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Google’s three Ps

A company is nothing more (and nothing less) than three things: people, processes and purposes. In the language of the software engineer these would be inputs, algorithms and specifications. In the language of classical business analysis they are assets (or resources), organization structures and business models. In military theory, these are logistics, tactics and strategy.

This is the trinity which allows for an understanding of a complex system: the physical, the operational and the guiding principle. The what, the how and the why.

When approaching any analysis problem, these questions form the foundation of causal inference. What is it, how does it work and why does it exist?

When analyzing nature the sciences often help with the what and the how but rarely address the why.[1] In contrast, man-made systems (e.g. systems of law, religion and commerce) require an answer to the why as there is a presumption of a will in their creation and preservation. The why allows ultimate judgement on the merit of an enterprise. The why may escape us but it’s assumed to always be there. For instance, in criminal law the motive is often a crucial piece of evidence but it’s not always found. In business, the motive for action or for organization is a crucial piece of the puzzle which often explains the what, who and how, but here the ultimate why is usually profit. This the characteristic of a for-profit business, the purpose is explicit.

Notes:
  1. Religion attempts to answer the whys which science leaves as unanswerable. []

Apple Fourth Quarter Estimates

As Philip Elmer-DeWitt is still interested in my estimates I provided the following:

Revenues ($B) 57.8
EPS ($) 14 (908m shares)
iPhone (units) 56.4 million
iPod (units) 7.6 million
Mac (units) 4.14 million
iPad (units) 26.5 million
iTunes/Software/Services ($) 4.2B
Accessories ($) 2.2B
GM% (percentage) 37.1%

I arrived at these estimates without looking at anyone else’s (except for Apple’s own published guidance). Soon after sending them I noticed that Daniel Tello published his own.

In the same format as above, I quote them for comparison. Please visit his post for additional detail.

Revenues ($B) 59.0
EPS ($) 14.92 (895m shares)
iPhone (units) 56 million
iPod (units) 9 million
Mac (units) 4.65 million
iPad (units) 25.5 million
iTunes/Software/Services ($) 4.3B
Accessories ($) 1.8B
GM% (percentage) 37.8%

The graph below shows the history of revenue guidance vs. revenue reported. The last quarter shows my estimate for net sales.

Screen Shot 2014-01-15 at 1-15-4.06.58 PM

Note that the company achieved at or slightly above its upper guidance ever since they started offering a range for guidance (i.e. since Q1 2013). My estimate for sales is therefore very near the top of guidance. The figures for units earnings and margins all result from this assumption.

When Apple reached parity with Windows

In 2013 there were 18.8 times more Windows PCs sold than Macs. This is a reduction in the Windows advantage from about 19.8x in 2012. This decline is mostly due to the more rapid decline in Windows PC shipments relative to the more modest decline in Mac unit shipments. Gartner estimates that about 309 million Windows PCs were shipped,[1] down from 337 million in 2012 (which was down from 344 million in 2011, the year PCs peaked.) I estimate about 16.4 million Macs were shipped in 2013 down from 17 million in 2012.

The history of PC shipments relative to Mac shipments is shown in the following graph:

Screen Shot 2014-01-13 at 1-13-3.09.21 PM

I chose to graph the Mac data as an area with additional areas for iOS devices layered on top.

Notes:
  1. This figure is not published publicly but can be derived from subtracting Mac shipments from the total PC shipments which are published []

Asymcar 9. Stasis: Depreciation, Brands, Information Intransigence

Horace and Jim discuss shopping online for used cars and how and why the value of cars disappears so quickly. The conversation drifts into information asymmetry, the declining interest in auto maintenance and the perpetual closed-loop auto information model. We hypothesize on the impact of the coming self-monitoring and awareness of the lives of vehicles. Finally we ask whether the dysfunction in the industry is the cause or the effect of the ancient integrated factory model and the sustaining auto eco-system incentives that impede transformation.

Asymcar 9. Stasis: Depreciation, Brands, Information Intransigence | Asymcar.

Of bits and big bucks

Exactly one year ago, on January 7th, 2013, Apple announced that the App Store reached 40 billion downloads[1]. Here are additional data points from that release:

  • 20 billion downloads in 2012
  • 2 billion downloads in December 2012
  • 500 million active iTunes accounts
  • 775,000 apps
  • sold in 155 countries
  • 300,000 native iPad apps
  • over $7 billion in developer payments

This year, on January 7th, 2014, Apple announced a new set of data points:

  • $10 billion spent on the App Store in 2013
  • $1 billion in December 2013
  • 3 billion app downloads in December 2013
  • 1,000,000 apps
  • sold in 155 countries
  • 500,000 native iPad apps
  • $15 billion in developer payments

The obvious:

  1. 225,000 apps were added in 2013
  2. 200,000 native iPad apps added in 2013
  3. App download rate for December increased by 50%
  4. No new countries were added in 2013
  5. $8 billion was paid to developers in 2013 (more than in all previous years put together)

The less obvious:

Notes:
  1. Unique downloads excluding re-downloads and updated []

When will smartphones saturate?

GSMA Intelligence reports provide valuable statistics on the growth of mobile networks. One in particular shows the history of regional smartphone penetration.

I took the historic data and plotted it as follows:

Screen Shot 2014-01-07 at 1-7-1.43.56 PM

Note that I chose to model using the same logistic function that I have used to describe the US market (as measured by comScore) and the global Internet user market (as measured by the ITU) and the stove, landline phone, Electricity, automobile, consumer radios, washing machines, refrigerators, TVs, dryers, air conditioning, dishwashers, microwaves, VCRs, PCs, cellphones.

It’s also the same model used to show the rise and fall of energy sources, canals, railroads, roads and air travel.

If we believe that smartphones in parts other than US and Europe will behave the same way as all the other technologies listed above then the forecast penetration is likely to follow the thin lines in the graphs above.[1]

With the exception of Africa and Middle East, note that the primary difference between regions is not the rate of growth in penetration but rather the delay in adoption. I marked this delay as 4 years between US/EU and Central & Eastern Europe. An additional one year delay to Asia Pacific region and 4 years more to Africa/Middle East adoption.

The resulting smartphone user forecast is shown below.

Screen Shot 2014-01-07 at 1-7-1.36.39 PM

Although 2013 was often cited as the year when smartphones saturated (“everybody that wants one has one”), the total population of users will likely take another decade to reach maximum. The point of inflection in global growth could be expected in 2017.

What most observers sensed was the point of inflection in growth in North America and Western Europe. Those regions are 11% of the world’s population.

Notes:
  1. This is a big if, and, judging by their forecast, one which the GSMA Intelligence team seems not to believe will happen. []

The Critical Path #108: Chief Magical Officer

With new ChromeOS and Chromebook data, Horace returns us to the topic of Google. How do they define and view their customers, products, and businesses? Who actually serves whom? What user data is collected, how is it used, and why?

via 5by5 | The Critical Path #108: Chief Magical Officer.

On the future of the Internet and everything

According to ITU data, Internet usage reached about 2.2% penetration in the US (2.2 users per 100 residents) in 1993. The figure in 2012 was 81%. The history of penetration is shown in the following graphs.

Screen Shot 2014-01-03 at 1-3-12.17.41 PM

Similar graphs can be drawn for other countries (data is available for 193 countries/territories.) I chose the following set of countries arbitrarily:

ניהול אחר אפל: צבא התפוחים הסודי: An article on Apple in Calcalist

ניהול אחר אפל: צבא התפוחים הסודי.

An article by Dor Zach, correspondent at Calcalist, the largest economic newspaper in Israel.

I offered some thoughts on Apple’s current strategy, and the various misconceptions about the company.

(Hebrew only so if anyone wishes to summarize it in comments, it would be helpful to others).

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