First Thoughts on the iPad

I think it’s a logical evolution of mobile computing. A hop along the trajectory. When the iPhone first rolled out as an embodiment of the new touch-based UI–a disruptive technology, I said it was far too good as a phone. It could not be a better phone because phones were as good as they could be. It was a pretty lousy computer so I reasoned all it could become was a better computer. The iPad is a better computer.

Will it be a big hit? I think it will grow nicely and be profitable. It will take several iterations but eventually it will absorb usage from low-end laptops and move computing to new contexts. It will have amazing applications in certain verticals like education, health care, travel and automotive use.

All these steps are like checkboxes in the disruptor’s playbook. In 5 years, this will be as big a business as the Mac and then Apple will have to think how they break out of the 5% share ghetto.

Will there be a response? Yes, but, like with the iPhone, not for a long time, and not symmetrically. The PC guys will dismiss this and the phone guys will see it as outside scope. Once they begin the effort in earnest, it will fall well short of the entrenched, incumbent, integrated(*), rapidly evolving juggernaut that will be Apple Mobile Computing.

(*) Note the emphasis from Apple on its own CPU in the device. Apple does not talk about chipsets in their devices, but they did this time. Not only are they signaling control, but it also shows that value-chain integration down to silicon is what is needed to go up the performance trajectory for good-enough mobile computing.

Oppenheimer on Quattro

When asked about the company’s recent acquisitions of Quattro and Lala after yesterday’s earnings report, Apple’s chief financial officer Peter Openheimer answered, “In terms of Quattro and Lala we acquired Quattro because we wanted to offer a seamless way for developers to make more money on their apps, especially free apps.”

As I said before: why would a developer bother with AdMob if Apple integrates ads into the SDK? Does AdMob offer better terms? Does AdMob offer more sponsors? It’s the developers (and Apple indirectly) who supply inventory.

The Dynabook

Alan Kay, regarding his reaction to the iPhone in January 2007:

When the Mac first came out, Newsweek asked me what I [thought] of it. I said: Well, it’s the first personal computer worth criticizing. So at the end of the presentation, Steve came up to me and said: Is the iPhone worth criticizing? And I said: Make the screen five inches by eight inches, and you’ll rule the world.

See also: Dynabook

Cash is King

40 billion at end of 2009 shows acceleration over 2008. In 2008 Apple added $9.7B in cash while in 2009 it added $11.7B.

Apple still has no debt.

I consider it safe to assume that at least $10 billion will be added during 2010 for an end of year total of $50 billion.

To put that in perspective, there are only 76 companies (out of 2673 listed on Google finance) whose entire market cap is greater than $50B. Nokia is not one of them.

Sony Ericsson ships 14.6 million phones

Sony Ericsson shipped 14.6 million phones at an average selling price of EUR120 in the fourth quarter, down from 24.2 million units at an average selling price of EUR121 a year before. Net sales fell to EUR1.75 billion from EUR2.91 billion, in line with market expectations.

We will see next week, but by my reckoning, Apple sold more iPhones and iPod Touch units last quarter than Sony Ericsson sold of all its phones.

The ASP is also likely to higher at maybe 400 EUR blended average, for a total sales of 6 Billion EUR vs. 1.75B for SE. That’s more than 3x the sales level.

Next year we might see >50% growth from Apple which would imply Apple overtaking Sony Ericsson in the phones market share race.

Keeping it Real

From the VP of marketing for the Limo Foundation:

Growth within the siloed Apple ecosystem will actually stifle the grass-roots innovation

It’s interesting that this comment came on the day after Rob Glaser left Real Networks. Let’s take a stroll down memory lane of Glaser quotes:

(in 2003) “It’s absolutely clear now why five years from now, Apple will have 3 (percent) to 5 percent of the player market. … The history of the world is that hybridization yields better results.”

“Apple’s (market) share will go down if they continue to do this. The only way to presently put songs on an iPod is to (buy) them from iTunes.”

The (unforeseen) standard that emerged from the iPod is iTunes marketplace. It allowed Apple to establish itself as the premier and dominant merchant of all media including disruptive new media like apps. The iPod was “closed”, “siloed” and “locked-in” users. But it worked and grew and grew to the point where it set the standard.

The same arguments raised against the iPhone were raised against the iPod and Windows before it. Last I checked iPod had 70% share 9 years after the launch and Windows has 90% share 20 years after launch. iTunes sells more songs than any other retailer on the planet and more apps that anyone imagined possible.

Perhaps this data bears repeating:

  • 140,000 apps – made by over 28,000 developers
  • Users downloaded an average of 3.7 apps each in December.
  • One Quarter of apps downloaded are paid. Average cost of $2.59/app.
  • Each iPhone user spends an average of $10/mo.
  • There are over 75 (est.) million active users
  • 200 million apps are being downloaded every month
  • $500 million in revenues each month. 70% to developers or $385 million

All these numbers are increasing and accelerating. iPhone Platform Fastest Ecosystem Ramp in History.

Apps are not Applications

Understanding the new world of apps. Apps are not Applications.

That should have been the first sign that the software market was changing. It’s obvious in retrospect; people were buying software that would make them laugh. This runs counter to the common understanding of an Application. An Application represents the developer’s best effort at creating software that applies the capabilities of the device to solving a specific problem. Making people laugh is not a problem an Application can solve; it’s not about the device it’s about the person using it.

Lots more clues here:

I always said that the App is a new art form. As much art as desktop publishing and web design and home videos done by the masses. It’s not pretty but it’s real.