Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof!

Apple has announced the release of the iPad 2 and it is an impressive
piece of hardware, very nicely packaged and comes with margin boosting
accessories (that are actually pretty slick) such as a magnetic cover.
With that being said, the RDF (reality distortion field) and FUD (fear,
uncertainty & doubt) absorbed and regurgitated by the tech media is
simply horrendous and is an example of how difficult it is to get truly
unbiased information (not to mention true grit analysis) these days. I
truly believe, as in the political and banking rags, many tech sites
simply recycle press releases and marketing material from Apple in lieu
or performing critical analysis and independent research. Let’s debunk
some of the myths that I have found on some popular tech sites.

Myth Debunker 1: Apple’s incremental upgrade is enough to kill the competition

Most of Apple’s competition has shot itself in the foot by taking too
long to come to market with a competitive device and appropriate
marketing. Why? Who the hell knows, but that is how they run their
business. Many of the Android vendors are in a totally different camp,
though. They have a markedly superior OS which they bear very little
(relatively) development costs for as well as the 2nd largest and
fastest growing app market in the industry. In addition, they have the
largest global and US reach for said apps. What you do not hear in the
tech rags who proclaim how well Apple is doing against Android in the
tablet arena is that there has only been ONE official Android tablet
running a Google tablet OS released thus far, and that is the Motorola
Xoom. It is sold out of every retail outlet that I have been to (and
allegedly sold out immediately). The Xoom is acknowledged to be a very
capable competitor by most reviews, although it needs some polish. The
reason is that it is running BETA software. That is
correct! Honeycomb (the Android 3.0 tablet OS) hasn’t been released in
AOSP (readily manipulable open sourced code) yet because it is still
being polished. Motorola (like Samsung did by pushing Eclair 2.1 onto
its tablet last year) decided to jump the gun by hacking beta code to
get an early release. With this unfinished product it has produced what
most consider a real contender (spec wise, it is the most capable tablet
device in the retail channel). The finished Honeycomb code is due out
in a few weeks, and with it a slew of tablet competitors who didn’t want
to take the risk of releasing unfinished software. This is why they are
all coming out next month, and also why many features of the Xoom won’t
be ready until next month as well.

Putting all of this into perspective, one should realize that the
first tablet either competes with or best the iPad, depending on taste
and preference (the Samsung 7″ Tab doesn’t truly count since it ran cell
phone software, again to gain mindshare from Apple, like Motorola is
attempting). Looking at how rapid the Android hardware and software
development cycle is in conjunction with how rapidly the space is
commoditized by Android, it would be foolish not to realize that margins
and prices will compress in near real time while tech and capabilities
will spike in the same time frame. We are not talking years here, we’re
not talking a year. Not a quarter either. I mean literally months.
Expect no less than two tech refresh cycles on Android before Apple gets
to refresh once next year for the iPad 3, along with the commensurate
margin compression. To clarify for those who are not getting the point,
the iPad 2 is noticeably behind the Xoom in hardware performance and
features – the Xoom has already been rooted and overclocked to 1.5 Ghz,
which makes it faster than most desktops at mundane tasks. Apple is at
least a generation behind in mobile OS capabilities in that the iPad is
still just an enlarged version of the iPhone
OS with very few differentiating features. I can tell you this from
experience after owning several (7) iOS and Android products and
thoroughly testing all – which I will demonstrate below.

Myth Debunker 2: The Honeycomb OS is subpar to iOS

This is absolutely nonsense. As stated above, Xoom is running BETA
software and can compete easily. The biggest advantage of Android is
that it is COMPLETELY customizable AND open. Almost anything that you
complain about can inherently be modified, and modified to a great
extent. The iOS interface is quite static and confining in relation. I
actually have taken the time to prove this by taking a Barnes and Noble
Nook ereader and customizing it to run head to head with an Apple iPad.
I’ll let you judge the results for yourself. This is not pie in the sky
rocket science stuff either. My ten year old son helps me in the
customization, testing (particularly the games, of which he is an
expert) and configuration and has actually decided to start a business
selling customized tablets and phones that easily bests anything anywhere NEAR their price range, up to almost double their prices.

Here’s the spec sheet below, followed by a few videos that put these specs into real life, real people experiences. To enlarge to print quality, click the graphic to open in a new page, then click again to enlarge.

Note: It actually appears as if my Nook has 1 GB of RAM memory, in lieu of the listed 512k!

Myth Debunker #3: Apple owns the supply chain so no other manufacturer can match them in pricing

This is total bulls1t! If that is the case then why are so many Android phones surpassing the iPhone
in features and capabities (both hardware & software wise) for not
only the same price but significantly less. Anybody who truly believes
Myth # 3 needs to spend some time around the HTC Android phones –
subsidized at around $99, they run circles around the latest iPhone.
After that, see the BoomBustBlog customized Nookie vs. the Apple iPad
videos below. Hardware starting at $200, complete package is put
together by my 10 year old (and he just turned 10, may I add) son for
sale for under $300 retail. Own the supply chain my ass…

When such nonsensical rumors start making rounds in what I thought
were respectable rags in the face of obvious and ample evidence to the
contrary, that is when you know the Apple RDF (reality distortion field)
is truly pumping at full throttle. Those that are really in the know
know that looking towards the future, Apple is not the real threat. The
CEO of the hardware side of the recent Microsoft/Nokia alliance (Elop)
put it most accurately – recognizing what I have been saying for about a
year now, and that is Google/Android is at the forefront of the mobile computing wars – according to Nokia’s Elop: “Our first priority is beating Android!”.

How is Elop going to address this by using Windows
OS? He has to do more than just charge more, he has to produce better
product at competitive prices, which keep getting lower. Elop will
have to license the Widows OS, which is an expense, one that he
would bear to nowhere near the same extent if he used Android. I
feel he mistakenly looks at this as Google commoditizing the Android
platform, in lieu of the more reasonable perspective of Google
commoditizing the entire portable computer space. This is where most
pundits are missing Apples Achilles’ heel as well. Google can
commoditize all day and night because they benefit regardless, as
long as the masses are moved to the cloud – and they have willing
partners (minions?) to assist in this process with the likes of
Motorola, Samsung, LG, HTC, Sony, Acer, Asus, Dell, and about 120 other
hardware vendors. Yes, I know Apple can design the hell out of its
products from an aesthetic prospective. Yes, I do believe they hit the
ball out of the park with the iPad when it was launched. Yes, Apple has
very capable management. The fact still remains, they are not immune to
the basic laws of economics, and Google’s Android business model strikes
Apple at its very weakest point – commoditization. Due to Apple’s
prominent position, this may not be evident to all, but it is more than
foolish to deny it when the evidence is ascendant. Androids rise from
last to first in a matter of a year and change should be more than
enough to out more than just Nokia’s management on alert. See some real world examples
of the margin busting capabilities of the smart application of Android
below. For the record, one of the videos below was actually edited and
published on that $295 tablet shown in the video using Google’s cloud
services via Youtube.

Cnet’s Eric Franklin has put together a list of soldiers
looking to fight on the front lines of the Tablet Commoditization wars.
Remain aware that only one tablet running Google’s Tablet OS has been
released, just a few days ago, and it is already be touted as a viable
competitor. Just imagine when things get rolling with the release of
hundreds of tablets, all running arguably a superior OS to that of
Apple’s. Be aware that not only do I and my team of analysts crunch
numbers regularly, not only do I spend nearly all of my workday on these
products, I actually own and use BOTH platforms regularly. I talk to
everyday people, everyday – inquiring into their preferences,
perceptions and desires. Many pundits and analysts fail to do this.

Name	OS	Price	Release date	Screen size	4G?
Acer Iconia Tab A100	Android 3.0	Unannounced	April	7-inch	Unannounced
Acer Iconia Tab A500	Android 3.0	Unannounced	April	10-inch	Unannounced
Apple iPad	iOS	$400-$830	Available now	9.7-inch	No
Apple iPad 2	iOS	$500-$830	March 11, 2011	9.7-inch	No
Archos 70	Android 2.2	$325-$380	Available now	7-inch	No
Archos 101	Android 2.2	$350	Available now	10.1-inch	No
Asus Slider	Android 3.0	$500-$800	May	10.1-inch	Unannounced
Asus Transformer	Android 3.0	$400-$700	April	10.1-inch	Unannounced
Asus MeMO	Android 3.0	$500-$700	September	7-inch	Unannounced
Dell Streak 5	Android 2.2	$300-550	April	5-inch	No
Dell Streak 7	Android 2.2	$200-$450	April	7-inch	Yes
HP TouchPad	WebOS 3.0	Unannounced	Summer 2011	9.7-inch	Yes
HTC Flyer	Android 2.3	Unannounced	June	7-inch	Yes
Maylong Universe M-150	Android 2.2	$100	April	7-inch	No
Motorola Xoom	Android 3.0	$600-$800	Available now	10.1-inch	Yes
RIM Blackberry Playbook	QNX OS	$500 (16GB)	April	7-inch	Yes
Samsung Galaxy Tab	Android 2.2	$300-$600	Available now	7-inch	No
Samsung Galaxy Tab 10.1	Android 3.0	Unannounced	Spring	10.1-inch	Yes
T-Mobile G-Slate	Android 3.0	Unannounced	Spring	8.9-inch	Yes
Toshiba Tablet	Android 3.0	Unannounced	June	10.1-inch	Unannounced
Viewsonic Viewpad 7	Android 2.2	$415-470	April	7-inch	No
Viewsonic ViewPad G Tablet	Android 2.2	$580	April	10.1-inch	No
Vizio Tablet	Android 3.0	Unannounced	April	8-inch	Unannounced

Myth Debunker #3: The PC era is gone

The PC era is not gone, it is most definitely here to stay. It is
just being shrunk to fit in both hands. Tablets are PCs, simply ask the
inventor of the category, Microsoft – the PC software king. This would
be obvious to all who think independently and objectively. What is soon
to be gone and gone for good is the expensive, high margin PC. Yes, that
includes expensive tablet PCs as well. When putting the Xoom through
its initial paces, I thought to myself, “This is a fast, slick, and
flexible tablet. It’s just not worth $800 of my dollars. It is also not
worth $600, nor $500, particularly considering what will soon be
available for a lot less that can do as much or more.” The same goes for
the Apple iPad, and most of the other >$600 competition. Google’s
cloud computing for the masses, coupled with its disruptive open sourced
Android business model has and will continue for the near future, to
collapse margins at a spectacular rate while increasing the rate of
technology adoption and innovation that will make Moore’s law look like
an understatement. As a matter of fact, it already has. Check out the
computing power of the Nvidia quad core, 3d capable chip to the high and
laptop of just 6 or 7 years ago. Over 1,000% increase in power at a
fraction of the price and power consumption. The videos above
corroborate my personal feelings that cute, pretty slates, beefy
powerhouse slabs and competition crushing marketing prowess are cool,
but most prefer strong performance at rock bottom prices. This sounds
more and more like Android, unless Apple and Microsoft shift gears and
do so quickly.

Apple has
always thrived as a niche company, and entering a space that is being
rapidly commoditized by Android is dangerous and at the very least
guarantees margin compression. It is not as if money can’t be made in
the space, but it is much easier to make money in the commoditized space
when you don’t have to pay for the OS development, you know like the
Android adopters. Witness the success of my historically favorite (at
least for now) handset maker, HTC after they invested full on into
Android and benefited from the commoditization of the high end
smartphone…

The margins
will shrink even further, even as revenues skyrocket. R&D costs will
be massive. There were many who argued with this perspective throughout
all of last year. Apple is the best, Android will never outsell Apple,
etc. Well, come first quarter of 2011, Android has went from near zero
to the market leader in all major markets. The argument that Android
will not take over is now mute, it has already done so. Here is
the complete analysis of smartphone and vendor handset growth up until
Q3 2010. I will parse the numbers and release the most recent quarter
soon, and make it available to subscribers. Be sure to scroll through
the entire spreadsheet model below using the “<” and  “>” buttons
in the lower area of the window. The model is very, very extensive!

Note: The embedded market share spreadsheet model that should be here must be viewed at the original post due to formatting issues. Click here and scroll down to the equivalent spot in the article.

Benefiting from the mobile computing wars, regardless of the prospective winner!

Long list candidates

We
have performed a scan to identify long opportunities in the electronics
& semiconductors space that stand to benefit from the mobile
computing wars. The scan was essentially searched for companies that are
proxy play for the battle between Apple, Google and Microsoft. Our
initial list included a set of 125 companies across the US, Europe and
Asia, mostly in the following sectors – Semiconductor, Consumer
Electronics, Communications Equipment, Integrated Circuits and Computer
Hardware.

We performed value and growth analysis assigning rank to each company
on various metrics bucketed into like categories (as below) and arrived
at a final score for each company based on weighted average rank. The
bucks and ranks were as follows -Valuation (20%) (Price-to-sales (3%),
EV/EBIDTA (5%), one year fwd PE (6%), two year fwd PE (6%), Growth (15%)
(EPS growth), Value & Growth (20%) (PEG ratio), Value (35%) (Net
Cash / EV (17.5%) and Net Cash / Market Cap (17.5%)) and Profitability
(5%) (Margin). We then excluded 55 companies which did not have ADR /
direct listing in US. Of the remaining 70 candidates, we came down to a
list of 29 companies based on the attractiveness of their business
model, expected growth rate, valuation metrics, price performance, and
profitability. We later performed a detailed historic analysis for each
of these 29 companies to look into the past performance and see how
these companies had performed over the last two downturns (2002-03 and
2008-09) by analysing revenue growth, gross margin and operating margin
trends for these companies. I will discuss a portion of our findings in public over the next week. Subscribers should refere to the most recent downloads on BoomBustBlog.

For those of
you who have not followed me in the past, here is a description of who I
am and what my accomplishments are - Who is Reggie Middleton!

Interested parties should also read “The Potential Equity Investments Most Likely To Prosper From the Google/Apple/Microsoft Mobile Computing Battle”.

For more realistic, objective contrarian views on the Google/Apple battle for the mobile computing space, see:

1. Apple Gears Up To Combat The Margin Compression That Apparently Only It, Google & Reggie Middleton Sees Coming
2. Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space
3. How
   Google is Looking to Cut Apple’s Margin and How the Sell Side of
   Wall Street Will Enable This Without Sheeple Investor’s Having a
   Clue
4. Android is gaining preference as the long-term choice of application developers
5. A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
6. Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
7. Apple on the Margin
8. Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space
9. How
   Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall
   Street Will Enable This Without Sheeple Investor’s Having a Clue
10. Empirical Evidence of Android Eating Apple!

Comments

[ZakuKommander]

Reggie, nothing you say is wrong, but much is besides the point.  

This is not Gateway and Dell slugging it out, two competitors, with similar product lines.

There is simply no company that is a direct competitor across the board.

AAPL has created a different paradigm, and you're looking at things in, well, a very reasonable way, based on old school paradigms.  Creating a better, cheaper product to tackle one of the many products in the AAPL ecosystem will not, in and of itself, slow down AAPL.  Never has, never will.

But I love your articles and posts.  Great work.

[Reggie Middleton]

Thanks, I'm glad you like the articles... but Android has already slowed down Apple and taken pole position. What do you think Apple would have done if there were no Android? Do you really think the iPhone or the iPad would be anywhere near where they are now if not for the Android threat and subsequent dominance?

It is good for us as consumers, but dangerous if you ignore it as an investor.

[jimijon]

You forgot the most important slide... if I remember correctly... the sign posts with Liberal Arts vs. Technology.

That succinctly summarized the difference in a wonderful manner... brilliant marketing meme there.

[ZakuKommander]

Good points.

Next article, I'd like to hear your thoughts on AAPL as paradigm breaker.  How do we as investors take into account that it has no comparable competitors, but many competitors (Google, Microsoft, Samsung, Motorola, etc.) of the AAPL "faces" or "aspects" nonetheless.

[Reggie Middleton]

I've already done that. Look to the mobile wars series: http://boombustblog.com/reggie-middleton/2010/06/01/3883/

The key is to realize that this is no longer about Apple anymore. The companies need to take out Google, but they cannot because Google wields the only weapon that allows them to compete against Apple. Google wins regardless, as long as people move to the cloud - which is occuring in droves.

Microsoft, Nokia, RIM are all aiming their sites at Google, but the media is focusing on Apple due to Apple's prowess at manipulating the media. Apple is also, obviously aiming at Google, but it appears that the battle is with hardware vendors as one sees it in the media.

[TruthInSunshine]

Apple is definitely not able to innovate like it used to.

Even the most ardent fanbois of Apple must concede this.

Apple is becoming.....the horrors!.....commoditized.

Build your future investment thesis on Apple around that central point, because it fits.

Apple's OS and product differentiation truly set it apart at one time.

The former is far less glaring (Windows 7 closed the gap significantly in the computer space, and Android is definitely a credible threat in the quasi-computing space) and the latter is virtually non-existent, today.

The only thing that remains is the massive price premium one pays for an Apple product vs the competition.

[Dburn]

That "price premium" has all but disappeared. Notebooks are about the only place where I see a large premium, but I haven't done a feature by feature comaprison to see how much a note book would cost head to head with all the Apple features on it.

The problem is, people's perception of Apple from the 90s and before are being passed around as gospel now when that perception is based on a faded and old reality that is no longer relevant.

Lets talk margin compression though to get to the meat of Reggie's presentation. First off, no single manufacturer can come close to the volume that Apple buys in parts which gives them a huge advantage from the get go. When Individual manufacturers place overseas orders they aren't consolidated to get best price on components. This is where a parts manufacturer can really market the buck. A company pioneers the product and buys in huge volume. Then come the copy cats who could never come close to the volume, so they pay prices for parts that are at substantially higher price points.

Lets talk about the O/S and Google a little too. Schmidt was unable to find a way to monetize the O/S. Maybe one of the founders can. Shareholders will become or have become very impatient to see the O/S monetized. That means increased cost for each manufacturer. That's coming, it's just a matter of how long Google can hold out. The manufacturers of the pads and phones also realize this a fight like the one HP and Dell won when the PC Clones came starting in the early 80s. It wended up to be a profitless fight too. The dead corpses of small and large companies litter the market place when price is the only thing they are competing against. A Manufacturer or OEM is not only competing against Apple, they are also competing with each other which is one reason Apple has such a large head start. They would not or could not standardize on the same version of the Droid O/S with certain features being built to one version that would break in the next.

In order for them to have a chance, Google has to show the same discipline that Microsoft did and get everyone to standardize on a single version O/S and not tie any proprietary features to that version. Personally, I don't think it's in the company culture, yet if they don't, Manufacturers who do try to gain an edge with a feature tied to a version of the O/S are dead manufacturers walking.

None of the brands of tablets come close to the brand equity and recognition that Apple has. As we see in Cars and just about everything else, Brand equity allows for a premium. If GM came out with a $250,000 sports car to compete with Maserati type cars. No one would be caught dead driving one even if it was substantially superior. If it's just a "me to" it has zero chance of selling.

Motorola seems to have come out with a Good tablet at $700. The fact they are sold out means nothing until we see how many they actually sold. Apple's supply chain management has gotten to the point where it will be difficult for anyone to compete after years of Apple feeling the heat of getting dinged by analysts for back-orders. They also don't try the old game of "Freezing the Market" by pre-announcing product that won't be ready in volume for months.

People have gotten use to be able to take delivery within weeks of Apple's official roll out.

The nook is interesting but there have been $79 tablets available from China for some time that have never caught on. The speed tests Reggie showed were a little tilted to the ability of the Nook to handle and on a machine that is very slow compared to the iPad 11, yet people considered it very quick when it was the sole iPad out there. No one ever compared it to a Nook, even the geeks on the various forums that would never buy a Apple product if their life depended on it. .

Barnes and Nobles who sells the Nook, is a Book reseller. There is nothing in their past or future that show they are ready for a high volume battle. In fact , it's being compared to Borders as a good stock to short to Bankruptcy. If the Nook was superior to Apple in any way, except price, there would also be numerous copies of it.

I think they have taken the razor/blade approach of selling it for cost while hopefully making it up in book sales. E-Books are wildly profitable for both Author and for the content store. Even though the margins are lopsided.

Getting digital IP that can be sold 1000s at a time to millions at a time is probably where Barnes and Nobles hopes rest. This is a public company who has never disclosed how many of the Nooks they have sold. Is there any doubt if they had even approached a million or 3 million wouldn't we have heard about it? Even Amazon is unwilling to disclose Kindle unit sales.

Barnes and Nobles is in a fight for its life with Amazon, not Apple or the Droid Clones. It doesn't have the resources to engage in an electronics battle when the company has no experience in design , development and supply chain management from overseas all the while it is bleeding from wounds caused by Amazon already. Selling it at cost would be one way to discourage competitors but it won't cause Apple any headaches.

They are used to tearing off covers and returning books that don't sell. Imagine them in a high volume situation where they get one in that needs to be recalled. I'm guessing they engaged one of the better design firms to give them that package. They don't know a resistor from a capacitor. All they know is returns. You can't return anything made for you with your name on it overseas whn your volume is short.

The clone firms have experience with warranty reserves and supply chain management and one or two may have a high volume product at some point in their history under the belts. I do know when Motorola had a hot cellphone that they were unable to deliver in quantity they got dinged hard for it. They are not known for being a reliable supplier for anything.

Samsung has a conflict. They sell many parts to Apple. That may be one of the reasons their tablet is more costly.

RIM has a good chance with the enterprise market unless Apple decides to get serious and address the needs of it. But it's also well-known, if Apple has a few problems it's nothing compared to the Droid. The IT dept also face the "fait accompli" problem of people snapping up iPads before RIM can get a foot hold. Then they have to question how many users of different models can they hope to support.

I know Apple is almost a irresistable target for Reggie, but here it is approaching another all time high with 1% to go. Margin Compression always happens but a tear down operation took apart a iPad 1 and it showed a 100% mark-up from cost or A 50% Gross Margin on the cheapest one which is critical.

As Reggie knows higher priced units of any product based on the same parts and build of the base product brings in enormous profits. What did we see last year? People quickly selling their $499.95 model to get the $650.00 model which probably had all of 2% of additional cost but has an additional margin of 24% over the base model which brings the over-all gross margin to where the original Macintosh's were. In short they have plenty of room to play with. Once Google starts charging for the O/S that advantage will be what separates the two.

One final Note. I tried the Samsung model and to say it was touch sensitive is a complete fabrication unless your finger has been trained in the martial arts.

[Rogerwilco]

Your logic escapes me. If there is credible competition, how can Apple charge higher prices? Both premises (viable competitors and the "Apple tax") can't be true at the same time.

[TruthInSunshine]

You vastly underestimate the power of brands and marketing, apparently.

I want to allow you to acknowledge the power of those forces in the marketplace, but your response insinuates you do not, or that you at least don't give those forces much weight.

The one thing Apple certainly has now is the power of marketing, in a big way. When that is not enough anymore is anyone's guess, but without some fundamental innovation of the underlying product, I would bet that even that won't buy Apple the premiums it now enjoys.

[Rogerwilco]

And that is Apple's fault? LOL, cry me a frikken river. Gee, maybe Apple should announce a one year moratorium on marketing, and while they're at it give all employees a 12 month vacation. Then maybe the competition can catch up and it will all be "fair" again.

The bottom line is Apple is executing while competitors flounder and flail. Nobody forces consumers to buy Apple products. It's not Apple's fault there is no credible competition in the post-PC space.

[TruthInSunshine]

The point was that Apple offered a differentiated product (physical), better OS, AND had better marketing once upon a time.

One of those sell points has been negated, one has been greatly marginalized, but the great marketing still exists.

But great marketing alone won't be enough, IMO, given the losses in the other two categories, long-term.

Apple's margins and sell rate are being floated by two factors that really don't exist anymore.

[jimijon]

Airplay, the Air, Final Cut Pro, iMovie, GarageBand, Logic, AppleTV, beautiful carved enclosures, new thinner iPad2, their own A5 processor... what the heck are you talking about? That is what I call innovation and execution.

The "rest of them" offer none of this. Zip. 

[Reggie Middleton]

Each and every technical spec and app you named has an equivalent (or better app) on Android except for GarageBand which is currently vaporware until it is released, no? Android's movie editor works in the cloud, on top of it.

You see, Apple RDF at work again.

[tarsubil]

Why debate Apple's coding capabilities? What a waste of time. If someone thinks they produce superior software, they've already downed a gallon of koolaid.

[jimijon]

Ecosystem vs. what? Finally, come on... have you ever tried to get help from Google?!!!!! Apple also executes brilliantly in the service space too. I can name many people, including myself, where Apple did the "right thing" even after warranty expiration and fixed something for free, or without even questioning someone lying to them about dropping it in water.. just winked and replaced it for them.

And who has carved out enclosures?

[Rogerwilco]

Sorry Reggie, them that can do, them that can't bash Apple. Jobs and his team make what they do look easy, but the reality is no other company, even mighty Samsung that makes many of the parts for Apple, comes close to their level of competence and expertise in systems integration.

The post-PC market doesn't give a rat's ass about GHz, RAM, or open source cred. All that matters is the user experience and the support infrastructure.

BTW, do you still feel good about dumping AAPL at $250?

[Pool Shark]

"The PC era is not gone, it is most definitely here to stay."

Yep.

You can have my PC when you pry it from my cold, dead, greasy little, sausage-like fingers.

[hawk295903]

What Reggie does not understand is that comparing Apple products to Android based gadgets is like comparing the Ferrari F430 to the Chevy Camaro. You just cannot do that. Once you have established credibility and generated a religiuous following; you are untouchable. Devices like the IPAD 2 and MacBook Air just keep raising the bar higher. Good luck betting on the pack behind playing catch up!

[High Plains Drifter]

Are you talking 1/4 mile or circle track?

[TruthInSunshine]

Toshiba Portege with 500GB HD or 128GB SSD, i5 or i7 (soon to be SB), bluetooth, USB 3.0 and weighing 3 pounds with a 13" screen destroys the MB Air, especially when it's 1/2 the price.

[Pool Shark]

Yep. No question that Apple makes ground-breaking products with a built-in "cool" factor.

They're just too damned expensive for what they actually deliver.

If you can resist the urge to be an early-adopter, you can get much more bang for the buck elsewhere.

[Rogerwilco]

So true, and isn't it wonderful that time isn't money and we all live forever?

[FreeMartinArmstrong]

nice one

[jimijon]

Oh one last thing... the new cover is very cool and the I am sure all the young ladies will love the new colors.

[TruthInSunshine]

As a tablet user, I can honestly say that until they have a fully integrated  and PHYSICAL QWERTY keyboard and the functionality of a full-fledged PC (with Word, Excel, Flash, etc.), then they're just not going to replace the notebook.

The form factor is great, but input is difficult, business apps are near non-existent, and even one of the biggest iPad fanbois of all time, Dan Frommer, agrees, writing recently that he has pretty much stopped using his iPad within the first year, and gone back to his notebook.

[flattrader]

Agreed.

Went and looked at tablets yesterday.

To get an ipad to work close to "right" I'd have to spend somewhere around $200 additional dollars above initial purchase price and it would still come up short.

Xoom looks promising, but too pricey.

At this point, a high end netbook looks like my answer to protability.

I don't need to look cool.

[jimijon]

Ha! Reggie you completely miss the whole Apple thing. As a developer and also knowing many others, we all prefer iOS and apples store. Maybe the big guys don't like the 70/30 cut, but us small timers love it.

Meanwhile, regular ol' Macs are selling more and more. 

I am currently vacationing in Jupiter Florida and went to one of the high end malls around here. It was a ghost town and then I went to the Apple store and it was jammed! Very surreal really. 

Meanwhile my apple options keep making me money, the number of ads looking for iPhone developers from corporate america continue to grow and the whole eco system of Apple software and products continues to work seamlessly. 

Apple is shipping next week.. when are the copycats shipping? What is their weight? How do they feel? Do they have the great software.. movie making, music making? no.

Will they grow ... of course.. there is enough apple haters out there to buy.

Finally I have both a DroidX and Apple iPhone and have given the droidx to a lot of people to try. (Verizon sent me one to review) While it is nice in certain ways, no one who had an iPhone wanted to change.

However, I will wait and see how Android confronts the virus attacks that are starting. 

cheers

[stollcri]

I agree that their strategy has a lot to do with software developers. I think that Jobs learned a while ago the consequences of loosing developers and thus Apple will work to prevent that from happening in this new "non-PC" world. They seem to be working hard to merge development for all of their platforms. Furthermore, fragmented hardware could eventually lead to development for the least common denominator, which could make Apple products perform better than the competition even if the competition were using technically faster hardware (or development costs will be more for the fragmented platform, the real point is that there is a cost to diversity in computing).

I don't think this guy gets it, and so far he seems to have been consistently wrong about Apple.

[Reggie Middleton]

Hmmm...

Furthermore, fragmented hardware could eventually lead to development for the least common denominator, which could make Apple products perform better than the competition even if the competition were using technically faster hardware (or development costs will be more for the fragmented platform, the real point is that there is a cost to diversity in computing).

I posted a video that has a device at 2/3rds the price handily outperforming an iPad in both real world software execution speed AND flexibility. Maybe you should watch the video.

I don't think this guy gets it, and so far he seems to have been consistently wrong about Apple.

I said Apple will face margin pressure. They faced margin pressure.

I said Apple will be surpassed by Android in market share shortly. They were surpassed even faster than I anticipated. If that's what you mean by wrong, then maybe I was.

[jimijon]

And, don't forget the new App store for the desktop. All those developers that were trained on iOS will now be moving to create even more apps... for the desktop! This will again lure more customers with the ease of getting some great apps at sub $100 prices.

If anything, you should be investigating margin pressure at Adobe.

Finally, a fragmented and now virus plagued ecosystem is not that great. And, who is getting the margins? Many of these copycats will soon be roadkill. Apple's margins will always be greater than these me-toos. 

[dark pools of soros]

i agree about the app marketplace.  Good developers want to get paid a decent cut.  Yes there are tons of turds in the store but lots of great cheap and/or free stuff too.  

I don't think PC's die though, ergonomics means a lot for people who work all day on computers..  i have a 2nd gen mac air that i use casually and love it, way better than any tablet

[velobabe]

yeah i might of taken that first bite out of the apple, but can look back again.

thanks reggie, glad to hear you have  a 10 year old. i know you are a good parent and teacher for your child. i am sure he will be a leader for this new generation, as you are for the present generation.

[No One]

In your chart, you have the ViewSonic gTablet listed at $580. The ViewPad 10 (Dual Boot) is $580. The MSRP of the gTablet is $399. I picked up a gTablet for $380 a couple of months ago, and love it. Yes, it is rooted, and I have a gingerbread (2.3.2) ROM installed. Suck it Apple!!!

[savagegoose]

cvool death of the desktop pc? meansd i have a few 1000 years of salvaging till i need ot buy a new pc part

[Cognitive Dissonance]

Dammit. And Banzai7 had just convinced me to purchase the iPad2. Thanks for the save Reggie.

But seriously Reggie, why the non stop hating of Apple? I agree that the entire "Apple is God" meme is quite overblown, but it appears that it has become personal with you?

[Atomizer]

CD,

My first computer:

http://oldcomputers.net/heathkit-h89.html

Many of my friends owned either Trash 80's or Crapple. Its hard to change me after all these years of using Microshite. Next month, picking up the BB Playbook.

[alien-IQ]

While I would not be long AAPL at these prices...I would not dare short them either.

As far as the company and it's products go...I started using a Mac about 10-12 years ago and it is simply infinitely superior to any windows PC I have ever used. It's the difference between a 2010 Ferrari California and a 1971 Ford Pinto...No contest. I'll never go back to a regular PC.

As a company...AAPL still has lots of available market share to capture. They ain't done yet....not even close.

[williambanzai7]

I don't think the analogy to Microsoft is very good. MS is a poster child for laziness and lack of management vision and execution, let alone creativity.

I think AAPL has the market painted into their corner. The corner that has always said in this business you need to control the hardware, the operating system and the application ecosystem.

Surprise, surprise, they were right.

Gotta go, busy generating content on my iPad ;-)

[goldfish1]

National day of unplugging starts at sundown according to sfgate.com.

[Reggie Middleton]

There's no hate for Apple I actually admire management's execution, and like it a lot. I feel they are painting themselves into a corner, most likely as a punch drunk result of thier success - similar to what Microsoft has done, and what they did back in the '90s.

What I do hate is the allegedly objective media serving as a marketing arm for Apple, versus an unbiased reporter of news and purveryor of independent analysis. I also admired Goldman Sachs management as well, but they got (and still do) get away with murder and until Matt Taibbi's article made it sexy to bash Goldman they were the unassailable media darlings in the finance space.

Remember, TRUTH does not equal HATE :-)

[crazyjsmith]

You are missing the entire point of Apple Reg.

It's not about whose operarating system has a more open platform, or who has a faster clock speed,etc.

It's about the end user and their ability to use technology in a way that won't give them a migraine trying to figure it out.  Most people could care less about the mechanics of a PC, they just want the stupid thing to work, and that is what Apple has been able to deliver.  A seemless relationship with technology and the end user.  The iphone is so easy to use compared to the Android phones.  I have friends who went with Android, and it takes months for them to get comfortable with it.  The iphone takes minutes to get comfortable with, same with the ipad. 

They make beautiful products, that come with a 5 page manual, and are simple and easy to use.  They don't get riddled with slowed down with bugs, and they have great customer service.  I use both PC's and Macs. 

[Reggie Middleton]

I simply disagree. In the video you saw an Apple user get up and running on the Android device in less then 3 seconds. You saw a user who did not use Android nor the iPad get stumped because they couldn't get the iPad to play Youtube (because it can't), yet they were able to do it on the Android.

You also saw how much slower the iPad was than the Android in loading pages, wherein we had enough time to waste where I was able to move on to the next step of the demonstration on the Android while waiting for the iPad to load.

These real life experiences, captured on video for all to see, fly in the face of your (and Apple's) assertions of the comparable ease of use and care free user experience of Apple. If you have to go to a propietary app to view one of the most popular sites on the Web, your product is definitely NOT user friendly. Users have to pay a PREMIUM for this downgraded experience.

[SwingForce]

That is SOOOoooo cool that your son can load Android onto a Nook and make it work. $249 Unreal!!!  I'm waiting to load ChromeOS onto my desktop computer.

[NotApplicable]

There is no such thing as being unbiased, Reggie. All people have points of view shaped by their beliefs and experiences. To claim to be unbiased is to be blind to it, which is why there are some here who point it out to you, as its appearance is obvious.

My guess is that 90% of the media "analysts" obtain both their experiences and beliefs from the words of each other. While I agree with you about the limited value of this echo chamber, I don't feel that it's worth the time to constantly attack, as it detracts from the otherwise excellent analysis that you do.

Of course, this is all merely my opinion, but I don't think you do yourself any favors chastizing others reviews, as it comes off as sour-grapes, and like I stated above, detracts as well as distracts from your work.

If your analysis is superior, it will be recognized as such, regardless.

[Reggie Middleton]

You seem to be missing the point. I'm not comparing analyses, I am complaining about a lack of analysis. I'm not chastizing other people's reviews, I'm complaining about a lack of review. Reguritating and repeating what Steve Job says is not a review nor is it analysis, but your point is well taken.

[pemdas]

Arguing about tech products is like arguing about religion.

[Ahmeexnal]

Thanks for the info Reggie.

I used to be Apple man through and through until the switch to Intel.

First iPad did not appeal to me but was starting to think about v2.

But the I figured why spend more than 5 franklins on them when they'll be selling for the equivalent of today's 50bucks (or maybe less!) when TSHTF.

Those 5 bennies today are better invested in atomic number 47.

[dlmaniac]

Once that ME-style mass food inflation finally lands in US watch out!! A nose dive across the consumer electronics (or any sector depending on lavish consumer spending for that matter) is guaranteed. If people have trouble putting food on table you bet they could care less of Apple's next hype-pad.