Apple Is Approaching a Defining Moment

37 Comments

nyc_14thapplestore1Come Wednesday, it will be Apple’s (s aapl) turn to discuss its results for the first three months of 2009. But among the crowd of Apple watchers, the discussion has been simmering for months, with the tone shifting from pessimism about recession-whacked sales to cautious optimism — especially as the stock has rebounded 58 percent and skeptical analysts have revised previously bearish outlooks.

While Apple is still feeling the weight of the bad economy, it’s also still holding the loyalty of cost-conscious consumers who continue to see value in its products. As encouraging as this last quarter may prove to be for investors, however, the bigger story for Apple is the three months that lay ahead. Not only will they be far more interesting, they could mark a significant turning point for the company and the markets it’s helping to reshape.Apple’s innovations this past quarter were largely incremental — upgraded iMacs, new iPhone software, a smaller iPod shuffle. This quarter, however, it’s expected to roll out initiatives that involve considerably more risk.

The iPhone is sure to see its stiffest competition to date from the soon-to-be-released BlackBerry Niagara (s rimm), the Palm Pre (s palm) and various Android (s goog) devices. Leaks of the features on the next-generation iPhone suggest Apple could maintain an innovative edge over rivals, but any missteps could hurt its market share. The iPhone also faces an uncertain fate as Apple pushes to launch in China as early as June. Talks with China Unicom have dragged on for months, but a successful debut could add to Apple’s revenue growth for years.

Apple’s developer conference in June will offer a platform to unveil the Snow Leopard operating system and offer hints of the company’s strategy for responding to the increasing demand for netbooks. Rumors of a touchscreen device from Apple have been echoing louder recently as well.

All of these efforts are well timed. Not only are they aimed at markets where competition is rising (and in the case of computers, a silly but effective PR campaign by Microsoft), they may be unveiled just as consumer spending reaches a trough. There is precious little room for errors.

Normally, this would be little more than a tricky juggling act for Apple, but hitting all these moving targets in the midst of a major shift in leadership will make it a defining moment for the company. While the Wall Street Journal reported this week that Jobs still regularly reviews products and product plans (a report that was greeted with some skepticism), if and when he takes up the reins at Apple again, he’ll be returning to a company that has made several crucial strategic decisions during his absence.

In the meantime, the longer Apple can continue to execute without Steve Jobs’ day-to-day guidance, the less handwringing there is over how well the company will do under a new leadership. I’ve argued before that Apple will do fine without Jobs. But for the best insight into how successful Apple will be after his eventual departure, the first glimpses will come this quarter.

37 Comments

montex

Now that Apple has posted the highest profits in a non-holiday quarter, will Gigaom post a followup article? Will Gigaom answer it’s own question about Apple’s Defining Moment and make note that Apple triumphantly beat expectations?

I rather doubt it. The snarky tone of this article tells me they were hoping to crow about a downturn in the past quarter. Now that the opposite has happened, Gigaom doesn’t get to gloat and that means their own trumped up Defining Moment will be met with… silence.

online free games

Mac can’t lower their prices unless they’re prepared to lose their identity which is – Functional, slick and PRICEY. They are going through a hard time but they should grit their teeth and and brave through it.
A significant percentage of apple supporters are brand chasers who buy mac stuffs precisely because its pricey and its brand image. Who cares if it has flaws like the first generation iphone? Its still THE best phone when it was launched to many fanatics out there who don’t even SURF the net using their phones.
Its all about brand image mac, so hang in there and look for some other ways to earn your financial pillar and pray the bad times move over as fast as it can.

Jeff

I walked by an Apple Store Saturday – the place was packed and sounded like there was a party going on. I didn’t go in to avoid temptation. Wednesday should be interesting.

JimDreamworx

There is always a party at an Apple store. They are always busy.

Microsoft said it, but Apple did it: Welcome To The Social!

JanB

What many analyst and Apple haters does not get is. It is not about features and specs. Its about how easy it is to use a machine with a give set of features and specs. Take something like the iPhone. Yes you can find smartphones with more features than the iPhone, but are they easy to use. Apparently not according to usability test done by various sources. My iPhone is easy to use. I can check my mail easy on it though I am looking forward to version 3 of the OS for landscape email viewing. Internet browsing is great considering the size of the screen and I can download small apps the improve the usability of the phone. But the camera is only 2M and you cannot multitask. Regarding the camera I don´t care. Regarding the lack of multitasking. Apple has disabled that function in the Os to save power. I for one prefer a phone with power on the battery when I need to make a call compared with a phone drained from power because one or more running programs has drained it for power. Considering how fast you can switch from one program to another on my iPhone Multi running programs really is not something I lack. If Apple keep develop products that just works they will keep succeeding. They might not sell as much as they would have with out a crisis, but they will earn money and they will be ready on the other side of the crisis. Just like they where after the 2001 crisis

Cubert

Gadget Sleuth,
Go on Dell’s website and spec out a desktop PC compared to the Mac Pro. You will find the Mac Pro a couple hundred cheaper – and that is before the extra software you will need to buy with the Dell. Try the same with an iMac. The results will be that they cost about the same. When you consider the quality and lifespan of a Mac, you effectively end up paying two times that amount for a PC (the average Mac lasts twice as long as the average PC).

lrd

It’s all about the bottom line. Keep making great products; keep innovating; open more stores and don’t worry about market share- keep the profit margins as high as possible.

ash

That a new 3G iphone will be released with new hardware is a given … there’s no claim to fame in prophesying that. Every year, you’ll see faster new computers and hardware. To get excited about that is to miss the point. What Apple has shown in the preview of iPhone 3.0 is far more important to its strategy and revenue growth.

Things such as micro-payments, bluetooth hardware control, peer-to-peer communication, peripheral control – these open up an entirely new line of applications that people are just starting to dream about. I have no doubt in my mind that it’s this new software that will revolutionise the industry, as the first iPhone revolutionised what we expect from a smartphone.

A while back there was an article proclaiming that the iPhone was a new platform; this is the *key* thing to understand here. Finally we have a true personal computer, one that you carry everywhere, that essentially has always-on internet, and geolocation abilities. It already beats my Macbook Pro in these ways. In my own opinion, the iPhone is the future of the Macintosh. Already, there are more mobile OS X devices (iPhone and iPod Touch) sold in a shorter 2 year period of time, than anytime in the history of the Mac.

If you want to talk about consumer attraction to Apple products, by all means just concentrate on the hardware and the wow factor. But if you are serious about looking into Apple’s financial health, than look past the shiny surface and examine the strategy – think about the future – and look at their competition. Apple is more than just pretty hardware and a fly-by-night company that builds products for one quarter in advance. They likely have plans for the next 2-3 years already.

Constable Odo

Screw market share. Profit margins are what matters. If companies are willing to practically give their products away to gain market share, that’s just poor business sense in the long run. Better that Apple grab and keep about 15% of the computer market share and just maintain good profits. Those other companies will just run out of money or cut their end up cutting employees and customer support. Apple should never bother to compete with other companies on price. I still want quality and I’m willing to pay for it. Apple is still gaining reserve cash while many computer companies are burning cash. Apple runs it’s business the same way I would want to run a business. I don’t care if I don’t satisfy the masses. I just want loyal customers that would enjoy using my products.

Macman

I agree with those above, who have observed that the writer of the above article is clueless about Apple

Stand A Chance

When are people going to realize that MS model is over. Sure it has marketshare, but that’s it. Redmond’s grip is slipping and Apple has expanded its business into new markets that they know lead. Down the road, Apple will lead and the rest will try to compete. Its a brave new world

kerryb

Apple has a unique position which many analyst have for some time not fully understood. They have great profits, a loyal and growing user base that appreciates what Apple does with software and hardware both beautiful, thought out and striving to be the best. I don’t believe this quarter will spell doom or say that Apple is recession proof. 2001 was a bad year for everyone in the high tech and 2009 may see a repeat. I agree with what was said here, the coming quarter will be interesting with Snow Leopard raising the OS bar on Windows 7, and the new iPhone OS will do the same in the smartphone world. One quarter does not make a trend.

spinoza

Yes, I think Gadget Sleuth is echoing the oft-repeated refrain that Apple should commoditize the Mac, to make low-end, cheap models that compete with Dell, HP, Acer, et al. Not only is there no incentive for Apple to do this–that low-end is about as sleazy as it gets, business-wise–but it would only bring negatives for Apple. Steve Jobs is right, you simply are not going to get a decent computer for under $800 without making serious compromises in build-quality, reliability, software integration, and support. The entry point for those not willing to get a real Mac is the Mac Mini, and at $599 it’s plenty low-end enough, price-wise, while still maintaining Apple quality.

KenC

Well, that defining moment won’t happen for two more quarters, I mean, we won’t know until the 3rdQ results are in, whether the new iPhone or Snow Leopard are a hit, right? Gotta launch the new stuff and then see how it sells right? So, that defining moment is a couple quarters away.

Eric

Oh please, this is utter nonsense. It sounds like like a Cramer-like attempt to manipulate Apple’s stock price than an attempt to analyze what’s really happening. Why?

The company is affected like every other company when it comes to the economy. Only less because they are different than the rest. They have no debt, they have a healthy profit margin and they have a good, strong customer base.

But the real bottom line is that this constant beating the drum. Nonsense about Apple being at a crossroads because they need to innovate based on outrageously high expectation for products that people who don’t know what they’re talking about keep saying they need to introduce.

Apple has said over and over and over again they are not ready to put much serious effort into a sub-compact laptop. But people keep repeating the meme that Apple has to concede to market demands. Excuse me, but in its 33 years as a company, have they ever done that? Especially since Steve Jobs came back? No. People like the writer here keep telling them to be more like Dell or HP or Microsoft, and in this case with netbook makers like Acer. And yet Apple’s formula for success is that they have never been like anyone else. They know their customers and they know their direction.

And yet, Apple’s in big trouble if they don’t concede that everyone else is right but them. But that’s not the history of the company, or the right thing to do. They need to continue to be Apple and no some company that come committee of pundits keep crying about. It’s really gotten ludicrous that people after all this time don’t get what makes Apple successful. But then, if more people did, there’s be more companies like Apple. And that’s simply not the case.

Nokia has a disastrous year, with profits down 90 percent, and they make some meager statement to the press and their stock goes up 17 percent. Apple has record sales of Macs every quarter for four straight years, and their constant beating of the market’s predictions for them, and their stock goes down. Is it any wonder the world’s economy is in a mess? People have no clue what they’re talking about, and they’re more than happy to give Apple advice about what’s wrong with their formula for success.

The only time Apple would go wrong would be to take that advice.

Alan

I disagree with your analysis since Snow Leopard was in development long before Jobs took his leave in January; the same for iPhone 3.0 as well as the Apple watching the market potential of netbook/touchsreen devices.

Oh Blah Dee Blah Dah

RE: “… This quarter, however, it’s expected to roll out initiatives that involve considerably more risk…. ”

Oh, maybe Apple should do nothing new and just keep selling what it already has on the market.

Please, Apple has done superbly for years by introducing innovative products and services. and it should keep on doing that, regardless of the economic conditions. Some of the most revolutionary products introduced many decades ago were brought to market during bad economic times.

Apple will only introduce a product when it can “get it right.” And, THAT is the right time to introduce an innovation.

Oh Blah Dee Blah Dah

RE: “… This quarter, however, it’s expected to roll out initiatives that involve considerably more risk…. ”

Oh, maybe Apple should do nothing new and just keep selling what it already has on the market.

Please, Apple has done superbly for years by introducing innovative products and services. and it should keep on doing that, regardless of the economic conditions. Some of the most revolutionary products introduced many decades ago were brought to market during bad economic times.

Apple will only introduce a product when it can “get it right.” And, THAT is the right time to introduce an innovation.

Nicholas

That is quite true. As much as I loved the Newton, or more accurately the possibilities of the Newton, it was a failure. A business failure… Apple is doing just fine, and the iPhone is nothing if not a revolutionary business success.

Robert Douglass

@ Mr. Kelleher-

<>

Hardly! The iPhone will do fine, even without China. It’s fate is FAR from uncertain; In fact, all the ‘stiffest competition’ is really just me-too’s, trying to catch a forward moving target…

<>

Please be more specific. I, for one, do not believe that ANY ‘crucial strategic decisions’ have been made without Steve’s input… which is your implication in your article.

I find the whole ‘slant’ of your article an attempt to promote FUD.

kevin

Fully agree – Steve said he’d be involved in strategic decisions during his leave and there is no evidence that he has not. Totally unsupported assertion.

Karla

Until the competition can create full complement of services like itunes, ipod, iphone, app store – apple will maintain a niche that is more profitable than any single store or device in the market. Apple has a low volume, high margin niche and will do well to concentrate on that market and not expand too far into the low end.

If the competition does not come up with a similar ecosystem, they will be consigned to the low end, low profit, high volume market. It’s not bad if you can sustain it.

Mark

This next quarter is not likely to reveal any “tablet” device. Rather, Apple is very good at focusing media and customer attention on one major product at a time, with a secondary offering focused at a different market. Here is what the near-term future holds for Apple and it’s growing market of customers:

April: New Final Cut Pro Studio suite. The timing matches the NAB and new Mac Pro tower introductions well. A boost for the hardware and SW cash cows for Apple, while giving professionals the tools which have pent up demand.

June: WWDC will bring the iPhone 3G. Beyond the amazingly powerful iPhone 3.0 OS, Apple’s new iPhone HW will be stunning. It must be a major update in order to entice all those original 2-year iPhone owners to stay the course and upgrade, while dragging newbies to the platform.

HW Features:
– Thinner
– 16GB and 32GB models
– 5mp out-facing camera (still or video)
– 3.2mp front-facing camera (still and video – mostly video for iChat AV)
– Better battery life.
– Faster processor
– Faster video

SW Features:
– Video ability over the new 7.2Mbps 3G AT&T network.
– Wild-card?…

Dual cameras will be most impressive, and will be the feature people can sink their wallets into.

iPhone touch: What is this? iPod touch turns into iPhone touch. It gains 3G, but one can only buy a dataplan for it. The killer feature? Apple includes their own VoIP application. Anywhere you are in 3G, phone capability is completely available.

What separates iPhone touch from iPhone 3G? iPhone 3G has EDGE and 7.2Mbps speeds and network. iPhone touch cannot work in EDGE (as it does not contain EDGE ability), and it is governed to the old speeds of 3.6Mbps.

Buyer can choose to – or not to – sign up for AT&T’s $30 a month dataplan. If you own and iPhone already, and buy an iPhone touch, each dataplan is only $20 a month.

Non professionals will dive into this. It will be AT&T showing that yes, they buy into being only a pipe, and VoIP is the future of calls. $30 a month for VoIP!? Such a deal. It will rock the industry. Kids can now remove a $10 a month line from Verizon or T-Mobile, and quicky justify the $20 extra for iPhone touch.

This will sell millions upon millions of iPhones to people dropping one line here and there off their family plans, while AT&T scoops them up.

iPhone touch does not have video capability, nor does it sport the front-facing camera. It’s basically today’s iPhone, without Edge, but has the look and feel of the new iPhone 3G.

This will be an amazing move only a few see coming, and “tablet” talk won’t even be relevant.

OS X Snow Leopard: Oh yeah, it will be released, showing off it’s new iPhone/OS X desktop merged interface (yes, in 2010, iPhone will be powerful enough to run a full desktop OS. mobile touch, and desktop OS when plugged into a monitor – no tablet required here).

~Mark

Mark

This next quarter is not likely to reveal any “tablet” device. Rather, Apple is very good at focusing media and customer attention on one major product at a time, with a secondary offering focused at a different market. Here is what the near-term future holds for Apple and it’s growing market of customers:

April: New Final Cut Pro Studio suite. The timing matches the NAB and new Mac Pro tower introductions well. A boost for the hardware and SW cash cows for Apple, while giving professionals the tools which have pent up demand.

June: WWDC will bring the iPhone 3G. Beyond the amazingly powerful iPhone 3.0 OS, Apple’s new iPhone HW will be stunning. It must be a major update in order to entice all those original 2-year iPhone owners to stay the course and upgrade, while dragging newbies to the platform.

HW Features:
– Thinner
– 16GB and 32GB models
– 5mp out-facing camera (still or video)
– 3.2mp front-facing camera (still and video – mostly video for iChat AV)
– Better battery life.
– Faster processor
– Faster video

SW Features:
– Video ability over the new 7.2Mbps 3G AT&T network.
– Wildcard?…

Dual cameras will be most impressive, and will be the feature people can sink their wallets into.

iPhone touch: What is this? iPod touch turns into iPhone touch. It gains 3G, but one can only buy a dataplan for it. The killer feature? Apple includes their own VoIP application. Anywhere you are in 3G, phone capability is completely available.

What separates iPhone touch from iPhone 3G? iPhone 3G has EDGE and 7.2Mbps speeds and network. iPhone touch cannot work in EDGE (as it does not contain EDGE ability), and it is governed to the old speeds of 3.6Mbps.

Buyer can choose to – or not to – sign up for AT&T’s $30 a month dataplan. If you own and iPhone already, and buy an iPhone touch, each dataplan is only $20 a month.

Non professionals will dive into this. It will be AT&T showing that yes, they buy into being only a pipe, and VoIP is the future of calls. $30 a month for VoIP!? Such a deal. It will rock the industry. Kids can now remove a $10 a month line from Verizon or T-Mobile, and quicky justify the $20 extra for iPhone touch.

This will sell millions upon millions of iPhones to people dropping one line here and there off their family plans, while AT&T scoops them up.

iPhone touch does not have video capability, nor does it sport the front-facing camera. It’s basically today’s iPhone, without Edge, but has the look and feel of the new iPhone 3G.

This will be an amazing move only a few see coming, and “tablet” talk won’t even be relant.

OS X Snow Leopard: Oh yeah, it will be released, showing off it’s new iPhone/OS X desktop merged interface (yes, in 2010, iPhone will be powerful enough to run a full desktop OS. mobile touch, and desktop OS when plugged into a monitor – no tablet required here).

~Mark

John

Keep dreaming about those hardware upgrades for the iPhone, Mark. People have been talking about the two camera thing since before the 3G iPhone came out and it’s still not going to happen. Who needs that?

Nicholas

A 3mp is silly for iChat, but it looks like video chat is getting incorporated. There was not a good reason in the past, and I frankly am not interested in the feature, but who knows!

I think a tablet, or a slightly larger pro version would be great. With the new ARM processors, duplicating cores will essentially provide scalable processing. A 10 inch is starting to look like a great idea! The iPhone OS is going to become computer-like, and I am anticipating this for my next business…

Alex

@Gadget Sleuth,

In the segments where Apple competes, its pricing is pretty close to the competition in the Windows ecosystem. What I think you’re trying to say is that Apple should elect to compete in markets which contain more budget-conscious buyers and where margins are significantly slimmer, correct?

Alex

@Gadget Sleuth,

In the segments where Apple competes, its pricing is pretty close to the competition in the Windows ecosystem. What I think you’re trying to say is that Apple should elect to compete in markets which contain more budget-conscious buyers and where margins are significantly slimmer, correct?

Gadget Sleuth

I still say…lowering the price of their Mac systems to compete with PC would really level the playing field, I think.

Martin Kelly

I don’t see BMW or Mercedes lowering their prices to the same level as base entry models from other companies. Apple is a quality brand and many are like me are happy to pay the extra for the quality, usability and fun that Apple products bring, not act as unpaid developers and support staff for Microshaft.

Let those who want a cheap experience have one, let the rest of us do our own thing. Have aspirations for the best.

Get a Mac, get a life

Chris

Cheap does not mean bad as open source would show. But my favouite comment is get a mac get a life.
How does that mean anything lol? Think about it for a second. How is getting a mac vs pc vs linux box any different? They all do similar things (except mac’s and linux have less video game support, maybe that’s what you meant by get a life??).
I think that the quality excuse is a bit silly, the only products I feel are worth a BIT of a premium is the macbooks, as they are made from a large block of aluminium.
I have aspirations for the best too, that’s why I prefer the freedom of a PC where I can configure it to suit my needs, and if I had the money, faster than a mac ;).
Have fun :)

hapco

The comparison with Mercedes is an apt one. While Mercedes produces some exceptional models, their cash cows are the low-end C series cars. These are overpriced budget models which compare poorly with other cars in the same class. Those who can’t afford the real thing buy them at a premium just for the logo. MacBooks are the same. Little more than glorified netbooks (in fact some $400 netbooks have higher specs), they appeal to simple minded logo chasers. It’s hilarious to hear Jobs say that he wouldn’t know how to make a $500 netbook. He’s already done it!

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