At the launch event Wednesday for the new iPad, Apple Inc. (Nasdaq: AAPL) CEO Timothy Cook talked about what he called a post-PC era, when the desktop computer no longer represents the epicenter of users' lives. Apple claims to be the leader in the race to bring about this era, with devices that include the venerable (and somewhat antiquated) iPod, the iPhone, and the latest version of the iPad.
However, its design and visual appeal aside, the new iPad raises a question about the innovation coming out of Apple these days.
During the launch event, Cook said Apple sold 62 million iOS-based devices in the fourth quarter, including the iPad, iPhone, and iPod Touch lines. The company sold 15.4 million iPads, which Cook said outpaced the sales of each PC maker for the entire year. He also said Apple generated 76% of its fourth-quarter revenue from post-PC gadgets.
Apple's stock is coming off a 52-week high of $548.21 during the March 1 trading session. The shares closed at $541.99 the day it launched the new iPad.
The new iPad (which is not the iPad 3 or iPad HD, as some journalists and bloggers expected) sports an improved high-definition display, voice recognition software, and 4G LTE connectivity on select wireless networks. Some may question whether the upgrades constitute a true evolution of the device, but Stephen Baker, vice president of industry analysis at the NPD Group, said it is a whole new product for Apple -- depending on how it is positioned in the market.
"What they're saying, without directly saying it, is this is your on-the-go video machine," Baker said. "This is your small television."
He referred to the new display as a possible move by Apple to position the device as a platform more for watching video than for Web browsing. "I think, in Apple's mind, it totally differentiates the product from what they offered before."
Apple remains the dominant player among tablet makers, Baker said, and its rivals are scrambling for more marketshare. "There's nothing even close. For now, it's iPad and a million other products that don't mean a lot in the big scheme of things." Some argue that the Amazon.com Inc. (Nasdaq: AMZN) Kindle Fire has become a game-changer in the tablet market, but he said the product's key differentiator is its lower price. So far, Apple has not cut prices on its newest versions of the iPad, though it is discounting older-generation tablets.
The form factor of the new iPad looks much the same as the iPad 2, and Apple said it will deliver the same battery life (about nine hours), even though it has beefier hardware under the hood. So what's the big deal with this gadget? The new display trounces rival tablets. It squeezes in 264 pixels per square inch, while the Samsung Corp. Galaxy Tab 10.1's high-definition display offers 149 pixels per square inch. More pixels mean clearer, more vibrant images.
Still, has innovation slowed at Apple? The iPhone 4S drew somewhat mixed reactions after its debut last year, and the new iPad seems to be more about nuances than drastic changes in technology, at least so far. "The gadget guys might say this isn't a really differentiated product, but consumers say, 'This is great, we want more of it,'" Baker said.
The new iPad is also equipped with a smattering of novel features, such as speech-to-text dictation software. Depending on the model, the new iPad can connect to the AT&T Inc. (NYSE: T) and Verizon Wireless 4G LTE networks. It looks like Sprint Nextel Corp. (NYSE: S) missed out on this 4G party with Apple. There will be six models of the new iPad, including WiFi-only versions. It is slated to hit US stores next Friday.
Remember those drawings of the angel on one shoulder and the devil on the other? Well, my devil is saying "Go ahead, get one. It's cool. It's better than that weighty circa 2005 Dell you've been carrying around for work. It'll do everything you need."
And then the angel whispers, "But Apple lies about battery life. Think about your iPhone -- everytime you're away from an electric outlet you feel a growing sense of panic. You made that kid unplug his Leapster at the airport so you could plug in your iPhone. And do I really need to remind you about Foxconn?"
The iPhone 4S was also supposidly received in a lukewarm manner and it then went on the ste a sales record for Apple for a quarter. I think it is too early to say the new iPad is not exciting or it shows a slowing of innovation. The sales numbers will speak louder than words in this case.
I am a little confused about the hot sale of iphone 4s too. If you put the iPhone 4s with Samsung Galaxy S2 (the most popular Android phone for now), Galaxy S2 is a far better choice than iPhone 4s in my opinion:
4.5" display against crappy 3.5",
4G against 3G network speed
2M Fornt facing camera against basic VGA
Replacable battery against fixed battery
Expandable microsd against fixed choice
I think the hot sale of iPhone 4S is more contributed to Apple's built-in momentum in the market. What will happen when the momentum is gone and there is no revolutionary product come out for the another two year?
The new iPad is good, but competitors can catch up Apple quickly if Apple continue its slow movement.
iPhones, in my opinion, are selling because buyers have the impression there are more apps, and accessories -- and some like the ease of integration with itunes, though I know a lot of people who also keep their music separate.
I am due for an upgrade so I will check out the Samsung though I believe the Apple interface still superior.
Also, maybe Android has improved but my wife has an Android phone (motorola) and it's always breaking and freezing up -- tons of software glitchers.
What's interesting is how Apple popularity resonates with kids. They're always asking for Apple products. Addicted to them, in fact. They can easily distinguish between Android and Apple and they prefer the latter.
Apple's focus on usability was definitely a smart move. Cutting edge hardware won't help regular user if usability experience is inferior, Nokia's smartphone is the best example. iPhone's usability was far better than other smartphones two years ago. Now I really can't tell the usability difference between Android and iOS. Both Samsung & HTC's UI are very easy to use. Motorola 's MotoBlur is not a good UI from the right beginning.
With new Android OS 5, Google may take control of UI from vendors, which will be a good move for the consumers.
Apple offered an example of voice dictation for writing e-mails. That has its uses for some I'm sure but then there is my low-brow response:
If I am going to speak my message out loud, why not just make a phone call?
The other part of this is the race to deliver more voice-controlled gadgets to the market. Back at CES in January, voice control was that new, not quite ready feature being integrated into a variety of devices.
According to a tweet from CNBC's Jane Wells, bond king Jeffrey Gundlach of DoubleLine Capital said at Thursday night's CFA Forecast Dinner in San Diego, "one of my favorite generational shorts is Apple... the rainmaker is gone, and I don't see people lining up all night for iPad 482."
Gundlach might be on to something. Apple is due for a little Microsoft stagnation---if only because what goes up must eventually come down or at least go sideways for a while. It's a law of the cosmos and no one can avoid it, not even apple (especially not apple sans jobs).
From valuation point of view, Apple shall not be considered a bubble. But Apple is on the consumer electronic market, which is traditionationally very volatile. I don't think Apple enjoys the kind of deep moat as IBM on mainframe, Intel on Microprocessor, or Cisco on router. Once Apple lose its ability of continuous innovation, the downfall will be vicious, just like what happened to Nokia and Rimm.
Shorting Apple at the right time will be richly rewarded. But finding the right time is the toughest part, for any short trade.
Exactly right. Whether you are shorting or you are buying it is about risk/reward. If a company is fabulously overvalued and a lot of things have to go right to make it attain its valuation, that might be a good short.
But, but, if you have a fairly valued company (and Apple, with a forward P/E of 12, is by most measures fairly valued), to make money on the short, you would have to have a lot of things go wrong
This is not, for example, Yahoo in 1999 priced at a P/E of 100 or Cisco Systems priced at a P/E of 70. It is priced a P/E OF 12, a reasonable valuation for your average industiral company, let alone the most innovative, fastest growing technology compan y in the world.
Now, you could make a bet on Apple as a "macro bet" that the economy would weaken (for example, Apple went down a lot in 2008), but if the economy sours then there are a lot over overleveraged, overvalued companies that will go down a lot faster.
So, again, just don't understand this. I wouldn't short Apple in a hundred years.
Now Amazon.com, that is a different story. There is a stock that has been weak with a profit margin of 2% and a forward P/E of 70. Yes, 70. So if you put a gun to head and told me I had to short a fast-growing technology stock now I would short AMZN before AAPL.
Scott, Good points on short trade. To be honest, I am not an expert on short, even I did several short trades before, but I tried to avoid unless I am very confident AND I have a lot of liquidity on my account.
I don't have any short position on AAPL now. The real question about Apple is: is AAPL a CSCO in 1990, or a CSCO at 2001. Apple's current valuation is a far cry from the rich valuation of CSCO at 2001. But Apple's grab on smartphone market is also weak compared to CSCO's grab on Router/Switch market. Even with the hot sale of iPhone 4S, I am not convinced the trend can continue without bold innovation in the future.
Will Apple repeat its history of early 1990? Without Steve Jobs, it may...., just my 2 cents
People have been predicting the demise of Apple for a long time. Back in 2000, right after the company announced 4th quarter earnings would be "substantially below" Wall Street estimates and the value of Apple's stock fell from $53.50 to $29.13, Forbes ran a story titled Apple R.I.P.
From that story:
"The bloom is off the rose. The incredible run-up Apple stock has enjoyed since Steve's return is over, and the sheen of success that had enveloped the company has been tarnished. A temporary setback? Don't be too sure. Unlike, say, Hewlett-Packard, Apple has always been a company that deals poorly with failure. When things go bad at Apple, they go very bad."
That is an amazing reference! Actually at one time Michael Malone was a big technology media gun. He was an editor of the once-influential tech magazine "Upside" (big in the early 90s). I have no idea what he's done recently but I can only say I'm glad I don't have that headline attached to my name.
@Scott, is this the same Michael Malone? http://en.wikipedia.org/wiki/Michael_S._Malone If so, he hasn't done too bad for himself despite the idiotic comments about Apple back in the day.
Yes, that Michael Malone. I'm sure he's fine, though he'd be retired beachfront in Maui if he'd bought apple in 2011.
I used to read stuff in Forbes ASAP by Malone and I always thought he was good.
As a journalist, I'd be horrified if people started cherry-picking things I wrote. I'm sure that's the case with him. You average journalist writes millions of words so you can probably go back and find anything to nail somebody if you want.
Sure, Scott. I've said plenty of stupid things. I say stupid things every day. But I don't write whole books about them, like Malone did:
Infinite Loop by Michael Malone
February 16, 1999
The inside story of how one of America's most beloved companies--Apple Computer--took off like a high-tech rocket--only to come crashing to Earth twenty years later.
No company in modern times has been as successful at capturing the public's imagination as Apple Computer. From its humble beginnings in a suburban garage, Apple sparked the personal computer revolution, and its products and founders--Steve Jobs and Steve Wozniak--quickly became part of the American myth.
But something happened to Apple as it stumbled toward a premature middle age. For ten years, it lived off its past glory and its extraordinary products. Then, almost overnight, it collapsed in a two-year free fall.
How did Apple lose its way? Why did the world still care so deeply about a company that had lost its leadership position? Michael S. Malone, from the unique vantage point of having grown up with the company's founders, and having covered Apple and Silicon Valley for years, sets out to tell the gripping behind-the-scenes story--a story that is even zanier than the business world thought. In essence, Malone claims, with only a couple of incredible inventions (the Apple II and Macintosh), and backed by an arrogance matched only by its corporate ineptitude, Apple managed to create a multibillion-dollar house of cards. And, like a faulty program repeating itself in an infinite loop, Apple could never learn from its mistakes. The miracle was not that Apple went into free fall, but that it held up for so long.(Emp. added. and this was in 1999)
But you have to put this all in context. Apple did lose its way. During the John Sculley years Apple was terrible. Remember the Newton? The company went nowhere for 10 years, so this is entirely accurate.
The next year is when i think he wrote the RIP Apple piece - seems a bit of a harsh prediction, though it makes more sense when linked with a way to promote book sales.
I think I have a Newton in the garage somewhere. Given the level of Apple fanaticism, do you think I could sell it to one of the hard core devotees to place on his Apple Altar? Maybe I should stroll past the people lined up in front of the flagship store on Friday (or are all those iPads sold out?) I bet you someone would take it just for the sake of owning a piece of Apple history. BTW...I did not buy it.
Noreen, you shall try to sell the Newton on Ebay. I donated my perfectly working Lisa 10 years ago during a move. Now I am pulling my hair after reading the following story:
I don't know it is a cult or not. But in those days, the Apple gadgets definitely have far better resale value than Wintel ones, no matter new, old, or even antique model.
During the tulip mania, a sailor who mistook the valuable tulip bulb of a merchant for an onion and grabbed it to eat. The merchant and his family chased the sailor to find him "eating a breakfast whose cost might have regaled a whole ship's crew for a twelve month". The sailor was jailed for eating the bulb.
Some expert explain that it is the game of the greater fool. The other experts say the item may have sentimental value - link yourself to the biggest company in this world
Michael S. Malone, as you may have seen in Scott's post. He's still in the business: He's an Adjunct Professor at Santa Clara University, Associate Fellow at Said Business School and a blogger at Forbes.com.
But I found something he wrote when Steve Jobs died last year. And this helps put things in perspective, a bit. What do you think?
We are near contemporaries, just a year apart in age, and we grew up in the same neighborhood and had mutual friends. We both moved to better suburban neighborhoods, just a few blocks apart, in junior high school, where his future partner Steve Wozniak swam on a team with my buddies and showed his inventions at the local science fair. It was just a few years later that I saw the scruffy trio, who I thought were buying roach clips, preparing to prototype Wozniak's computer design. A few months after that I saw the result introduced at the Wescon computer fair in San Francisco. I was also standing in the Wozniak living room when Mr. Wozniak took marketing executive Regis McKenna outside to ask the man's help in getting his son away from the bad influence of a kid named Steve Jobs.
Could Malone's impressions of Apple have been colored by his own perceptions of Jobs? I mean, realistically, mine would have been. Wouldn't yours?
Good guys finish last? It's always been well documented that Steve Jobs was a tough cookie. You also would probably rather take Larry Ellison's side in a business war, rather than bet aginst him.
What I find intriguing is the personal association between Michael Malone and Steve Jobs. Think of someone you knew from school and didn't like. Now try to disassociate all that personal stuff and look at his business objectively. You might be able to do it. But a lot of people would let baggage -- and school yard BS -- cloud their vision.
Yes agreed. I often say that emotion is the number one enemy of the objective investor. Certainly a negative personal relationship whould affect one's investment judgement.
I am a bit worried that the new iPad might have issues with the screen. I remember hearing that getting the screen at the iPad size was difficult and then it went into production rather quickly.
The reports are in- Apple sold out of this new device and on March 19 there will be lines at the Apple stores and retailimng partners. I bet Rim or Samsung would like to have the same kind of Lukewarm reception.
As Baker said in the interview: "The gadget guys might say this isn't a really differentiated product, but consumers say, 'This is great, we want more of it'.'"
Speaking as a so-called "gadget guy", improved visuals are a nice perk but it (and the other features) did not fill me with the need to buy a whole device.
Even with Apple leveraging this as a potential second-screen gadget, for me it doesn't trump what I already have in hand. I choose to be more pragmatic about waving the flag for a new, pricey tablet. Early adopters will probably never turn down the chance to be first to own the latest Apple gadgets even if said products do not not represent a dynamic evolution from one generation to the next.
I think it's always a sure bet that the World Consumer will choose flash over functionality. iPad is as much a lifestyle statement as it is a technology device.
Perhaps iPad is just riding the wave of a paradigm shift in devices rather than pure functinolity. It seems to me that more people are opting for buying iPads rather than upgrading their laptops. Penetration is still quite low when you compare it to laptops. Also think of vertical applications in business and healthcare.
The reaction to a new product can be measured in sales. Not tweets. Not analyst quotes. Not message board comments. This device isn't on sale yet, so i think we can say is that we're eager to see how many people will buy the new device given that there are now more choices than ever in the tablet category.
Also, just curious, when you say Apple's not innovating much these days, to what are you comparing it? Is there another company of a similar size, reach, and value that's innovating more, beating it to market, outpacing it in sales, etc.? If so, do tell.
I never said that. I posed questions about the pace of Apple's innovation.
Show me a 10-inch tablet with an OLED display and then I will do backflips.
As far as analyst comments go, did you ignore this part of the story:
Apple remains the dominant player among tablet makers, Baker said, and its rivals are scrambling for more marketshare. "There's nothing even close. For now, it's iPad and a million other products that don't mean a lot in the big scheme of things."
FIrst of all I didn't mean to misquote you in the comment. But same question applies, though. To what or with what are you comparing the pace of Apple's innovation? If the pace has slowed, what does it look slow in comparison to? That's the piece of the article I didn't understand.
As far as the analyst comments, I didn't have an issue really with what was said there. My intent was to point out that your reporting didn't justify your headline. My feeling on such a story is that we can't say what the market reaction has been because the new iPads aren't yet in stores.
The evolution from the first generation iPad to the iPad 2 offered significant changes including the built-in front and back cameras which introduced FaceTime video chat on the device for the first time. That put pressure on Skype to attempt to improve its game on video calls for Android tablets (how Skype and Android have performed in that regard is a whole other story).
The introduction of the gyroscope in the iPad 2 also created a platform for developers to write a whole new family of software that takes advantage of motion sensing for maps, games, and other apps on the tablet.
The newest iPad increases the clarity of its visuals and camera shots. Are higher-res displays easier on the eyes? Of course. Faster processing is nice as well. Does that make it a must-buy item? As I said in another response, some early adopters will always want to own the latest devices from Apple; hence the pre-order batches have sold out.
Okay, now I see what you're saying and I think you are on to something. Maybe the headline got a little ahead of itself but the device's newest features may not be as obvious to consumers who aren't early-adopers. Or not obvious enough to buy the new iPad over the less expensive iPad 2.
Great response and thanks for entertaining my chatter.
Tough call. I'd have to say the headline is accurate on the market and "technology pundit" level. The market actually sold off after the announcement (typical "sell the news"), but is now taking off again. So the market reaction may be considered "lukewarm" considering the scale of typical Apple reactions.
Also most of the reviews I have read would agreed that in Walt Mossberg's view itis "evolutionary, not revolutionary."
I consider Walt Mossberg the gold-standard of consumer tech reviewers, so I defer to him...
"However, unless you are desperate for the cameras or feel you are laboring under the greater bulk of the original model, I don't advise that iPad owners race to get the new version"
That may just qualify as "lukewarm," again, considering this is an Apple product.
What's it mean for the company? As I said earlier I still see them expanding their presence in the tablet market, so they may very well continue to grow large numbers as Phil points out. For example, our household still does not own an iPad 2 so I very well could buy one!
It never crashed in my tests, unlike every Android tablet I've tested.
@Scott - thanks for the link to the Walt Mossberg review. The quote above remains the deal-maker for many consumers. APPL owners should worry if/when the basic stablity of Apple systems starts to look ordinary. It's not about impressing the technical pundits - never was.
@Noreen - If one of my High School rivals had founded a multi-billion dollar company, I might be able to keep my personal opinions to myself for a time. But not forever. How do you find this stuff?
Experian Simmons has compiled a list of 15 U.S. cities with the highest concentration in ownership of Apple products -- the iPhone, iPod and Mac in particular. San Francisco came in first, while Salt Lake City was a surprising second, narrowly edging out Austin, Texas. (source: MediaPost Communications/Marketing Daily)
So what do you think links San Francisco, Salt Lake and Austin in a love of Apple products?
Here are some more facts that perhaps other people, like me, did not know about Utah, and indirectly, Salt Lake. All the following were developed in Utah or by Utahns:
The first electronic hearing aid (Harvey Fletcher)
The first red-green electric traffic light (Lester Wire)
The first electronic television (Philo Farnsworth)
The first electronically-amplified guitar (Alvino Rey)
The first computer game (Nolan Bushnell)
The first computer graphics (Professors Evans and Sutherland)
The first artificial arm (Stephen Jacobsen)
The modern word processor (Alan Ashton & Bruce Bastian)
ARPANET (precursor of the Internet)
The first artificial heart (Dr. Robert Jarvik)
And these tech companies were founded by Utahns: Novell, as you mentioned, along with Pixar (Ed Catmull), Adobe (John Warnock), Silicon Graphics and Netscape (Jim Clark), Iomega, Folio, and MegaHertz.
My last trip to Utah was limited to Monument Valley, where I stayed in a hogan, and that was not very modern at all, by design! Gorgeous scenery, though I ate way too much Navajo fry bread.
Apple said it will open stores in 10 countries at 8 a.m. tomorrow, when the new iPad goes on sale. Other US chains, including Best Buy, Target and Wal-Mart, also will begin selling the new tablet tomorrow, too.
A writer at BGR called a dozen Apple Stores in and around New York City between 5 p.m. and 5:30 p.m. EDT on Friday to find out whether or not they still had the new iPad in stock.
In years past, checks like these were fielded by apologetic sales associates breaking the news that launch-day inventory had been completely depleted. This year, however, we didn't find a single store in the New York area that reported a complete stock-out.
So what do you think: greater volume of inventory or lower demand?
A friend who thought about upgrading changed her mind after seeing the new iPad. She said the screen was better, but not enoungh to make her want to spend the money on the upgrade.
I think this new ipad will appeal to first time ipad buyers or for ipad1 owners. But iPad2 users will more than likely just wait for the next generation.
I have to wonder...since this new ipad is just called "the new ipad" and not ipad3, do you think that this will be the last generation? Or will the next version be the new new ipad? You have to wonder about the meaning behind the name.
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