August 2012
Mon Tue Wed Thu Fri Sat Sun
« Jul   Sep »
 12345
6789101112
13141516171819
20212223242526
2728293031  

Month August 2012

How many Kindle Fires were sold?

Last September I argued against the potential of the Kindle Fire acting as a low end disruption in the tablet market.

Now that the first version of the product has reached is end of life, it’s time to review the discussion.

The first problem is finding out how well the product did. Amazon just released a statement that the Fire accounted for 22% of tablet sales in the US in the nine months it was available. The challenge becomes knowing how many total tablets were sold in the US during this time frame.

Fortunately we know the vast bulk of that total based on the Samsung v. Apple trial. Both Apple and Samsung submitted as evidence sales of the iPad and the Tab product lines in the US. The iPad added up to 16.14 million units (Q4’11 through Q2’12) and the Tab was 540k units. That makes the iPad and the Tab add up to about 16.7 million units. Assuming an additional 1 million units for the other (non-Kindle) total yields an estimate of 22.7 million tablet devices sold in the nine months ending June.

Applying the 22% claim to that total gives a Kindle sales total of 4.987 million. That’s awfully close to a round number of 5 million.

Since Amazon admitted that they ended production prior to launching a replacement (and presumably did so quite early in order to drain inventory,) then we can safely assume that the original production order was 5 million units.

Five million Kindle Fire units becomes the first reliable estimate of Kindle sales (based on Apple, Samsung and Amazon supplied information rather than guesses from analysts.)

Sponsor: Checkmark

Checkmark is the fastest way to create location- or time-based reminders for iPhone.

In just a few seconds you can create new reminders — it only takes 3 taps! You can watch this little movie we made to see it in action.

In only 3 taps you can remind yourself to:

  • Do laundry when you get home
  • Pick up milk next time you’re at the grocery store
  • Call your wife when you leave work
  • Remember to pick up a cake at 3 pm tomorrow
  • Make a haircut appointment on Tuesday at 10 am

You can even add a timer to location-based reminders so the alert goes off when you’re ready to get it done — like 15 minutes after you arrive home.

Checkmark is available in the App Store for $2.99.


Sponsorship by The Syndicate

Deus ex Machina

Apple Inc. v. Samsung Electronics Co., Ltd. makes for powerful courtroom drama. Calling it drama, however, is faint praise. It’s entertaining and thrilling but the effects are shallow and they don’t last.

I have been asked to comment on the trial that just concluded and I find it difficult. The problem for me is that I’ve seen too many of these dramas. From the United States v. Microsoft to NPD v. RIM and Nokia v. X, Y or Z to make sweeping conclusions. This frustrates the journalist.

The problem is that the process of litigation leads to little satisfaction for any of the parties. There is always the anticipation of catharsis, but it never comes. The expectation is understandable. We are led to believe that the law is decisive, the ultimate adjudicator. The reason it isn’t is that the system was established in a different era. A time when technological change was slow, or non-existent. As a result the institutions of law move so slowly that they are nearly futile in administering justice or righting wrongs.

Here are just a few problems I can cite without any research:

  1. Legal processes are glacial. They tend to last longer than the lives of the products being litigated. In the case of phones with shelf lives of six months to a year, the trials are unlikely to get underway before the accused infringer is already off the market.
  2. The law is ambiguous. IP law varies and is subject to interpretation. What one jury (or judge) finds unanimously infringing another will find non-infringing. This gets even more dramatic when comparing decisions across countries and legal systems and through appeals processes and the influence of political considerations.
  3. It’s a big world. Even though patents can be internationalized, the way they are enforced varies.
  4. The financial penalties or awards are arbitrary. As exposed during the Apple v. Samsung (US) trial, the impact of infringement can be calculated numerous ways, all hypothetical.
  5. It is incredibly complex. The technicalities are so onerous that they baffle judges and lawyers and legal experts, not to mention company management and lay jurors.
  6. It is costly. Only major companies or those backed by legal hit squads can participate in litigation. This means it sustains incumbents rather than facilitate entry. By necessity, entrants need to “route around IP.”

But the most damning thing about the litigation process is that it’s assumed to be decisive. Decisive in terms of altering the success (or failure) of companies. That rarely happens. Instead it adds friction to an existing, inevitable outcome. Sometimes it cripples the winner and rewards the loser.

Therefore strategists need to be careful to avoid placing their faith in this system. It’s a lottery at best, a time and money sink at worst. Considering the analogy to litigation as drama, I would re-phrase this caution as a warning not to treat litigation as Deus ex Machina. It’s not something that will get your business out of a jam or reward you for a violation, perceived or real.

Practically, these exercises in drama are used to signal. Signal to competitors, partners, customers and employees. In other words, they are used to create psychological effects. But we know that psychology can be effectively shaped with other messages. Signals that products themselves give (positioning), or that are shaped by communications via advertising. And these means for signaling are much more effective than using the legal system. So why not use traditional means of signaling?

This is the crutch of Deus ex Machina. That this artifice will help tell a story. That “a seemingly unsolvable problem is suddenly and abruptly solved with the contrived and unexpected intervention of some new event, character, ability, or object.”

It won’t.

Using Perspective

A 2 minute video introduction on how I use Perspective to create interactive presentations:

 

5by5 | The Critical Path #51: Product Portfolio Theory

We cover three topics:

  1. Safety and air travel: the bases of performance that don’t get rewarded
  2. The unintended consequences of litigation: US v. Microsoft and lessons learned for Apple v. Samsung
  3. Product Portfolio theory: is focus impossible for everyone but Apple?

5by5 | The Critical Path #51: Product Portfolio Theory.

Asymconf: The Introduction

The first of a series of padcasts capturing the Asymconf event is ready. This presentation includes a discussion on the formation of Amsterdam and the innovations that both made, and were made by, The Dutch.

It is the story of the Netherlands as seen through a disruptive lens.

The introductory remarks are captured with audio and video mixed with data and content as presented live.

The Story of Amsterdam is free.

View it using the latest version of Perspective on your iPad.

Think small

We can put all of our products on the table you’re sitting at. Those products together sell $40 billion per year. No other company can make that claim except perhaps an oil company.

We are the most focused company that I know of, or have read of, or have any knowledge of.

We say no to good ideas every day; we say no to great ideas; to keep the number of things we focus on small in number.

Tim Cook said this in February 2010 at the Goldman Sachs technology conference.

Since then the only product that has been added to the kitchen table has been the iPad. The sales level however, has increased in proportions shown in the chart below.

The revenues are shown with their contributory products and the costs of those products. The payments for costs of sales as well as R&D, SG&A and Taxes are then subtracted revealing the Net Income (in green). This is done for the second quarters of 2010, 2011 and 2012.

Since Tim Cook made the analogy, the  table holding the products has not gotten any bigger but the sales level has more than doubled while profits have nearly tripled.

In his talk he cited revenues of $40 billion (for the pervious year, 2009). In the last twelve months Apple’s revenues were $148 billion.

Tim Cook went on:

The Interlopers

Google, Microsoft and Apple all had reasonably good second quarters. Microsoft’s revenues grew by 4%, Google’s by about 22% and Apple by 23%. Apple’s growth was disappointing but the other companies weren’t. The revenues for the three companies are shown in the following charts:

 

It’s costly and has unpredictable consequences

“It’s costly and has unpredictable consequences. That makes it a very bad business model. I suppose both companies have agendas that are not visible in court and perhaps Apple is signaling to other parties, and perhaps Samsung is using it to raise its profile. It still seems that unintended consequences may arise and the result could be very bad for everybody,’’ said Horace Dediu, founder of equity-research firm Asymco, in an e-mail interview with The Korea Times.

The above was a quote from the article  Samsung can’t afford to lose Apple fight by Yoo-chul Kim from The Korea Times. Yoo-chul contacted me via email with a series of questions. I want to share all his questions and my answers as well:

Samsung wides market gap with Apple, according to research firms.
You think the gap will further be widen and please tell me why

As Samsung converts its phone portfolio to be all smartphones, it is very likely to reach much higher smartphone volumes. One year ago Samsung sold about 56 million feature phones. Last quarter it sold about 43 million. The smartphone portion increased from 20 million to 50 million. At the same time, Apple has maintained a growth in its smartphone business of about 100% on a yearly basis. I expect that to continue into 2013 as well. Therefore it’s possible that Samsung could sell 290 million smartphones in the next 12 months and Apple could sell about 200 million in the same time frame.

However, it’s important to understand that the companies compete on different bases. What I mean is that what generates a profit (i.e. payment by the consumer above what a product costs) is different for each company. Apple is a platform company that sells access to the iOS ecosystem across many other device types. Samsung sells consumer electronics with limited “network effects” but desirable features. In this view, the gap in device sales is “asymmetric” and not reflective of the actual competition which is between Google’s Android and Apple’s iOS as forms of access.

International Tablet of Mystery

One of the remarkable patterns associated with the iPad has been its growth rate. Looking at the ramp of the product relative to the iPhone and iPod touch reflects this sense of raised expectations: