It remains to be seen if Apple win the watch market however they safely have the smartphone business firmly under control says Kantar Worldpanel ComTech
As the annual Mobile World Congress begins to wind down in Barcelona, Kantar Worldpanel decides to stir things up with its quarterly report on the market share of mobile phones.
The news is mixed; Apple continues its rampage in the Chinese market with a quarter of phones sold in the PRC being iPhones while Android slips in Europe but picks up market share in the US.
At the top end of the market it’s clear Apple is beating Samsung and the other manufacturers are deciding to avoid entering the battle of the market at all, instead focusing on lower and midrange devices.
Competing at the price points which don’t interest Apple may not be easy though suggests Carolina Milanesi, ComTech’s Chief of Research & Head of US Business; “while mid-tier consumers might be more accessible than high-end ones, manufacturers will have to work harder than ever to stand out in an increasingly crowded marketplace.”
Diversifying away from a tough smartphone market is one reason for the focus on watches at Mobile World Congress although even in that market Apple is about to launch a blitz around its upcoming product.
It remains to be seen if Apple win the watch market for the moment though they safely have the smartphone business firmly under control.
The performance of Apple and Microsoft in recent years show two very different management philosophies.
The stunning quarterly results of Apple announced yesterday compared to Microsoft’s indifferent performance illustrate how the fortunes of two different business cultures have changed.
Apple yesterday announced a spectacular result for its quarter finishing at the end of last year with revenues up 30%, profits by 38% and Earnings Per Share just short of fifty percent.
The announcement was an emphatic vindication for Tim Cook and his management team who made some big bets on the larger form factor iPhone 6 which paid off spectacularly with shipments growing 46% to 74.5 million and revenue reaching $51.2 billion, over two thirds of the company’s total sales.
One notable aspect of Apple’s success is the difference with Microsoft’s and this shows how different business cultures come in and out of fashion.
The Triumph of the MBA
For two decades Microsoft’s licensing business model was dominant and this confirmed the MBA view that companies should do everything they can to move design, research, manufacturing and distribution out of their operations – the virtual corporation where there was no inventory, few costs and even fewer risks was the ultimate aim of the modern manager at the turn of the century.
Microsoft encapsulated this philosophy with its licensing model, while the company made massive sales with huge margins – as it still does – all the business risks in the computer market were carried by resellers and equipment manufacturers. For many years the markets loved this.
Apple tinkered with the licensing model under John Sculley in the mid 1990s during Steve Jobs’ exile but was never really serious about giving away its hardware capabilities and in 2001 moved into retail with the opening of the first Apple Store.
Coupled with the App Store, Apple have come to control the entire customer journey from marketing, design, purchase and ongoing revenue after the product is bought.
King of the new Millennium
While the 1980s and 90s were the time of triumph for the Microsoft model, the 2000s have been good to Apple as shown by the revenue and profit figures.
Apple and Microsoft Revenues 2000-2014Apple and Microsoft Profits 2000-2014
The key inflection point in these charts is, of course, the iPhone’s release in 2007. Apple caught the wave of change as computer use switched from personal computers to smartphones and is now the dominant vendor.
For Microsoft the success of Apple is bittersweet; the company had a smartphone operating system in Windows CE but it was too early to the market and the devices vendors went to market with were, at best, substandard.
Microsoft’s failure with the smartphone was also echoed with tablet computers and exposed the licensing model’s reliance on vendors to supply and support decent products, even today Microsoft’s hardware partners struggle to release decent tablet systems.
Cloudy on the web
Another problem that exposed Microsoft’s weaknesses was the rise of the web where hardware and operating systems really did matter so much any more. Along with pushing out personal computer lifecycles it also had the consequence of allowing other systems into the marketplace, notably Linux and Google Android.
With OS X, Android and Linux systems no longer hampered with the compatibility issues that irritated non-Windows users in the 1990s the market was open to adopting those systems. While the PC market has remained quite loyal to Windows, although the Apple Macs are showing serious growth as well, Microsoft’s system has barely any marketshare in other device segments except servers which are also declining as business increasingly move to cloud services.
Apple have shown in the computing and smartphone business that controlling the hardware products is as important as supplying the software, a lesson that Microsoft now acknowledges with its restructure into a ‘Devices and Services’ company under former CEO Steve Ballmer.
Under current CEO Satya Nadella Microsoft is focusing on cloud services which also aren’t as profitable as its legacy operations but see it competing with companies like Amazon and Google who don’t boast the profits from their online operations that Apple makes from its hardware.
Microsoft aside, the lesson Apple gives the technology is pertinent for its competitors in the smartphone space as well; companies like Samsung, LG and the army of Chinese handset vendors are going to find their markets tough unless they can take control of their software development and distribution channels – relying on Google for Android and telcos to get their phones to customers leaves them exposed in similar ways to Microsoft’s partners in the last decade.
In the battle between business models, Apple is the current winner and shows throwing all of your business operations over the fence to partners and licensees is a risky strategy. How those lessons are applied in other sectors will test the limits of both management philosophies.
Why social media numbers don’t matter, what are teenagers doing on Twitter and why tech companies are firing, not hiring.
Links today have a bit of a social media theme with Twitter co-founder Ev Williams explaining his view that Instagram’s numbers don’t really matter to his business while researcher Danah Boyd explains the complexities of teenagers’ social media use.
Apple’s patents and why the tech industry is firing, not hiring, round out today’s stories.
Twitter co-founder Ev Williams attracted attention last month with his comment that he couldn’t care about Instagram’s user numbers, in A Mile Wide, An Inch Deep he explains exactly what he meant at the time and why online companies need to focus more on content and value.
One of the frustrations with following the modern tech industry is how patents are used to stifle innovation. How an Apple patent for something that seems obvious caused camera vendor GoPro’s shares to fall is a good example.
Despite the tech industry’s growth, the industry’s giants are shedding jobs. This Bloomberg article describes some of the struggles facing the tech industry’s old dinosaurs.
Researcher Danah Boyd provides a rebuttal of the story about young peoples’ use of social media. “Teens’ use of social media is significantly shaped by race and class, geography and cultural background,” she says. Sometimes it’s necessary to state the obvious.
The future of Goodle,,how the name ‘Silicon Valley’ came about, why solar power is getting cheaper and how some startups die.
On many measures Google are in trouble, but one analyst thinks we’re panicking and his view is the lead of today’s links of the day. We also look at how the name ‘Silicon Valley’ came about, why solar power is getting cheaper and how some startups die.
“Google is down but it’s not out” is the warning of this analyst’s report on the company’s earnings and strategy. Interestingly Google outspends Apple by $4bn a year on research and development, but both of them are dwarfed by Microsoft’s spending, which indicates R&D investment doesn’t guarantee success.
Last Sunday marked the 44th anniversary of the first time the label ‘Silicon Valley’ appeared in print. The US Computer History Museum looks at how the name came about and no-one will be surprised it was a marketing person who coined it.
A few years ago putting solar cells on a building was expensive, now in many parts of the world the price of PV panels is becoming competitive with mains power. Vox Magazine looks at the factors driving the price drops and finds that economies of scale are now the main factor affecting the falling cost of installed solar power systems.
One of the earliest food review platforms was Urbanspoon which was founded on the basis it would only grow as a bootstrapped company. In 2009 the founders sold out to a larger company who have now sold it onto an Indian business who is going to shut the name down.
Apple extends its lead over Android in smartphone activations, a teenager’s view on social media and Google’s declining market share.
Today’s links are somewhat more upbeat; starting with Apple extending its lead over Android in smartphone activations, a teenager’s view on social media and Google’s declining market share.
Apple takes the lead in smartphone activations
In their regular survey of mobile phone activations, research company Kantor found that Apple have taken the lead back from Android phones. The Kantar Worldpanel ComTech global consumer panel monitors the brands of phones being connected through selected apps to give them an idea of what’s going on in the smartphone marketplace.
While not an absolute numbers, and one that was inflated by the new range of Apple iPhones released late in the year, it’s clear Apple are by no means out for the count when it comes to the smartphone market.
I’m not sure how accurate or scientific this story is, but it illustrates how complex the social media industry is and how dangerous assumptions are with what age groups use new media channels for.
Document service Evernote cuts jobs proving that even a job in the hottest parts of the tech sector isn’t safe. Notable in this story is the concentration of employment in two locations which shows Silicon Valley isn’t keen on remote working at all.
Apple Pay is making big gains in the online space, however the battle is far from over.
Apple are making great gains in the online payment space but the battle with Google Android, PayPal and the banks to control the market is far from over.
One of the biggest business struggles this blog has been watching for the last five years is the battle over payment systems as banks, credit card companies, telcos and technologies vendors have jostled for control of what will probably the world’s most lucrative market by the end of the decade.
Apple Pay may be getting the headlines, but at present Google Android still dominates the mobile commerce industry according to another research company Criteo.
In their State of Mobile Commerce report, Criteo claims that globally Android is well ahead in smartphone transactions. An interesting aspect of Criteo’s report is how far behind many nations such as Japan, South Korea and Germany the United States is in the take up of mobile commerce.
Criteo’s report shows the battle to control the e-commerce space is far from over, however if Apple Pay can grab a large chunk of the payments market then the company will have a strong hold on key part of global industry. It remains a high stakes and uncertain battle.
Could the Apple Pay experience be similar to the development of the computer USB port?
Has Apple Pay legitimised mobile payments? It appears so, reports the New York Times. Since the launch of Apple’s payments service, Google and other mobile payment providers are claiming usage has doubled with customers exploring the systems.
If this is true, it’s similar to how Apple legitimised the USB port in 1998 with the release of the iMac.
Prior to the iMac the USB port was a bit of an oddity, on most PCs the sockets sat unused and the few devices available on Windows computers worked reliably, as Bill Gates himself found out during a live demonstration at the 1998 Comdex show.
Unlike Apple Pay, the move to USB on Macs wasn’t welcome and it was a high stakes decision by Steve Jobs given that Apple’s existence was still precarious and its user base was still made up of largely of true believers who had been through years in the wilderness with the company.
Those users also had many thousands of dollars invested in Apple Device Bus (ADB) devices, all of which became redundant with the move to USB. Many customers at the time swore this was the last straw and they would move to Windows PCs.
Apple’s users didn’t carry out their threats and stayed with the company whose move to USB turned out to be a winner for the entire computer industry.
For Apple USB’s success meant their customers were no longer locked into a proprietary technology, for manufacturers they were able to start moving off archaic serial and parallel ports while for Microsoft the shift meant a better range of more reliable devices — although their operating systems struggled with USB until the release of the far more stable Windows XP.
It appears in this respect Apple Pay is repeating history in giving a boost to a technology that has been struggling to find traction in the market place.
The difference this time is that the payments industry is a far bigger market with far more implications for the broader economy than the computer peripherals segment.
If Apple raise the boat on payment systems, there are some incumbent businesses who are going to find themselves in a very different marketplace in five years time.
