Apple NewsFlow 2.0

Analysis: iPhone’s China “Disappointment” – Why Apple (AAPL) Need Not Worry

This article first appeared in MarketWatch.com.

After months of anticipation for the “official” iPhone release in China, the news last week was not so exciting: only 5,000 iPhones sold over the first weekend. Even the typically bullish, and usually correct, Gene Munster of Piper Jaffray called this “a disappointment” and lowered his China 2010 iPhone sales forecast from 1-2 million to 550,000.

 

What does this news really say about the prospects for iPhone growth in China and worldwide? Not much really, and here’s why:

 

1. Apple is already profiting in China from gray market iPhone sales. Forget “official” for the moment and check a few Apple message boards or forums. You’ll find posts from China techies who have owned unlocked gray market iPhones for years. Some have already sold their first generation iPhones and are now on to their second. In fact, the China Market Consulting Group estimates that 3.5 million Chinese already owned unlocked iPhones prior to last week’s launch.

 

This also disputes the contention that the high price of the entry-level iPhone 3GS in China (over $500 US) is a deterrent. In fact, gray market iPhones likely sold, and continue to sell, at prices close to or above the current official price.

 

2. Apple’s carrier limitations, for China and elsewhere, are temporary and will resolve themselves. China Unicom (NYSE:CHU), Apple’s wireless carrier there, and the Chinese authorities placed roadblocks in the way of smooth iPhone proliferation, among them disabling its WiFi capabilities as well as limiting the availability of certain apps. These decisions and other delays allowed the gray market to flourish with China Unicom the loser, but Apple still pocketing profits. In addition, most Chinese consumers prefer pay-as-you-go plans, not ongoing service contracts mandated by China Unicom’s iPhone.

 

China Unicom will eventually have to face market realities and offer pricing and plans in tune with their audience. Ultimately, its exclusive with Apple will expire and China Mobile (NYSE:CHL), the country’s largest carrier with 70% of the market and its most upscale market segments, will at some point offer the iPhone. In the meanwhile, the brand-conscious Chinese, for whom gray market shopping is a way of life, will still be able to buy one. If China Unicom sales remain tepid, expect some changes soon; Apple’s past actions show it moves quickly to adjust iPhone prices or polices to gain market share.

 

3. The iPhone is just getting started, with new models and technologies coming. Most of the above considerations will also vanish as new iPhone technologies and models are introduced. Last week’s most credible Apple rumor was anticipation of a “world iPhone” compatible with both GSM and CDMA systems. This clears the way for Verizon to offer the iPhone in the U.S., another huge sales potential for Apple. Knowing the pent-up iPhone demand for users unwilling to switch to AT&T here, imagine when similar roadblocks come down in other countries and you get a sense of how far the iPhone can go.

 

Plus there are only two iPhone models available now, the 3G (8GB only) and the 3GS in 16GB and 32GB capacities. This won’t be the case for long. Follow the iPod template and we could easily have as many as five iPhone models over the next two years.

 

Even more extraordinary is the fact that Apple has only 9% market share of the fast-growing worldwide smartphone market, but vastly more of its mindshare. That’s a lot of upside. So given this big picture, last week’s China “disappointment” was a short term blip in the long term growth prospects for one of the dominant technology products of the decade.

Full disclosure: Frank Cioffi is long AAPL stock.

Apple: Time to Drop Anti-PC Sarcasm from TV Ads

This article first appeared October 27, 2009 in ReadWriteWeb.

I always looked forward to seeing new "I'm a Mac - I'm a PC" ads on television. As a long-time Mac fan and as a marketing pro, I really admired these spots. They were smart and edgy, yet friendly. They were fun. They differentiated Macs from PCs. From a marketing perspective, they were appropriate to Apple's David fighting Microsoft's Goliath. And they worked really well, perhaps better than any mass-market technology product ads.

Now I wince every time I see a new one, hoping its smug attitude and condescending tone doesn't go too far.

I also relished how Apple's spots unhinged Microsoft, prompting the Goliath to produce its own, usually inept, TV ads that broke a major rule of marketing: never appear reactive to a smaller competitor. Microsoft's PC ads and the flurry of Ballmer-isms that accompanied them, all on the heels of the Windows Vista catastrophe, actually seemed to reinforce Apple's point.

But what has worked for Apple over the last three years doesn't seem to work as well now. Call it a psychographic observation, but the theme is getting tired, and the emotional impact of the ads has shifted. The superior, mocking tone of the ads sometimes goes too far, especially now as the new Windows 7 is being well received. Don't get me wrong. I'm a born-and-raised New Yorker. I like sarcasm. But for me, edgy has gone over the edge in some of these ads.

Do we Mac users tend to feel superior? Of course. We know we enjoy the world's most elegant operating system. But when a Mac evangelist like me starts feeling mildly apologetic about these spots and empathizing with the PC guy, something is amiss.

Does Apple's research show that prospective Mac customers, the intended audience, still like these ads? I assume so. But perhaps Microsoft's jab at Apple in its TV ads earlier this year (the one in which PC buyer Lauren says, "Maybe I'm not cool enough" to be a Mac person) was accurate, signaling that Apple's approach borders on arrogance, especially as it gains ever greater market share.

While Mac's market share still pales in comparison to Windows, Apple is no longer a David. With its omnipresent retail stores, the iconic iPod and the runaway popularity of the iPhone, Apple is a real and perceived leader. It has a market cap of over $170 billion and more cash than Cisco or Microsoft. Its TV ads, its recent mishandling of App Store developer issues and criticism from prominent tech journalists show that the Apple perception machine is showing cracks. The company is starting to appear arrogant.

To its credit, Apple's iPhone television ads are clean and crisp, relaying useful features and the latest apps. And not all of the Mac-PC ads are disdainful. The recent one with actor Robert Loggia as PC's trainer is fun. But the spot portraying a top-of-the-line PC model as a semi-sleazy sales guy? That's when I cringe. The new spots reacting to Windows 7? Not so bad, but they still rely too much on criticizing Microsoft. There's a difference between conveying product superiority and having a superior attitude.

For this Mac fan, these ads are past their peak. They were great fun for a while. But it's time to shift the tone or move on. Certainly Apple's creative teams can come up with a follow-up act that is informative, entertaining and edgy, without sounding smug. Otherwise, Apple runs the risk of (gasp!) emulating Microsoft.

Opinion: Apple Tablet Expectations Too High

This article originally appeared on TheStreet.com.

 

At Apple Investor News we track all the Apple newsflow, and it’s clear the media hype, fanboy blog rumors and analyst chatter about an impending Apple tablet is fast approaching the anticipation that preceded the iPhone. Once it is officially announced (early 2010?), the hype will then kick into the stratosphere.

 

I think the expectations for the iTablet are running too high, especially with investors who seem to be inferring a potential iPhone-like sales hit. Here’s why that will not happen.

 

Tablet PCs have been around for a decade and have never been more than a small niche seller for users with specialized needs. For that targeted audience, tablets are a laptop alternative, not a separate product category.

 

Herein lies the key question that will determine the potential success of this product: Will the iTablet be a product that a user would buy in addition to a laptop?

 

Like most users, I need a laptop either as my sole computer or as a second computer to do real work (writing, spreadsheets, presentations, etc.) on the road. I also need a smartphone for voice and email checks. For me, both products happen to be from Apple.

 

So if Apple produces a tablet product that turns out to be a winner, I would certainly buy it -- but only as a replacement for my laptop, not in addition to it.

 

This assumes it has full Mac OS functionality and at least a 10-inch screen. But if the tablet turns out to be just a larger iPod Touch or iPhone, it would not be a laptop alternative and therefore not a viable purchase for me and, I suspect, for many others.

 

So there’s Apple’s challenge: make a Tablet Mac and you risk cannabilizing existing Mac laptop sales; make a larger screen iPhone or Touch, and you’re asking people to buy a third device that would duplicate, albeit in grander fashion, the functionality they already have in their existing, but must-have, laptop and iPhone (or Touch).

 

Then there’s the potential that this product will have built-in 3G service, which creates another hurdle: asking people, who probably already own or will soon buy an iPhone, to pay additional wireless service fees. This is not something I want or need.

 

And what if, as the latest rumors indicate, the iTablet is designed as an e-book reader (an alternative to the Amazon Kindle and others), but with the added functions of web browsing, email and the array of apps available though the iTunes Store? Could Apple break open this exciting and growing market and do for books what iPod-iTunes did for music? If anyone can accomplish this, it’s Apple. But I don’t think lightning will strike twice. Once again, this could be a great product, but not a must-have product.

 

(FYI: Electronics analyst firm iSuppli estimates 3.5 million e-readers will be sold worldwide in 2009.)

 

Apple enjoys an enormous amount of press, blog and analyst coverage. This is a blessing any company would envy. But sometimes it can be a curse, when expectations run too high, and each product announcement is expected to include an iPod- or iPhone-like hit. Such could be the case with the Apple Tablet.

 

So my prediction: Apple will indeed create a fabulous tablet device that will sell quite well. It will provide a strong incremental boost to Apple’s existing portable line, not so shabby when you consider the Mac’s growing market share and popularity of the MacBook and MacBook Pro line. But it will not be a mega-seller like the iPhone or iPod.

 

Whenever this “disappointing” news becomes apparent to the market, use it as a buying opportunity for a stock that, regardless of its tablet sales, is firing on all cylinders for its core product categories.

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Full disclosure: Frank Cioffi is long on AAPL.

One Marketer’s View: Microsoft vs. Apple TV Ads

By now, you’ve all seen Microsoft’s “I’m just not cool enough to be a Mac” television spot. (While I’m Mac-biased) I think it is one of the least effective TV ads in recent memory. From a marketer’s point-of-view, here’s why:

1. It is reactionary to a competitor that Microsoft dwarfs. Apple’s TV ads work because Mac is the underdog to Windows. Doing the opposite shows desperation and actually heightens the Apple brand. “Lauren” even visits the Apple Store first.

2. Promoting solely on price (Lauren can’t find a 17” Mac laptop for under $1000, but finds a Windows model for $699) can be a trap over the long haul. Is “hey, we’re cheaper” the only positive Microsoft can tout?

3. It further commoditizes the PC. That’s not good for anyone in the PC business, except for, maybe, Apple!  Promoting value usually wins out. There’s no hint of the value (features, benefit) of a Windows PC in this ad.

Apple has maintained its price leverage in this recession by building a premium image and focusing on the value of its products. This is what’s driving Microsoft CEO Steve Ballmer crazy. And his response is not going down well. At a recent McGraw-Hill Media Summit, Ballmer said of Apple products, “No one’s going to pay $500 more for a logo.” One reporter noted this statement resulted in “audience gasps.”

However you look at it, the last three major TV ads coming from Microsoft (Seinfeld, Reconsider Vista, and this one) have all been reactionary, either to Apple or to the weak consumer and business response to Vista.

Did Ballmer just force these down the throats of the ad agency? They break too many marketing rules. One wonders what the Microsoft retail store will look like. On a positive note, the ads at least are watchable and Lauren is cute.

I must also say that the “not cool enough” comment resonated with me. The Mac TV ads, like some Mac owners, can tend to be a bit smug, sometimes a lot. I get concerned this could backfire for Apple.  

(full disclosure: Cioffi owns AAPL shares)

Retrospective: Stewart vs. Cramer - Artful Cheap Shot

Opinion from Frank Cioffi, Apple Investor News:

I’m a big fan of Jon Stewart. I often learn more from “The Daily Show” than from network newscasts. But his artful, well researched skewering of Jim Cramer this week was still a cheap shot, an easy way to blow off populist steam about the financial crisis.

While I agree with Stewart’s premise that most major financial media failed us, making Cramer the poster boy for the crisis, in essence associating him with the liars and thieves, went too far. It’s also ironic to me that Stewart would attack a financial journalist who consistently provides information that attempts to level the playing field between the institutional financial complex and the average investor.

Jim Cramer saw this crisis looming, and called it before almost anyone else in his famous “rant” months before the October 2007 market peak. He also suggested some investors exit the market on “The Today Show” when the Dow was around 10,500. That advice saved a lot of people almost 4,000 points.

Cramer is an easy target because of his visibility, his bombastic style and because he makes many market and stock recommendations, some of them wrong. CNBC is easy game too. You can pull 20/20-hindsight video clips all day and make a good case against the network.

Of course, it’s not hard to see that most of the large financial media are as much a part of the problem as the financial institutions themselves. As Cramer admitted, “we can do a lot better.”

Yet while the highly publicized “Stewart vs. Cramer” episode will ultimately compel better reporting, I fear it may also further cement black-and-white populist thinking on the financial meltdown. This is a highly complex crisis requiring us to make finer shades-of-grey distinctions about what happened, how to fix it, and how to move forward productively.

One of the lessons of this crisis is the need to distinguish between real content and window dressing. This applies to journalism as well as earnings reports. While I see the clowning Jim Cramer does to be entertaining, I also see his knowledge, perspective and willingness to call it as he sees it. To me, he’ll always be the guy who “got it” a year before Ben Bernanke did.

Similarly, I hope more investors will be able to see beyond the reserved, steady and credible demeanor of the many mainstream financial media which let us down. During the height of the crisis those media maintained their demeanor, when maybe what we really needed was a guy screaming at us.

AAPL & Steve Jobs: Has Sentiment Shifted?

Reports on Steve Jobs’ health crowded the media last month and culminated in Apple’s announcement of  his six-month medical leave. The underlying theme of most reports: Apple, Inc. will be sunk if Steve leaves for good. What a difference a month makes.

A look at Apple Investor News’ “Steve Jobs” news aggregator shows a shift in media sentiment, with more stories focused on COO Tim Cook’s qualifications (he took over during Jobs’ 2004 cancer surgery leave) and even a few “Apple can do well without him” stories. While some analysts still complain it doesn’t have a solid succession plan, it’s clear to me Apple has a deep bench in its executive suite.

So has investor sentiment on the Steve issue shifted? I think so. Investors love certainty and (after Apple reversed itself several times) the leave announcement at least offered some near-term clarity and a pause in the rumor mill. I also think many investors are now anticipating his leave could be a permanent one. The blog post that put me in that camp was from Cult of Mac’s Leander Kahney, who wrote the best-seller “Inside Steve’s Brain.” Kahney speculates that Steve will not return and provides some compelling perspective as to why. Still, I hope he’s wrong. Get well, Steve.

Steve Jobs & Macworld: A PR Veteran’s Prediction

Now that we’ve had a few days and, hopefully, a fresh New Year’s perspective on the latest Steve Jobs media scare and conjecture-fest, let’s assess what really happened and get one high-tech PR expert’s prediction (that would be mine) on what it could mean this week.

Last week’s Steve Jobs newsflow (see Apple Investor News Steve Jobs news category) showed a pattern: several credible journalists with inroads into Apple corporate are telling us Steve’s health is not declining. This group includes CNBC’s Jim Goldman, who always gets the post-new product announcement sitdown TV interview with Jobs, Reuters, and Barron’s Eric Savitz. The WSJ’s Kara Swisher chimed in too, reminding us this is all getting “flat-out macabre.”

So it’s clear Apple is doing it’s best to indirectly dispel the “Steve’s health is declining fast” Gizmodo report without violating its stated policy that Steve’s health is a private matter.

Of course, blogger Robert Scoble took the media prize with his much-reported Tuesday Friendfeed post (“I'm in Palo Alto. Just had yogurt at shop that Steve Jobs eats at frequently. They said he was in a couple of days ago and is in great health”). This reportage was both the oddest and perhaps the most grounded piece of information to hit us all week.

But it was a Reuters report that sealed the deal for me by managing to get an Apple spokesperson to deftly dance around its policy with the words: "...if ever Steve or the board of directors decided that he was no longer capable of doing his job as CEO of Apple, I'm sure they will let you know." 

Now an Apple spokesperson is indeed on the record with a promise to alert the media. If he or she somehow misspoke and Steve is indeed ill, this will have to be clarified shortly or Apple faces SEC scrutiny and media mistrust. If not, with each passing day we can be more assured that Gizmodo’s report is indeed wrong.

Which gets to my prediction: I think we are going to get further clarification on this topic in the coming week, probably to confirm Steve is doing OK. I wouldn’t be surprised if Steve made a remote appearance at Macworld, perhaps showing up via a video iChat during Phil Schiller’s Tuesday keynote. If I was steering Apple’s PR, that’s what I’d do. I’d have him there on webcam bantering with Phil and enjoying some yogurt.

Can One Site Aggregate ALL Apple User News?

Well, we're certainly going to give it a try.  (and you can help...more on that later)

Today we introduce Apple Enthusiast, designed to aggregate all the Apple user news in one, always-updating website. Combined with Apple Investor News, which aggregates all Apple [AAPL] business and financial news, we have the entire Apple universe covered.

Whether it’s user news about the Mac, iPods, iPhones or software, hardware, user tips, hacks, accessories, games, or the best deals for Apple-related products, we’ll have it here. Plus audio and video podcasts.

Like Apple Investor News, Apple Enthusiast sorts news headlines into useful and relevant categories spread over three main site pages, updated continually. Categories include Apple Mac + Mac OS, Apple iPod, Apple iPhone, Apple Rumors, Tips + Tricks, Apple Games, Apple in Living Room, Deals + Sales, Steve Jobs, Apple Developers and 12 other categories. Apple Enthusiast also aggregates video into some of the categories.

What intrigues me most about AE us how different the newsflow is from AIN!  There's some overlap between the two sites, but not as much as I expected. This is testament to the extraordinary amount and diversity of Apple-related news. And to our filters.

You can help make us better by suggesting news sources or new categories. Just contact us here. Enjoy.

MacWorld 2008: What! No Flying Car?

There are two interesting news cycles converging right now, resulting in a sale on AAPL  stock if you’re a long-term investor.

First there’s the overall market and financial newsflow that’s getting increasingly negative and knocking down certain stock sectors for no reason. Sure, we may be heading into recession, but should Intel stock (INTC) really have lost 35 percent of its value in the last four weeks? Probably not. This type of prevailing negative market sentiment is always a good time for bargain hunting.

Then there’s the Apple newsflow. It seems a lot of media were expecting a MacWorld 2008 announcement to match the WHAM of last year’s iPhone announcement. Wednesday’s San Francisco Chronicle actually had an editorial chastising Apple for not “knocking it out of the park” this year at MacWorld. How naïve. iPhone is a game changer. One every five years is amazing enough. Even a few analysts who should know better had unreasonable MacWorld expectations; check the Apple Investor News “AAPL Analyst” single category view for proof.

Then there was the MacWorld announcement that Apple sold 4 million iPhones in its first 200 days, garnering close to 20 percent of the U.S. smartphone market in the process. And this is met with a 10 percent price decline in two days!  I agree with CNBC’s Jim Goldman that both the Intel and Apple declines were overdone and that Apple remains “a long-term island in a sea of short-term waves of uncertainty.”

Of course, it’s natural for such a well-loved company to get pounced on by many of the same media that put it on its pedestal. But a decline with no fundamental news as the cause tells me this is a buying opportunity, courtesy of two converging newsflows. 

Apple Media Coverage Moves To The Mac

With so much focus on the iPhone and the iPod this year, media coverage on Apple’s core business -- the Mac -- has taken a back seat. Even analyst comments have considered the Mac an afterthought. But that’s changing.

Things started a week ago when American Technology analyst Shaw Wu led his Apple comments with projections of stronger-than-expected back-to-school Mac sales. Then Scott Moritz of thestreet.com had an exclusive story on booming Mac sales this quarter. Citigroup followed this week, also leading their comments with the Mac.

On Monday’s “Mad Money,” Jim Cramer focused his positive Apple comments on the iMac, saying the share price of Apple is “undervalued.” He set a $175 target. His Apple comments have been trending more towards the Mac in the last several weeks.

Looking ahead, the Mac will also likely take the lead in Apple’s third quarter earnings report, followed by the release of Mac OS X Leopard (10.5) late in October.

This will be the Mac’s most visible OS release and, in contrast to the lackluster, better-late-than-never release of Microsoft Vista, will bring the Mac to the media forefront. Can’t wait to see what Apple will do with the Mac and PC guys television commercials around Leopard.

Stay tuned for what could be Apple’s biggest Mac attack ever. Oh, and then there’s the holidays.