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A Dollar a Day

There are 80 million Mac users. The last 12 months saw sales of 18 million Macs.

As of the end of June there were 886,580,000 iOS devices sold. As of today the total is well over 900 million. One billion sold will happen well before this year is out. Estimates of current iOS users vary but they are probably at least 500 million and could be 600 million.

Screen Shot 2014-07-25 at 7-25-2.44.06 PM

Apple claims 800 million iTunes accounts.

Therefore, in terms of revenues:

  • Mac User = $289/yr
  • iOS User = $262/yr
  • iTunes User = $25/yr[1]

Adding iTunes usage to either Mac or iOS yields

  • One Mac owner = $323/yr or 89c/day
  • One iOS device owner = $287/yr or 79c/day[2]

This should make valuing Apple easy.

80 million Mac Users and 500 million iOS users add up to about $169.3 billion in sales per year. If we assume that the number of Mac users grows to 90 million  and 600 million for iOS then next year Apple should get another $200 billion from its population of users.

So over the next 30 months Apple sales should easily be higher than its current enterprise value.[3]

This would be the forward price to sales ratio of about 2.5. Each sale yields a certain net profit, which for Apple is on average 21%. Multiplying 2.5 by (1/.21) gives 12 which is about the P/E ex cash.

This exercise summarizes Apple’s valuation nicely: Apple is expected to keep its current customers for about a decade and then disappear.

Notes:
  1. Measured from billings []
  2. This conforms well to the rule of thumb that, after taxes and accessories/services, one Apple device is worth about $1/day []
  3. Enterprise Value = Market Capitalization – Cash + Debt = $585 billion – $164.5 billion + $29 billion = $449.5 billion []
  • os32za

    One Mac owner = $314/yr

  • PeterBCunha

    Great post confirming the bull case on APPLs conservative share price

  • sspam

    typo:If we assume that the number of Mac users grows to 90 million and 600 million for iOS then next year Apple should get another $200 million from its population of users.

    • claimchowder

      Should read: “then Apple should get to $201.3 billion from its population of users”.

  • Sirdonic

    Doesn’t AAPLs return of cash via dividend affect this calculation? The market cap isn’t going to grow the same way when some of those “a dollar per days” are returned to shareholders.

    • Sacto_Joe

      Good point. Also, some of that cash is swelling the E part of P/E by removing shares, further compressing the P/E ratio. (In fact. Google Finance’s EPS, presently at $6.19, is improperly calculated. The correct number is about $6.43. Google failed to take into account the change in share count and the need to recalculate year over year EPS by the new share count.)

      But Horace’s larger point, that Mr. Market is not calculating in any growth in Apple until after that growth had materialized, still stands. And with continued growth now clearly on the horizon, that indicates a return to quarterly periods of P/E compression and re-inflation as the market continually underestimates Apple’s growth capacity.

      • highr0llerr

        ” Google Finance’s EPS for AAPL, presently at $6.19, is improperly calculated.”

        I’m not an accountant, but I believe that this is a standard accounting method of calculating EPS. EPS is not recalculated every quarter for previous quarters when the number of shares changes. In fact, when it’s calculated for a just concluded quarter, they don’t use the number of shares at the end of the quarter, but rather the average count of shares during the quarter. So, if the next year Apple’s earnings are flat and the share count stays still, it should still get a bump in EPS.

      • Sacto_Joe

        If that’s the convention, then it’s pretty dumb, IMHO. It clearly isn’t capable of showing factual information about Apple’s EPS growth. I grant you, Apple is rather atypical in the size of the buybacks, but that’s rather the point: The actual effect of the massive buybacks is being masked by this convention.

        I agree that it will eventually show up, but when? When Apple finally ends its buyback program in 2016, a year and half from now?

        There’s a huge gap between a P/E of 15.72 and a P/E of 15.14, and it shows every likelihood of growing larger.

        BTW, if a company is adding shares, then it makes sense that this would create a gap in the other direction, and mask a shrinking EPS. Food for thought….

      • highr0llerr

        Accounting rules can be weird like that sometimes. That’s why some companies choose to report both, GAAP and non-GAAP numbers. I’m not advocating these rules, but in all likelihood, large institutional investors are well aware of them.

        I think, a more important factor driving Apple’s shares is expectations. The market is frantically trying to understand what will happen to Apple a few years down the road. That’s why the shares have become hostage to huge and irrational sentiment swings. Remember last year, when Apple’s P/E dipped below 10 for some time, and its P/E ex-cash was even more ridiculous. It was when the company was experiencing GM contractions and many were afraid it was the beginning of a trend. It was perceived as a company with dropping margins, contracting market share, and tepid sales growth. Some even speculated it was following the path of BlackBerry. When the margins stabilized/improved, and sales came in above expectations, the market started valuing the company at a 60% premium, compared to last year, even though from Apple’s point of view nothing has changed in its business. I think, at the moment, more people are convinced that Apple is here to stay.
        Apple is a unique company in many ways and that’s where its strengths are, but herein also lies its weakness and it has to do with how it’s perceived by the outside world. It’s harder to understand and predict, because there are no precedents, no other companies in history like Apple. That’s why, I think, the decision by the management to launch a huge buyback program is very important, not just because it reduces the number of shares, but it also signals the market that the management is very confident in the company’s future.

      • charly

        It is not weird. Profit is also only calculated ones per year and what to do with share buybacks who will later be re-issued for dividend or employee stock options.

      • highr0llerr

        Sorry, I’m not sure what you meant here.

  • Walt French

    Well, at least I expect to enjoy my computers for ten years. I could maybe die happy rather than settle for a LumiaFire 9000 running Android BlackBerry.

    Or maybe, in ten years Cupertino will have finally gotten the creative spark to have made a 5.3″ iWatchTV, which Wall Street hasn’t priced in because it’s too radical for the current plodders who haven’t figured out how to promote “moonshots” instead of conducting business.

    • SockRolid

      Leave the freaky techno-gimmick “moonshots” to Samsung.
      Apple should stay where they are: a year ahead of everyone else.
      They learned, from their Newton experience, not to get too far ahead.

  • SockRolid

    Glad to see iPod touch sales still gradually increasing. Just imagine if the rumored 5.5″ iPhone turns out to be an “iPod touch mega.”

  • Harmonica2

    It’s possible that Apple’s massive market cap itself is the problem. Said another way, there may not be enough money invested in equities (properly diversified) to push Apple much higher. Short of splitting up the company, Apple’s stock buybacks would be the only solution.

    • highr0llerr

      It doesn’t necessarily take a lot of capital to value a company properly. E.g. when you see a gap of 10% the day following an earnings announcement, it wasn’t an inflow of capital that made that happen. The market just started valuing the company differently based on its fundamentals and the stock then found a new equilibrium based on the amount of buying and selling that took place following the jump. Obviously, the size of a company and the amount of float are important factors, but they aren’t the only ones that matter.

      • Harmonica2

        I agree, but large institutional investors who hold the stock for long periods create a foundation for the price. For Apple, that support seems to be far below the current price, which leaves the door open for high volatility disassociated with fundamentals.

      • Sacto_Joe

        Per Google Finance, GOOGL is 83% institution owned, while AAPL is only 62% institution owned. Of course, that’s not strictly true, since around 30% of GOOGL is owned by Sergey Brin and Larry Page, and their ownership is in Class B stock with ten times the voting rights of Class A stock.

        In Apple’s case, many of the large institutional investors dumped a lot of their shares starting two years back, thus precipitating the huge drop in AAPL’s stock price. They have yet to make a concerted effort to buy back in.

        Apple’s market cap, while large, is actually being continually whittled down by the stock buybacks. And its market cap, as measured by its P/E ratio, is actually quite moderate compared to its earnings. And that doesn’t even take into account Apple’s huge cash reserves.

        The bottom line is the market is selling Apple back its stock at fire sale prices, not because it can’t finance Apple’s market cap, but because it is not convinced Apple will continue to maintain its earnings. That’s the market’s loss and the long term AAPL stockholders’ gain.

      • Harmonica2

        You might be right, Sacto_Joe, and I certainly used to think that as well. But I must point out that you are assuming that institutional investors are not buying more Apple stock because they miscalculate the company’s value. I am proposing that institutional investors cannot buy more Apple stock due to diversification requirements. This depresses the stock’s price, and the explanations for this mis-pricing are apocraphal.

      • charly

        Unlikely to be true otherwise the oil companies would split up

      • highr0llerr

        No, oil companies wouldn’t split up based on that. That’d be a pretty stupid thing to do, just to avoid being underweight due to diversification requirements of institutional investors. Do you realize the cost involved in doing something like that? Not to mention, other implications. Nonsense.

    • chano1

      Disagree.
      Many of Apple’s recent actions will do much to bring the investors in.
      Apple may enter the DJI, which will also mobilise certain DJI-centric funds.
      At sub-$100 per share, even the multitudes of minnow investors will rush in for a nibble.

  • Gene Grush

    The future is very bright for Apple. Sorry for the long winded post. The following is something I wrote back in Feb. Some of which is coming true.

    Apple’s business plan as I see it.

    Apple is punished by Wall Street in it’s valuation of the company. These same analyst’s reward Google with a very high P/E ratio in the 30s, a company that is a one trick pony dependent on internet advertising. They continue to punish Apple which has transformed the desktop/laptop computer, music, mobile phone, and the mobile tablet industry. The analyst believe that Apple’s margins are either going to start dropping and or their revenue will start dropping. They don’t see any prospects for growth from the company. They don’t understand Apple’s business plan and philosophy even though Tim Cook is constantly re-explaining their culture for building great products and their vertical integration.

    Even though the analyst don’t believe it, Apple’s is poised to dominate the electronics industry for many years. The key to this domination is derived from four key company attributes. They are Apple’s satisfaction rate, ecosystem, design excellence, and their vertical integration. These key factors are somewhat dependent on each other but can be discussed on their own merits.

    The satisfaction rate is vital to insure that all your existing customers will return and buy your future products. Since Apple strives to design products that are high quality, these products will last much longer then their competition and thereby affect the sell through market share in a negative way. The analyst see this as a negative, but Apple views this as in their best interest for the long road. This is their genius and why companies such as Apple stay on top for many years. The Mac computer line has demonstrated this approach since Steve Jobs returned to the company. They don’t build in the low end, because they don’t build under performing computers. They want their customers to have a high satisfaction rate when using their computers. This has resulted in Apple’s market share to gradually go from below 2% in the US to greater than 13% in the last holiday quarter. World wide they are nearing 6%. On line OS usage is measured above 7.5% world wide, which indicates that Apple users hold on to their computers longer.

    This increase in market share should increase for many years as people continue to realize the cost of ownership may be lower on the Apple side because of the longevity of their machines and the satisfaction rate continues to be high. Even with a shrinking market, increase market share could eventually reach 15-20% worldwide which could result in computer sales greater than 10,000,000 for a holiday quarter. This may take another decade, but this would be excellent growth for a product line that many view as decaying. As speciality software vendors start converting to the Mac OS because Apple’s installed base is too high to ignore, this should be a catalyst for growth in the enterprise market.

    This same approach has been used for both IPhones and IPads, but analyst are miss reading the data and view that Apple is losing ground because they are only looking at sell through market share. Tim Cook repeatedly saids that Apple has a greater than 90% retention rate for these devices. Same as the Mac. If you could access the data, you would probably see that the throw away rate for existing Apple mobile devices is lower than other manufactures. They last longer. Remember, the trade ins are resold and thereby have negative affect on Apple sales, but they accept this as part of the cost of doing business if you build great products.

    Eventually, Apple’s market share will go up in mobile computing once the market saturates and stabilizes. This may take five or more years, but will happen. In the mean time, Apple sell through numbers for their mobile devices will continue to increase, but not at the rate that analyst want to see. Apple just had a record sell rate for IPhones and IPads in the December quarter and the analyst were still not satisfied. Remember that Apple has instant access to all their ICloud accounts and knows how many of their devices are still in service based on this data. They know how well they are doing in this market.

    Apple’s ecosystem is one of the key factors that drive their high satisfaction rate and retention rate. Anyone that has lost an iPhone to an accident and sees the Apple store restore their phone’s software and settings from an ICloud backup understands the importance of this ECO system. Yes other manufacturers may supply this function, but the totality of Apple’s Eco system functions is what drives customers to re-purchase apple devices. Yes to some degree pictures, movies, songs, backups, on-line office suite access, application downloads/updates, and backups can be match by other manufactures, but the effort to move to a different system would only occur if their is a significant cost advantage or a more impressive ECO system. This is were other manufacturers fall short. The cost advantage only occurs on devices that have less functional capability. Once a customer gets use to all the functions available to them, they are very unlikely to switch to a different company.

    If any where Apple is falling short, it would be in the adoption of their ECO system and the usage of all the possible functions that are available to a customer. For example, are 100 percent of customers using the time machine function on their computer. Probably not. These are opportunities lost. Especially if a customer lost a hard drive and all their data. An event like this, saved by time machine is probably a customer you retain for life.

    Apple knows this and you should expect that they will continue to improve their Eco system to minimize the current deficiencies and add new functions. A control panel for the Eco system to manage a customer’s apple devices and show a customer lost opportunities is something to expect. This is already done to some degree via system preferences, mobile device settings, and iCloud web access, but there is a large room for improvement. The objective is for customers to be fully aware of functions that are underutilized and to control all their devices from a single portal. Since ICloud only provides 5 Gbyte of on-line storage, a control panel that shows all the devices usage and the capability to optimize this usage would be a welcome increase in capability. The mobile devices provide limited capability in this area and the mac none. Also expect that the free 5 Gbyte amount to move upward.

    Expect Apple to continually to improve their Eco system for many years. This is key to insure that Apple customers continual to re-purchase Apple products, especially if there is a perceive premium cost for these products.

    Design excellence by itself doesn’t insure growth or survival, but couple this with other key factors and the retention rate will be maintained above 90%. When you buy an Apple product you can expect it to last a long time on average and to deliver a superior user experience. It is this superior experience that is key for Apple. No other company has been as successful as Apple in maintaining this experience across all product lines. Considering that computing devices in general are complicated devices, Apple has been extremely successful in minimizing this complication for their customers. Although there have been some mis-steps along the way, every operating system and software upgrade has eventually been an improvement to the user experience. Even Maps and IWorks has been improved to the extent where users started appreciating the upgrades and ease of use.

    Vertical engineering is the last of the key factors and may be the hardest to understand. Didn’t Apple have vertical engineering on the original Mac and didn’t it fall behind the IBM clones. To some degree yes, but it didn’t control the CPU and as such had to use specialize devices unique to it’s architecture which cost more. It could not lower the cost of manufacturing level low enough to compete fully with IBM clones. As such, they lost out in the market share and volume level. It is possible that the lack of control on the CPU may have been the biggest factor in losing ground to the IBM clones. They could not control performance and therefore set itself apart from the Clones.

    Apple first cut it’s teeth on vertical engineering with the IPod from a hardware standpoint. They learned how to manufacture and design a device that either was manufactured in house or that they had full control of the supply train by buying manufacturing equipment for their suppliers. They eventually developed the capability for control of the CPU when the IPhone came along. This enables them to stay ahead of the competition both in cost and performance. This is very important since Apple wants higher margins for selling their products. The combination of lower cost through vertical engineering and sheer numbers of products sold and their Eco system is what gives them the capability of maintaining their goal of profit margins in the 37% range. The competition is not undercutting Apple on cost for mobile devices.

    Apple still doesn’t control the CPU for the Mac, but switching to the Intel CPU has allowed Apple to match on CPU performance and cost. They have managed to maximize their vertical engineer on the rest of the Mac computer. Their casing is second to none. If they achieve a higher market percentage and achieve a significant performance advantage via their mobile computing chips, they may revisit their CPU usage for their Mac line of computers. They are learning a lot via their in-house chip design and production. Intel should be worried.

    Software vertical engineering across product lines is also very important. Maybe this should be called horizontal engineering. Either way, they achieve the same look and feel across all their product lines. This is probably achieved because it appears that the project managers for a given product line such as the IPhone doesn’t have dictatorial control over the software for this product. A centralize software group is responsible for delivering the user interface. There is very good cross communication across the different software programs that Apple delivers on. There is probably an excellent set of standards for software that Apple maintains. For a large bureaucracy this is amazing.

    Vertical engineering achieves lower manufacturing cost, higher performance, and commonality across the user interface and is instrumental in Apple’s future growth and dominance.

    Also the analyst want another home run like the IPhone or the IPad. When the IPhone hit the market, the IPad was the next obvious next step. There doesn’t appear to be another major disrupting product on the horizon. This doesn’t mean there aren’t great opportunities for new products for Apple. However, some of these opportunities may not lead to a new product category as it is to drive existing product sales.

    Apple’s business philosophy is to make it’s money through hardware sales. This gives the appearance of not nickel and diming customers and puts added pressure on software houses like Microsoft which overcharge for their software.

    Apple’s future opportunities as a minimum are in televisions, cars, home automation, purchasing, IBeacons and wearable devices.

    For televisions, the analyst all expect Apple to start selling televisions. This may happen, but only if Apple can compete on cost while maintaining their margins, improve performance via 4K pictures, and or greatly improving the user interface. Remember that Apple doesn’t compete in monitors and only sells a few monitors at premium price. They were not disruptive in monitors and as such didn’t enter the market in a large scale. In the end, the current Apple TV may be their major thrust into the television market. This device is starting to be very disrupted. All your iTunes content is delivered to your television via your computer or the ICloud. Expect causal gaming and on-line apps to be next. Apple will make their money either via both Itunes and hardware sales. People wanting to enter the Apple Itunes Eco system will be buying apple computing devices. Apple will strive to not make money via sale of Apple TV devices. These devices will remain inexpensive. If Apple is successful in forcing the entertainment companies to switch to a-la-carte pricing for streaming stations, they will be successful in providing the customer what they want. A superior television experience. Either way, this will drive both their hardware sales and the size of their Itunes store which is starting to make a lot of money.

    Apple seems to be entering the Car market in a big way. Again it’s probably to drive sales of iPhones and IPads. It also probably a preemptive strike against other manufacturers to not get a leg up. There reasoning centers around voice control, Itunes content, navigation, and apps. All of these, the car manufacturers are failing at and everyone with IPhones is carrying this in their pocket. Why should car customers pay 2-5 thousand extra for these functions in a car when they have it in their pocket. The automobile companies will work with Apple to avoid losing customers to other car manufacturers that do support Apple devices. If Apple delivers a superior user interface, it will drive sales of IPhones and IPads. They may also make some money charging the auto companies for this service.

    Home automation is another area that may drive sales of Mac computers and IPads and to a lesser extent IPhones. Apple needs to do this more from a preemptive strike against Microsoft and Google. With the reduction in cost of automation components using wireless controls, people will want to control their thermostats, monitor their house via cameras, security monitoring, automated door locks, and light control. This is a natural extension of their Ilife suite to provide an automation software package that makes this easy. They may enter the component business to some degree, but more so on the management software side. This is an expansion of their Eco system and will help maintain their customer base while bringing in new customers. The software will probably be free.

    For purchasing, Apple’s fingerprint system potential may be boundless. Everyone, except thieves, want elimination of passwords and fully reliable purchase systems that can’t be compromised. Apple’s fingerprint technology may be the pathway to do this. In addition to driving sales of their existing devices, they may figure a way to make money via the purchase side. Especially since they have so many iTunes accounts and may be able to create a purchase system off of these accounts.

    IBeacons is Apple’s micro location sensors that allow companies to deliver services that we have only seen in sci-fi movies. Imagine going into a supermarket and seeing a map of all the isles and as you walk through the store your apple device shows you what is on each isle as you walk down the isle because the store knows what isle you are on. Initially we may not like some of the services because they are too intrusive, but eventually a balance will be reached and services we can’t imagine today will change our experiences for the better.

    Wearable devices for Apple will probably start with the IWatch which appears more to be a biomedical device rather than a time device. As people age, there is more and more a need for a constant monitoring device that can tell you when something is wrong. If Apple is very successful in the sensor area for monitoring both heart and blood performance, these devices may be very hard to keep on the shelf. This may make a lot of money for Apple. This may even lead Apple to make other biomedical devices that both challenge the current industry veterans, such as General Electric, and lead to lower cost for medical test.

    In summary, there is plenty of growth in Apple’s current product categories in addition to new opportunities that they are targeting. Apple is a company that is prime for more growth. Probably not at the levels that analyst want, but for a company as large as Apple, 5% to 10% growth per year would be remarkable. Couple this with their P/E in the low teens and you have an excellent and reliable investment opportunity. With buy backs, their stock could rise at an annual rate of 15% or greater.

  • obarthelemy

    Apple are in the middle of a difficult transition. They used to embody ease of use and social value. Performance, features, durability and price/value were never really their thing. They know the ease of use part is going away, their standing in the other areas is getting even weaker, so the only thing they have left to fight on is social value (hence Beats, the Burberry’s girl, the luxury watch guy, the LVMH guy…).

    Building the first luxury IT company will be difficult.

    Furthermore, with Mobile becoming the hub/controller or at least a player for a lot of things (payments, wired home, entreprise IT,…), Apple’s monolithic+proprietary approach and bad record with partnerships and long-term planning+visibility makes expanding their ecosystem outside of purely Apple-made services difficult, especially with low market share in all markets except US, UK, Japan.

    That’s not even looking at the challenges faced by the iPhone and iPad lines.

    I think analysts are pricing all that in. Apple are obviously not going away, but they seem happy with 15% market share and 80% profit share, which is very very nice, but does put a cap on the upside, bar revolutionary new products (which the iWatch won’t be)

    • deasys

      Performance, durability, and value along with ease of use have *always* been Apple’s thing. You (and those analysts) should familiarize yourself with Apple and its products. I think you’ll like what you see…

      • obarthelemy

        You mean the glass phone, or the special-tools required for disassembly iMac ?

      • DontExpectAReplyToYourReply

        Just assume that he means the glass phones, the ones that don’t fall apart like the competition’s plastic phones. You may indeed be as ignorant as @deasys suggests.

    • danieleran

      Performance was Apple’s “thing” when the Mac arrived with a 68k chip, when PowerPC arrived, when Intel began getting fast with Core, when Intel moved to x64, and throughout the iPhone and iPad line but particularly with the A7.

      “Features” are so obvious it would be embarrassing to write about. And Durability? Are you kidding? Macs have always had longer life spans, and the only reason a person trades up to a new iPhone is because the new one is so much faster. And the old one isn’t thrown in a box like every other phone or gadget, it’s resold for a relatively astronomical price.

      Price/Value was the reason people started switching from WinPCs, which had low prices but much lower value.

      And Apple has been a luxury hardware company since the 1980s. NeXT was too, and they acquired that. Nobody else has pulled it off very well, but if you don’t think Apple can sustain what it’s been doing for the last 10 years, it has to be because you don’t want to believe it.

      Everything else you wrote, from the sexist dismissal of one of the best performing CEOs to the exposure of the breadth of your ignorance about Apple’s current business, is just too silly to even respond to.

      • obarthelemy

        did you find “the Burberry girl” or “the LVMH guy” sexist ?

      • danieleran

        ‘Guy’ comes from a common French name for man. But you really have to lack respect for women to refer to a person in a professional context as a “girl.” You wouldn’t call Tim Cook “the boy running Apple” unless you were trying to insult him and his abilities.

        From the context, however, it’s clear you weren’t trying to express anything other than a lack of respect for a variety of people who are far more competent than you are. I was just pointing out that you went out of your way to insult a person based on gender. It indicates a weakness in your ability to reason and communicate worthwhile ideas.

      • obarthelemy

        What’s the female equivalent to “guy” ?

        Maybe your tendency to project your preconceptions onto other people’s writings is your weakness, instead ?

      • amused

        Always amusing. You can see why royalty used to keep a fool around.

      • obarthelemy

        You are extremely right. But probably don’t realize it.

      • melci

        Funny how you quibble about the gender stuff while desperately ignoring the many comments about Apple’s enormous active user base and ecosystem. I guess it belies the hollowness of your argument.

      • goodgrief

        Why is it so important to you to specify the gender of individual professionals when you “don’t care enough to google up their names”? Is the posture in which they urinate really that relevant to their skills in the marketplace? Or is the little head the only one you have that can think?

      • flimbus

        A broken record playing in a dark musty room: “preconceptions”, , “preconceptions”, , “preconceptions”, , …

      • chano1

        My, my. You really are confused if you have to ask! Ask a hermaphrodite whydontcha?

      • obarthelemy

        Also, I’m not denying anyone’s competency (you misread that too), just saying all those hires send a very clear message which the way Apple are moving.
        Edit: my use of “girl” and “guy” was merely to state that I don’t care enough to google up their names.

      • Spittt

        Apple is no longer the same size company Steve Jobs ran. What do you expect them to do now with their huge bank account? Run a hedge fund for their shareholders or grow into new albeit integrated areas? Capt’n Cook is doing the right thing by growing but in a well integrated fashion. Cook likes everything to be interconnected and humming like a fine tuned Ferrari. Bodes well for AAPL shareholders.

      • obarthelemy

        I’m just doubdtful because of network effects. Getting huge profits out of a relatively small share is very fine, but, if Mobile becomes the nexus (pun intended) of other stuff (payments, ID, shopping, tracking, media consumption…) then setting up all that technical, business, and contractual infrastructure becomes harder if you lack scale, and I’m not sure local arrangements only in markets were Apple is strong are feasible/worthwhile.

      • deasys

        “Lack scale?”

        The article you’re commenting on stated that, “There are 80 million Mac users…As of the end of June there were 886,580,000 iOS devices sold…One billion sold will happen well before this year is out. Estimates of current iOS users vary but they are probably at least 500 million and could be 600 million.”

        I wouldn’t exactly characterize a market of 600 million to 700 million users as “lacking scale,” obarthelemy…

      • Spittt

        Why don’t you put your money where your mouth is and short the stock? Would love to take your money.

      • Space Gorilla

        “Getting huge profits out of a relatively small share is very fine”

        Here’s the inconvenient fact you keep ignoring, that ‘small share’ is going to be a billion users fairly soon. That’s more than large enough to sustain all the things you think Apple can’t do because of their ‘small share’. Your arguments no longer make sense.

      • charly

        That billion can only be achieved if Apple chances which is doubtfull.

      • chano1

        Please translate this into English so we can reply, or not.

      • Space Gorilla

        Yes, I remember you saying Apple could never get to 500 million users, no way, no chance. Then you said 600 million was the no chance number. Now that Apple is at or past 700 million, you’re changing your tune yet again. Whether it’s exactly a billion isn’t the point, the point is Apple’s user base is already large enough to do all the things you think they can’t possibly do because they’re too small.

        You just don’t get it, it’s the absolute number of users that matters, not whether or not that number is a small percentage of some whole market. Never mind that Apple doesn’t even operate in most of the market, only the best customer segment. I do have to give you credit though, you never give up on your Apple bad/doomed riff.

      • charly

        Users is something else than ios devices. Your number is devices, not users. I think i said that before.

      • melci

        Apple has over 800 million iTunes/App Store accounts, the majority of which are credit-card enabled.

      • Space Gorilla

        No, my number is users. The devices number is EVEN LARGER. Pay attention charly, your world is crumbling around you.

      • charly

        A billion out of a market of 8 billion tablets and phones is small

      • chano1

        Silly boy. There aren’t even 4 billion people out there with the money to spend in this way, or even the desire to do so. You are truly a Jobsian bozoid.

      • charly

        Have you any idea how many people own a mobile phone in this world? And people can and do own more than one phone.

      • melci

        Ah yes, overwhelming market share in the profit-less segment of the market. very compelling.

      • charly

        You are comparing an integrated OS-SoC-smartphone end product company with a market in which those functions are split. The SoC maker Qualcomm isn’t exactly loosing money on snapdragons, Google is highly likely making money on Android. The smartphone sellers have it difficult but they are not the ones that do the difficult part.

      • melci

        And this is one reason why Apple captured 85% profit share of the entire mobile phone industry up from 72% last year. Qualcomm’s profits are trivial in comparison and Google lost billions on Android thanks to the Motorola albatross.

      • charly

        Includes that 85% the trivial 7 billion from Qualcomm?

      • melci

        Considering most of those 7 billion are buying the cheapest least-functional devices with razor-thin margins, Qualcomm will most certainly not be making anything like the profit that Apple makes.

      • charly

        Have you looked at the margin Qualcomm makes? It is Intel like.

      • melci

        And yet Qualcomm made less than 6% the amount of profit that Apple made last quarter.

      • charly

        Apple makes 7.7 billion last quarter Qualcomm something like $2 billion. I think that answers the question if that 85% include Qualcomm. (obviously not)

      • melci

        I take it back, Qualcomm made 26% the profits of Apple. That certainly doesn’t help Motorola, HTC, LG, Sony and the myriad of other smartphone manufacturers who are all making multi-million dollar (or billion dollar in the case of Moto) losses.

        I’m not sure why you are comparing Apple to Qualcomm considering Apple sub-contracts the manufacture of their chips to other foundries etc.

      • charly

        Qualcomm is fabless

      • melci

        True, and Apple makes 4x as much profit as Qualcomm and other smartphone manufacturers have an even smaller share of the profits if you include Qualcomm. Whichever way you look at it, Android is hurting because of its concentration at the profit-less end of the market.

      • charly

        Qualcomm and Apple sell about the same number of SoC’s. But Apple makes its margin on the end product, not a part of it like Qualcomm. Add the lower cost SoC’s qualcomm sells and 4x sounds about right even with higher margins

      • obarthelemy

        depends, because it’s not 1b users spread equally, but concentrated in few countries. Yet if you do payments, you need to go global (nobody would use a US-only credit card, especially not the richer demo of Apple)

      • melci

        Morgan Stanley has a few comparisons from 24 months ago that demonstrate just how dominant Apple’s ecosystem is against the competition and how misbegotten your argument is:

        Account Base (millions):
        FaceBook = 1,056 (not credit-card enabled accounts so much less valuable)
        Apple = 500 (now 800)
        Amazon = 200 (now 243)
        Zynga = 180
        Paypal = 123
        ebay = 112
        Pandora = 66
        Netflix = 29

        Revenue per user:
        Apple = $329
        Amazon = $305
        eBay = $125
        Netflix = $123
        Zynga = $7
        Pandora = $7
        FaceBook = $5

        Account growth:
        Apple = 55%
        Pandora = 39%
        Facebook = 25%
        Amazon = 22%
        Netflix = 20%
        Paypal = 15%
        ebay = 12%
        Zynga = 10%

        Free cash flow per account:
        Apple = $95
        ebay = $23
        Amazon = $9
        Facebook = 0
        Pandora = 0
        Zynga = -1
        Netflix = -2

        Notice that Google isn’t even mentioned in these figures. That’s because they only have an unbelievably minuscule 50-100,000 users for Google Wallet, the mobile payments system that they’ve been spending hundreds of millions of dollars on for the last 3 years. This has to be just about the biggest failure in Tech Industry history.

      • charly

        Apple’s revenue is mostly in own brand hardware. Comparing that to Netflix revenue, which is mostly subscription, feels wrong. Google doesn’t need to now the user to make money of him.

      • melci

        When it is iOS users that generate 1,790% greater advertising ROI than Android users and as Apple marginalises Google more and more from the iOS platform, Google’s mobile ambitions become even more threatened.

        We’re talking ecosystems here as Apple competes in media just as much as Netflix.

      • charly

        18x more? Are you using very old data or so or comparing an iphone 5s user to a Samsung young user?

      • melci

        A study of 200 billion ads on Facebook from October last year by Nanigans, one of the biggest buyers of Facebook ads. found that mobile ads on iPhone generate 1,790 percent more return on investment than ads on Android. Even worse, advertising on Android actually costs more than it returns.

        “Retailers are realizing significantly greater return from audiences on iOS than audiences on Android,” the report says. “For the first three quarters of 2013, RPC [revenue per click] on iOS averaged 6.1 times higher than Android and ROI [return on investment] on iOS averaged 17.9 times higher than Android.”

        However, Nanigans is not alone in these sorts of findings with IBM reporting that during this last Christmas buying season, as a percentage of total online sales, iOS was more than five times higher than Android, driving 23 percent of sales vs. 4.6 percent for Android. In addition, on average, iOS users spent $93.94 per order, nearly twice that of Android users, who spent $48.10 per order. iOS also led as a component of overall traffic with 32.6 percent vs. 14.8 percent for Android.

      • charly

        So that is what you meant with that 1790% greater advertising ROI. That has nothing to do with Android but the mistargeting of advertise spending.

        IOS users are more female and richer than Android users, especially when you consider tablets, the more likely buying device.

      • melci

        It has everything to do with Android as its major reason for existence is to generate ad income for Google. iOS is a far more lucrative platform for advertising than Android which demonstrates why Google’s millions of eyeballs mean squat when they don’t bring home the bacon.

      • charly

        US+UK+JP = half a billion. I never understand where the other 500 million should come from

      • Space Gorilla

        Well, it’s happening whether you understand it or not since Apple is already well past 500 million.

      • charly

        500 million devices, not users.

      • melci

        700 million still-active devices out of 900 million devices sold with 800 million Apple ID users (most all of which are credit card enabled).

        Apple will be hitting 1 billion soon of both devices and user accounts.

      • charly

        How can you have 800 million active ID’s and only 700 million active devices?

      • melci

        Because those active accounts also include the overlapping segments of 80 million active Mac users and however many of the 295 million old non-iOS iPods sold since 2001 that are still active. The fraction of those users who only own iPods and not another Apple device may not be buying apps, but they are buying media – hence why they are classed as active participants of Apple’s ecosystem.

      • Space Gorilla

        Devices are over 900 million right now, soon to be one billion. It is active users that is over 500 million right now. As I said, the world you’ve created in your mind where Apple can’t ever have more than 500 million users, where sales of Apple products are cratering, where Apple is struggling just to survive, that world is crumbling around you. Time to wake up charly.

      • charly

        You are putting words into my mouth. I never said that Apple sales are cratering (except ipods but that is obvious also true for all mp3 players)

      • Space Gorilla

        You’ve talked plenty of smack about Apple having trouble with sales, losing market share, and so on. It is obvious that Apple’s success upsets you, so much that you’ve created some weird kind of alternate reality in your mind where Apple isn’t succeeding.

        I think you truly believe the batshit crazy things you say about Apple. It’s fascinating.

      • Space Gorilla

        It seems obvious Apple is going to do something modular with identity and security that will enable payments and ‘plug into’ existing systems. This will mean it is very easy for retailers et al to implement. I wonder if you realize how global Apple already is with iTunes? You just keep on bangin’ that Apple doom drum son.

      • obarthelemy

        I can see how mobile payments would be marginally more practical for buyers. What’s the use case for sellers though ? Lower fees ? Less fraud ? Better conversion ?

        In any case, that will require some investment (validation, servers, POS, security…). I’m sure a very good case can be made for it, especially with Apple’s higher-revenue clientele, but Apple’s 10%-ish share in quite a few markets must be an issue.

        I’m unclear about whether mobile transactions piggyback on the credit card infrastructure -and fees- or whether mobile payment operators are setting up something completely different. If the former, you tack on the mobile fee to the CC fee, if the later, that’s a lot of work for the tech, the contracts, the regulation… The issue is not Apple-specific though.

      • Space Gorilla

        “but Apple’s 10%-ish share in quite a few markets must be an issue.”

        Funny how that doesn’t seem to be an issue for anything else Apple does. They seem to be doing just fine with their small market share.

        You’re not thinking large enough, easy payments will only be part of it. The important part is identity.

      • obarthelemy

        But that’s the point: the rest of what Apple does in purely endogenous, apart from content deals with a handful of local players.

      • Space Gorilla

        Apple gear works just fine with the ‘outside world’. You talk as if I can only use an iPhone, iPad, iMac, etc to interact with other Apple products and can’t do anything at all with anything that isn’t from Apple. Oh no! I’m trapped in the tiny Apple world! What a bunch of nonsense.

      • charly

        For most things you don’t need active participation of others. With a payment scheme you need help from the buyer and seller. This is for example unlike a webbrowser. It works without help from the website

      • Kizedek

        I love it! May Google reign because it requires no active participation! Something that requires my active participation? Bah, too “restrictive”.

      • Space Gorilla

        I wonder if you realize that you just attempted to say why Apple will have trouble with a payment scheme, and then provided the solution to your imagined problem, all in a single comment. Bravo.

      • Spittt

        If you truly believe that rubbish, then please go ahead and short AAPL. I would be glad to take your money.

      • twilightmoon

        Very tiring seeing political witch hunting run amok. Not everyone who uses the term “girl” hates women, not everyone who uses the term “black” is racist, etc.

        Don’t walk around with a prior intent to find offense at everything around you.

      • charly

        It was an Apple thing when the 68k, power & core arrived. But it wasn’t in the between time. Besides if i thing of performance i think of gaming. That is not exactly a strong point for the Mac.

        Features like PCI cards and build in internal hard disks.

        Durability? Can you still use a ten year old windows pc for what it was intended. If you upgrade it to windows 8 (or 7) than that answer is an absolute yes. Apple? no. Besides for such an expensive product they have a lot of issues

        Price/Value Porsche buyers say it is worth it, whom am i to argue with that.

      • http://www.facebook.com/anthony.hess Anthony Hess

        Through most of the 90s Apple had a raw performance advantage with PowerPC and it wasn’t until the end of 68k that they were struggling to keep up. Unfortunately they were stuck with partners who didn’t keep aligned with Apple in terms of interests as the market didn’t pan out like they wanted (moto with the 68k, IBM/Moto with the PPC). Now they are roughly comparable by using similar hardware, and faster in mobile as they bought their own talent in house to stay on top of mobile performance.

        And now you switch and start talking about gaming, but that was a software issue not a performance one. The Mac for most of it’s life never had the market share to get the titles, which isn’t true for the iPhone which leads in games and in gaming performance.

        It’s really doubt a 10 year old PC with 256MB of RAM and a small hard drive is going to have enjoyable performance. Is it fair to say that Macs didn’t see very long term support due to the switch to Intel? I would say yes, but at the same time really old PCs aren’t worth spending a lot of money on upgrading either.

      • charly

        It is not a software issue. It is a reason why people need a fast PC.

        I don’t care if it is enjoyable. It works. Can’t say the same with a ten year old Apple.

      • deasys

        You’re confused, charly. It’s Macs that have long useful lives, not PCs. An example: http://bobskelley.com/2014/07/17/powerpc-macs-most-definitely-still-have-game/

      • charly

        I’m not going to google for a dos webbrowser. Should i?

      • http://www.facebook.com/anthony.hess Anthony Hess

        Sure the 10 year old machine will work – with an older OS. And a 10 year old Win box is pretty much useless – so what if it runs if you can’t use it?

    • melci

      What an ignorant post.

      No Android phone offers a full 64 bit OS and 64-bit hardware or a fingerprint reader that actually works or a digital compass that points in the correct direction (talk about features and quality!).

      The iPhone has always been released with best-in-class GPU performance such that the 9 month old iPhone 5s still comes in at number 1 on more than half of Anandtech’s 30 or so smartphone benchmarks against all the latest Android phones such as the Galaxy S5.

      In terms of ecosystem, Apple has more active credit-card attached users (800 million) than Amazon, eBay, Paypal, Zinga, Netflix, Pandora, Google Wallet and Spotify combined and the iOS platform continues to generate more developer revenue, more web browser share, 1,790% greater Advertising ROI, and 500% greater e-commerce revenue than Android. No problems there.

      That supposed 15% marketshare figure is a complete red herring with Apple’s actual active user base closer to 700 million (Flurry reported they had recorded around 510 million active iOS users back in April 2013 and Apple has sold 291 million iOS devices since then), only 30% less than Google’s 1 billion active Android users.

      With Apple’s recent partnership with IBM, Apple’s complete and utter dominance of Business (92% tablet mart safe, 77% mobile marketshare) can only be reinforced.

      • charly

        The only advantages 64 bit has in mobile is more than 4GB memory and future proof. Both are things you need in a few years. And guess what Android phones will be 64bit in a few years if you look at all the roadmaps.

        5S is the most expensive phone on the market (excluding Ventu etc) so being fastest is to be expected. Besides Qualcomm had an off year. See what happens when Qualcomm does make a big step and

        Apple doesn’t.

        Apple doesn’t make its money as an intermediary. For that it profits are way to large so it is a side business for Apple

        Flurry doesn’t measure users but devices. Owning more than one ios device is not uncommon.

        92% seems to me a “little” high but 77% mobile market share in business mobile is obviously completely wrong

        Google makes money of Android. Qualcomm makes money of Android, the screen makers make money of Android etc. The ODM are doing great with Android. The only one that aren’t doing great with Android are the OEMs but they are in the easiest to enter market of the Phone ecosystem

      • melci

        I’m afraid you don’t know much about Apple’s 64bit architecture do you? All those extra 64bit wide registers mean that many more 16bit and 32bit instructions can be executed every clock cycle, which is one reason why the iPhone 5s is so blindingly fast. 64bit means much more than just breaking the 4GB RAM limit.

        You also have a short memory – the 5S is no flash-in-the-pan as *every* generation of iPhone has blitzed the opposition in all the GPU and web browsing benchmarks.

        In addition, Apple’s TouchID sensor and the hardware-based Secure Enclave on the A7 SoC are far in advance of anything Samsung or Google have managed to come up with and put Apple in the Plum seat as far as the Next Big Thing – Mobile Payments – which Google with its paltry 50-100,000 Google Wallet users has utterly failed at.

        I’m not sure what your argument is regarding Apple not being an intermediary considering the fact that iTunes generated almost $7 billion in revenue in Q4 2013 alone. That means iTunes by itself would be ranked as number 130 in the Fortune 500 if it were a separate company. Of course Apple’s ecosystem goes far beyond that with third party developers, e-commerce providers, advertisers and content providers all sharing in the riches of Apple’s lucrative platforms.

        And Google’s mobile revenue? Not looking good after having lost billions with their $12 billion dollar purchase of the Motorola millstone which continued to lose billions while under Google’s ownership and then was off-loaded for a paltry $3 billion leaving Google with an enormous hole in its wallet and a bunch of SEP patents that have proved completely worthless as offensive or defensive weapons in the Patent Wars.

        800 million active iTunes/App Store users isn’t measuring users either – considering the vast number of families sharing the one credit-card enabled iTunes account, Apple’s active user base is even larger again.

        In terms of mobile, iOS has already taken over Business. Apple’s iOS nabbed 76% of small & medium business device activations in 2013, relegating Android to a paltry 23% and leaving Microsoft languishing on 1% according to Intermedia’s Mobile Trends Report.

        The iPad has a 93.2% share of the Business tablet market according to Good Technology.

        Apple’s iOS mobile business market share increased from 69% to 78% while Android declined from 30% the previous year to only 22% (Egnyte) and Microsoft was relegated below 1%. According to IDC Apple has 95% market share in the Education tablet market.

        Google makes far more money from iOS than Android users but is being pushed off the iOS platform as Apple steadily replaces Google services with Siri, Maps, Bing, etc. Check out Google’s Mobile revenues – they’re tiny and with Nanigans reporting that iOS users generate 1,790% greater ROI than Android users, that is a very bad thing for Google.

      • charly

        It is not Apple’s 64bit ISA but ARM’s 64 bit ISA which also will come to Android

        Apple has been the most expensive mainstream phone on the market for a very long time. That that means that they have (one of) the fastest soc is an requirement. Especially because Android loses some speed because of its virtual machine.

        Mobile payment can’t be done with something so insecure as a fingerprint scanner. Mi bracelet is a much better idea.

        I’m not saying that they are not an intermediary. I’m saying that its upside is peanuts for Apple.

        Buying Motorola allowed Google to speed up the arrival of good cheap smartphones by a year or two and the real cost for the patents is only a billion or so. Don’t forget that the throughly strong can look weak.

        Tablets are new in business and education. Apple’s market share will change. But 93.2% is even higher than windows in business.

      • melci

        “Mobile payment can’t be done with something so insecure as a fingerprint scanner.” “Mi bracelet is a much better idea.”!!!! okaaaaay….

        Next you’ll be telling us that a PIN number or a signature is more secure than a fingerprint reader as well. Oh. My. Goodness.

        Apple licenses ARM’s ISA and with their considerable internal team bolstered with their acquisitions of PA-Semi, Intrinsity, Anobit and control of their own 64bit OS shows why the Android platform is years behind in actually implementing a competing 64bit architecture.

        “Don’t forget that the throughly strong can look weak.” Wow, just wow.

      • charly

        A pin is obvious more secret than a fingerprint. Fingerprints are in fact something extremely public and that is why they are not useful to secure anything of even low monetary value.

        64 bit is just not needed right now but Android already runs on 64 bit soc’s so what do you mean with years behind.

      • melci

        Ah yes because we all know that photographing a good fingerprint at 2400dpi, printing onto transparent sheet with a special thick toner setting, smearing with pink latex, waiting for it to cure then carefully lifting the latex sheet and then moistening it and hoping it’s the correct finger is far simpler and quicker than simply watching or video-recording someone press their code. *rolls eyes*

        Please show us a shipping Android phone with 64bit hardware and 64bit OS. That is what years behind means.

      • charly

        All the steps in lifting a fingerprint can be done in private and if there is demand can likely be made easier. Video-recording someone press their code can’t be done private Pin codes can also be thrown away. With fingerprints that can only be done 9 times. Besides what would happen if the Russian mafia stole the FBI fingerprint database?

        Is the Lenovo A805e shipping or any of the other Snapdragon 410 smartphones?

      • melci

        Shame about Apple’s Lost Mode and activation lock then isn’t it? Hacker have demonstrated covert video recording of pin numbers from 50m away. Capturing pin numbers is trivial. Capturing fingerprints is something the vast majority of crims wouldn’t even contemplate because it is too complex and takes too long. You’re beating a dead horse.

        The Lenovo A805e isn’t shipping yet and doesn’t have an OS or ecosystem to take advantage of 64bit.

      • melci

        The mafia can’t be bothered at scale with anything as exhausting as individual fingerprint hacking when hundreds of millions of Android devices are ripe for the picking through a myriad of other security holes.

        32.8 million Android devices were infected with 65,550 difference strains of malware. It’s no wonder that F-Secure, Kaspersky, Cisco and others have all reported that Android is now targeted by 99% of all the mobile malware in the world.

      • charly

        Not individual. The FBI database is millions of people. Steal the database. Ask 10 cent per person. run it automatic and see the money flow in.

      • melci

        That’s hilarious when it is Android users that are haemorrhaging money through remote hacks that require no physical access to devices or laborious manual handling that is defeated by Apple’s Activation Lock before the crims have time to do it anyway.

        An example of the viciousness of many Android malware exploits is the Eurograbber malware that swiped $47 million from the bank accounts of 30,000 hapless users last year.

        Then there is the Bmaster command and control botnet malware which has been siphoning between half to 3.5 million dollars off hapless Android users per year.

        And then there is the Google Messaging Service security hole being used by hackers to steal Android users’ data and forcing them to send premium SMS messages with direct financial implications to Android users.

        One big worry is the enormous Master Key security hole affecting 99% of all Android devices sold since 2008 that can give malware full access to all system and user data and control phone and SMS functions and turn the Android device into an always-on, always-moving, hard to detect botnet zombie.

        This Master Key vulnerability can unfortunately only be patched by manufacturers releasing new firmware for their devices which is regrettable considering the dismal record manufacturers and Carriers have of releasing updates for Android devices.

        On iOS – zip. The proof is in the pudding.

      • Space Gorilla

        “Besides what would happen if the Russian mafia stole the FBI fingerprint database?”

        Well, we’d be living in a James Bond movie, so we’d have that going for us I guess.

        Hmm, unless there was some way of coupling a fingerprint scanner with biometric sensors in a kind of two device ID authentication scheme… Nah, who’d come up with something like that? :)

      • charly

        The FBI fingerprint database is only useful if it is accessible so i don’t think it would be exactly impossible to break into it. The right corrupt worker and you have it.

      • Space Gorilla

        I guess you didn’t get the second sarcastic half of my other comment. I’m quite sure Apple has thought of a thousand ways to hack security and any identity solution they provide will be more than a single step. Come on charly, use your head, get out of your Apple Doom dreamworld. With an iPhone, PIN, wearable sensors, and a fingerprint scanner, there are so many ways to authenticate identity in a multi-step continuous process. Just your fingerprint wouldn’t be enough to crack it. Nothing is foolproof, but Apple could get darn close.

      • twilightmoon

        I already addressed this, knuckleprint.

        Completely airtight, and impossible to hack without cooperation.

        Done.

        Move on troll.

      • twilightmoon

        I tested the knuckle fingerprint scan on my 5S, it is now stored as one of my fingerprints. I’d be confident securing hundreds of millions of dollars based on my knuckleprint.

        Please tell me how you’d get a “public” copy of my knuckleprint anywhere? Excluding forcing me to open it myself, which you could do with ANY security measure.

      • twilightmoon

        First off, Charly, your posts show a tremendous level of ignorance about Apple’s tech. I’m not sure if you are trying to troll here on purpose or just do not know what you are talking about, but for the sake of Charity, I will engage you.

        You state:
        “The only advantages 64 bit has in mobile is more than 4GB memory and future proof. Both are things you need in a few years. And guess what Android phones will be 64bit in a few years if you look at all the roadmaps.”

        Melci already well addressed the ignorant statement that there are no advantages of 64Bit besides more than 4GB RAM which is completely laughable. That you could state that and expect anyone to take anything else you say seriously defies credibility.

        Then you go on to say that Android will have X in a few years… That was MS old tactic, claim that a current advantage wasn’t that great and MS would adopt it in the next patch or version. In Back to the Future we were going to have Flying cars “in the future”. Where’s my flying car NOW? I do not live in the future and never will. Only shipping products matter.

        Beyond that point, Android has a huge fragmentation problem so anything added into Android even today, or in the next 6 months may take many years to become mainstream, if ever. Very few customers will benefit from current and near future Android innovations because of this wide gap of fragmentation. Apple’s customers overwhelmingly choose the top level devices, so a large percent of them benefit from the very latest technology.

        “Mobile payment can’t be done with something so insecure as a fingerprint scanner. Mi bracelet is a much better idea.”

        I love this part. You seriously want to argue that an encrypted fingerprint scanner is “insecure”? Wow. First the only known hack for this is to get a very high res scan of someone’s fingerprint (you need a very pristine fingerprint, which is completely non-trivial to obtain), and then you have to take this to a 3d Printer and print out a fingerprint, and then use this, along with physical custody of the device to unlock the phone, and even after all this it is not a 100% guarantee to work properly.

        If you want to call that “insecure”, go ahead, but there is a very easy workaround to stop this form of hack, simply use the back of your knuckle as your “fingerprint”. Unless you want to argue that someone is going to be able to obtain a high res knuckle print from you without your cooperation, then this is one of the most solid and airtight security measures on any mobile device in existence. Far better than a password which is easy to observe someone typing in and duplicate.

      • charly

        Almost all Android software is running in a virtual machine so it doesn’t matter if the ISA is ARM32 or ARM64 or intel32 so for Android the only important difference between ARM32 and ARM64 is more than 4GB of memory. Seeing the historic development of smartphone memory and i think that saying next year is soon enough for is correct.

        Microsoft is a software company. I was using Android in the way of Android smartphones. As ARM64 is hardware i was talking about the hardware part and not the software part. This quarter you can buy Android hardware with an ARM64 SoC and i don’t really care if the software part of Android is 64 bit ready

      • Davel

        Historically Apple does not compete on specs.

        It does not advertise clock cycles or number of cores of its CPU/GPU

        It advertises what you can do.

        To date other than a rationalization of the architecture, 64 bit doesn’t add anything. The Touch ID sensor unlocks your phone.

        This will change, but most of these hardware features you cite do nothing to change the conversation.

        I am waiting for Apple to introduce a mobile payment system. Something that uses its touchid, passport and some way to verify the transaction to the vendor without sending the particulars in the open to be stolen.

        That would be huge. That would overshadow any iWatch or iTV to be introduced in the next year or so.

      • melci

        Of course Apple doesn’t advertise GHz or number of cores.

        However, Apple does continually compare the raw speed of the latest hardware and software. For example, on introducing the new iPhone 5s, Phil Schiller boasted that the A7 offers CPU boosts 42 times faster than the original iPhone, with graphics up to 56 times faster and whenever announcing a new version of Safari, it is how much faster browsing and graphics are that gets the limelight.

        And the iPhone’s 64bit hardware architecture with its far greater number of registers is right up there helping realise these performance gains.

        However, even when advertising what you can do, what underpins everything is how buttery smooth and fast you can do it. In contrast, Android has always suffered lag in the real world, despite repeated attempts at improving the situation with Project Butter etc.

        You don’t seem to understand that half of the revolution of Apple’s TouchID is getting the hardware out there in 100 million new handsets to set the stage for a vast installed base ready for the promised expansion to things like Mobile payments. Now that IS huge.

    • twilightmoon

      Obarthelemy, Asymco is not a place that welcomes trolling. Please have some facts to present if you choose to discuss things here.

      There are plenty of places where your post would be welcome, full of Apple hating trolls. Let me suggest Engadget, or Gizmodo.

      The “Apple sells to ignorant customers because of a logo” argument is very, very, very, very, VERY, VERY, VERRRY old and tired.

      If you plan to post on here again, and intend to re-hash this old saw, please don’t. Go somewhere else.

      • obarthelemy

        You mean, like all the facts you’re posting yourself ?

  • Elliot Temple

    “then next year Apple should get another $200 million from its population of users.”

    typo. you meant billion not million.

  • Costa K

    I guess they’re doomed.

  • Mark Gold

    Horace,

    I wonder if the 800 million iTunes accounts under represents the number of iOS users. In my family we have one iTunes account which five members of my family share ( we can share the music, movies and app purchases). One Apple ID but five individuals with five iPhones, iPads and Laptops (my kids are in college).

    • highr0llerr

      On the other hand, you have inactive iTunes accounts and people with more than one account. Since you now can create an iTunes account without a credit card, it’s pretty easy to do. Some international users do this, so that they can use services like iTunes radio, available only in the US, and Australia, I believe. Besides, you don’t have to own an iOS device to have an iTunes account. Some may own just an iPod shuffle, or a Mac. I highly doubt that the number of active iOS users is greater than 800 million, as the cumulative number of iOS devices ever sold is 900 mln.

      • melci

        Apple excludes inactive accounts as they have specifically stated these are all “active” accounts.

        Apple has sold 295 million non-iOS iPods since 2001 so that places an upper bound on how many could be iPod users and considering one wouldn’t expect too many iPods from 13 years ago to still be active, the number reduces further.

        Add in the significant percentage of iPod owners who also own iOS devices and it becomes apparent that 700 million active iOS users is not at all unreasonable.

    • http://www.asymco.com Horace Dediu

      It’s possible but there is also the possibility that there are unused iTunes accounts or that one person has more than one account. I’ll just stick with the figure Apple reports as it’s the one with the fewest assumptions to defend.

      • melci

        Apple does say actve accounts so one would assume that eliminates unused accounts.

        One would imagine most families share the one credit card enabled account so they can all share the media and apps purchased on that account, but how one estimates that number is indeed the tricky thing.

      • charly

        This assumes that most accounts have been used to pay for something. If you only have an account with free stuff than it doesn’t matter if there is a different account for every device.

      • melci

        I’m sorry charly, although you may have different accounts on every device, I’m afraid most sensible people wouldn’t see the point – particularly since most iOS users do see the value in paying for things. You’re evidently stuck in the mindset of an Android user who doesn’t.

      • charly

        With 800 million account holders and a quarterly spend of 4 billion on apps which include games than i don’t think that the average account holder values paying for non-game apps

      • melci

        Morgan Stanley reports that each of those 800 million Apple user accounts is generating $329 annually for Apple, more than Amazon, eBay, Netflix etc. Sounds like a pretty lucrative user base to me.

        Revenue per user:
        Apple = $329
        Amazon = $305
        eBay = $125
        Netflix = $123
        Zynga = $7
        Pandora = $7
        FaceBook = $5

        Free cash flow per account:
        Apple = $95
        ebay = $23
        Amazon = $9
        Facebook = 0
        Pandora = 0
        Zynga = -1
        Netflix = -2

      • charly

        Itunes etc. has revenue of $20 billion per annum or a revenue per person of $25 per year if you user your 800 million. I would not consider $25 per year a lot of money for people who value paying for (non-game) apps.

        ps Except the don’t pay $25 per on non game apps but $16 including apps.

      • melci

        Horace reported earlier this year that Apple is now hitting a gross revenue for the iTunes group of $7 billion per quarter 6 months ago and growing exponentially so by now the iTunes group is easily hitting $30 billion per year which works out as close to $40 per user.

        When most apps are free (with revenue being generated by advertising) or only 99c (plus in-app purchases), that works out as plenty of apps and vastly more revenue than the Android platform is generating.

        However, we are talking total ecosystem here and Apple has the advantage that those 800 million users are also buying hardware so Morgan Stanley’s figure of $329 per user also demonstrates complete dominance by Apple in the ecosystem stakes, which after all is what this article is about.

      • Space Gorilla

        Yes, yes, whatever it takes to maintain the make believe world you live in where Apple can never have more than four, maybe five hundred million users.

  • MurderMostFowl

    I wonder what Mac sales growth versus sales price would over the last 6-8 years would look like. Prices have been going down slower than sales I believe. However, it will be interesting to see if people will still pay premium prices for Macs when the major software that drives casual computing it all ( IMHO ) satisfied by mobile/tablet market. I haven’t bought new software on my mac ( other than video games ) in about 3 years.

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