Apple Sales - A little perspective

Apple is a victim of its own success.

Everybody who writes about Apple or critics it has lost all sense of objectivity. This is a direct result of the performance that Apple has been able to show, which itself defies objectivity.

Now, the analysts are crying hoarse that Apple has only managed to sell 5 Million iPhones in the first 3 days, not booked, sold! 

Let us just add a little perspective to this. The so called Android jaggernaut which is supposedly outselling iOS, whose poster child is Samsung's Galaxy S3, only managed to sell 10 Million unit in 2 months. Apple managed to sell half as many in 3 days! (http://news.cnet.com/8301-1035_3-57477475-94/samsung-galaxy-s3-hits-10-million-sales-mark-early/)

If we go a little further and take Nokia Lumia as an example; although it is an unfair comparison to compare Apple with a firm that is hanging onto dear life; they managed 4 Million in an entire quarter. (http://www.bloomberg.com/news/2012-07-19/nokia-reports-lumia-sales-topping-estimates-as-losses-widen.html)

So considering this, 5 Million is 3 days is huge. Analysts who have come to expect more and more just because Apple has been able to beat their expectation year after year, quarter after quarter. It is not going to go on forever. They need to start putting things into perspective.

 

Conservation

So, there is a lot of talk about how we are leading lives which are unsustainable in the long run. Societies have needs that are unsustainable, population growth is unsustainable, consumption growth is unsustainable and on and on...

But think about it, is the entire capitalist economy not about growth? And if this economy has to thrive and survive and deliver consistent growth, how is that going to come about, and manage to co-exist with the concept of sustainability?

 

TED_Tristram_Stuart_The_global_foo.mp4 Watch on Posterous

 

If you watch the TED talk that is posted above, you would note that in developed nations food production has now peaked to 4 times the average requirement. This means that the ease with which food is now being made available ensures the demand for more. 

Businesses by definition need growth and in order to grow they make product or services that people would want. Most often these are products or services that would make lives easier! This is the root cause of the problem of sustainability.

I had a moment of epiphany today, when I was forced to take bath in cold water due to the lack of electricity and noticed, how much less water I used! The odd temperature of water made it uncomfortable for me hence I used less of it.

Now, in my experience the moment you make things harder for people, the better they become at conserving!

Let us say, you supply only cold water during winters in the pipes. Well, I do not foresee many taking those long showers. Water Conservation!

For that matter, if bread was not supplied in the supermarket and one was forced to bake the bread themselves, I do not suppose that the ending pieces of the loaf that most throw away would ever be thrown away. Food Conservation!

Let us say that the furniture business model involved building the furniture by yourself. A model that is the grandfather of Ikea, which involved some sawing and shaving the wood to put the end product together; the demand for wooden furniture is sure to plummet. Timber Conservation!

The underlying idea being that in order to conserve something, you need to make it harder for people to acquire and use the same. Businesses would never want to do this; it is sure to cause their value to disappear, if such practices are adopted. Over the centuries, man in his constant pursuit to make lives easier has simplified consumption. This consumption now threatens to cause the problems in the future, simply due to its unsustainability.

We need to start thinking about the kind of growth that should be avoided. Unfortunately, currently we are replete with only this kind of growth.

How many businesses would be willing to sacrifice growth to ensure sustainability?

Apple Maps

Well, the much anticipated iOS 6 is here. It brought in a lot of changes (beautification) to the general user interface and it is swell. They were going to bring beautification to the Maps application as well and had demoed how the new Maps is going to look. Understandably, everyone was eagerly awaiting the same.

The rumble of disappointment grew louder and louder as the 19th Sep progressed. Many users found error in the rendering of satellite pictures and still others found their cities missing. In my own case, the entire street that I live on, does not seem to be listed at all.

Just to render some perspective to the situation, the same street, was missing in the Google Maps App two and a half years ago. Kudos to Google for having improved their app so much over this period of time. 

Now, any cloud based app requires usage over the cloud by many for all issues surrounding the service to be ironed out. There has always been a hue and cry about Siri when it launched, with many describing the issues that they faced (thankfully they had the prevision to release it as a Beta). The same issue was faced when Mobile Me was released and Apple eventually pulled the plug on the same and upgraded to iCloud. Many forget that Mobile Me was the reason iCloud seemed to just work!

I myself have written a lot of hate mails to Google about the shortcomings of Google Maps in India, assuming that everything was perfect in the US, only to find out later that such problems do in fact occur and upon being reported they are corrected.

This has become a classic case with Apple, getting slippered after a new cloud based app roll-out.

So what is the issue now? Apple has introduced a product that does not have as much run-time on field as Google has had. Therefore there are more holes in the Apple product as opposed to Google. Oh, yes Google has holes, on a recent trip by road to certain interior parts of India, Google Maps suddenly showed me to be in Czech republic. It corrected itself a few minutes later, but well. Apple will need a lot of run-time to compile more data from various users and improve itself which will happen over the course of the next year.

While some of the whining is over public transportation not being mapped and so on, which I frankly feel is just a matter of adding another layer; the more critical failing will be the lack of sufficient business listings across the world.

Now, Google being in the search business means that they have an interface on the net, where business owners can go and list their businesses which can then be reflected on the Maps. This is the main tool that helps update their Maps application and makes it highly relevant in all geographies. Apple is not in the search business, hence they need to figure out, how that are going to get this data. This area is going to be harder to plug and more difficult to work around.

Also, Apple tends to focus on their primary markets US, Europe and China. What about plugging data in other geographies? It is going to be a monumental challenge! When an American with an iPhone travels to India, he is going to expect it to function just as it would in the US. Being able to meet those expectations is going to require more on-field resources and data gathering. That is going to prove to be a road-block at the moment. I wish to see how they plan to work their way around it!

What is the solution?

Buy more geography specific mapping companies.

Nokia seems to claim that theirs is the most comprehensive mapping solution, more so that than Google; well, buy Nokia; they will sell out for pocket change.

Double down and setup ground level teams in every country where they have operations and make the maps app really robust over the next 3 years. A very painful and arduous task which will pay dividends in the long run.

 

Leave Mark Alone...

At the time that the Facebook IPO was put up and the company was put up for sale, everybody knew that Mark Zuckerberg was going to lead the company and that he was going to retain the majority voting rights. He had unequivocally announced that nothing was going to change at Facebook. Then why the hue and cry??

Facebook was a company that had little revenue to support its valuation. The company was to be listed at 100X. Or in layman's terms 100 times the earnings that the company generating. Now, in the investment world for a fairly mature firm 10X to 15X is considered fair valuation given decent prospects in the coming years. For a high growth company, which happens to be the case with smaller firms due to the base effect, a higher multiple of 30X to even 150X in certain cases are considered.

Facebook will be a decade old, in another couple of years. A seventh of the world population is on it and another sixth (china) is banned from logging onto it. Such a firm by no means can be considered a growth firm. The first five years can be considered growth stage, this company was well and truly beyond that.

There were a few investors (Peter Thiel and company) who invested early into the company. Since Facebook was in no hurry to list, all the other VC firms that had not invested into Facebook early enough thought; ah, shucks, we should have invested there... So they did invest at whatever valuation was demanded by the team as facebook, with the last investment round of funding coming from Goldman Sachs at as abominable valuation (50 Billion USD). Now, in order for these latecomers to justify their investment, they needed to further inflate the valuation. Hence at the time of the IPO we landed up with a $100 Billion dollar valuation.

Every soul that invested at that valuation was foolish. There was no way that the company could have ever supported such a valuation. It was designed to fail. 

The stock is taking a drubbing not because of the way Mark is leading the firm, it was designed to take a drubbing.

Stop blaming him, blame the investment bankers who sold the IPO.