The iPhone is dying?
While it is all sensationalized BS, I love reading news articles in the tech world. They are HILARIOUSLY uninformed. Today's gem was this article from MSN.
Things the article gets wrong: the iPad isn't dying, iPhones didn't cannibalize iPod sales and their financials actually ARE as good as they appear.
Firstly, saying that iPads are dying is akin to saying that PC's are dead or dying. Neither is true. Both have simply hit the same point in their life cycle. They are no longer hot and new. Tech isn't advancing along nearly as fast, there is less and less differentiation between generations or products and people are simply holding onto them longer before buying a new one. Households may also downsize the number they keep as old devices die. The vast majority of households who currently own a tablet, I think, would buy a new one if one of their died. And if it were an iPad they would more than likely buy another iPad. Put simply, nothing has truly supplanted tablets.
Next, iPhones DID NOT CANNIBALIZE iPod sales. Or at least insofar as any metric that matters. No one with a brain would call selling a device 7-10x more expensive "cannibalizing" sales. The iPad Mini cannibalized iPad sales because people a lot of people who would have bought a more expensive iPad otherwise instead bought the cheaper Mini. In other words, the iPad Mini decreased Apple's overall sales because sales of one device ate into greater potential sales from another.
Even if the iPhone had been cheaper than the iPod, on a purely technical level it STILL wouldn't have been cannibalism. They aren't the same category of product, there simply happens to be some overlap in functionality. So we neither have a situation which leads to lower sales nor a situation which leads to a cheaper version of a device significantly impacting sales of a more expensive device.
Oh, and to make my point even more solid. Even if SOME sales are diverted to a cheaper product, it isn't generally considered cannibalizing sales unless the total sales of the cheaper product aren't enough to offset the expected losses incurred on the more expensive product line.
Math session: Assume I would have expected to sell 1000 units of product X at $100 (expecting to make $100 000), then released product Y which had some overlapping features but cost only $50. If, instead I sold 900 units of product X and 100 units of Product Y, I would only have made $95000. That is an example of cannibalized sales (releasing a cheaper product resulted in lower than expected sales).
If, on the other hand, I had sold 1000 units of Product Y I would make $90000 off of Product X and $50000 off of Product Y for a total of $140 000 ($40000 more than I expected to earn off Product X alone). This latter situation is what Apple had hoped for with the iPad Mini, but the former is more what they got. If the latter situation had panned out, it wouldn't have been considered cannibalized sales.
It is generally accepted that if you release a cheaper product which competes with another of your own that some of the sales will go to the less expensive product. The hope is that the lower sales will bring in enough new sales to offset those losses.
So, it should be easy to see how Apple selling not just more iPhones than iPods but also selling them at several times the cost would NEVER be considered cannibalized sales.
The final point I had beef with was that the article tried to dismiss Apple's $200B+ cash by pointing out their liabilities and taxes they would face if they tried to bring it all back to the US. This is sadly misleading because the same is true of just about every single large company. And in that light, the $200B+ is as good a marker as any. Worth noting that they could pay back ALL of those liabilities and still have BILLIONS left over.
Worse, while they were quick to point out liabilities, the article was silent on non-cash assets. I'm sorry but using intangible liabilities while refusing to acknowledge less tangible assets is just cheap and/or idiotic. Do have any f***ing clue just how much real estate Apple owns? That is just ONE category of assets. They also have unsold product (probably valued in billions). They have AR assets, especially now that they launched their financing program. And they are still profitable, so, more than likely the gap between their assets and liabilities will continue to grow.
I'm not an Apple fan. The above is just reality. I presently own ZERO Apple products. I have no particular love of the company or their business model. On some level, I'd even love for the doom and gloom stories to have some merit. They don't.
The scariest thing for Apple is the slow down in iPhone sales. But again, don't read too much into it. Firstly, sales still grew. They just grew more slowly than ever before. Even if they experience zero growth or shrank, as long as it weren't severe they would be fine. This is only important for Apple because iPhone is their core business at the moment, making up something silly like 75% of their revenue. But, even with that slowdown in sales they still made more money than most in the industry if not the most overall.
Things the article gets wrong: the iPad isn't dying, iPhones didn't cannibalize iPod sales and their financials actually ARE as good as they appear.
Firstly, saying that iPads are dying is akin to saying that PC's are dead or dying. Neither is true. Both have simply hit the same point in their life cycle. They are no longer hot and new. Tech isn't advancing along nearly as fast, there is less and less differentiation between generations or products and people are simply holding onto them longer before buying a new one. Households may also downsize the number they keep as old devices die. The vast majority of households who currently own a tablet, I think, would buy a new one if one of their died. And if it were an iPad they would more than likely buy another iPad. Put simply, nothing has truly supplanted tablets.
Next, iPhones DID NOT CANNIBALIZE iPod sales. Or at least insofar as any metric that matters. No one with a brain would call selling a device 7-10x more expensive "cannibalizing" sales. The iPad Mini cannibalized iPad sales because people a lot of people who would have bought a more expensive iPad otherwise instead bought the cheaper Mini. In other words, the iPad Mini decreased Apple's overall sales because sales of one device ate into greater potential sales from another.
Even if the iPhone had been cheaper than the iPod, on a purely technical level it STILL wouldn't have been cannibalism. They aren't the same category of product, there simply happens to be some overlap in functionality. So we neither have a situation which leads to lower sales nor a situation which leads to a cheaper version of a device significantly impacting sales of a more expensive device.
Oh, and to make my point even more solid. Even if SOME sales are diverted to a cheaper product, it isn't generally considered cannibalizing sales unless the total sales of the cheaper product aren't enough to offset the expected losses incurred on the more expensive product line.
Math session: Assume I would have expected to sell 1000 units of product X at $100 (expecting to make $100 000), then released product Y which had some overlapping features but cost only $50. If, instead I sold 900 units of product X and 100 units of Product Y, I would only have made $95000. That is an example of cannibalized sales (releasing a cheaper product resulted in lower than expected sales).
If, on the other hand, I had sold 1000 units of Product Y I would make $90000 off of Product X and $50000 off of Product Y for a total of $140 000 ($40000 more than I expected to earn off Product X alone). This latter situation is what Apple had hoped for with the iPad Mini, but the former is more what they got. If the latter situation had panned out, it wouldn't have been considered cannibalized sales.
It is generally accepted that if you release a cheaper product which competes with another of your own that some of the sales will go to the less expensive product. The hope is that the lower sales will bring in enough new sales to offset those losses.
So, it should be easy to see how Apple selling not just more iPhones than iPods but also selling them at several times the cost would NEVER be considered cannibalized sales.
The final point I had beef with was that the article tried to dismiss Apple's $200B+ cash by pointing out their liabilities and taxes they would face if they tried to bring it all back to the US. This is sadly misleading because the same is true of just about every single large company. And in that light, the $200B+ is as good a marker as any. Worth noting that they could pay back ALL of those liabilities and still have BILLIONS left over.
Worse, while they were quick to point out liabilities, the article was silent on non-cash assets. I'm sorry but using intangible liabilities while refusing to acknowledge less tangible assets is just cheap and/or idiotic. Do have any f***ing clue just how much real estate Apple owns? That is just ONE category of assets. They also have unsold product (probably valued in billions). They have AR assets, especially now that they launched their financing program. And they are still profitable, so, more than likely the gap between their assets and liabilities will continue to grow.
I'm not an Apple fan. The above is just reality. I presently own ZERO Apple products. I have no particular love of the company or their business model. On some level, I'd even love for the doom and gloom stories to have some merit. They don't.
The scariest thing for Apple is the slow down in iPhone sales. But again, don't read too much into it. Firstly, sales still grew. They just grew more slowly than ever before. Even if they experience zero growth or shrank, as long as it weren't severe they would be fine. This is only important for Apple because iPhone is their core business at the moment, making up something silly like 75% of their revenue. But, even with that slowdown in sales they still made more money than most in the industry if not the most overall.
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