We go over Apple’s last earnings report. Is significant growth conceivable for the next quarter? Plus the new iMac and the end of visible pixels.
In Q3 2014 Apple’s revenues were 5.3% higher than the upper end of their guidance. This is the highest error in guidance since the new range-bound reporting regime started two years ago.
The following graph shows the guidances given since 2005 and the actual revenues. The error (as a percent of upper guidance) is given in the second graph.
The problem with getting better is that if you’re more than good enough you’re actually getting worse. Improving beyond the point where your improvements can be absorbed is not only wasteful but it’s also dangerous. It opens the door to competitors who compete asymmetrically.
This is the perverse and pervasive threat hanging over all system vendors. The temptation to “get better” is not coming from incentives and human nature. It’s always there as Moore’s Law offers an exponential increase in power. People don’t naturally have exponentially increasing needs. For them to absorb this new power, it has to be couched in new uses.
What has permitted the absorption of improvements in semiconductor performance (and production) have been other aspects of the system: the software, communications and services innovations have been positioned on more demanding jobs to be done which, once hired for those jobs, saturate the available processing and storage.
This is most easily evident in how digital photography has advanced. The constraints on sensors meant that quality was initially poor and as cameras were unconnected, they were relatively under-utilized. But once software and communications were added (by inclusion in smartphones) digital photo creation exploded. This, in turn, led to more storage needs both on the device and the servers. In a virtuous cycle, more processing power meant video was possible, then high definition video, then slow motion high definition video. The previous storage limits on mobile devices were quickly overwhelmed. Megabytes of storage became gigabytes and then hundreds of gigabytes. Video editing meant processing power was suddenly in demand again. Cores multiplied.
Third party media (music and videos) storage and playback used to be the main job that storage was hired to do but as cameras got better, user-generated content suddenly bellied up to the bar.
That is now the story for phones, which are gobbling up all the storage and bandwidth we can throw at them. But what about the larger form factors? Are iPads (and laptops) growing in their demands? Paradoxically, it would seem that the smaller devices are hungrier than their larger cousins.
The answer lies with the jobs to be done. If highly portable devices are more usable, they will be used more. Large devices are left behind, literally, because their jobs are not as pervasive in place and time. For a large screen like the iPad to increase its attractiveness, it has to be the stage for a set of jobs that only it can perform.
The new iPad has the horsepower. It has more portability (thinner, lighter) and it has the touch ID convenience. It even has a better camera. But for it to succeed it needs to be hired for a set of jobs as expansive in usage as the user-generated photo/video jobs that the iPhone has been called to do.
I hire my iPad for one such job: to persuade audiences small and large. I use it across a dining table and across an auditorium to appeal with a visual language. I use Perspective to create stories that have to be seen to be believed and once seen, create belief.
The tool is demanding however. As the stories are fed by data and the visualizations are rendered algorithmically and not as stored images it is hungry for processing power. I also need it to record performances which taxes storage. I need to transmit those performances both in real-time and as recordings, tasking the WiFi and cellular bandwidth. I need as much screen as I can get to be able to interact with the elements on screen, of which there may be hundreds. I need to export video versions of performances and thus I need a video studio with all its extravagance. I need it to run for all-day workshops connected to a projector, sometimes through AirPlay, under stage lights, which pushes the battery.
Consider my last padcast. It was recorded in one take lasting 18 minutes. I then exported the results to a video that was uploaded to Vimeo and viewed by thousands. However it took over one hour to render it and due to that constraint I did not have the luxury of editing it. I could not easily add, subtract or annotate the video production. This was done on an iPad Air and I was happy to get it done at all.
But if I had an iPad Air 2, not only would production time be shrunk the things I could attempt to do with a presentation suddenly expand. It’s not just about more efficiency but an expansion of scope. More power means more work I choose to do.
So is the new iPad better? As far as the jobs I hire it do do, the new iPad is better. It is in fact not good enough. Which is the best thing to be.Notes:
On the October 2014 iPad and iMac event. When are the iPad killer apps going to come out?
The purpose of Airshow is to:
- Understand how data can be used to persuade through an appeal to logic as well as through empathy.
- Understand the basics of “data cinematicism” including the techniques analogous to cinematography and direction.
- Understand story development techniques including how to facilitate the audience’s entry into the story.
- Learn how to build a cinematic presentation.
The method we devised borrows heavily from the techniques of cinematography and screenwriting to impart meaning to the audience beyond the literal words spoken or images shown on screen. These techniques are demonstrated with “feature presentations” and then deconstructed in interactive lectures. Throughout we also weave Aristotelian rhetorical tips and present from the Asymco repertoire of stories.
Given the cinematic nature of the event, we thought it would be fitting to use a screening room, so we have reserved the the Auditorium at Fry Art Museum. See Airshow Seattle event page for more information. Discounted registrations for readers of this site are available. Students and teachers may register with an academic discounts.
I received a few questions from Shirley Siluk of NewsFactor as a follow-up to my post on the trajectory of successful companies.
1. Do you foresee any hope for a turnaround for Samsung? If so, where do its best opportunities lie?
The smartphone business was a huge opportunity for Samsung and they took full advantage of it. Unfortunately, it’s a difficult business to stay on top of. The list of victims in that industry is quite long and there have been no long-term winners. Samsung’s operating model seems to be to invest as a ‘fast follower’ filling in the market after it’s established while leveraging capital intensive components synergies. That has also worked for them in consumer electronics (at the expense of Sony and other Japanese vendors). If the modus operandi does not change then their turnaround will depend on the creation of new opportunities/categories. Wearables may be such an opportunity but it may not be as big as the phone business.
2. What has contributed most to Samsung’s decline? Which competitors are posing the greatest threat?
- The graph shows estimates of smartphone shipments for a select number of vendors. [↩]
Horace and Anders on the irrelevance of shareholders. Anticipating an Apple October 2014 event they discuss how the iPad and tablet designs could evolve. Diving into how brands can manage disruption through a whirlwind tour of products from cameras to watches to cars.
Horace and Anders analyze the possible business models for Apple Watch, how it may be introduced, distributed, sold, and bought. What impact will the Watch have on Apple’s top and bottom lines? They further look into possible introductions for the rest of 2014. Horace sounds about to give up hopes on Apple TV.