Yesterday, Apple announced their impressive results, revealing their first quarter over $20billion in revenue. Unlike Google’s share price, Apple’s actually fell over 6% on the results … due to disappointing sales of their iPad and iPod which missed analyst expectations. Steve Jobs decided to join the earnings conference call, and spent most of his time trying to convince the world that his strategy for mobile devices is the right one and that Google are no threat. I will comment in italics …
“As most of you know, I don’t usually participate in Apple’s earnings calls since you are all in such capable hands with Peter and Tim. But I just couldn’t help dropping by for our first $20 billion quarter. I would like to chat about a few things and then stay for the rest of the Q&A if that’s alright.
“First, let me discuss iPhone. We sold 14.1 million iPhones in the quarter which represents a 91% unit growth over the year-ago quarter and was well ahead of IDC’s latest published estimate of 64% growth for the global smartphone market in the September quarter. And it handily beat RIM’s 12.1 million Blackberry’s sold in their most recent quarter ending in August. We’ve now passed RIM, and I don’t seem them catching up with us in the foreseeable future. They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company.
“I think it’s going to be a challenge for them to create a competitive platform and to convince developers to create apps for yet a third software platform after iOS and Android. With 300,000 apps on Apple’s App Store, RIM has a high mountain ahead of them to climb.
We’ll see if Apple can continue this rate of sales … there is bound to be a spike in iPhone sales each time a new version is released.
“Well, what about Google? Last week, Eric Schmidt reiterated that they are activating 200,000 Android devices per day. And have around 90,000 apps in their App Store. For comparison, Apple has activated around 275,000 iOS devices per day on average for the past 30 days with a peak of almost 300,000 iOS devices per day on a few of those days. And Apple has 300,000 apps on its App Store.
Steve Jobs is trying to imply that Apple iPhones are outselling Android phones. This is not the case, he states ‘iOS devices’ not iPhones. Therefore the figure must include the iPad and perhaps the later iPods?! A little bit desperate Steve?
“Unfortunately, there is no solid data on how many Android phones are shipped each quarter. We hope that manufacturers will soon start reporting the number of Android handsets they ship each quarter. But today that just isn’t the case. Gartner reported that around 10 million Android phones were shipped in the June quarter and we await to see if iPhone or Android was the winner in this most recent quarter.
Steve has switched back to referring to the iPhone now – clearly he wants to cast doubt over who is winning the mobile phone battle. Eric Schmidt reiterated that Google is activating more than 200,000 Android devices per day … which is 18million per quarter.
“Google loves to characterize Android as open, and iOS and iPhone as closed. We find this a bit disingenuous and clouding the real difference between our two approaches. The first thing most of us think about when we hear the work open is Windows which is available on a variety of devices. Unlike Windows, however, where most pc’s have the same user interface and run the same app, Android is very fragmented. Many Android OEMs, including the two largest, HTC and Motorola install proprietary user interfaces to differentiate themselves from the commodity Android experience. The users will have to figure it all out. Compare this with iPhone, where every handset works the same.
“Twitter client, Twitter Deck [actually Tweetdeck], recently launched their app for Android. They reported that they had to contend with more than 100 different versions of Android software on 244 different handsets. The multiple hardware and software iterations present developers with a daunting challenge. Many Android apps work only on selected Android handsets running selected Android versions. And this is for handsets that have been shipped less than 12 months ago. Compare this with iPhone, where there are two versions of the software, the current and the most recent predecessor to test against.
This must be why one of the most popular mobile games ‘Angry Birds’ is free on Android but a paid for app on iOS? Steve is clearly spinning the numbers to make a point. Google’s Android 3 will control fragmentation and they have been aware of this for some time. Steve Jobs includes all the home-grown versions of Android created by enthusiasts to reach his ‘more than 100’ figure Fact is, over 99% of users are on just 3 versions of Android and that the top 15 handsets make up >75% as well. You can view TweetDeck’s own stats here: http://blog.tweetdeck.com/android-ecosystem
“In addition to Google’s own app marketplace, Amazon, Horizon and Vodafone have all announced that they are creating their own app stores for Android. So there will be at least four app stores on Android, which customers must search among to find the app they want and developers will need to work with to distribute their apps and get paid. This is going to be a mess for both users and developers. Contrast this with Apple’s integrated App Store, which offers users the easiest-to-use largest app store in the world, preloaded on every iPhone. Apple’s App Store has over three times as many apps as Google’s marketplace and offers developers’ one-stop shopping to get their apps to market easily and to get paid swiftly.
Are you sure it has over 3 times as many apps Steve? Android has only had 90,000 apps for quite some time now if you’re to be believed (other sources say 115,000). Submitting an app to a marketplace is hardly an ordeal, so I would bet that most popular apps are available on all the marketplaces. Giving customers a choice is a good thing, it also makes Google’s partners happy. Multiple marketplaces allowed Angry Birds to be downloaded 2million times in just two days. Perhaps Steve is upset that such huge names are embracing Android fully?
“Even if Google were right, and the real issue is closed versus open, it is worthwhile to remember that open systems don’t always win. Take Microsoft’s PlaysForSure music strategy, which use the PC model, which Android uses as well, of separating the software components from the hardware components. Even Microsoft finally abandoned this open strategy in favor of copying Apple’s integrated approach with their Zoom Player, unfortunately leaving their OEMs empty-handed in the process. Google flirted with this integrated approach with their Nexus One phone.
“In reality, we think the open versus closed argument is just a smokescreen to try and hide the real issue, which is, what’s best for the customer, fragmented versus integrated. We think Android is very, very fragmented and becoming more fragmented by the day. And as you know, Apple’s provides with the integrated model so that the user isn’t forced to be the systems integrator.
Yes, customers are sheep and should be controlled by the shepherd. Don’t give them choice, don’t give them flexibility (Apple tried to make it illegal for customers to root their own handsets!), make them behave the way you want them to & which makes Apple more money. Clearly Google are doing everything wrong, just like Microsoft did with Windows.
“We see tremendous value in having Apple rather than our users’ be the systems integrator. We think this is a huge strength of our approach compared to Google’s. When selling to users who want their devices to just work, we believe Integrated will triumph Fragmented every time. And we also think our developers can be more innovative if they can target a singular platform rather than a hundred variants. They can put their time into innovative new features rather than testing on hundreds of different handsets.
More ‘Ve vill controle from ze centre!’
“So we are very committed to the integrated approach, no matter how many times Google tries to characterize it as closed. And we are confident that it will triumph over Google’s fragmented approach, no matter how many times Google tries to characterize it as open.
Ooops, you’re on record now Steve. Long rant coming next …
“Second, I’d like to comment on the avalanche of Tablets poised to enter the market in the coming months. First, it appears to be just a handful of credible entrants, not exactly an avalanche. Second, almost all of them use seven-inch screens as compared to iPad’s near 10-inch screen. Let’s start there. One naturally thinks that a seven-inch screen would offer 70% of the benefits of a 10-inch screen. Unfortunately, this is far from the truth. The screen measurements are diagonal, so that a seven-inch screen is only 45% as large as iPad’s 10-inch screen. You heard me right; just 45% as large
“If you take an iPad and hold it upright in portrait view and draw an imaginary horizontal line halfway down the screen, the screens on the seven-inch tablets are a bit smaller than the bottom half of the iPad display. This size isn’t sufficient to create great tablet apps in our opinion.
“Well, one could increase the resolution of the display to make up for some of the difference. It is meaningless, unless your tablet also includes sandpaper, so that the user can sand down their fingers to around one quarter of the present size. Apple’s done extensive user-testing on touch interfaces over many years, and we really understand this stuff. There are clear limits of how close you can physically place elements on a touch screen before users cannot reliably tap, flick or pinch them. This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.
“Third, every tablet user is also a smartphone user. No tablet can compete with the mobility of a smartphone, its ease of fitting into your pocket or purse, its unobtrusiveness when used in a crowd. Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet in our pockets is clearly the wrong tradeoff. The seven-inch tablets are tweeners, too big to compete with a smartphone and too small to compete with an iPad.
“Fourth, almost all of these new tablets use Android software, but even Google is telling the tablet manufacturers not to use their current release, Froyo, for tablets, and to wait for a special tablet release next year. What does it mean when your software suppliers says not to use their software in your tablet? And what does it mean when you ignore them and use it anyway?
“Fifth, iPad now has over 35,000 apps on the App Store. This new crop of tablets will have near zero.
“And sixth and last, our potential competitors are having a tough time coming close to iPad’s pricing, even with their far smaller, far less expensive screens. The iPad incorporates everything we have learnt about building high value products from iPhones, iPods and Macs. We create our own A4 chip, our own software, our own battery chemistry, our own enclosure, our own everything. And this results in an incredible product at a great price. The proof of this will be in the pricing of our competitor’s products which will likely offer less for more.
“These are among the reasons we think the current crop of seven-inch tablets are going to be DOA, Dead on Arrival. Their manufacturers will learn the painful lesson that their tablets are too small and increase the size next year, thereby abandoning both customers and developers who jumped on the seven-inch bandwagon with an orphan product. Sounds like lots of fun ahead.
Okay, ignoring the fact that Samsung make Apple’s A4 chips for you and are likely to be the leading Android tablet manufacturer, Steve is actually predicting that all Android tablets will fail. He has perhaps missed the point that the majority of what PCs use the Web for doesn’t require more than a browser. Android’s browser also supports Flash. Mr Jobs also ignores the fact that plenty of 10″ tablets are on the way should his extensive knowledge regarding touch-screens prove correct (hard to not laugh at his comments considering an iPhone is significantly smaller than a 7″ tablet!). Personally I would never carry a 10″ iPad around and would much prefer something like Samsung’s Galaxy Tab. Steve Jobs also continues to mislead anyone that will listen to him, calling Android 3 a ‘special’ tablet release. No Steve, that’s the version of Android you should REALLY be afraid of as it addresses every petty point you’ve made about Android to date.
In summary my feeling is that Steve Jobs is like a politician, spinning for all his worth to try and create public support for him/his products. This smacks of desperation, which is bizarre considering how well his company is doing. Perhaps he is having sleepless nights over what happened to him and Apple before thanks to Microsoft. If that were the case, you would think he would change his course and allow some selected manufacturers to build handsets to his specifications … and support Flash. Steve must be worried about the momentum Android is carrying at the moment, but appears to have no answer for it apart from to whine about how fragmented it is.
I sense the tide turning here, and I keep thinking about going short on Apple’s stock just to make a point. However I suspect there is still plenty of growth left for Apple who continue to expand geographically.