Tuesday, May 2, 2017

iPhone 8 | Lefsetz Letter

There is no pent-up demand.

Tech is all about utility, not fashion. And there’s no breakthrough coming, other than a curved screen.

You needed a new phone when they went from 3G to LTE.

You needed a new phone when they increased the screen size.

You no longer need a new phone, especially since the carriers have stopped subsidizing the purchase, now that the true cost is evident.

People drive their cars ever-longer, but analysts believe consumers are all gonna fork over a thousand bucks for a fashion statement?

Not gonna happen. Otherwise, 3-D TV would have been a juggernaut and you’d be throwing away your present flat screen for one with 4k.

Not that Apple isn’t powerful.

While the fanboys cheered on ever more expensive and less unique products, all power was consolidated in the four horsemen, Apple, Google, Amazon and Facebook. That’s the story here, not the iPhone. With a beachhead in tech you can get ever-bigger. Hell, Facebook bought Instagram, never mind WhatsApp, and it looks like Snapchat is gonna struggle. Maybe not, but going it alone is nearly impossible these days, because of deep pockets and network effects.

Apple is a giant network. With people inured to their ecosystem. That’s the power of the company, not some me-too, gussied-up new phone. How much does it cost to switch? Hell, a friend of mine just got a new 7 Plus. Transferring photos was a nightmare, because he’s on WINDOWS! Yup, you want to be an all Mac all the time person, all Apple or all Android, not because one device is superior to another, but because you don’t want to waste your life trying to make your devices work, especially in a world where they all speak to each other and one in which there’s very little tech help.

So Apple will report its numbers tomorrow. They won’t be terrible and they won’t be great. It’s like a new Air Supply album, only that band can still tour decades on with the same songs and no one will want anything Apple sells today that far in the future.

And the stock went up and if you read the newspaper you’ll learn that the Cupertino company is a juggernaut.

But it’s not.

Let’s not focus on the stock split and what the increase in share price really is, let’s just say that that the only thing Apple has got going for it is its ecosystem. I just paid four grand for a laptop that’s good, with a ridiculous touch bar that no one who knows how to touch-type, who could afford a machine like this, would ever use. They admitted the Mac Pro was a failure and the Watch is about as important as Apple TV, which was overrun by also-rans.

So if you believe in Apple you’re sheerly looking at the numbers. That giant cash hoard. And if you were looking to the future you wouldn’t be worrying about that blip on the radar screen known as the iPhone 8, but what breakthrough is coming down the line, what will cement people’s loyalty to the Apple ecosystem and get them to spend more bucks on hardware in a world where you lay down ever less frequently. Your computer is good enough, your phone is good enough, your tablet is good enough, which is why iPad sales have tanked. Where’s the runway?

The internet is all about monopolies. When Apple was niche, even after Jobs came back, it was an interesting little company. It wasn’t until the iPod that revenue soared.

Amazon has got a monopoly on retail.

Google has got a monopoly on search.

Facebook has a near-monopoly on social networks.

What is Apple’s monopoly again?

P.S. It’s been five years, as David Bowie once sang, since Jobs’s death, name the breakthrough under Tim Cook.

P.P.S. Good is good enough, that’s why the world is on Android, this is Clayton Christensen 101, it’s why Windows 95 almost killed the Mac. Apple needs a great leap forward.

P.P.P.S. People will overspend for breakthrough items. Exhibit A, Tesla. Proving that people will buy a product from a company with no track record in that sphere.

P.P.P.P.S. Juggernauts are about belonging, can you say Beats headphones? A mediocre product Jimmy Iovine willed cool?

P.P.P.P.P.S. Services, schmervices. You’ll hear talk about this tomorrow, Apple Music, storage, but the number isn’t big enough to matter.

P.P.P.P.P.P.S. The cash hoard. They’re afraid to spend it, they don’t know what to buy, they’re afraid of the stock stalling. Really, Apple is little different from AT&T and Verizon, forces of nature that hit a wall when the market became saturated.

P.P.P.P.P.P.P.S. All of the above is long term. In the short term Apple is okay, but history tells us tech companies crater overnight. When will that be? In order to avoid this fate Apple must spend its cash hoard, to compete with Amazon, Facebook and Google. They must buy market share/influence, because based on Ping they sure don’t know how to invent anymore.

Finally… Of course the iPhone 8 will sell well at first, there are always early adopters who want to parade the latest device, but then what? Remember the Mac? Launched in 1984 to great fanfare, then it sold well for about a minute. Even the record business has learned it’s not about first week sales, but sustained listening.

[from http://ift.tt/2k9aO1A]

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