No Jobs at Apple, Inc.?

To be or not to be, that is the question! Will Apple survive the absence of Steve J0bs?

Before I share my thoughts on this topic, I’d like to mention that the timing of the announcement was superb; only Apple could have done it.

I’m sure this has been in the works for some time, and it is possible that because of his poor health, SJ did not show up in NYC for the launch of the Verizon iPhone. It has also been rumored that of late, he has been coming to 1 Infinite Loop only about twice a week, having lunch in his office rather than at the company cafeteria, etc. It is quite probable that Tim Cook has been running the entire Apple operations, behind the scenes, for some time.

Announcing his indefinite medical leave on a stock market holiday in the US gave investors time to mull over the impact of Apple without SJ, and with Tim Cook running the company. While Apple stock in foreign markets dipped almost 10% on the day of the announcement, it was down only by less than 2% in the US at the end of the first post-announcment trading day. I have no doubt it will regain its value soon.

The timing was also perfect as it was the day before the 2011 Q1 results announcement, where Apple was supposed to blow past the WS expectations, and it did.

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Would Apple be the same without SJ? Probably not. Would AAPL sink or not grow as much as it has been in the recent past? Also, probably not.

SJ is the kind of individual who appears amongst us only once in a long while. The greatest genius of SJ is his instinct to foresee the needs of consumers down the road, even when they themselves, or Apple’s competitors, may not be aware of it. As SJ himself said, it is better to be where the puck (of ice hockey) is going to be, than to be where it is now.

iPad is a good example. In 2005, Bill Gates announced that within the next five years, most of the computing would be done on tablets, but his wish wasn’t granted. It took SJ, and Apple, to create a third mode of computing while the mobile computing (in laptops and netbooks) was still flourishing, despite being criticized for creating just a bigger iPod Touch which is not capable of replacing the PC. The sales were predicted to be dismal.

Besides his vision, SJ is also a charismatic speaker, and his passion for his products is obvious. In addition, the attention to detail he gives to these devices as well as the quality of Apple’s merchandise gives confidence to the buyer. As of now, while Mac is only 9% of the entire PC market (used to be 2-3% in 1990s), it commands 90% of the $1000 and above segment.

In mid-1990s, an AAPL share used to be in single figures, and the company’s annual earnings less than what they are every quarter now. The stock is trading over $300 now and Apple is the biggest tech company in the world, and the second firm largest in the US, with a market cap over 300B.

iPod is another great example of his foresight and tenacity. The criticisms of it were greater than of the iPad. Who’s going to spend $400 to buy a MP3 player? Even though the sales have dipped a shade over the last year, the iPod is still in the lead, capturing over 70% of the MP3 player market.

But the iPod story also shows us a side of SJ that will be hard to replace: his negotiating skills. Only SJ could have managed the coup de theatre that had the music industry agree to sell single songs, rather than only albums, on iTunes for 99¢ each. Later, they dropped the DRM requirements as well. Today, iTunes is the biggest store selling music and its sales top that of even the CDs. This coup de grace to the Big Albums could only have been given by SJ.

The other thing SJ is famous for is his ability to say no. When he came back to Apple in 1996, there were over two dozen models of Mac PCs; he slashed them to just four. This speaks of the confidence he has in his vision, and the sales of Macs have risen ever since. He also nixed the Newton, the granddaddy of all PDAs, although a lot of its technology was advanced to build touch-enabled devices like the iPhone and the iPad.

Finally, this confidence of saying no and flying against the wind has had a big impact on several industries, and has often changed them. As Henry Ford famously said that if he he had asked his customers, they would have wanted him to build a faster horse. The iPad and the iPod are obvious examples, but so is the iPhone.

Before 1997, when the iPhone debuted, all phones copied BlackBerry. Even the first Android was rumored to look like the BB8700. Since then, however, all phones try to look and behave like the iPhone. Flip phones that were all the rage, like the Motorola StarTac and Razr, are so passé now.

The iPhone changed the whole mobile paradigm. I remember having WiMo and Palm devices, and then the BBs. While they were great, the iPhone brought the whole new meaning to ‘mobile computing’ with a real mobile web browser and then apps. While Android is catching up fast, it still is behind the iOS eight ball. The first iPhone was about five years ahead of the competition, but is only about six months or so ahead of an Android device now. With Verizon carrying the iPhone now, however, I am sure the Android OS will suffer.

(An interesting aside: the Verizon homepage lists three kinds of phones they carry – the Feature phones, Smartphones and the iPhone! It was Google that wanted to call the Nexus a ‘Superphone’.)

Besides the iPhone, Apple has spurred on industries by being the first to use USB as their only I/O port and the first to use Wi-Fi in all their computers. It has also killed, by eliminating in it’s products, the floppy drives (both 5.25 and 3.5). All these, any many more changes, were met with initial resistance, but are industry standard now. I fear for the extinction of optical and hard drives in the next few years, as Apples discontinues their use.

Not widely known is his involvement with movies, another industry SJ changed. Having bought Pixar for a mere $10,000, its first animated movie – Toy Story – won accolades and awards. This was at a time when computer animation was in infancy and ignored. All of the movies from this studio have been box-office hits since. SJ even had Disney agree to have Pixar as a co-brand on all movies and merchandise. He is now Disney’s largest shareholder, owning 7% of the stock.

Certainly, it is not possible to have all these qualities is a single individual. However, I am certain that the executive bench at Apple have most of these qualities in committee. It is also certain that the company has been preparing for a succession for some time.

Furthermore, SJ is only the public face of Apple. He would not have succeeded without the industrial design genius of Johnny Ive or the inventory management expertise of Tim Cook. There are many others who add to complete the experience that is Apple. So Apple is prepared, IMO, to bear the brunt of SJ’s departure.

Nevertheless, while design, quality, and deliverance of new and exciting product may be assured from Apple going forward, with or without SJ, the biggest hit the company will take is the force of personality SJ brings to the negotiating table.This would be very important for Apple going forward as the company wrestles with media, print and video, to enlarge and solidify its ecosystem to provide for the iDevices and its foray into the living room with Apple TV and the rumored Apple HDTV.

In addition, no one else at Apple will have the authority and decisiveness to say no or yes to any major decision. Like the military, great corporations are not democratic.

Perhaps that is why SJ has retained the title of CEO while on medical leave, and has indicated that he will have a say in all tactical decisions at Apple, while Tim Cook runs the day-to-day operations.

All good things come to an end and it has been painfully obvious that companies deteriorate when founders leave, as it happened with HP and MS. On the bright side, there are companies, like Disney, which have maintained the vision and vigor of their founder.

Apple is now a big cap company but still acts like a startup. Companies like this don’t grow 71% year-over-year, as Apple has reported on the 18 January  Conference. In addition, SJ has been notorious at keeping teams small, about a hundred or so. That is why there are delays often, as the same teams work on all OSes, from iOS to OSX. However, this is good for the Mac platform as a whole, because the same people carry over experiences from one side to the other, unlike at MS.

The management structure at Apple will be studied in business schools for decades to come. There are never more than two or three layers of managers, so each worker has an easier time to share his idea/work with the top layer.

(Another interesting aside: Messrs. Hewlett and Packard introduced the concept of ‘coffee break’ to the American workplace. The idea was to have all levels of employees, from workers to managers, gather at one spot to share ideas; the company provided the coffee and doughnuts. Other H&P innovations: retirement plans, share in the company and flexible working schedule including work from home.)

It is a surprise that a $300B company employs only about 50,000 workers worldwide.

In conclusion, I see no danger to Apple or AAPL in the short or medium term. Who knows where we will be in 10 years?

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Will Intel go Google on Apple?

Intel has just bought the mobile chip-maker Infineon, which has the technology industry abuzz.

Intel is the biggest maker of computer ‘brains’ on the planet, and its x86 architecture has been a successful model running Microsoft Windows on PCs, so far. However, it has become clear that the mobile devices are at the threshold of overtaking the desktop computers.

Intel has developed a low-power Atom processor, but it has not been quite popular in the face of processors that use the ARM based architecture. With the purchase of Infineon, Intel gets its foot in the door of the mobile processor world. Previously, Intel had partnered with Nokia to develop a mobile platform; at that time, this was a move by these companies to counter Qualcomm cornering “…the market on vague- sounding, ultra-mobile device niches…

That project wasn’t too successful, but with the purchase of Infineon, Qualcomm, which makes ARM-based processors, beware: “Intel-Infineon deal goes far beyond handsets, putting new technologies in netbooks, tablets, embedded PCs, and more“; this could make Intel “Mobile’s next Goliath“.

In addition, it mounts a challenge to Apple’s lead of making its own A4 chip based on ARM. “…the Intel (INTC) acquisition of Infineon’s wireless unit has probably changed the balance. The move allows Intel to add an piece of the mobile puzzle that it never had before. Given its expertise in advanced semiconductor construction, the company could create a single package that would offer most of what handset manufacturers need to catch up to the iPhone, at least in terms of size and power, and still be compatible with the Android operating system.

Given Intel’s expertise in putting “…more stuff onto chips and get more chips out of a piece of silicon…“, this acquisition will be synergistic in providing Intel to “…offer bundled packages and potentially make itself economically attractive to handset vendors.

Paul Otellini, Intel’s CEO, told Liz Claman of Fox Business that about his deal, “Steve was very happy…and there were a number of competing companies for it…I think they’re very happy that Intel won the bid.”

Only time will tell if Steve Jobs remains happy about having someone providing aid and comfort to iPhone’s competitors. He has been burnt once by Eric Schmidt sitting on Apple’s Board and then coming out with an Android handset; he has to be carefully watching Intel’s moves, especially since Apple uses Infineon’s chips in the iPhone.

I would not be surprised if Apple ditches the ‘Intel-Infineon’ altogether. It could use AMD (it already uses ATI graphics, now a part of AMD) instead of Intel processors, and ramp up its in-house chip manufacture to avoid dependence on ones made by Infineon.

A case for an unlocked iPhone?

Gene Steinberg laments that AT&T, or any other US carrier, does not offer reasonable international rates, and would not unlock his son’s iPhone to use in Spain, either.
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I had a similar problem when I went overseas for three weeks last October. After a long to-and-fro with AT&T’s international ‘advisor’, she finally told me that under contract with Apple, AT&T cannot ‘SIM unlock’ the iPhone (I had the 3GS then), like they can any other handset when requested. I was forced to use another phone that I bought unlocked from Amazon.com, because I did not want to jailbreak.
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I did use Skype over Wi-Fi since all my contacts were on the iPhone, praying that nobody will place a call to me from the US when I was talking on VoIP. The 3GS did not have a separate disconnect for Wi-Fi and Cellular, and it didn’t occur to me to take out the SIM!
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I did write to Steve Jobs, then, to please issue an unlocked version of the upcoming iPhone. Apple has done so, but not in the US.
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This is indeed preposterous; I know a couple of my friends had their SIM unlocked in other cellphones. Using a prepaid SIM in the country you’re traveling is the best option for voice and data. This is especially true in Asia, where rates are very cheap.
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I had one other revelation: Carry an Airport Express on travels, especially overseas. While ethernet is available in homes and hotels worldwide, a Wi-Fi router is not that common everywhere. If you want to use Skype to place calls, you would need Wi-Fi.

iPhones at Target?

Well, old ones.

Target has started a program where you can trade-in your old iPhone.

Being evil?

Jason Hiner tells us The dirty little secret about Google Android: Google’s “…Android is enabling the U.S. wireless carriers to exert too much control over the devices and keep the U.S. mobile market in a balkanized state of affairs…

This is because “The carriers and handset makers can do anything they want with it. Unfortunately, that now includes loading lots of their own crapware onto these Android devices, using marketing schemes that confuse buyers (see the Samsung Galaxy S), and nickle-and-diming customers with added fees to run certain apps such as tethering, GPS navigation, and mobile video.

This is very much unlike Apple that took control of technical follow through from AT&T, and this is very likely the reason it had to have an exclusive with just one carrier at the iPhone launch in 2007. For example, Apple refused to throttle data speeds so the users cannot watch YouTube. All wireless carriers, and not just AT&T, disable hardware features on handsets all the time, so that the data demand remains low and not tax their underdeveloped infrastructure; in fact, Verizon is the worst. This assertiveness by Apple has proved to enhance user experience with the iPhone.

Google, however, has no such concerns. Customer experience is not its business model to make money. Its main revenue source is advertisements and all it wants is as many eyeballs as it can garner, whether it means giving the license to use Android for free to OEMs and letting them tweak it, or giving a free rein to wireless carriers to disable any features they want.

The Google-Verizon deal on net-neutrality should be looked in this light as well. If the “Voogle” understanding prevails, the wireless access to the Internet by mobile devices will have two tiers of service, the classification of which will be controlled by the telecom carriers. If a company pays a certain fee, or shares advertisement dollars, the carrier will let that company’s site be accessed at a faster speed. Smaller companies will less money to spare and common users without money, who do not have any such restriction now, will have their websites and blogs load at a much slower pace.

Google and the carriers know that the next big thing is mobile computing. The search giant has a lot of money to throw around and share, and will get preferential treatment. The faster Google sites, like YouTube, load, the user will have a better experience and is more likely to revisit them over others that load slowly. Google wins with being able to generate more ad revenue, and more dollars to share with the carriers. For Google and the carriers, it’s a virtuous cycle.

The sad part is that it is us users who will be at a loss. The breath of fresh air that Apple brought with having a tight control over the hardware and software of the iPhone will be lost pretty soon. We will once again become worse than a third-world nation regarding telecom services. We already pay more per user for the third-class services than any other nation in the world; we’ll be paying even more without any significant improvement in resources.

Future of Android?

While the iPhone OS (iOS) has been dominant for a while, Android recently surpassed it in the US and globally.

Is this good news for Google? Yes and no.

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Apple has introduced one phone a year for the last 4, and at any time, it offers 3 flavors: 16 and 32 GB versions of the current model, and one lower GB version of last year’s. Apple makes both the hardware and software of the device, and tightly controls software by 3rd parties.

Google, on the other hand, only supplies the OS (for free) to any OEM (Original Equipment Manufacturer) who wants it, and has little, if any, control on software by 3rd parties. Consequently, there are numerous flavors to choose from for an Android handset. This is why Android is outpacing the iOS in the number of devices installed. It won’t be long before it becomes the dominant platform for mobile phones, just like Windows once was.

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However, there is bad news for the future of Android.

Firstly, since OEMs are allowed to tweak the OS to their liking, there will be OS fragmentation because different makers would like to differentiate their device from the competition.

Secondly, different Android devices may have different versions of the OS (1.6, 2.0, 2.1, 2.2), and the path to upgrade to the latest version will be different for different manufacturers and will be dictated by them, as well. This has led to further OS fragmentation.

How does it matter? Well, any software (app) written for an OS works the best if it is written for a particular version of that OS. Certainly, it can be programmed to be backwards compatible but then it would lose some of the optimization for a later version it was primarily intended to work with.

In addition, if an app is written for one particular version of the OS running on one particular device (hardware) will be the most optimal in function. If and app written for a particular OS version for several different devices will not be as good. It would be worse if an app is written to work on several OS versions running on several different devices by different vendors.

In other words, Apple has the best of all worlds: one device, one manufacturer and one OS version at a time. Certainly, there is some fragmentation of the iOS (a user with an older model may not choose to, or be unable to, upgrade to the latest version), but it is not as bad as Android. Google, on the other hand, has the worst of all options: several devices, several manufacturers and several OS versions at the same time.

In addition to the quality of apps produced for the OS, any software designer will prefer to make money by making only one version of the app, like for the iPhone; he/she will have to make several versions to run on different versions of the Android to make the same money.

As a device user, I’d like to have the latest version of the OS as soon as it is available. I’d be rather upset that I cannot upgrade to the current version of the OS because of my hardware or the OEM would not allow it. I’d be very irked to see another person sporting a similar gadget with the latest version of the OS.

Finally, there are rumors of a Google-Verizon tablet that will run on the Chrome OS. This will lead to even more OS fragmentation of Google’s mobile devices; developers who write several versions of the same app for the Android OS that powers the mobile handsets (different OS versions, different OEMs), will now have to write a totally different app to run on a Chrome based tablet.

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It is a bit perplexing why Google is following this model. Apple has only one iOS for both its phone and tablet, and therefore has a single App Store. True, all of the 250,000 iPhone apps do not look great on an iPad, but you still can use them. While there are apps exclusive to the iPad, there are many more that are scalable to both the iPhone and iPad displays (universal apps). Google on the other hand, has two ‘App Stores’: an Android Market and a Chrome Market (announced to open later this year).

It could be that Google’s decision to put Chrome on its rumored tablet is because of the recent suit by Oracle: “In developing Android, Google knowingly, directly, and repeatedly infringed Oracle’s Java-related intellectual property” an Oracle spokesperson said in a statement. “This lawsuit seeks appropriate remedies for their infringement.”

If Oracle prevails, it could mean the end of Android, as “Google makes heavy use of Java in the Android software development kit (SDK). Third-party developers code Android apps in Java, which is then translated into bytecode that runs in Dalvik, Google’s own custom VM Virtual Machine).Google’s sole purpose of creating Dalvik was to route around Sun’s IP-based licensing restrictions on Java ME.

Android could be cast away like a hot potato by Google, like Microsoft ditched the Windows Mobile platform!

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There is more bad news for Android. The three most profitable cellphone makers are Apple, RIM and Nokia. They also have their own OS and would not likely use Android in their handsets. So the OS is left to be picked up by manufacturers like Samsung, LG, Motorola and HTC. While they make a lot of phones, their profit margins are very thin.

This chart is courtesy of another blog, asymco. The article, ‘Android Pursuit of the Biggest Losers‘, is very well written and worth a read.

In three years, RIM and Apple now have increased their EBIT (Earnings Before Interest and Taxes) from 6% to 17% and 1% to 48%, respectively, of the share among the top 7 mobile vendors. This was at the expense of Nokia, mainly. What is quite interesting is that all the prospective Android (and Windows 7) manufacturers share the humble pie of the remaining 13% of the EBIT.

Something to think about.

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UPDATE: A good explanation of why “its time to end the forced use custom skins” by different OEMs (Motoblur, Sense), and why “the fragmentation of UIs slows Android upgrades and removes customer choice”.

Droid-gate?

The well-hyped ‘iPhone’ killer, Droid 2, has been in the market for only a few days. Already, there are reports of it losing it signal even without holding it!

This seems worse than the iPhone 4 ‘Antennagate’, where you had to hold the phone in a certain way (death grip) to see a drop in signal strength.

It is interesting to remember what Sanjay Jha, Motorola’s co-CEO, said recently when reacting to Apple’s woes: “While the whole industry has to deal with phones being held in different ways, it is disingenuous to suggest that all phones perform equally. In our own testing we have found that Droid X performs much better than iPhone4 when held by consumers”.

At least he was honest; Droid 2 goes to 1 and 0 bars just sitting on a table, randomly.

It seems that everyone is trying to copy the iPhone, warts and all!