-2-3 productivity suite.

This is an articulate and critical analysis of Apple's current software development strategy.

There seems to be an everlasting discussion about the relative success of Android versus iOS. It's like the fable of the blind men inspecting an elephant. Each man tells a different tale of how he perceives the elephant depending on where he touches it. However, some sanity can be derived from following people whom you trust, people who do their homework and make sense of the graphs presented. One such person in my view is Dan Dilger. Try this one for size: "More iPhone buyers switching from Android this year than in 2012."

Two articles this week speak to the fate of Microsoft. It's very hard for Microsoft to properly size up its condition when the money still rolls in. Perhaps only Steve Jobs could take a company that's making money, evaluate the real crisis, and turn a company on a dime.

The first essay is by Peter Burrows and Dina Bass is "Microsoft CEO Candidate Elop Said to Mull Windows Shift." The second comes from CNET's Charles Cooper. "Does fixing Microsoft mean ending Microsoft as we know it?" My take on the situation is that people who are in a position to know, expert followers of Microsoft, realize that Microsoft has backed itself into a big corner. The details of the escape remain murky.

The similarity of names, MacBook Air and iPad Air invite comparisons. And that's exactly what this article does. It's a playful comparison of the two products in terms of living with one or the other. For some fun: "Air vs. Air: Can the iPad Air be a suitable stand-in for a MacBook Air?"

If you thought AES 256-bit encryption was good enough to protect your encrypted disk images, think again. Google has had to up the ante to 2048-bit encryption to keep its customer data safe from the prying eyes of the NSA. "Battle brews as tech companies attempt to fend off NSA hacking." According to the National Institute of Standards and Technology, 2048-bit encryption should suffice until about 2030.

Finally, Jonny Evans has provided some really good suggestions on how to improve Siri in iOS 7. The article reminds us that Apple can only take us so far. Sometimes learning a few tricks can save the day.

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If you thought AES 256-bit encryption was good enough to protect your encrypted disk images, think again. Google has had to up the ante to 2048-bit encryption to keep its customer data safe from the prying eyes of the NSA.

I’m old enough to remember when companies touted their 32 bit encryption as “uncrackable”, and by the systems of the time it was. It would have taken centuries. Now a desktop can break it in what, a minute or two? So now that 256 bit isn’t enough and it does not surprise me at all. 2048? I give it 5-10 years before it’s crackable by desktop systems.


From Does Fixing Microsoft Mean Ending Microsoft as we know it?

Feel free to slam Microsoft for its myriad miscues, but let’s not forget there’s another side of the ledger, including Xbox and Flight Simulator, Windows 95 and Windows XP, Microsoft Exchange Server, and MS Office.

I think I see the problem. Xbox has been losing money hand over fist for years. It might be good but it’s not profitable. Windows 95 is 20 years old and is not the code base used today. It’s as irrelevant as saying how great Ford is today because the Model T was so good. Windows XP is over 10 years old and is obsolete even by Microsoft’s standards. Their current OS is Win8, a disaster by all but the most WinFan metrics. Exchange Server is horrifically expensive and I know of several companies, including my own, that have decided not to go with it just because of the cost. Office is the one winner on the list, mostly because of it’s legacy, but it’s not in mobile space, except on the Surface, another disaster. Even then between the cost and The Ribbon I personally know or more and more people that are looking into alternatives, like iWork, OpenOffice, etc. That monopoly is eroding.

Lee Dronick

  It’s as irrelevant as saying how great Ford is today because the Model T was so good. Windows XP is over 10 years old and is obsolete even by Microsoft’s standards.

Two weeks ago we bought a new Ford Focus Titanium, the touch screen and electronics are controlled by a MicroSoft OS. I don’t know if the engine and transmission are also using MicroSoft, but the software is upgradeable.



Funny thing about that. A couple of years ago I was in the market for a new car. I looked at the Focus and I really liked it. In the end though I went with a Honda, because of the Microsoft control systems on the Ford. Oh it gets good reviews and seems to work fine for people, but I just couldn’t do it. I’ve been dealing with horrible, unstable Microsoft systems for so long I just couldn’t get a car with one. I kept seeing myself stranded somewhere because of a BSOD or a malware uploaded during an upgrade. I just couldn’t do it.

But automation and embedded systems could very well be Microsoft’s major profit centre in the coming years. The company I work for is going with Windows Embedded in several of our new products.

Lee Dronick

It has been working very well thus far, but the voice control is a bit of learning curve. The dealer offers a one-on-one training class and there are how to videos on Ford’s Youtube channel. Also I have the vehicle manual PDF downloaded and in iBooks.



Just getting to my TMO reading at the end of a busy weekend. Great picks.

Standouts to me include:

1) Bloomberg article that explores Apple’s capital investment into robotics, etc. It reflects proactive and forward thinking by a company that plays the long game and is preparing to take its production quality to another level across devices. Combined with winning design, this will be the industrial equivalent of a force of nature.

2)  Jean-Louis Gassée’s editorial. His points are sobering, but well-aimed. Apple could and must do a better job of forewarning their client base about deficits in product and services releases that remain, substantially, works in progress. While I personally have not suffered substantively in the iWork makeover, I can readily sympathise, as a busy professional, how this could severely hamper someone who depended on this suite for their livelihood. I know how I’ve been ‘inconvenienced’ by sub-optimal product upgrades by other vendors.

3) Dilger’s piece on Android user migration to iPhone. Although I am somewhat intrigued by this piece, and it dovetails nicely with my own anecdotal observations in my field (the primary Android - really I should say Samsung - users in my profession are junior colleagues or, even more often, support staff with both less education and disposable income and who, honestly neither follow the industry or know much about the devices they own (I’m talking about those in the high income countries like the US and the UK - those in low income countries are another story altogether, burdened as they are by low-end Chinese products dumped onto their markets because they could not sell anywhere else). Indeed, nearly all of my professional colleagues use iPhones and iPads as mobile devices. And those who have migrated to Apple have done so primarily from Blackberry and Nokia - fewer from Android but only because they never went Android in the first place. Never even seriously considered it, as it is generally perceived as a not-quite ready for prime time product - a view reinforced by it being taken onboard by students and lower paid staff who do not use these devices for anywhere near as many functions as do professionals - a fair perception or not - it is the perception. Nor is this confined to my own profession. A scan of the business lounge at any of a number of my frequent haunts, be it Heathrow, Geneva, Orly, Dubai, Doha, or Dulles - it’s ever the same - iPhones, iPads and MacBooks (Airs and Pros) are the dominant tools of trade for the global cosmopolite and enterprise decision maker. The competition is not even close.

4) The two fate of Microsoft pieces. I’ve belaboured this theme more than enough, so will not burden either you or my fellow readers/commenters with yet more, except to say (couldn’t resist) that MS require a corporate cultural change so radical, if it is to be effective, that it will threaten the future existence of the company no less than the combined competition arrayed against the company. The cure will be co-equal in menace and severity with the disease, the outcome uncertain, except that, what doesn’t kill the company should render it stronger. Maybe. It is already late in the game for MS, and every succeeding hour grows later. MS is by no means done, but its opportunities to become a major player in this post-PC era continue to dwindle. I concur with one of the authors who, if correct about Stephen Elop, argues that MS’s first course of action should be to focus on Office for the iPad and Android. I argue, however, that thereafter, they need to study the market the way a premed student studies for his or her med school entrance exams, learn what works, then stepwise and methodically, migrate to that post-PC market with products and services that anticipate where the market is headed - not where it currently is. They’ve already ceded that to the competition. Focus on next-gen products and services. That’s my non-solicited advice to MS’s next chief.

Many thanks for the reads.

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