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Post WWDC Thoughts

1. Very surprised that Apple has two different versions of the MacBook Pro. There’s no point behind the upgraded 15 inch old version MacBook Pro beyond the addition of USB 3.0. MoD understands that the cheaper 13 inch MacBook Pro with a media drive is probably a big seller in the education market so updating that machine for this fall makes sense. A retina display solid state storage 13 inch MacBook Pro rumored for later this year will probably start at around $1599 or higher so having the $1199 MacBook Pro entry level makes sense. But the 15 inch Pro at $1799 only has 4 GB of RAM and still has the same resolution of 1440 x 900. Upgrading it to 8 GB of RAM and to a 1680 x 1050 display puts the total to $1999, replacing the HD with a SSD takes the total to $2499 or two hundred more than the retina machine which has a much better screen and completely new architecture. It’s hard to imagine that the non retina 15 inchMacBook Pro will sell well at all.

2. The retina display MacBook Pro is priced about $400 more than I had anticipated. I need a new machine and I was hoping to stay at the 15 inch screen size. As mentioned above, the old 15 inch is a non starter. The retina display machine has great specs. The combo of Thunderbolt, USB 3.0, and HDMI should take this machine far into the future. The only real negative is that the RAM is not upgradeable post purchase (same annoying limitation as the MacBook Air). The SSD should be upgradeable down the road once the upgrade guys figure out the connector used by Apple. The retina MacBook Pro will drop in price as the components drop just like the MacBook Air did.

3. Can Apple move the retina display to the MacBook Air form factor? It’s unclear if the integrated Intel HD graphics can effectively power a retina display or if the current battery space allowed in the MacBook Air can provide comparable hours of use powering a retina. The iPad got a little heavier It’s definitely an engineering and price challenge for Apple down the road.

4. iOS 6. Apple’s in a fine tuning phase right now with a heaping bowl of FU Google. This fine tuning is also showing a level of flexibility and partnership sharing not usually an Apple strength. The integration of different services into Siri, and the system wide integration of Facebook shows an Apple willing to partner. Jobs often noted that one facet that he would like to borrow from MS/Gates was their ability to work with partners. Tim Cook seems to be taking that advice and running with it.

4. Tim Cook’s promised new hardware for professionals is not a Mac Pro with new processors, USB 3.0, and Thunderbolt in the same giant cheese grater case. Take the design philosophy of the recent MacBook Pro and apply it to the Mac Pro, smaller overall  footprint and a break from the past in terms of overall architecture. I’m seeing something with a super fast processor, super fast graphics, large RAM capability, maybe as little as two internal drives one SSD, one HD as the base configuration. It will feature multiple Thunderbolt ports and channels enough to replace the PCIe bus/cards entirely. And with it a cheaper overall price as Apple has poured the bulk of the cash in to the core speed components. The only carryover tech will be Firewire 800 and Gigabit Ethernet.

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Apple March 2011 Quarter Numbers

So there were 3 numbers that MoD wanted to track from the just announced numbers

1. iPad ASP  2. iPhone Sales Volume 3. Mac Sales Volume.  How did Apple do?

1. iPad ASP was $558. This number is a little lower than MoD expected. But without Apple releasing a product mix it’s impossible to tell what is the true iPad “3” ASP. MoD will track this number down the line, and still thinks that an iPad (3) only ASP might be north of $699.

2. iPhone Sales Volume was 35 million. The pent up demand for iPhones in December 2011 Quarter and the lower numbers of Verizon and AT&T had some Wall Street Analysts scrambling. However, the international demand for the iPhone 4s continues to be very strong and Apple had barely introduced the device to their second Chinese carrier. The possible total market for the iPhone could be in the 200 million range by 2014. The only growth issue MoD can see this year is in the US where for both Verizon and AT&T by July/August timeframe the lack of LTE in the iPhone 4s will start to become a serious feature disadvantage.

3. Mac Sales Volume was 4 million. Analysts were projecting a number close to 4.3 million so on some level this was a miss by Apple. MoD suspected that the Mac number might be light. No upgraded products especially no upgraded MacBook Pros really hurt Mac Sales. If Apple can release the new laptops in May and upgrade the iMac and MacBook Air this quarter as well, there could be significant pent up demand for the new hardware. Mac Mini and Mac Pro future are also up in the air to a certain degree.

And finally it wasn’t announced on 4/24 but the following morning we now have the dates for WWDC 2012. It’s already sold out in under 2 hours (it took 12 hours last year), and will occur June 11 thru 15th.

iOS 6 and OS X Mountain Lion are sure to dominate the key note. Provided that the next gen iPhone is tied to the release of iOS 6, and that’s been Apple’s practice lately and that places the next gen iPhone launch window as August/September.

iPad Resolutionary Event Recap

It’s funny reading some of the comments about the event today. So many writers/tech bloggers completely missing the point of the event and Apple’s overall strategy.  So what should they be talking about?

1. Doubling the screen resolution while holding the line on price is absurd. According to iSuppli for the iPad 2 the screen is almost 38% of the total cost of the iPad 2. So for Apple to have “innovated” in their production and supply chain to source this new screen and not increase price is amazing. Sarcasm intended. If Apple is able to move the MacBook Pros to Retina type screens at the same price, media members would be going crazy with praise.

Tech folks should NOT underestimate the impact of this new screen. This screen update is equal to a brand new form factor design with a brand new operating system. It’s that big a selling point.

Also, Apple’s main competitors are all spec followers/spec junkies. Other than maybe Samsung, the competitors are going to have a incredibly hard time matching $499 with no contract and a Retina Display. It’s also going to be a problem for Windows tablets, but more on that later

2. The new iPad’s WLAN/Cellular data chipset with support for almost every communication standard is a clear sign of the capabilities of the upcoming iPhone 5. It will have LTE in the US. It will support every version of 3g GSM in Europe and elsewhere. The new iPhone could support T-Mobile if an agreement can be reached. It will support powerhouse carrier China Mobile’s proprietary LTE/CDMA standards. Basically, Android will have no carrier safe havens any longer. Both LTE and the new chipset are getting a test run in the new iPad before the global iPhone 5 launch.

3. iOS 6 was never mentioned once. It’s out there. It’s in development. Apple is a dual headed monster of hardware and software. We just got the hardware part. The software part is coming.

4. He’s not Steve, but in his own way Tim Cook did an excellent job handling the event today. Apple is featuring more of key executives like Eddy Cue, but Cook handled the bulk of the event.

5. Android tablets have to little to no momentum right now. Apple just moved the benchmark in hardware, and the tablet software market is only becoming more and more dominated by Apple.  Android tablets manufacturers seem to still be hoping that the carriers can sell devices with contracts. The tablet market though is very different than the smartphone market.

6. Apple probably has 6 months of free reign until the first Windows 8 ARM based tablets are released with Metro based (tablet/touchscreen) apps. Windows 8 tablets seem like the only thing that can stop the iPad juggernaut. We still have not seen a single estimated price of a 10 inch ARM or Intel tablet (and I suspect the Intel versions will be more expensive with perhaps worse battery life). Still the MS brand and MS Office are familiar safe places for corporations and could slow iPad adoption in the enterprise.

7. Horace Dediu on his podcast today talking about the keynote made an interesting suggestion. Rather than the alleged 7 inch device being an iPad Mini, it will be an iPod Touch HD or XL. The iPad will always be 9.7 inches/10 inches. But Apple to counter the cheaper small market, will instead market a new expanded iPod Touch. It will run iPhone not iPad apps. If Apple increases the screen size on the iPhone 5, then Apple will need to figure out a second resolution/size for iPhone apps, perhaps Apple can figure out to support a 3rd screen size/resolution as well. A $299 iPod Touch HD along with bigger screen regular iPod Touch (mirroring the screen format of the new iPhone)  at $199 would place great pressure at the low end. With the older generation iPad working as a $399 barrier at the other end. Seems unlikely, but Apple did not update the iPod Touch at all last year so Apple could take the product in a radical change of direction.

The End of Apple’s Ability to Surprise?

Is it possible that the effort needed by Apple’s supply chain has ended any ability for Apple to release a surprise product?

It certainly looks that way.

Five years ago, Apple was a much smaller company in terms of the number of products it develops and ships. Sure there were the varieties of iPods and Macs but that was it. The last existing product lineups that had genuine surprises from Apple were probably the MacBook Air and iPad Nano (replacing the very popular iPod Mini).

Can Apple still spring a surprise of a product that has not been sent to production? Sure, it can show a product/final prototype like the original iPhone or iPad and then announce sales in 60 days. That type of product can still be a surprise. The alleged new Mac product line could be that kind of surprise like the old Apple. An integrated Apple branded TV could be that next kind of surprise, unveiled then launched 60 to 90 days later.

But for the next gen  iPad/iPhone/and even the MacBooks, Apple is shipping in such large quantities that the supply chain/development process has to involve so many moving parts/third party vendors that keeping total secrecy is going to be nigh impossible.

For the iPhone in particular, Apple looks like it’s going to need upwards of 20 million phones a quarter maybe as many as 10 million a month, and cannot logistically pull off shutting down volume of an older version and ramping up production of a new iphone without word of those changes spreading throughout contacts in Taiwan/China. In addition, as the iPhone 4S launch taught us, spare parts are going to leak out prior to the unveiling. The supply chain will have to start sending out various repair parts samples before launch. The repair business for these products has become too big and too important. If there is a big screen iPhone 5 coming next year, our first concrete sign will be replacement back cover or a replacement LCD unit.

For the iPad 3, the production of that many retina display quality LCD panels is not going to go unnoticed. We also can guess based on the recent iPhone 4s launch that Apple is going to keep the iPad 2 in production at a lower price point even after the iPad 3 launches (Apple didn’t do that for the iPad 2 launch, and sales numbers for the original iPad product reflected the ramp down and ramp up problems). Two production lines churning out different iPad versions is going to create some noise, enough that news sites/analysts are going to be able to track down the impact.

Mac volume especially for the MacBook lineup is getting close to that kind of volume. Mac volume if current growth trends continue will be over 5 million a quarter, and already sees the impact of customers delaying purchases waiting for the hardware refresh. For the recent MacBook Air launch, Apple was able to build up inventory before release due to the coordination of launching the MacBook Air with OS X Lion. Again, in these kinds of volumes, the scaling back of production and the ramping up of the new product line is going to create noise.

Apple cannot do the “prototype unveiling/product launches 60 days” with the iPad or iPhone or risk hurting sales for almost 2 quarters due to the demand drop in the quarter right after the announcement and then the inability to meet the pent up demand in the following quarter after launch. That potential problem is only going to increase as the installed base (upgrade base) continues to get larger and larger. The analysts all thought that iPad sales were slowing down in February-March (calendar Q1) when it was more a case of customers waiting on the new product and then not enough iPad 2 inventory to meet that demand in calendar Q2 (April thru June). Apple may in the future have to pre-announce a price drop (letting customers know a new model is coming) and take the hit in margin something it has been reluctant to do especially for the iPhone. But a price drop prior to the announcement and mass availability of the new iPhone 5 could keep sales going of the all iPhone variants with no real dip seen at launch.

Death of a True Rock Star

I have a series of articles about the iPhone event, but out of respect for the man behind Apple, I’m going to hold off 24 hours.

I was only 9 years old when John Lennon was murdered taken too soon with many more songs to write, so I didn’t really understand the impact of someone dying who you felt like you knew but you really didn’t know at all. I think the first time the death of a celebrity really upset me was the death of Freddie Mercury in 1991. Like John Lennon and Steve Jobs, Freddie was taken from us too soon. Being a huge fan of Queen, it was depressing to know that I would never be able to hear Queen with Freddie live in concert. Queen would never produce another album with Freddie on lead vocals. I was very lucky to be able to come pretty close by seeing Freddie’s best friend Elton John do a phenomenal live performance of “Show Must Go On!” where Elton seemed to be channeling Freddie’s vocal power that night.

I think Steve Jobs would be very happy to hear that he’s being compared to two great rock artists, Lennon and Mercury. Apple Computer as most folks realize was named as an homage to Apple Records the Beatles Recording Label. Ironically this sign of adoration would cause Jobs legal problems when Apple become the digital provider of music, and the Beatles were one of the last artists to be on the iTunes Music Store.

Steve was a true Rock Star in every sense of the term. Brilliant, ahead of this time, visionary, mercurial, polarizing, obsessed with every minute detail. Apple products since Steve returned have had the soul of an artist, an aesthetic balance that other companies have had an impossible time trying to equal. Apple products were almost like albums to Jobs, he’d redo every possible aspect of a product to make sure that it was perfect. You can almost see Jobs in the role as a frontman for a megaband demanding to record a song for the hundredth time to get it just right. His keynote presentations were the equivalent of rock concerts. Jobs would rehearse every element down to the smallest detail. The legendary Jobs reality distortion field was like a rock star mesmerizing an audience. Jobs in many ways was the 5th Beatle, only creating in the world of technology. The Apple 2 was Meet the Beatles. The Mac was a Hard Day’s Night. The iMac was Help. The iPod was Rubber Soul. The iPhone was his White Album. The iPad is Sgt Peppers.

It’s really sad to realize that Steve won’t be there to introduce Apple’s next great product. However, there isn’t a major rock artist today who won’t acknowledge the influence of the Beatles on their craft. And while we will not get to enjoy any new Steve “albums” I’m confident that there’s a future Police or Pearl Jam in Cupertino (please insert your favorite band here, I’m just listing two of mine)  to release the next great product/album. Steve won’t be the frontman on these products but his influence will be obvious. Maybe the iPhone 5 will be “Ten” or the iPad 3 will be “Ghosts in the Machine”, new great albums from new artists.

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As a Philosophy/History/French major working in IT, there was no clearer explanation of why I use Apple products than when Steve said;

It’s in Apple’s DNA that technology alone is not enough — it’s technology married with liberal arts, married with the humanities, that yields us the result that makes our heart sing and nowhere is that more true than in these post-PC devices.”

Photo by Michael Copeland (from Fortune)

In fact, Steve since 2008 years has been working to develop a “college” at Apple, Fortune’s recent article detailing the inside operations of Apple was the first piece to mention the Apple University created recently to codify, document, and institutionalize the Steve way of creating great products. This was Steve’s way of ensuring his DNA got baked into Apple’s future, and ensuring the future of this amazing intersection of technology and the humanities. It’s a college that I would love to attend, but I’ll settle for using their great products.

The Nightmare Apple Fall Lineup

Well the iPad HD/2.5/3 rumors just won’t die, and the iPhone 4s vs redesigned iPhone 5 (thinner, lighter, no word on screen size though)  rumors also are not going anywhere.   Sprint iPhones? T-Mobile iPhones?

New MacBook Airs with improved faster SSD drives are mere weeks away as is OS X Lion. And nobody has any clue what’s going on with the iPod Touch’s future.

So what would a nightmare fall lineup look like from Apple for the rest of the consumer electronics industry? (not going to include any Mac Minis or Mac Pros as they are still very much niche products)

  • Macbook Air 11 inch starting at $899 with 64GB SSD/4 GB RAM – w/ Intel Sandy Bridge chip and on Thunderbolt
  • Macbook Air 13 inch starting at $1099 with 128GB SSD/4 GB RAM see above
  • Macbook White starting at 799 with Intel Sandy Bridge chip and Thunderbolt
  • iPad HD/3/2.5 with retina screen at $599
  • iPad 2 at $399
  • iPhone 4 on all 4 US carriers starting at $0 for 4 GB version
  • iPhone 5 (bigger screen, thinner, lighter) on all 4 US carriers for $199
  • iPhone 5 LTE/CDMA for Verizon for $249
  • iPhone 5 WiMAX/CDMA for Sprint for $249
  • iPod Touch 5 (using the same big screen as the iPhone) for $299

The Fall iPad 3 Launch Rumor That Won’t Die

So the Apple launching an iPad 3 this fall rumor just won’t die.

It started with Daring Fireball predicting an iPad 3 this fall before an iPad 2 was even released, and has been rolling ever since with other reputable sources such as MG Siegler also reporting that Apple has something big planned for this fall.  And, on Thursday DigiTimes  entered the fray indicating that their sources indicated the iPad 3 would be heading into production in September/October. Digitimes record inconsistent at best, but always based on information from the type of vendors/partners that Apple uses to build their gear. And that supplier chain has often been the source of the best Apple rumors. It had the iPhone 4 before the infamous brewpub incident, and had data on the iPad 2 based on case supplier prototypes. Now, there’s one obvious feature for this imaginary product and it’s a higher resolution screen, the elusive retina screen iPad.

MoD does not believe that the iPad 3 is coming out this fall. Apple cannot make enough iPad 2s right now, and has a huge launch of the new iPhone 5 coming up. It just doesn’t look like Apple’s suppliers are up to the task of handling two iPad production lines. I personally think the big Apple news this fall is an all assault on Android smartphones and some very new version of the iPod Touch. I don’t think that Apple can produce an retina screen iPad at a reasonable price point right now. The LCD production yields for the required display resolution are probably too low, driving up the overall cost. The touchscreen flat panel is one of the most expensive components of the iPad2.  The battery life hit for that sort of screen is going to be too high, in addition the processor needed to run that resolution at a proper speed is another huge question especially at the size/energy ratio that Apple needs. However, let’s say Apple does release an iPad 3 this fall what would that mean?

This retina screen iPad 3 launch would basically be Steve Jobs asserting that Apple is going to own the tablet market and sees no reason to let up. It’s the equivalent of John McClain shoving Hans Gruber off the Nakatomi tower and EMPTYING a whole clip of bullets into Alan Rickman. Apple’s already so far ahead with the iPad 2 and has iOS 5 arriving to bring an enhanced tablet experience that an even better iPad 3 is a powerslam off the top rope after winning the WWE title.

iPad 3 or iPad HD would probably be priced slightly above the current iPad 2, or allow Apple to lower the price on the iPad 2 to $399 to apply even more price pressure and margin pressure to their competitors. A $599 price point for an entry level iPad 3 makes sense, allowing Apple to move the 16gb iPad 2 to $399 and the 32 GB iPad 2 to $499. Any higher entry price and Apple could give the opposition a price opening. There’s a quote that’s been thrown around lately from Jobs in 2004 about how in the mid 80s when Apple with the Mac had a monopoly on the GUI PC and that after Jobs left the “Sales guys” (Sculley) kept going for margins when they should have gone for dominant market share and focused on the next Mac OS. This iPad 3 launch would be guaranteeing that Apple would never make that post Mac launch mistake again.

The iPad 3 launch would mean that Steve smells blood in the water, and the lukewarm customer response to the opposing tablets certainly adds a strong odor of chum. A unique moment to dominate this tablet industry in the same way that Apple never lost control of the MP3 player market after achieving dominance. The iPad 3 would destroy the RIM Playbook, the HP Touchpad, and send all the Android tablet hardware developers scrambling at a time when many of them are debating the wisdom of being in the tablet game since unlike Android smartphones the carriers cannot sell their products for them. And it would further establish Apple’s dominance going into 2012 and the arrival of a parade of Windows 8 tablets from vendors that actually understand consumer electronics retail. This early iPad 3 could “Zune” the Windows 8 tablets in the same way the iPod Touch destroyed Microsoft’s attempts to compete in the MP3 market. An iPad 3 could be a pretty pricey device, so if Apple was able to sell it for $599 it would show their commitment to pricing and lower margins for the pursuit of market dominance. Apple certainly has the component buying leverage, and billions in cash for up front commitments with vendors to make this strategy work. As Daring Fireball suggested, it could be that the display fabs to produce all these high end LCDs were part of Apple’s secret 4 billion dollar investment coming to fruition. And that 4 billion dollars if it leads to Apple’s dominance of the tablet industry will have been money well spent.