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Apple Remarks to Investors in FQ1 2018 Earnings Conference Call, Categorized and Annotated

The following is a transcript of the comments from Tim Cook (CEO) and Luca Maestri (CFO) at Apple’s Q1 2018 Earnings Conference Call February 1, 2018. I color coded my interpretation of the comments into four categories:

  • Grey: Background and promotional commentary
  • Red: Strategy and signals of what management considers important and may include data beyond the regularly reported numbers.
  • Green: Financial data
  • Black: Commentary.
  • Blue: My commentary, in brackets.

For a quick read of Apple’s strategy, read the Red text. These comments are not repeated in financial reports. Highly recommended.

For a quick read of Apple’s financial performance, read the green text (which are replicated in financial reports). Read this if you don’t want to wade through the financial reports.

For marketing or product material, read the grey text.This is sometimes unique but also repeats product launch information.

—-
Tim Cook:  Thanks, Nancy and thanks everyone on the call, and welcome to everyone today. Before we dive into the quarter, I’d like to take a moment to talk about a significant milestone we recently crossed.

Apple’s active installed base reached 1.3 billion devices in January and is at an all-time high for all of our major products. 1.3 billion devices represents an astonishing 30% growth in just two years. It speaks to the strength and reliability of our products and our ecosystem, as well as the loyalty, satisfaction and engagement of our customers. It’s also fueling tremendous growth in our services business, which I’ll talk about a little later in the call. [This is probably Apple’s most important number. For at least the next 20 years this is the key performance metric and it can be used to derive company’s valuation. A summary of the history of active devices vs. units sold is shown in the graph below:]

Turning to the December quarter. We’re thrilled to report Apple’s biggest quarter ever, which set new all-time records in both revenue and earnings. We generated revenue of $88.3 billion, which is above the high-end of our guidance range, and it is up almost $10 billion or 13% over the previous all-time record we set a year ago.

It’s also our fifth consecutive quarter of accelerating revenue growth with double digit growth in each of our geographic segments around the world. What makes us even more remarkable is that the quarter we’re reporting today was 13-weeks long, while the year ago quarter was 14-weeks. When we look at the average revenue per week in the December quarter this year compared to last year, our growth was a stunning 21%. [The 13-week vs. 14-week year-on-year comparison is repeated several times. The summary differences are shown in the table below:] 

Our growth was broad-based and a key driver was iPhone, which generated its highest revenue ever. iPhone X was the best-selling smartphone in the world in the December quarter according to Canalys, and it has been our top selling phone every week since it launched. iPhone 8 and iPhone 8 Plus rounded out the top three iPhones in the quarter. In fact, revenue for our newly launched iPhones was the highest of any lineup in our history, driving total Apple revenue above our guidance range. [The iPhone X is a huge hit. It drove the average selling price $100 higher y/y. This is not only unprecedented for Apple but for the entire Industry. The average smartphone sells for less than $300 while iPhones sold for $800. The gap is widening. The following graph shows the product mix and the average resulting price.] 

I want to take a moment to recognize the tremendous amount of work that went into creating iPhone 10. Our teams carried out an extremely complex launch from both an engineering and operations perspective, executing an outstanding product ramp that required years of research and development; one that introduced innovative features like an edge-to-edge Super Retina Display and the TrueDepth Camera, which enables face ID. Our customers love these new features and the new gestures like simply swiping up from the bottom, which make using iPhone even more intuitive and enjoyable.

Our team has put the technology of tomorrow in our customers’ hands today, set a standard for the next decade of smartphones and we are very proud of their achievements.

It was another very strong quarter for services with revenue of $8.5 billion, up 18% over last year, and we’re on pace to achieve our goal of doubling our 2016 services revenue by 2020. The number of paid subscriptions across our services offerings passed 240 million by the end of the December quarter, that’s an increase of 30 million in the last 90 days alone, which is the largest quarterly growth ever. [Services has been growing relentlessly for over a decade. This steadiness of growth makes is a juggernaut. Apple is increasingly speaking about subscriptions as the key metric and 240 million is reaching record territory. The rise of Services is shown below (both revenues and consumer spending.)]


We had an all-time record quarter for the App Store with our best holiday season ever. We’re seeing great excitement around augmented reality with customers now enjoying over 2,000 ARKit enabled app, spanning every category in the App Store. In December, when Pokémon GO released its new augmented reality features built with ARKit, it jumped the top of the App Store charts. Last week, on a stop in Toronto, I met developers who are hard at work on creative applications using ARKit from art appreciation to ecommerce, and I was very impressed with what I saw.

Just for months after ARKit launched to the public, we’ve already released ARKit 1.5 in beta to developers around the world, and the response has been tremendous. Augmented reality is going to revolutionize many of the experiences we have with mobile devices. And with ARKit, we’re giving developers the most advanced tools on the market to create apps for the most advanced operating system running on the most advanced hardware. This is something only Apple can do.

In addition to the App Store, several other services had their biggest quarter ever, including Apple Music, iCloud and Apple Pay, all of which saw growth in both active users and revenue.

Apple Pay has reached an important milestone in the U.S. As a result of 50% year-over-year growth in merchant adoption, it’s now accepted at more than half of all American retail locations, which includes more than two-thirds of the country’s top 100 retailers. Now available in 20 markets, global Apple Pay purchase volume more than tripled year-over-year and we’re delighted to be expanding to Brazil in the coming months. [There are no absolute data points on Apple Pay but we do have some scattered growth data. The US data is cited here but in my experience it’s more popular in select countries like UK where users are using it habitually]

Today, you can use Apple Pay to take the subway in Guangzhou, China, see a concert at London’s Wembley Stadium or buy a souvenir in Yosemite National Park. In the U.S., we launched Apple Pay Cash in December, and it’s off to a terrific start. Millions of people are already using it to send and receive money with friends and family quickly, easily and securely; to split a bill, pay someone back, or send last minute gift right from the messages app.

It was our best quarter ever for the Apple Watch with over 50% growth in revenue and units for the fourth quarter in a row and strong double-digit growth in every geographic segment. Sales of Apple Watch Series 3 models were also more than twice the volume of Series 2 a year ago. Apple Watch is the most popular, smart watch in the world and gained market share during the quarter based on the latest estimates from IDC. [Apple Watch is growing consistently. The following graph shows my estimates of volume (total 42 million to date) and revenues (total $15 billion) based on all available data and commentary from management.]

It was the third consecutive quarter of growth for iPad revenue, thanks to the strength of both iPad and iPad Pro. Based on the latest data from IDC, we gained share in nearly every market we track with strong outperformance in emerging markets.

Worldwide, almost half of our iPad sales were the first-time tablet buyers are those switching to Apple, and that’s true in some of our most developed markets, including Japan and France. In China, new and switching users made up over 70% of all iPad sales.

For Mac, we launched the all new, iMac Pro in mid-December. It’s an entirely new product line designed for our Pro users who love the all-in-one design of iMac and require workstation class performance. It’s the fastest, most powerful Mac ever, delivering incredible computational power, for simulation and real time 3D rendering, immersive VR and complex photography audio and video projects. Worldwide, 60% of our Mac sales were the first time buyers and switchers and in China, that number was almost 90%.

We’re looking forward to getting HomePod in customers’ hands beginning next week. HomePod is an innovative wireless speaker, which delivers stunning audio quality wherever its placed in the home, thanks to the advanced Apple engineered hardware and software.

Together with Apple Music, HomePod gives you instant access to one of the world’s largest music catalogs. And with the intelligence of Siri, it’s a powerful assistant you control through natural voice interaction. We’re very happy with the initial response from reviewers who’ve experienced HomePod ahead of its launch, and we think our customers are going to love this new product.

We believe one of the key issues of the 21st century is education. And because of that, we’ve strengthened our commitment and investment into initiatives like everyone can code. To find the innovators of the future, we need to nurture the students of today. Our App Development with Swift curriculum, which is available free on iBooks, has been downloaded more than 1.2 million times worldwide with almost half of those coming from here in the United States. It’s also being taught in dozens of community colleges across the country, putting practical skills in the hands of today’s jobs seekers.

I was in London two weeks ago as we announced that the program was expanding to more than 70 colleges and universities in Europe. Millions of students around the world will have the opportunity to add Swift to their coding vocabulary and gain skills that are essential for today’s economy.

This is an exciting time at Apple and with the best lineup of products and services we’ve ever had and a set of initiatives that show how business can be a force for good in the world. We could not be more excited about our future.

Now, for more details on the December quarter results, I’d like to turn over the call to Luca.

Luca Maestri: Thank you, Tim. Good afternoon, everyone. Our business and financial performance in the December quarter were exceptional, as we set new all-time records for revenue, operating income, net income and earnings per share.

Starting with revenue, we’re reporting an all-time record, $88.3 billion, up nearly $10 billion or 13% over the prior record set last year. It is our fifth consecutive quarter of accelerating revenue growth. As you know, the December quarter a year ago spanned 14-weeks compared to 13-weeks this year, which is important to consider as we have set the underlying performance of our business this year. When we look at average revenue per week, our growth rate was even higher at 21% with growth across all product categories for the third consecutive quarter.

Our results were terrific all around the world with double digit revenue growth in all our geographic segments, an all-time quarterly record in the vast majority of markets we track, including the U.S., Western Europe, Japan, Canada, Australia and Korea, as well as Mainland China, Latin America, The Middle East, Central and Eastern Europe, and India.

In Greater China, we were very happy to generate double digit revenue growth for the second quarter in a row and in emerging markets outside of Greater China, we saw 25% year-over-year growth.

Gross margin was 38.4% at the high end of our guidance range. Operating margin was 29.8% of revenue. Our net income was $20.1 billion an all-time record, and up $2.2 billion over the last year. Diluted earnings per share were $3.89 also an all-time record and cash flow from operations was very strong at $28.3 billion.

During the quarter, we sold 77.3 million iPhones, the highest number ever for a 13-week quarter. Average weekly iPhone sales were up 6% compared to December quarter last year with growth in every region of the world despite the staggered launch of iPhone 10. We established all-time iPhone revenue record in nearly every market we track with double-digit growth in all of our geographic segments. iPhone ASP increased to $796 from $695 a year ago, driven primarily by the launch of iPhone 10 and the success of iPhone 8 and 8 Plus.

We exited the December quarter towards the lower end of our target range of five to seven weeks of iPhone channel inventory with less than 1 million more iPhones in the channel compared to the December quarter a year ago, in line with our growth in average weekly unit sales. Customer interest and satisfaction with iPhone are very, very strong for both consumers and business users.

The latest data from 451 Research indicates U.S. customer satisfaction ratings of 96% or higher across iPhone models. In fact, combining iPhone 8, iPhone 8 Plus and iPhone 10, consumers reported an amazing 99% satisfaction rating. And among business customers planning to purchase smartphones in the next quarter, 77% planned to purchase iPhone. Our customers are also incredibly loyal with Kantar’s latest U.S. research, reflecting a 96% iPhone loyalty rate, the highest ever measured. [Customer satisfaction is the second most important figure after active user base. Combining these two figures yields the recurring revenue value of the company. Remember what Deming said: the most important measurements for a company’s value are the multipliers of a satisfied customer and a dissatisfied customer–these numbers never appear on any financial report but they are applied to all the numbers on every report].

Turning to services. We had a terrific quarter with revenue of $8.5 billion, up 18% year-over-year and up 27% in terms of average revenue per week; that is an acceleration to the 24% services growth run rate that we experienced in the September quarter.

The App Store set a new all-time revenue record. The Store’s all-new design is off to a fantastic start with quarterly store visitors, transacting accounts and paying accounts, reaching new all-time highs. During the week beginning December 24th, a record number of customers made purchases or downloaded Apps from the App Store, spending over $890 million in that seven-day period, followed by $300 million in purchases on New Year’s day alone.

And according to App Annie’s latest report, the App Store continues to be the preferred destination for customer purchases by a very wide margin, generating nearly twice the revenue of Google Play. Across all our services offerings, paid subscriptions reached $240 million with growth of 58% over last year and they were a major contributor to the overall strong growth in services revenue[Apple has half the user base of Google Android. This is based on Google’s May 2017 report of 2 billion active devices vs. the 1.3 billion that we just got from Apple. And yet these users collectively spend twice as much on apps. This ratio of “half the users, twice the spending” has been cropping up in individual developer anecdotes and can also be seen in other metrics of engagement and consumption. This should not be surprising as it conforms to the Pareto distribution of economic value.]

As Tim mentioned, it was our best quarter ever for Apple Watch. And when we add to this us from Beats and AirPods, our total revenue from wearables was up almost 70% year-over-year. In fact, wearables were the second largest contributor to revenue growth after iPhone, which is impressive for a business that started only three years ago. In total, our other products category set a new all-time record with quarterly revenue exceeding $5 billion for the first time[Wearables now includes more than watches but watches are likely still the dominant product.]

Next, I’d like to talk about the Mac. We sold 5.1 million Macs during the December quarter, which translates to a 2% year-over-year increase in average sales per week. Mac performance was particularly strong in emerging markets with unit sales up 13% year-over-year and with all-time records in Latin America, in India, Turkey and Central and Eastern Europe. On a worldwide basis, the active install base of Macs was up double-digits year-over-year to a new record.

It was also another growth quarter for iPad. We sold 13.2 million units with average iPad sales per week up 8% over last year’s December quarter. iPad sales grew strong double-digits in many emerging markets, including Latin America, the Middle East, Central and Eastern Europe and India, as well as developed markets, including Japan, Australia and Korea. The active install base of iPad has grown every quarter since its launch in 2010, and it reached a new all-time high in December, thanks to extremely high customer loyalty and large numbers of first-time iPad users. [iPad is clearly recovering from a long decline. ASPs are rising as it’s being positioned as a PC alternative. Its low end functions are being absorbed by large screen iPhones.]

NPD indicates that iPad had 46% share of the U.S. tablet market in the December quarter, up from 36% share a year ago. And the most recent surveys from 451 Research found that among customers planning to purchase tablets within 90 days, 72% of consumers and 68% of business users planned to purchase iPads. Customer satisfaction is also very high with businesses reporting a 99% satisfaction rating for iPad.

We are seeing great traction in enterprise as businesses across industries and around the world standardize on iOS. For example, Intesa Sanpaolo, one of Europe’s leading banks, has chosen iOS as the mobile standard for its entire 70,000 employee base in Italy; choosing iOS for its security, user interface, accessibility and reliability, Intesa Sanpaolo will deploy native apps to improve employee productivity in customer support, human resources, and marketing across the company.

And LensCrafters, one of the largest optical retail brands in North America, will be using over 7,000 iPad Pros to enable digital eye exams and digital optical measurements in a personalized and interactive experience. We’re also rolling out a new initiative, called Apple AtWork to help businesses implement employee choice programs more easily and offer Apple products company-wide.

Resources from both Apple and our channel partners will enable enterprise IT and procurement teams to buy or lease Apple products more efficiently, streamline the setup of iPhone, iPad, and Mac, and deliver a seamless onboarding experience for employees. We launched the program with CDW in the U.S. last week, and we would be expanding to more channels and regions later this year.

The December quarter was extremely busy for our retail and online stores, which welcomed 538 million visitors. Traffic was particularly strong during the four-weeks following the launch of iPhone 10, up 46% over last year. And across the quarter, our stores conducted over 200,000 today at Apple sessions, covering topics including photography, music, gaming, and app development, and art and design. Just last weekend, we opened our first store in Seoul, Korea and we’re looking forward to opening our first store in Austria in a few weeks. These newest openings will mark the expansion of our retail store presence to 21 countries.

Let me now turn to our cash position. We ended the quarter with $285.1 billion in cash plus marketable securities, a sequential increase of $16.2 billion. $269 billion of this cash, or 94% of the total, was outside the United States. We issued $7 billion in debt during the quarter, bringing us to $110 billion in term-debt and $12 billion in commercial paper outstanding, for a total net cash position of $163 billion at the end of the quarter. We also returned $14.5 billion to investors during the quarter. We paid $3.3 billion in dividends and equivalents, and spent $5.1 billion on repurchases of 30.2 million Apple shares through open market transactions.

We launched a new $5 billion ASR program, resulting in initial delivery and retirement of 23.6 million shares and we retired 3.8 million shares upon the completion of our 12th ASR during the quarter. We’ve now completed over $248 billion of our $300 billion capital return program, including $176 billion in share repurchases against our announced $210 billion buyback program with $34 billion remaining under our current authorization[An updated look at Apple’s cash is shown below]

Turning to taxes. Due to the recently enacted legislation in the U.S., we estimate making a corporate income tax payment of approximately $38 billion to the U.S. government on our cumulative past foreign earnings. This amount is very similar to what we had been accruing on those earnings in our financial results through fiscal year 2017, including the $38 billion payment. We will have paid over $110 billion of corporate income tax on our total domestic and foreign earnings during the last 10 years for a cash tax rate of about 26%. [Apple has paid more tax than any company in history, and is about the make the largest single payment to the US Treasury.]
Our tax rate of 25.8% for the December quarter was close to our guidance of 25.5% as the lower U.S. statutory rate from the new legislation was effective offset by the remeasurement of deferred tax balances.

As we move ahead into the March quarter, I’d like to review our outlook, which includes the types of forward looking information that Nancy referred to at the beginning of the call; we expect revenue to be between $60 billion and $62 billion; we expect gross margin to be between 38% and 38.5%; we expect OpEx to be between $7.6 billion and $7.7 billion; we expect OI&E to be about $300 million; and we expect the tax rate to be about 15%.

Tax reform will allow us to pursue a more optimal capital structure for our company. Our current net cash position is $163 billion. And given the increased financial and operational flexibility from the access to our foreign cash, we are targeting to become approximately net cash neutral overtime. We will provide an update to our specific capital allocation plans when we report results for our second fiscal quarter, consistent with the timing of updates that we have provided in the past.

Finally, today our Board of Directors has declared a cash dividend of $0.63 per share of common stock, payable on February 15, 2018, to shareholders of record as of February 12, 2018.

  • Michel Elings

    Hope they increase buying back stock. Believe I read somewhere they will be able to retire a billion shares. Would be great for EPS and increase dividends, while adding support to SP.

    • They would be able to retire *an additional* billion beyond their current retirement rate but only if (1) price remains similar (2) they spend all 169 on re-purchase. My guess is something like this: https://twitter.com/asymco/status/960504140588896256

      (about 0.8 billion retired by spending additional $130b, yield reduction to 50% of peak share count.)

      • Sacto_Joe

        I couldn’t agree more with your chart, Horace.
        1. Apple has already retired over a billion shares from their float since the beginning of their buybacks 5 years ago
        2. Apple has a “net” of $169 B presently available. But in addition, every quarter that passes, they generate even more net cash.
        3. If we even out the “peaks [20 P/E and valleys [10 P/E]” over the last 5-6 years, Apple is basically growing it’s stock price at about the same rate it’s growing it’s EPS. Note that stock buybacks grow EPS even if net income flatlines. But never in it’s history has Apple had so much ready cash available and even more coming in. The impact on EPS is going to be profound even if net income flatlines, which it shows zero signs of doing.
        4. I’d say getting to 4 B shares total over the next 5 years is imminently possible. That would equal a ~20% drop in float from where Apple is presently.
        5. There are profound impacts on the nature of Apple stockholders if Apple continues to buy back it’s own float in anything approaching the same way it has for yet another 5 years. Long term holders will increase percentage-wise. We can already see the impact of this on market volumes. Check out the volumes 5 years ago versus the volumes today. If that’s the impact of the first billion or so, what will be the impact of the next billion or so? Will 5 million shares/day trading hands become the average 5 years from now?
        6. I am personally suspicious that the stock market drop of the last few weeks was timed to happen during Apple’s “quiet period”. What better time to begin a stampede for the cliffs by manipulators of AAPL stock? If true, what will be the impact of vastly reducing the volume of shares traded vis-a-vis creating and maintaining these stampedes 5 years from now?
        7. A lot of the “mini-stampedes” seem to have their genesis in the pre-market, when volumes are exceedingly light compared to the open market. How much of that is attributable to AAPL stock manipulation?
        8. For a true Apple long, these stampedes are actually beneficial, since they permit Apple to snap up vastly undervalued shares. As the saying goes, he who laughs last, laughs best….

  • Space Gorilla

    A little less than a year ago on Asymco there was a lengthy discussion about Apple’s 14 week quarter and how Apple didn’t actually have a great quarter because the extra week shouldn’t be counted. I assume there will be an equally robust discussion on this article about how Apple didn’t actually have a down quarter units-wise if you compare 13 to weeks to 13 weeks or 14 to 14 🙂 Just kidding, I’m sure the same people complaining about the 14 week quarter are just fine letting the narrative stand (down quarter!) this time around.

    • Over time these points are forgotten. I don’t keep adjustments as part of the long-term record of the company’s performance. It’s only interesting directionally and for a few weeks at most.

      • Space Gorilla

        Agreed. But the hand waving from some corners about a week here or there is amusing. BTW, I’m going to own that last Apple share 🙂

        I saw your comment (WSJ or Twitter I think) about Apple moving to a hardware + service subscription. I would love that. Pay X monthly and get Y hardware and services. The Apple Network of Things as a subscribed service.

      • tmay

        That comment is causing great consternation within Appleinsider comments.

        New concepts take time to digest. Give it a couple of quarters, and acceptance will be there.

      • Space Gorilla

        Yep. Most of us pay monthly on our cars, homes, cable/satellite, why not Apple stuff.

      • Sacto_Joe

        Many of us tried to remind people that you can’t make a strict comparison year over year, and not just for this reason. Apple simply doesn’t work like that. But frankly, this ignorance is a golden opportunity for Apple long term holders, even ones like myself that can no longer buy into the market; by retiring shares during these periods of panic selling, Apple is literally increasing my slice of the Apple pie. Pun very much intended.

  • Luis Alejandro Masanti

    Great analysis, as usual, thanks.

  • Sam Penrose

    An elegant and valuable way to educate us from primary sources, thank you. I am curious to know why you did not categorize ARKit as “Strategy”, given:
    1. Your emphasis on Apple’s embrace of service income.
    2. Tim’s using it to lead the App Store discussion.
    3. Jony using it to close “Introducing iPhone X”, where he presents “the device disappears” as his vision for the product.
    Do you think they don’t view ARKit as strategic?

  • Walt French

    “Augmented reality is going to revolutionize many of the experiences we have with mobile devices.”

    By marking this as Commentary, versus Strategy, are you discounting the statement?

    I personally will be very happy to see app developers make AR more than what my little imagination envisions.

  • klahanas

    Strictly from a customer (and thus regulatory) point of view, it would be a disaster. It will definitely trigger anti-competitive concerns, and rightly so. People forget that anti-trust laws exist to protect the consumer NOT companies. Sometimes it protects other companies by protecting against anti-competitive behavior and is one for the sole reason to foster competition to protect the CONSUMER.

    The argument of “we already pay monthly payments on other things” is beyond absurd, if not for the simple reason that we don’t make those payments to a single entity, even within a category. Cars for instance… we don’t make payments to one bank, or even an oligarchy of banks. These anti-competitive concerns, among banks, are still being addressed.

    The one positive I do see, again as a consumer, is that it will be an admission that you don’t really own your Apple devices.

    • Sacto_Joe

      What the Ech Eee double toothpick are you talking about?? And you might start by defining “it” in your first sentence….

      • klahanas

        Okay, fair point….

        The main subject is the Apple Subscription model. That is what “it” is.
        Now, your turn, wtf is Ech Eee double toothpick?

        Correction: “It” was not the main topic, rather that appeared in the comments. You are correct in your criticism. See.. I don’t care about financials at all, but I do care about me, the user.

      • Sacto_Joe

        Probably should have been spelled Aych, not Ech. That help? It’s no more abstruse then wtf, btw.

        And “Apple Subscription model” exists nowhere in this article….

      • klahanas

        I corrected as you were posting….

      • Sacto_Joe

        I just did a search for “Apple Subscription model” and the only two instances (now three) are from you and I….

      • klahanas

        And the Extraterrestrial Simian…

      • Sacto_Joe

        sorry – I don’t have time for this

      • klahanas

        You’re right. Let me be clear, if you only care about financial discussion, (AYCh, etc.) I’m not your person.

    • sense

      Why would it be concerning or trigger anti-competitive concerns to have a subscription business/financing? I don’t see how anything you’re saying makes any sense.

      • klahanas

        It makes Apple too powerful. Believe it or not, that’s why anti trust exists.

      • sense

        Too powerful in what sense? Power over who? How would a slightly different method of financing/payment provide this terrifying power that would need to be regulated?

      • klahanas

        Too much control over one billion users gives them unfair advantage. When these users now no longer even own their devices The ecosystem can restrict further.

        Look at HomePod, essentially Apple only. Look at streaming music, Apple Music is at a distinct advantage over others. This is MS level stuff. Even worse than that… MS never forbade anyone from coding anything. Imagine if Windows required you to purchase all your software only from MS stores.

      • sense

        Unfair advantage over whom? What kind of control are you talking about? Nothing you’re saying makes any sense or is related to the hypothetical at all (e.g. the things you talk about in the second paragraph are unrelated to how a product’s price is financed)…

      • klahanas

        Do you really need me to tell you that Apple Music is bundled with the iPhone and included without user intervention? Just yesterday Apple Music became the #1 streaming service in the US. Do you think that wasn’t at all related to this bundling? That it doesn’t have advantage over Spotify?

        That’s exactly like MS bundling Internet Explorer, which is what got them in trouble in the 90s.

        Then it gets worse, Apple has the sole store from which to buy iOS programs. In principle, and in arbitrary self serving fashion programs are forbidden. There’s nothing stopping Apple from pulling Spotify for instance. I’m not saying that they will, but the fact that they can should be highly concerning.

        Moving to a leasing model removes the user ownership aspect of the device. Under leasing, THEY own the device and basically tell YOU what you’re allowed to do. You know, like now, but legitimately.

      • sense

        You, once again, completely misunderstand the Microsoft decision (this is not exactly like that at all from a practical or legal standpoint) and just rant about things that make no sense and are unrelated to financing method.

      • klahanas

        And then you still have not shown how your position did not support MS.

        You have made a statement, you have not offered proof.

        The financing method is nothing more than a lock-in tool, if it’s Apple that’s doing the financing. Leveraging “can” be anti-competitive. How do I know? MS did it?

        Others have suggested this is optional. That is not yet known by anyone.

      • sense

        Leveraging a monopoly, yes. Point to the monopoly.

      • Is bundling illegal? Google offers a Google Music free with YouTube Red and my brothers Android asked him if he wanted to sign up when he got a new phone (AKA: bundled with Android). Amazon will bundle their music service with Prime.

        Is you implication that bundles are inherently illegal and all of these companies are all willfully breaking consumer protection laws and not one agency is stopping them?

      • klahanas

        Not at face value, but bundling can be illegal. Ask MS about it.

      • Shameer Mulji

        Anti-trust exists so that monopolies do not abuse their power, not that monopolies perse are illegal. Nothing anti-competitive about offering a subscription model. That’s absurd.

      • klahanas

        Not just monopolies, that’s but one aspect, but all anti-competitive behavior. iBooks got busted on anti-trust law. Not the only online book store….

    • Space Gorilla

      I wish you luck peddling your nonsense on Asymco. Horace made the original comment about a subscription model re: Apple, but I’m sure it’s been discussed by others as well. Apple is sorta already doing it with the iPhone and it’s working great, and not triggering any nightmares except yours apparently 🙂 I’m not going to play with you this time around. Good luck.

      • klahanas

        I don’t expect you specifically to look at his in any other way than with the outlook of a stockholder. Thus no credibility. I see you’re still playing your silly “holding he last share” fantasy. Good luck with that. Nightmares indeed…

        Thanks for not playing.

    • “Strictly from a customer (and thus regulatory) point of view, it (Apple Subscription Model) would be a disaster.”

      ???? Regulatory point of view? There is nothing illegal to draw in regulators about subscriptions (ever hear of newspapers). As for customer point of view? Every hear of Netflix? Google Music? Amazon Prime? YouTube Red?

      What are you dreaming about when you write some of your comments?

      • klahanas

        The parallels with 90s MS are staggering, and worse.

        Do any of the services bind me to any ecosystem?
        Deflect much?

        And I made it very clear that anti trust regulations exist to protect the customer.

      • I don’t think you lived through the 90’s in the MS era.

        There is no law against subscriptions. Apple’s Music Subscriptions, for example, does not bind you to the platform even though the platform might make it more convenient.

        Likewise, there is no law against platforms. The point of a platform is to offer value in staying within the platform. Amazon, Facebook, Google and Microsoft all do exactly the same with their platforms.

        For anti-trust to kick in, you have to show damage to the consumer and you have, in no possible way, demonstrated that. You have demonstrated you don’t like Apple or their business model but that does not show damage to consumers.

      • klahanas

        This is not about subscriptions, this is about forced bundling and control.

        Netflix does not force me to only use Netflix on my devices, nor do I or other subscription providers need Netflix’s permission to use other services. Same for Hulu,Youtube Red, Google Music.

        “Likewise, there is no law against platforms. The point of a platform is to offer value in staying within the platform.”
        Then come clean right now. Was it wrong to punish MS in the ’90s, because they were far less egregious than Apple is today. You can’t have it both ways, at least be consistent.

        The consumer does get harmed. Censorship stifles innovation. Monopoly over the sale of iOS apps imposes censorship and stifles competition.

        When your own (Apple) criteria for App Store Guidelines (guidelines meaning anything they want them to mean) explicitly state “Apps that duplicate functionality” are forbidden, that, by very definition forbids improving functionality.

        Now you, like Space Gorilla, may have financial interests in Apple. I speak purely as a user.

        Oh, regarding whether I was there…

        I was a advocated of, and still advocate their breakup. You could have stopped at “I don’t think”.

      • Again, you show a remedial understanding of technology, law and business.

        “Then come clean right now. Was it wrong to punish MS in the ’90s, because they were far less egregious than Apple is today.”

        Apple does not hold anywhere near the market share Microsoft did in the 90’s. iOS holds a 15%-18% world wide market share in the mobile space. Microsoft was greater than 90%. This simple fact makes your entire point naive at best and still shows no harm to consumers. NOTE: it so happens, however, the 15%-18% market share Apple holds is, by far, the most financially lucrative cut.

        “The consumer does get harmed. Censorship stifles innovation. Monopoly over the sale of iOS apps imposes censorship and stifles competition.”

        Again, this shows no understanding of the law. Censorship, in how you are applying it, does not apply in this case. Is it censorship if YouTube won’t allow child pornography even if it is legal on some unspecified country? It is well established law platform owners are allowed to regulate the content on their platform even stricter than the minimum setup by local laws.

        If you find iOS app system (by far the most successful in the mobile space) stale when compared to the nearest malware ridden competitor, you are free NOT to use iOS. Because there are thousands of options in using different tablets and phones, you have failed to show any harm to consumers.

        If you truly are a user of Apple products, you are free to choose several other platforms. Chromium, Android, Linux and Windows all spring to mind. Apple will be forced to pivot if there are enough like minded consumers. Again, however, you have yet to show any harm to consumers.

        I question you understand business because Asymco is a site based on viewing the mobile space using Apple’s business as a lens. The nature of this site attracts people interested in the business of Apple more than simply a discussion on technology.

        Like many users posting here, I have financial interests in Apple, Google, Amazon, Facebook, Johnson & Johnson, Weight Watchers and about 50 other various stocks in a distributed portfolio. I have trouble believing you have all of your money stored under your mattress.

        So again, you have simply failed to show any consumer harm by Apple’s business model from device sales, app store or music subscription that can’t easily be solved by using different platforms For example, it is possible to use a fully web based cloud solution and use nothing from the App Store.

        You disliking Apple is not the same as showing consumer harm.

      • klahanas

        I do not own any stocks through direct purchase or through purchase of a fund. I just don’t play those ponies.
        When I received stock options in the past, I sold them once sufficiently above water. I’m not a gambler. So no, I hold no stock in any publicly traded companies as of this moment. I only care about the user, and only the user.

        So to you this is about market share? I guess that’s why we have courts. Because Apple iBooks got busted under anti-trust laws without huge market share. Anti-trust is not only about monopoly.

        Each ecosystem is it’s distinct market due to technical and other barriers, that’s not the problem. When you head a 1 billion strong market, and you fully control it, it stifles competition.

        Hey, I could be an eccentric developer that doesn’t want to do business with Apple, but I have no avenue to do so. They don’t own my App, they don’t own my potential customer’s device, yet no sale, or even give away. That’s harm both to the customer and me. Not only that, they can revoke my developer’s license. But that’s not anti-competitive… right.

        And just to show you that I was around… I should be able to write my App in assembly language.

        There’s nothing more anti-competitive than censorship.

        Addendum: “The nature of this site attracts people interested in the business of Apple more than simply a discussion on technology.”

        Very true. To the point where the consumer point of view is completely ignored. That is the “Apple critical” consumer point of view.

      • “I only care about the user, and only the user.”

        No you don’t. You have only demonstrated you care only about yourself and not the user space in general. You have yet to demonstrate any consumer harm.

        “Each ecosystem is it’s distinct market due to technical and other barriers, that’s not the problem. When you head a 1 billion strong market, and you fully control it, it stifles competition.”

        That is not how it works. The mobile space is a distinct market and it is billions of users in size. It currently dominated by 2 unique platforms with Android being the largest, but lowest value, platform.

        “Hey, I could be an eccentric developer that doesn’t want to do business with Apple, but I have no avenue to do so. They don’t own my App, they don’t own my potential customer’s device, yet no sale, or even give away. That’s harm both to the customer and me.”

        You have multiple avenues to do so. There are web based apps 100% out of control from Apple. You could develop for Android, Symbian ( I am sure there are a few people still using it) or even Windows 10 for Mobile (or whatever name it is now). There is no law saying you can only develop iOS apps. As a result, you have not shown any harm to consumers or even developers. There is lots of choice. Again, just because YOU don’t like something does not mean there is a harm to consumers.

        “And just to show you that I was around… I should be able to write my App in assembly language.”

        How does this prove anything? You know a word? BTW: If you knew anything, you would also know you CAN write your app in Assembly on iOS. More than once, I have dropped to Assembly to do various SIMD operations. Given the complexities of modern APIs, however, doing an entire application in Assembly would be counter-productive.

        “Very true. To the point where the consumer point of view is completely ignored.”

        Not in any way shape or form. The business of Apple is successful because they actually pay attention to the needs of their users. They sometimes make poor decisions and don’t always communicate well, but the majority of their decisions are beneficial to the bulk of their user base.

        If, for example, you examine Android Oreo’s adoption rates, it is possible see true consumer harm. Android is a permissive environment where most limitations for distribution are reactionary. You have a single company driving the direction of the platform throwing software over the wall hoping others might use it. You have many OEMs grabbing some stable baseline and designing products around the current baseline. These OEMs then throw these products over to distributers (collecting their money in the process) and start working on the next thing. Users then buy these OEM products from distributers or cell carriers.

        Who is responsible for updates? Google? The OEM? The distributer?

        What happens is most Android phones are orphaned devices so Oreo, released in August of 2017, just passed Ice Cream Sandwiches usage rate. ICS is over 5 years old.

        If you want consumer harm, this is a prime example. By not maintaining control of the platform, billions of Android users are left exposed to serious security issues for the entire life of their product. One way to circumvent this is to maintain a tighter control on the platform. This is a consumer choice I make because it is beneficial to me.

      • klahanas

        Defending Google or Android is not my job, but it’s not censored. It’s just better from an anti-competitive stance than iOS. Many seller of hardware, many buyers, freedom to have alternate stores, no central control of the device itself.

        Google can’t decide whether Samsung supports an SD card or not.
        That’s not to say there aren’t problems, and the biggest problems is once again, the retailer. In this case the carriers.

        If you can’t see that having a single channel for iOS Apps is not anti-competitive, then I cannot convince you that 1+1=2.

        And I repeat, I don’t care about Apple’s business, I only care about the user. That you can choose to shop only from Apple’s App Store is entirely your right, whether alternate stores exist or do not. It is YOU that only wants your iOS device used as Apple prescribes, and want to impose it upon me and others like me. Worry about your own iPad, leave mine alone.

      • NOTE: It is interesting you stopped arguing subscriptions were anti-competitive and would draw regulatory pressures on Apple.

        “And I repeat, I don’t care about Apple’s business, I only care about the user.”

        I would suggest you hold the user in contempt and care only about yourself.

        There are two highly competitive platforms available in the mobile space and it is foolish to think iOS stands alone in the mobile space like you are suggesting.

        There is the more open Android with multiple hardware partners, potentially multiple sources of apps (NOTE: some devices disable side-loading) but it carries with it a significant burden on keeping devices secure and updated. For example, there are still about 500 million Android devices not patched for Stagefreight. Android has the advantage of being less expensive in general. Driven by its lower costs, Android garners between 82%-85% of the market.

        There is the more closed iOS with a single hardware vendor and a single source for native applications. This does carry limitations with exact device specification and can limit what type of applications are available on the platform but this control of the platform also allows for significantly higher levels of security, better user service and a better update policy. iOS carries about a 15%-18% of the market but its higher value proposition allows much more vibrant developer environment allowing iOS to mature about 2/3 of the developer revenue.

        There is a reason why iOS can capture significantly more value than Android and it is the very reason you claim iOS is “anti-competitive”. It is platform trust and it is seriously lacking in Android driven specifically because it is more open and poorly controlled. iOS creates a high degree of trust in its users and this piece of mind is a significant benefit to 100’s of millions of users. For those not concerned with these qualities, Android is a very viable alternative.

        The very thing you are complaining about is the very thing that has allowed development to thrive on iOS attracting a wide range of truly useful applications for the users and allowing developers to capture the vast majority of developer revenue.

      • klahanas

        I do believe the anti-competitive aspects will be explored, several times, by regulators subscription or no subscription. It’s a matter of time. The iBooks case already happened, and I remind you that Apple lost. It wasn’t even a case of monopoly.

        But as far as the subscription possibilities goes, it’s already been suggested as possibly optional, so there’s nothing further to talk about, until the shoe drops. It could be as dire as I fear, or it can be less so. For me as a user with Apple, experience has taught me that it’s safer to be cynical.

        You’re suggestion of contempt is duly noted and filed in the suggestion box. I repeat there are two distinct, mutually incompatible markets that dominate the market right now. iOS and Android. Only one, IMO, is behaving in an anti-competitive manner by forced and exclusive bundling .

        Note: Some Android devices come with sideloading disabled by default, but it remains available. ANd it’s a good move.

        By the way, I would favor OS control and full accountability of Android by Google, like Windows had. As long as it remains “open access”. The OS is still just one piece of the device, and just one piece of the ecosystem. I agree Google has their own agenda, do you see me cheering for them?

        But first things first. Right now Android is the more “PC like” of the mobile OSs.

        Now, in a customer friendly sense, in related news… Who does not having a line-in on the HomePad Serve. Don’t bother telling me about Apple’s rights, I acknowledge they have the right. Who does it help by not having it? Who does it potentially hurt? These scenarios abound in iOS, and they HURT the consumer.

      • collusion

        The iBooks case was about collusion with publishers to raise pricing. If the deals had been negotiated separately they would have been legal. You’re really misrepresenting it and it had nothing to do with whether Apple was a monopoly or not, nor this hypothetical situation.

        And, of course, you can sideload on an iOS device. Simply compile the source in Xcode and send it to your device, no developer fee required.

        Who does not having a microwave built into HomePod serve? Who does it help by not having it? Who does it potentially hurt?

      • klahanas

        A) Collusion is under anti trust. You’re proving my case it’s not just about monopoly.

        B) You need a developers license to compile and distribute for iOS. Or should I give grandma my source code. That proves harm.

        C) Because speakers have traditionally contained microwaves for broad interoperability. Duh!

        Thanks for playing.

      • collusion

        A) No idea what this has to do with anything anyone said. How is a subscription financing model “collusion” now? What are you talking about…

        B) Sure, give your grandmother your source code. Now you’re arguing ease-of-sideload rather than possibility? Where is the bar?

        C) Oh, so once included means something should be included forever? Everything should contain every feature, connector, etc from their entire history? The iPod should have included a vinyl record player and a quarter inch jack and a DIN connector and a TOSLINK and an XLR and an RCA and a…

      • collusion

        Tesla cars should take gasoline also, your DVD player should play VHS tapes, your electric light globes should optionally run on natural gas…

      • klahanas

        A) You brought up collusion in the iBooks example. That was the context.
        B) No it’s harmful by not only causing me to expose my code, but MY Grandma doesn’t have the skills to compile. It gives an artificial advantage to App Store provided programs.
        C) Things should be obsoleted in their time. Not actively obsoleted. Again, as a buyer, why should i have to buy an Apple TV just to use it as a speaker for my TV? I know why Apple would want me to, but why should I be supportive of that?

      • collusion

        A) In fact, you bought up the irrelevant iBooks example to try to somehow make the case that subscriptions are illegal.

        B) So now your theoretical global world government is mandating that everything be made as easy as possible, not just possible?

        C) And you’ll be litigating when something is “actively” obsoleted as well? You’re going to be very busy. If you want a speaker for your TV then why are you buying a HomePod and an Apple TV if you don’t want either or both of them…very strange behaviour. Are you such a huge Apple fan that you haven’t noticed that other companies make consumer electronics?

      • klahanas

        A) Context my friend, I brought up iBooks as an example of anti-trust law having teeth, without monopoly charges, which is but one aspect.
        B) How about equitably possible?
        C) I like to buy “best of breed”, where possible. If the speaker played nice, with at least a line-in, I would buy it. I don’t do the fan thing… And actually I’m far more interested in modular versus integrated solutions. Currently I have three Echo Dots, connected to different speakers. The best one is my B&W A7. I’m ONLY interested in it as a speaker. I have two iPad Pros and I don’t think I used Siri twice.

      • collusion

        So you…purchased something else? Undermining the whole monopoly thing entirely? This is a shocking turn in the discussion.

      • klahanas

        I already had something else….

      • collusion

        Sure, so what are you saying here? That every product should be required to have the features you exactly want?

      • klahanas

        I should be allowed to use my hardware to the most of it’s technical abilities without interference from my supplier. So yes, just as I can say whatever I want on the device, I should be free to code on it, buy code from others, and (other than warranty) not be forced into a continued relationship beyond my initial purchase.

      • klahanas

        I don’t think that including “standard” features such as a line-in hole id “anything I want”. I do think leaving them out excludes capabilities of the device and that it’s a purposeful, anti-consumer agenda. Lock in is bad…. BY+TW, the same walls lock other’s out.
        If you want this superior sounding speaker (assumed true), you need to buy an iOS device to use it. I have iOS devices, but I want to use it with my Zune, am I wrong to want to do so? It’s a shortcoming that I can’t.

        Edit: BTW, the device contains a Bluetooth chip, but it’s not enabled for streaming. Thus the device is crippled in that regard. Who owns that chip? Why the owner of the device, of course. Why does the device contain a component it’s owner can’t use as intended? They certainly paid for it!

        Should this thing get jailbroken, I will laugh my ass off…

      • NOTE: Some Android devices come with side loading disabled. Period. As in unable to turn it on.

        “I repeat there are two distinct, mutually incompatible markets that dominate the [mobile] market right now.”

        I think they browse the same WWW. They both have almost identical Facebook, What’s App, Pokemon Go, Telegram, Twitter and Snapchat apps. You can use Google Maps on iOS and use Apple maps on Android. Google Music, Amazon’s music service and Apple Music are available on both platforms.

        While they use different APIs for native app support, the two platforms are far from “incompatible”. They differ in capabilities but there is a high level of data interchange available between them.

        “The OS is still just one piece of the device, and just one piece of the ecosystem. I agree Google has their own agenda, do you see me cheering for them?”

        In your post history, yes.

        But you miss that Apple is a Systems Design company. They design integrated systems of devices including hardware, software, protocols and interconnects. They use a mix of open standards, industry standards and proprietary designs in this process. Parts of the design stack, like Darwin, are open sourced under the generous APSL license (NOTE: I find GNU-GPL evil, hideous and beyond contempt) but other parts of the design stack, like the Secure Enclave, are kept under tight wraps.

        Apple is not about creating highly modular mix and match systems for OEMs. It is not their business model.

        “Don’t bother telling me about Apple’s rights, I acknowledge they have the right. Who does it help by not having it? Who does it potentially hurt? These scenarios abound in iOS, and they HURT the consumer.”

        Again, there is no hurt to the consumer. None. Zip. Ziltch.

        The HomePod does not have a line-in and it this is a feature you need, then DO NOT BUY IT! It is obvious Apple favors wireless connections over wired. Wired connections are additional high stress solder joints with potential for breakage. It makes sense to look at your target market and make design decisions on exactly what features are needed for the product. Likewise, if the vision is for a wireless future, product design decisions can be made to nudge people in that direction. Apple, like all companies, fails in this assessment from time to time. Their success ratio, however, is actually very high.

        If Apple had not done this with the iPhone, we would still be using chicklet keyboards.

      • klahanas

        Okay let’s say that some have side loading turned off period. I would advise such a buyer to buy another model, even (gasp) an iPhone if that’s the case. Fortunately Android does not confine one to one model or even one OEM. There is internal competition.

        Who cares what Apple favors, if I can’t play my Zune on a HomePad, or even my 1st gen iPod, it hurts me. Or I’m forced to do without the sound and Siri. That doesn’t strike me as customer friendly. The device should play nicely with other things. But as you point out, Apple is a systems company… what you left out is their own self serving agenda. Would the HomePad not work with the iPhone if hooked up to my stereo receiver by wire?

        Nudge… is that like corralled? I hate being corralled, it harms me… 😉

      • I want to know what individual is holding a gun to your head forcing you to buy a HomePod?

        I am guessing no one so any “harm” you state happening to you being caused by the HomePod is an outright lie. If you need to play your Zune on a speaker, you are not going to buy a home pod.

        You seem to hold in contempt people (AKA users) wanting to use technology as an appliance. You seem to believe everyone should be their own I.T. Department with infinite control over their device. Even if, as I have pointed out, such control opens 100’s of millions of users to potential security issues.

        If you want to change your own digital oil, apply after market Super Chargers and change the chrome on your homepage, the industry has Android.

        If you want a solid stock system that is safe, fast and secure with excellent service the industry has iOS.

        Why do you dislike choice and options?

        Nudged is nothing like corralled.
        Nudged: to push slightly or gently, especially with the elbow, to get someone’s attention, prod someone into action, etc.

        Corralled: to confine in or as if in a corral.

        BTW: you should read “The Paradox of Choice”. It might let you understand yourself and others decisions better.

      • klahanas

        Holding a gun?
        I want to get one or two and the BS limitations are stopping me!
        If I were to buy one it artificially forces me to buy all new other devices, and still I wouldn’t have the latitude I have today. Does Apple make a turntable?
        I don’t want to be “owned” by the ecosystem, I just want to buy a gizmo.
        Or is this not worth expressing because everything has to be “good for Apple”?

      • Then don’t get one. I don’t plan on it because I want it to be more flexible on music sources as well (but I couldn’t care less about wired inputs. Seriously, why should I be forced to pay for a wired input I will never use? That would harm me as a consumer? :-). It would be perfect for my sister, however.

        That and I already have a full house sound solution using AirPlay driving Krell amplifiers finally connected a pair of Logan’s. Likewise, the house has speakers in every room also AirPlay controlled. It was brain dead simple to setup.

      • klahanas

        “In your post history yes…”

        Do point it out, this I want to see. Show me my cheerleading.

        As for the rest, your profile says that you’re a developer. Thus, I can surely trust you know the difference between native compiled code and the Web and Web Apps. That’s just not an honest answer coming from you.

        Apple is not about creating highly modular mix and match systems for OEMs. It is not their business model.”

        No their business model is a locked-in, mandatory control freak IT department. I say that should be optional to the user. It’s called critique. But you serve vested interests, so why are we still talking?

        You can only argue that they have the right to be a monopoly within iOS, not whether they are one.

      • “No their business model is a locked-in, mandatory control freak IT department. I say that should be optional to the user. It’s called critique. But you serve vested interests, so why are we still talking?”

        Every business is about “lock-in” Netflix (you want your Stranger Things), Amazon (Prime anyone), Google (their moat is MASSIVE) and dozens of others. There are levels of interoperability, like how I disproved your incompatible systems argument, and there are levels of proprietary lock-in.

        So what? It’s called competition. The other option is idiotic regulations. For example, because of a flawed German study Europe mandated office equipment to be off-white or light grey; we were stuck with beige computers for decades. Ugh.

        Again, you hold in contempt 100’s of millions of users that don’t WANT to be their own I.T. department. There are 100’s of millions of users wanting to use technology as an appliance. I have pointed to the significant advantages of removing some consumer choice when it comes to managing technology and you simply ignore it. These are real and tangible benefits and you want to remove these from 100’s of millions of users simply because you hold them in contempt.

        Why do you claim to love choice when all you want to do is eliminate choice?

        As for your cheerleading, I am sure you know how to use DuckDuckGo to search through the Disqus history.

      • klahanas

        How about you DuckDuckGo and back your own words. That burden is on you. I’m very curious to see what you consider cheerleading.

        Does Netflix lock me in or out of anything? Absurd. Look Steven Netflix , Amazon Video, and Play Video open and running on the same device. I know, far out right? It’s not sorcery…

        There is zero contempt because I don’t suggest ANY Apple user do anything different than they do now, if they so choose. You show contempt to users.

        The only choice you support is the choice made for you. The IT choice should have a “go away” mode.

      • NonyAsip
      • klahanas

        If it’s still mandatory Apple App store, no sale.
        Otherwise I would take 2!

      • klahanas

        Look what I just stumbled upon!

        I thought I would share.

        https://gizmodo.com/apple-music-was-always-going-to-win-1822725051

      • Space Gorilla

        Okay, I have to step in for a moment. You didn’t just “stumble” upon this article about Apple Music a few minutes ago (Wednesday morning). It occurred to me you might be lying so I just checked macdailynews.com where you post as applecynic, and sure enough you commented on this very article a day ago (Tuesday around noon):

        http://macdailynews.com/2018/02/06/apple-music-was-always-going-to-win/

        It’s one thing to pollute Asymco with nonsense, now you’re being disingenuous.

      • klahanas

        Nope! Wrong again! Or is it still….?

        I did provide a wisecrack to a user about their state of origin, but only now did I click through and read the article.

        But that’s okay, I’m happy to give Gizmodo the credit. It’s the content that matters and that does not change anything I said. They crapped all over your suggestion better than I ever could have anyway.

      • Space Gorilla

        Sure… whatever you say applecynic. BTW, what suggestion did I make that was “crapped all over”?

      • klahanas

        You started this very line of conversation, in this very thread.

        ” saw your comment (WSJ or Twitter I think) about Apple moving to a hardware + service subscription. I would love that. Pay X monthly and get Y hardware and services. The Apple Network of Things as a subscribed service.”

        Now who’s being disingenuous…?

      • Space Gorilla

        Yes, I referenced Horace’s suggestion, but I did not suggest a subscription service. I agreed it was a good idea. It was actually you that then went off on a rant about anti-trust etc, with many other people, based on my reply to Horace. I suppose it is flattering that you follow me and read everything I write. But it is you that have gone off topic in this thread, not me.

      • klahanas

        Well you flatter applecynic, everytime you mention the name. Let me flatter you further… “mouse”!

      • Space Gorilla

        Heh, looking at your original comment you even referenced something I said to Horace “Apple Network of Things” when you said “Because we all love our cable companies too! They lease us equipment, content, and a “Cable Company Network of Things”.

        You follow me around like a lost puppy.

      • klahanas

        Funny applecynic told me the same thing about you.
        My comment was a parody.

      • Space Gorilla

        Please don’t tell me this lame reply is the best you can do. So disappointing. C’est la vie.

      • klahanas

        What was that! French?

        Let me get Obarthelemey for you.
        Bonne journée

      • klahanas

        No, Dediu said it elsewhere, you referenced it here (off topic by the way) and supported it. It’s on you!

      • klahanas

        On the censorship point, no it’s NOT censorship for YouTube to forbid pornography. But that stops at Youtube. Youtube cannot dictate to other sites, nor forbid other sites from existing.

        But the Mac, PC, Linux, permits pornography from other legal sources. They cannot exclude, taste aside, other legal sources.

      • Ian Ollmann

        As a practical matter, sometimes a company does not set out to force users to only use their products. It is just easier for them to do it that way. If I already have code for my proprietary format that I can just recompile and run on my device, I can put that in in a few weeks. Done, and probably done first.

        If I want to have amazon content on my device, then I have to get amazon to spend money to port their content to my device. They may decline to do so. They may just be slow to do so because they are working on something else. They may decide the Amazon Fire device needs sole access to the content and refuse to do the work. There is not a lot I can do about it if they refuse to do the work. I can’t *make* them ship their stuff on my platform. It’s theirs. I could possibly pay them to do it, but this is going to be really expensive and will cost me money. I’m probably only going to do that if my product is DOA without it.

        The proprietary standard is sometimes just “something is better than nothing” It doesn’t have to always be an elaborate scheme intended to manipulate the customer into highly profitable lock-in. You have to look at it as a case by case basis and even then wait and see what materializes over time and how profitable it is to determine intent.

      • klahanas

        I would agree with you, if otherwise legitimate applications weren’t already disallowed. Scores of them.

        I have no problem if someone wants Apple to pre-screen and pre-approve their Apps. My issue is that I don’t want Apple between me and my software provider. Frankly, if sideloading, were available, I would have no software gripe at all with Apple.

      • klahanas

        PS- Here’s a subscription model and ecosystem done right… Old ’90s AOL. Safe, curated, and you could leave and enter on your own hardware at will.

      • AOL was also censored and limited internet access. By you definition, that is anti-consumer.

      • klahanas

        Okay… slow down… ‘casue you’re skipping…
        Now finish reading the seconds sentence. I know it’s TL;DR, but try….
        Let me help, it has to do with the ecosystem…

    • Shameer Mulji

      How is an Apple Subscription Model anti-competitive as long as it’s offered as an option to non-subscription? It’s not an either / or situation.

      • klahanas

        We now have a second generation hypothetical…

        The first case does not (yet) exist and the option you suggest is not at all clear. Ant-trust looks at impact on the market for the consumer, that scenario is just too hypothetical.

    • Kizedek

      “The argument of ‘we already pay monthly payments on other things’ is beyond absurd…”

      And we still wouldn’t be paying a single entity. Hardware leased by Apple, for example, would be (and remain) one more option among many. Even now, Apple users regularly pay other entities like Mobile providers or resellers for services that include financing and even lease-like arrangements where hardware upgrades are included.

      Apple would simply be in a position to offer another such service. We would still be paying other entities for separate elements outside the Apple agreement — such as MS for Office apps (currently I have an O365 subscription in my name, therefore I can download and install Office Apps to up to 5 Macs plus iOS devices, and they are regularly updated outside the Mac App Store.

      The Apple service would presumably be a nice option for any number of reasons — continuity and simplicity of restoring data and settings to the next Mac; leasing (vs financing) possibly being more beneficial for users with their own businesses; not having to worry about depreciation and hassle of selling older Macs, etc.

      I could see it as a great option for a second Mac. Continue to use the paid-for desktop iMac for years to come, but have a laptop that is continually upgraded as an ongoing business expense that doesn’t involve an owned asset.

      You keep comparing to an MS situation, saying the anti-competitive angles would be much worse. Yet nobody here really sees it as you do, apparently. For example, the type of anti-competitive thing that MS seemed to do that was investigated and stopped, would be certain practices to do with the way leases/subscriptions/service agreements were issued to businesses: “Oh, you have 100 workers on site, but 40 use Macs, do they? Well, we are charging for 100 seats anyway, so you might as well supply them with Windows PCs”. That kind of thing.

      • klahanas

        “And we still wouldn’t be paying a single entity. Hardware leased by Apple, for example, would be (and remain) one more option among many.”

        That was not proposed, nor made clear. When it comes to Apple I’ve learned, cynically, not to take anything for granted. You don’t know such a hypothetical either. If it’s but one option, hypothetically, then it’s less an issue, I agree. But we don’t know that.

        “We would still be paying other entities for separate elements outside the Apple agreement — such as MS for Office apps (currently I have an O365 subscription in my name”

        I have two subscriptions, and I still had to get the Office Apps from the Apple App Store, not the MS App Store. And I seem to remember a row over MS not charging for the iOS Apps, if there was a PC subscription. I love it when a-holes fight. 🙂

        I agree with you on MSs anti-competitive practices, and I tell you, factually, Apple can, and has, forbidden applications to exist, by monopolizing the channel. There is NOTHING more anti-competitive than forbidding something by fiat. This is where you and I will be perpetually stuck, but I have “math” on my side. 😉

      • fiat

        They’re not “forbidding something by fiat” because they don’t have a monopoly in e.g. the phone market and alternatives exist. This is your fundamental misunderstanding of competition law and the actual market amongst other things.

      • klahanas

        Your fundamental misunderstanding is… to use the tired old example…I decide whether Flash (or confederate flags, or lampooning public figures, etc.) sucks and I take it up with the publisher, not my device manufacturer.

        New rule… Samsung decides that only media purchased through the Samsung Store can be played on Samsung TVs. That wouldn’t be anti-competitive at all, and no consumers would be harmed.

      • fiat

        Exactly, that wouldn’t be legally anti-competitive in any jurisdiction I’m aware of because (as far as I’m aware) Samsung doesn’t have a monopoly in any market. Of course, if they were taking this functionality away from already-sold devices then that would probably be covered by various consumer laws about crippling and false advertising, but it would be perfectly fine for them to release a new TV that only played Samsung content. It would just fail in the market after consumers made an informed decision about it.

      • klahanas

        Appreciate the thoughtful response, but I do think you’re fixated on a single aspect of anti-trust-monopoly. There’s much more to it than that.
        I for one would be crucifying Samsung (as if I could) even though I own several of them. You made it clear you would be defending the practice.

      • fiat

        Sure, you can feel however you want about it, obviously. From a legal and practical standpoint, however, this kind of thing exists in many forms all across the economy so I’m not sure why your focus is on one hypothetical case. For example, the television example you invented already basically exists for e.g. Blu-ray discs, where you need to license and comply with a whole suite of patents from audiovisual codecs, to DRM, to the physical structure of the pits on the disc to produce a valid disc. Your TV needs to implement HDCP for the image to be displayed. AACS restricts access to the data to certain devices. Region coding determines in which countries you can play back the disc you bought, etc.

      • klahanas

        Patents are exempt from anti-trust considerations. They are a government granted monopoly for an invention, based on certain criteria, are time and scope limited, and are given in exchange for disclosure.

        Yes BluRay had issues but not anticompetitive issues. It was a terrible implementation, now largely dead. Still DHCP was licensed (under FRAND maybe) and no one was forbidden from getting it. Region coding is plain evil, but an appeasement to the MPAA. We don’t defend these things do we? Not I. Behalf of the consumer anyway….

      • fiat

        Why do you phrase everything as “defending” when the question everyone is asking is: a) why are these things different from thousands of other business models and b) why do you think they would be illegal and in what jurisdiction?

      • klahanas

        Because you and other Apple fans defend a behavior that limits other’s usage which need not impact yours. You defend Apple over other fellow users. It should be no skin off your nose.

      • fiat

        Once again, you’ve phrased this as “defending” which is a rather useless framing. I’ve only explained simple facts, but for some reason you think that anyone who doesn’t agree with your opinion is conspiring against you to defend something or other for some reason (unclear).

      • klahanas

        That’s because I think my opinion in this matter serves a broader swath of customers, without impacting those of your opinion.

        Every purchase is a negotiation between a buyer and a seller. You sound like a buyer that’s being supportive of(defending) the seller and their agenda, at the exclusion of others.

        Again, if HomePad had a line-in it impacts you as a customer, not one iota. Yet you keep bringing up Apple’s “right” to do so. That’s defending and is in context. You are giving preferential treatment to Apple over the customer.

      • fiat

        No, I’m simply pointing out the reality of the global regulatory and financial system as it exists today. If you want to reform the world in your image then this issue in this comment section isn’t a great place to start.

        What is your last paragraph talking about? Where did I say anything about HomePod having line-in, or indeed mention HomePod at all? And if I had done so, how would pointing out that someone has the right to do something equate to defending their choice to do so?

      • klahanas

        I’m precisely allowing the world to be formed in it’s own (not Apple’s) vision. Open access> Staying within the walls is but one choice.
        My last paragraph was clear.

      • Kizedek

        “The World” ?
        You give Apple a lot of credit.
        That’s right, it’s one choice, that less than half the world is making: to purchase an appliance for a phone instead of a hobby kit for a phone.

        And you apparently want to regulate that choice out of existence. Sorry, but many don’t like your vision of the world, either.

      • klahanas

        Then don’t get apps from anywhere but Apple. Keep things, for yourself, as they are on YOUR iPhone.

      • Kizedek

        Of course you are intentionally missing the point. It’s an integrated product, hardware and software (which, as has been pointed out, enables a lot of the benefits that make it popular and successful).

        Obviously there is a market for it among smartphone users. And, equally obviously, others who currently enable hobby-kits by providing lowest-common-denominator OS’s would like to go that route and create integrated products, too –– despite writing off billions, or trying it for a second time with a second hardware acquisition.

        Again, when these hobby-kit enablers successfully create a successful appliance, bring your case again — when the “world” has only appliances available, and there are no hobby kits to choose from.

      • klahanas

        Nah, I would rather take a legitimate jailbreak feature directly from Apple. It should be no skin off your nose.

      • fiat

        Yes, exactly, staying within the walls is but one choice. Purchase one of the hundreds of other phones.

      • klahanas

        I mean on one’s own property, their own iPhone, which they, wait for it…., own.

        The leasing model at least would take away ownership too. Then Apple can hire all thos developers as employees or contractors, assume all the risk, and then yes, they can have a legitimately closed ecosystem.

      • fiat

        Not sure what this means. Purchasing something doesn’t entitle you to do whatever you want with it and/or, even further, for the designer of the product to specifically design it to allow you to do whatever you want.

      • klahanas

        “Purchasing something doesn’t entitle you to do whatever you want with it ”
        That’s exactly what it means…within the law… not the seller’s agenda.

        Ownership confers rights. Proof Apple tried to make jailbreaking illegal and failed. So they just make it harder to jailbreak.

      • Kizedek

        Yeah, ownership also entails obligations. Uniquely among tech companies who produce an OS, Apple actually takes ownership of its OS in more than name only. That’s why they can support hundreds of millions of users really well, while others can’t hope to support a smaller number.

        Apple has to try and get a line drawn somewhere, so that they have a feasible chance to provide the support they would like to, and which people have come to appreciate the value of and buy their products for (at steady ASP).

        It’s like trademark, “you have to defend it or lose it.” So, they draw as hard a line as they can at jailbreaking so they have a hope of providing support for everyone, instead of passing it off to a supplier, OEM, carrier, etc. as others do in an endless circle of passing the buck.

        I don’t think Apple has ever “gone after” a jailbreaker. In fact, they have the chance to support jailbreakers when asked nicely. They just don’t need to be obligated to support demanding jailbreakers, hence drawing a line.

      • Ian Ollmann

        One of you is arguing about what he thinks is right. Another one is simply reporting on facts of law. That the morality speaker doesn’t understand that is the cause of the disconnect.

        Little known fact: Law only resembles morality some of the time.

      • klahanas

        I’m no lawyer, and all I know about anti-trust law is what’s been happening in computers.
        MS got in big trouble by excessive bundling. In particular of bundling Internet Explorer. They also forced OEMs to pay for Windows, even if Linux was pre-loaded. They used undocumented function calls in Office, giving them a competitive advantage. They got in a lot of trouble. I for one favored breaking them up. In-bundling them, if you will.
        And still this pales with what Apple is doing hardware, OS, software distribution with flat out forbidding some applications. Bad as MS ever was (and they were) they never forbade ANY application.
        Apple not only forbids some applications, they forbid entire programming languages, on iOS. They also require a developer’s license to write anything.
        Then the argument of MSs monopoly position comes up as a differentiator, in protection of Apple. What was MSs 90%+ market share then? A billion users? Guess what iOS market penetration is…
        First of all, an improper practice is improper period. But anti-trust we are told also encompasses anti-competitive practices.
        So, if the law only resembles morality, it should resemble it equitably.

      • klahanas

        If it’s not allowed in the App Store, by fiat, then it’s out. It’s censored. There is a monopoly on App Stores on iOS. It’s not even up for debate, all you can do is to defend their right to the App Store monopoly for iOS.

      • fiat

        By this (seemingly useless to me) line of reasoning, they also have the monopoly on deciding what the iPhone is made from and a monopoly on deciding what modem chip goes in there and the monopoly on what colours it is supplied in. Again, they don’t have monopoly share in any device market. They can’t be said to have a monopoly on what applications you can install on a mobile phone, because they don’t have a monopoly on mobile phones. This is a simple precondition.

      • klahanas

        They have a monopoly “within” iOS which is a market 1 billion strong.

      • fiat

        Sure, and I have a monopsony on what brand of washing detergent I buy. Should we get the various consumer and competition organisations involved in my supermarket visits? What is the point of this “if you ignore all the competition then there is no competition” style narrowing?

      • klahanas

        You can buy whatever you want… except you can’t…
        Find a fitting analogy, because Apple doesn’t own your device, you do.

      • fiat

        Look up what a “monopsony” is.

        Again, what is the point of this “if you ignore all the competition then there is no competition” style narrowing?

      • klahanas

        Because the completion (for apps) is non existent, there is nothing to ignore. Btw -poly is to sell, -psony is to buy. Same situation, a monopoly is exactly the same as a monopsony.

      • fiat

        So there’s no other mobile phones you can install apps on? Weird.

        Oh, don’t worry, I know what it means. That’s why I correctly used it in the earlier post.

      • klahanas

        Okay, I looked it up, I was basing my understanding before on the roots of the Greek words. Always a mistake with business terms…
        So a monopsony is a buyers market, there is one buyer, which is exactly what iOS isn’t. There is one App seller, bundled with the device. At least you indirectly admit it’s a market….

      • fiat

        Please re-read my comment because this response is nonsense. I never suggested that iOS was a monopsony…

      • klahanas

        Then how is the term at all relevant. O was either wrong the first time or the second. Not both. You broug jt up the word.

      • fiat

        I think you can work it out. I believe in you. Hint: it’s related to the concept of uselessly narrowing the field of competition until there is no competition.

      • klahanas

        Or I can ignore it. It’s not incumbent on me to clarify your points.

      • fiat

        It’s incumbent upon all members of a discussion to make a best-effort attempt at understanding what people say, instead of making irrelevant statements or revisiting things that were already covered.

      • klahanas

        I made an effort and failed.

        “Look up what a “monopsony” is.”
        I did. Who is this “buyers market” of which you speak?
        But within the 1 billion strong iOS market there IS a monopoly App Store….
        So… clarify what you meant. I have clarified here and before that iOS is it’s own market, Android, Windows, MacOS, Linex their own. You want me to count them as competitiors for iOS apps? That’s silly isn’t it? I can’t get iOS apps from them.

      • fiat

        To quote myself, “Sure, and I have a monopsony on what brand of washing detergent I buy. Should we get the various consumer and competition organisations involved in my supermarket visits? What is the point of this “if you ignore all the competition then there is no competition” style narrowing?”

        Saying you can’t buy iOS apps from anyone else and therefore there is some sort of monopoly is like saying you can’t buy Coke from PepsiCo so the Coca-Cola company has a monopoly in the soft drink market. It doesn’t make any sense and doesn’t reflect how monopoly power is considered in any legal/regulatory framework that I’m aware of.

      • klahanas

        Absolutely not, and you’re not being honest about it. I not only can buy Coke or Pepsi, but there are multiple competing stores that carry them both simultaneously.
        I can gas my car at any gas station and drive it on any road too. I can even choose which radio station to listen to.

      • fiat

        I’m being extremely honest. Yes, and there are a number of carriers that stock both iPhones and Android phones. What is your point?

      • klahanas

        Except we’re talking about App sales, and App stores…not phones. Honestly!

      • fiat

        Sure, buy another phone, use another app store. If the restaurant you’re in doesn’t sell Coke, go to a different one. If you somehow buy a Tesla and then realise it doesn’t take your favourite gasoline, trade it in for an ICE car.

      • klahanas

        You’re not getting it, and you also highlight why I say your defending.
        I want alternatives to the Apple App Store for my iPad. I want to be able to buy things Apple doesn’t approve of. Or at least give me and other user’s the keys to the gate of our individual Walled Garden. No one would be forced to use those keys.

      • fiat

        Everyone knows and understands what you want, what they don’t understand is why you think anyone should be obligated to supply it to you. Most people learn this lesson at a young age.

      • klahanas

        As a fellow user, I don’t understand why you care about what I say. It does not impact you negatively.

        I think, as a customer, critique is appropriate. Censorship iand restrictive manipulation is bad. The most fundamental of reasons.

      • fiat

        Oh, to be clear, I don’t care about what you say or think here, and I apologise if I gave you that impression. I’m just trying to explain that just because you want something doesn’t mean it’s going to happen, through regulation or otherwise. This goes back to that lesson I mentioned earlier, that most people learn early in life.

      • klahanas

        And it doesn’t mean it won’t…
        There’s no certainty here, while as I highlight there is cause.

  • Horace,

    Question. What does: “we are targeting to become approximately net cash neutral overtime” mean? I read this as increased investments without a growing cash pile.

    • Sacto_Joe

      What it means, as I’ve been given to understand, is that they will keep exactly as much cash as they have debt. Does it also mean that, as that debt disappears, the cash will become “available”? Or does it mean they will not grow their cash stash any bigger than their debt is right now? About that I’m not sure. However, I’d think they’d always want to keep a stash of “black powder” for exigencies, so I’d incline towards the latter.

      • Shameer Mulji

        It means there’s gonna be a lot more share buyback.

    • presume

      Looking at the chart, they’ve already been approximately flat on net cash since late 2012, so I think they’ve been meeting that definition for over 5 years. I presume it just means they’re going to increase the capital return program temporarily to bring the cash on hand down to somewhere around $100b

  • Steve Cronin

    The Installed Base Related Purchasing chart shows an item labelled ‘App Billings’ and another labelled ‘ Licensing, other income’. It seems that you merge these two into ‘Services’, is that correct? Does ‘App Billings’ == Apple 30% of a developer sale, or is there more embedded in ‘App Billings’? An Apple Pay transaction creates revenue in the ‘App’ bucket or the ‘Licensing’ bucket?

  • Matt S

    typo/grammar: overtime should be “over time.”

  • BMc

    Very useful column Horace – thanks!

    Too bad much of the comments section was hijacked by the all-too-common troll.

    • katherine anderson

      Ode to a Troll:
      He was a known orator in the Greek city of Chalcedon. He appears in Athens in Socrates’ time, and so appears in Plato’s Republic … Thrasymachus, an angry, troublesome soul. A resentful, would-be ruler of Chalcedon, who, according to Plato, believed all men were out to obtain power for its own sake, and not for the purpose of building a just society for the benefit of a greater good. Injustice for Thrasymachus was more profitable, and therefore more realistic than virtue.

      It’s a mystery why Thrasymachus makes his appearance trolling the city of Athens, apart from wanting to seek out its most prominent citizens to vent his disappointment with the world, and to rage against it. He accuses Socrates of being “slow to learn.”

      In the beginning Socrates, in his teasing generosity, is a willing sparing partner. He questions Thrasymachus relentlessly, examines his words, analyses his reasoning, interrogates him further. It was no ordinary matter for Socrates to discuss the right conduct of life.

      By the end of Book 1 in the Republic, Thrasymachus, muddled by his own argument, abandons Socrates. “Excellent answers”, says Socrates sarcastically “nodding assent and nodding dissent at the same time”.

      … and so, without the energizing effects of the sparing, Thrasymachus retreats into silence … and probable exhaustion from all the negativity and rage, with only a rare brief appearance in the Republic again.

      • Space Gorilla

        That’s good advice not to engage the troll, advice I should take. Some quick math shows slightly more than 45 percent of the comments on this article were from a single troll, and it’s pretty much all nonsense, very little intelligent discussion. I’m actually surprised he hasn’t already been back with a reply to your Ode to a Troll comment.

      • katherine anderson

        He accuses commenters like yourself of vested interests, while planting the suggestion of anti-competitive business practices, and other scenarios that supposedly abound in iOS and “HURT the consumer” … which all but declares that this web-site also has vested interests.

        Ironically, it’s your knowledge and generosity that makes you the best kind of sparing partner for the troll, but he won’t succeed in turning people away.

      • Space Gorilla

        If you want to waste a few minutes at some point, go check out his comments on macdailynews.com where he uses the name “applecynic”. I don’t read macdailynews regularly and I’ve never commented (it’s a cesspool mostly) but once in a while it’s quite entertaining to read the comments. Just crazy stuff, fans and anti-fans slinging mud at each other. Then again, I imagine you have better things to do 🙂