Monday, August 06, 2012

Apple just had a Microsoft-esque month


The last 30 days have not been kind to the vaunted fruit. It is almost as if Apple Inc. has gone to the well too often and, much to the chagrin of its followers, has finally been denied the elixir that makes it, magical! Steve Jobs had the Midas touch. He is long gone, and the fabric of Apple is coming apart at its seams.

The rumbling on the bourse - Wall Street

The situation is so bad that the final bastion of its undoubting supporters, the financial analysts, has potentially switched sides. Heretofore, Apple was every financial analyst's darling because of its blockbuster quarters and unprecedented year-on-year growth. Every financial institution either has Apple stock in its portfolio or wishes it does. Until this last earnings report.

The word on Main Street

Apple has a polarizing effect on customers - they are either die-hard fans or harsh critics of its every move and product. Technologists are critical of the technical merits of its products. Mac OSX is a watered down version of Unix; iOS is not as open and customizable as Android; the iPad does not have expandable memory or slots for peripherals. All sound familiar? All of this criticism aside, Apple device sales, revenue and profit numbers showed no signs of abating. Until this last earnings report.

The Ad Man has left the building

Apple has the largest market cap of any company in the World. It is officially the Goliath in every market in which it has a foothold. It spends an inordinate amount of money on suggestive marketing campaigns that evoke memories of yore and a desire to covet its latest creations. Until this last marketing campaign.

An oft-told tale: The fall cometh after a meteoric rise

These missteps and issues are endemic of Microsoft post Bill Gates. Is Steve's absence finally felt? What happened in the last thirty days? For starters, Steve Ballmer finally slept in peace knowing that Apple is having a Microsoft-esque month. Seriously speaking, though a number of events have culminated in the past thirty-odd days, the ball was set in motion many months ago. I have analyzed Apple's fall from grace and distilled the reasons into five words: Samsung, Genius, Earnings, EPEAT, and Karma.

1. Samsung

Both its biggest competitor and general pain-in-its-arse, Samsung has locked in battle with Apple over patents, copyright and revenue shares. The courts are involved now, and the bickering has spilled over into the technology press. For the first time, Apple has come out as the evil wrongdoer in these proceedings. From my vantage point, it has definitely lost favor with the folks straddling the fence. It is not that Samsung is without fault. The company has filled its coffers by replicating the inventions of its direct competition or the companies to which it supplies parts. Apple is seeking $2.54 Billion in damages from Samsung. It claims that Samsung copied its designs to the point where customers could not tell Samsung and Apple devices apart. What hockum! How can someone, anyone, miss the SAMSUNG in that disgusting font plastered on the front and/or back of every Samsung device?

Even if Apple wins the case, its priceless product development and analysis strategies are now available for anyone to emulate. For a company with $125 Billion in the bank, who do you think stands to lose or gain from these revelations?

2. Genius commercials

The new Genius advertising campaign has been universally panned by everyone who has a brain and an opinion. The last time people were so united in their opinion of something was, wait for it... I got nothing. Adage ran a story claiming these were Apple's worst ads yet, and that this was the beginning of the end. The riff-raff has taken over, and without Steve Jobs sifting the chaff from the corn, we are going to be subjected to more "Genius"-esque ads.

3. Earnings

Aah, the reason financial analysts are bearish on Apple. Did you hear the news: Apple missed its earnings estimates, by a lot! Who is to blame: Tim Cook? Phil Schiller? The Apple rumor mill? No, it has to be Samsung! What if Steve Jobs was alive? What if...

Truth is, every company misses earnings once in a while. The death knell will begin to ring if this performance is repeated the next quarter. The ringing will hit fever pitch if this becomes the norm rather than the exception. Honestly speaking, the product pipeline needs a refresh. Here is what I think will rejuvenate the earnings report:

1. A brand, spanking new Apple product that is not the Apple TV, which I believe will flop, badly! Forget, for a moment, the field day Samsung will have as it claims that Apple plagiarized its market leading line of televisions. Apple works on margins, and in the TV biz, none exist.

2. A new iPhone that is not more of the same, old iPhone.

3. Office for iOS. You read that correctly. There is a whole market of business and information workers that do not use an iPad. Yet. Office makes the platform legitimate and will open the flood-gates for sales of the iPad, in particular.

4. EPEAT

The sleek, new Retina-display MacBook Pro has a dirty, little secret. It cannot be recycled in compliance with EPEAT guidelines. Apple announced that the design direction of its products was no longer consistent with EPEAT guidelines. This is just conjecture, but Apple, in its recently-acquired infinite hubris, must have believed that either the EPEAT guidelines would change or that government bodies would mend the rules for Apple. WRONG. In the shit-storm that ensued, state governments took Apple of their list of product vendors. Apple had to back-track on said announcement, and re-applied for EPEAT certification.

5. Karma

Developer angst is at its highest with Apple's recent products. The cup brimmeth over with criticism, and no pillar of Apple's developer story has been spared. To wit:

1. Mac OS X Mountain Lion has been receiving truly negative press about Apple's heavy-handedness. Features have been removed, prosaic defaults have been imposed, and many do not see the value in the $20 upgrade.

2. iOS 6.0 is due for release soon, and if the Mountain Lion trend continues, some key apps that launched with the original iPhone will likely be cut. Apple's torrid relationship with Google, yes over Android and plagiarism, has already opened the door for a new Maps app. There is talk about the YouTube app being cut from the final release.

3. iCloud, Apple's next billion dollar business, has not grown out of its diapers yet. In his thoroughly detailed review of Mountain Lion, Jon Siracusa astutely identified iCloud's shortcomings and inconsistencies. Developers want a consistent mechanism to leverage iCloud. Apple would be remiss to not heed these calls for change.

4. Mac App Store is seeing defections that the iOS App Store is yet to witness. A brouhaha about the draconian policies, sandboxing requirements for 3rd party applications, and non-uniform access to system APIs has developers up in arms. This piece by Marco Arment sums up the frustrations of Mac developers and future irrelevance of the Mac App Store. Though obvious, this warrants a mention - without compelling apps, the sustained growth of the Mac platform is in serious jeopardy. Additionally, Microsoft is launching Windows 8 in a few months, but the new platform has not been very well received by the developer community. Apple needs to move quickly and court these estranged developers. The result can only sustain future growth of the Mac platform.

5. Questions about App Store security have recently tarnished Apple's reputation. A user's account was hacked by some smart engineers, but they did not revert to technology. They called in to Apple Support, leveraged their charm and social engineering skills, and gained unbridled access to an unsuspecting user's account. This account of what followed sheds light on putting all your proverbial eggs in Apple's security basket. Scary stuff!

Epilogue

None of these things individually amount to much. Treated as a whole, the effect is greater than the sum of the individual parts. The short time-frame in which these supposedly random events have occurred might be a coincidence. Or it could be a harbinger for future Apple missteps. Dark days are ahead for the iconoclastic brand. I, for one, am going to watch this space closely.

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