My thanks to Kirk Burgess for providing this transcript:
Horace Dediu interview on CNBC Asia Cash Flow show – 10th September 2013
Chloe Cho (CNBC): Take us through what Apple is exactly trying to do?
Horace Dediu: Well, this is the first time in the six years of this competition in the smartphone market that Apple has broadened its portfolio. We have seen only a single product launch every year–this is very unorthodox in the industry. Normally each competitor [ranges] dozens of devices. Apple’s entry has been asymmetric from the start, and now in its sixth year we are expecting to see, finally, a broadening perhaps into two separate products. The question will be whether [there will be] a significantly lower price point for the so-called 5C and whether that will change the average selling price overall for the portfolio. The average selling price has been remarkably steady, and remarkably high, typically around $600 for the duration of this products life. Something, again, unprecedented. My expectation is the new price point will be quite a bit lower than $600, starting with about $450, it might drop a bit further, [which] would cause the overall price range to come down as we have seen with the iPad; [where we] also had a price erosion happen as the smaller version came out.
Q: Horace, do you think they have got the timing right? Should they have done this a little bit earlier when the market wasn’t so saturated and filled with cutthroat competition?
Android is the third platform to reach a billion users . The first was Windows and the second was Facebook. Apple sold around 650 to 700 million iOS and is expected to be the fourth to a billion sometime next year.
If we define the Race To a Billion to be bounded by a time limit of 10 years, then Windows does not qualify and Android is actually second. The race is shown in the following graphs (the one on the left is logarithmic scaled, the one to the right includes only a few contenders for illustrative reasons).
Android’s activations as reported are shown in the following graph:
Tim Cook famously said:
We can put all of our products on the table you’re sitting at. Those products together sell $40 billion per year. No other company can make that claim except perhaps an oil company.
For those of you laughing, that was three years ago. The revenues quadrupled since to a total of $170 for the last four quarters. But the more interesting thought is that the table has not gotten bigger. When Tim spoke the iPad had just been announced but was not yet for sale. So we can’t be sure if he thought it should be on the table or not, but it does not take up that much space.
It would be fun to actually lay out all the Apple products on a table to see how big it would be. The trouble is that there are many things Apple sells which take up no space at all. Things like iTunes content or services and AppleCare.
So rather than trying to imagine a table full of Apple products (some of which are non-phyisical) I thought a more fitting analogy would be to allocate the revenues from these products to a table and thinking about how much space relative to each other the products would take.
To make conversion easier, I picked a rather large table; 10 feet long, big enough to fit a small conference room. What would this table covered in product revenue look like?
My estimate is that it would look like this:
The answer may lie in the way the iPad mini has been marketed. The pattern for iPhone pricing is pretty regular but that for the iPad shows a marked difference. The reason is, of course, that the iPad has already gone through a portfolio broadening. The following graphs tell the story.
ComScore’s latest survey for US smartphone users showed that Android had 52% share of about 142 million users. That amounts to 73.84 million Android devices in use.
ComScore’s previous such survey showed that Android had 52.4% of about 141 million users. This amounts to 73.88 million Android devices in use. It also means that Android usage in the US went down for the first time.
In the latest quarter the iTunes group top line grew by 25%.
Additional newly reported items:
- Quarterly revenues dipped slightly to $4 billion (second highest after $4.1 billion last quarter).
- iTunes Stores billings (i.e. gross content revenues) were $4.3 billion
- Reached the best month and best week ever for App Store billings at the end of the quarter.
- iTunes billings translated to quarterly revenue of $2.4 billion, up 29% from the year ago but flat q/q. Company reports “strong growth in revenue in both content and apps.”
- New content added includes HBO GO and WatchESPN available on Apple TV. Apple TV catalog now includes over 60,000 movies and over 230,000 TV episodes.
- Users have downloaded more than 1 billion TV episodes and 390 million movies from iTunes to-date. They are purchasing over 800,000 TV episodes and over 350,000 movies per day.
- iOS developers have now created more than 900,000 iOS apps including 375,000 apps made for iPad. Apps created grew by 50,000 overall and 25,000 iPad apps.
- Cumulative app downloads have surpassed 50 billion.
- App developers are being paid at the rate of $1 billion per quarter.
- App developers have been paid over $11 billion for their sales through the App Store (half of which was earned in the last four quarters.)
- There are now over 320 million iCloud accounts
- There are 240 million Game Center accounts
- Almost 900 billion iMessages have been sent
- Over a 125 billion photos have been uploaded and over 8 trillion notifications were sent.
Some observations and estimates:
- Music revenue growth remains at around 15% while video revenue growth remains around 25%
- Apps continue to accelerate with a near doubling of revenues
- Book revenues are contracting as pricing pressure is being felt
- The software group grew moderately at 15% as Apple’s apps are reaching saturation within the iOS user base and as Mac sales stagnate.
As a reminder, you can order the iTunes Business Review from the Asymco Store.
Here are the latest performance figures for the Apple stores:
Stores Open and Visitors
Visitors per employee,Visitors per store, Revenues per store and Employees correlated with Visitors.
Excluding Motorola, Google’s gross margins have dropped for six out of the last nine quarters. They peaked at 65.8% in early 2011 but have now dropped to 60.4%. Including the drag from Motorola they are down to 57%.
Gross margins include the effect of price, volume and direct costs of sales. Although sales have grown (see graph below), the pricing Google has been able to obtain (CPC) has fallen. The cause is unknown but there is a strong correlation between the growth in their mobile channel. For their part, management cites mobile as having an effect in reducing CPC though they caution that it’s one of many factors.
As Intel has improved its products, their demand has decreased. Enormous efforts put into improvements are neither valued nor absorbed. The problem is not with the processors themselves but with the systems within which they are built:
PC sales fell again last quarter and the contraction is likely to continue. We received affirmation of this as Intel cut sales and earnings forecasts and the crucial capital spending that creates supply in the longer term.
At the same time, computing device sales have soared.
Even excluding Android devices which don’t register with Google’s Play Store (and excluding Windows Phone devices), mobile ARM devices are selling at 2.6 times the rate of Intel-powered devices. Put another way, since the birth of Android nearly as many iOS and Android devices have been sold as PCs.
In terms of install base, a computing category that did not exist six years ago has come to overtake one that has been around for 38 years.
The calamity for Intel has been that they have had no part to play in the new category. Perhaps that is because they had every part to play in the old category.
- Intel said it was cutting 2013 capital spending to $11 billion. The cut follows a reduction from $13 billion to $12 billion in April. Apple’s budgeted capital spending for fiscal 2013 (ending September) was set at $10 billion.
… says UBS analyst John Hodulik, as quoted by the Wall Street Journal.
No they haven’t.
According to the latest comScore survey data, 98 million Americans above the age of 13 don’t use a smartphone as their primary phone. That’s 41% of US mobile phone users.
What’s more, 2.5 million more people first started using smartphones in the three month period ending May vs. the three month period ending in April.
The switching rate to smartphones is shown below: