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« Now the Official Xiaomi Number ('over 70M') and apparently only 1M Windows 10 Lumia devices for Xmas | Main | Smartphone Wars: Oppo of China sold 50M smartphones, secures Top 10 (low end) ranking »

January 20, 2016


Wayne Borean

ISheep buying iTurds...

Is that any worse than Microserfs?


This discussion (with deplorably disparaging epithets flying around) about the Apple Watch selling greatly or not, and the iPhone increasing its market share or not, misses the one issue that Apple management has not been able to address in the past few years: finding the successor blockbuster to the iPhone.

So far, Apple had been very successful at developing a succession of blockbusters to prop up its business across product life-cycles and growing the firm: the new generation of Macs, then the iPod and iTunes, then the iPhone.

The iPad initially looked like the next blockbuster, but it is already faltering -- without ever having reached the absolute sales and profit on the magnitude of the iPhone.

Apple TV, as well as the Apple Watch, and even the Apple cloud services (everything from iTunes to AppleStore), are profitable endeavours, that probably make other firms envious -- but these are smaller scale businesses compared to the iPhone.

Apple is in a situation typical of the pharmaceutical industry, or the games industry (think Rovio): one giant blockbuster sustains the entire company, with the development pipeline producing interesting and profitable ventures -- but which never grow enough to become a second leg, or a replacement leg of comparable strength.

If there is one medium-term issue that keeps the Apple management awake at night, this is it -- much less what Android phone, tablet or watch competitors are doing.

And I agree with Tomi: smart watches, at least in their current embodiments (whether Apple or others) will not constitute that much sought blockbuster.



"you should rename the successor of an Android based phone."

The issue is not the market of phones in general, but what happens to individual firms.

Samsung has several legs of similar strength to stand on, for instance. If Android phones do not work, well, they still have chips, or medical devices, or freight ships.

Same for Huawei or ZTE: they do have strong-selling networking gear. Losing the mobile phones would be painful, but not existentially threatening.

Apple, on the other hand, relies pretty much entirely on one product class.

So does HTC, for instance, which is desperately trying to find a blockbuster to succeed its once popular smartphones in VR and other side endeavours.

Once again, Apple has tried the iPad, Apple TV, the Apple Watch, and is rumoured to do something with cars. But so far sales, profits, software, services, image, ecosystem revolve pretty much around the iPhone. Tim Cook will be judged on whether he manages to foster the advent of a blockbuster comparable to, and capable of substituting the iPhone after the product cycle of smartphones starts to unwind.


@Wayne Brady

You are committing three errors.

1) "Ford hasn't come up with a replacement for vehicles either. "

By this same reasoning, Apple is in the personal computing device business, and will not replace it with anything else either.

You are conflating entire super-families with product classes.

Apple has essentially become an iPhone business with other product classes (tablets, PC, watches) on the side. The Detroit big 3 were producing trucks and traditional saloon cars as well (all "vehicles"), but had missed the compact car class, and had become utterly dependent on one blockbuster: SUVs. When these tanked, the companies tanked.

2) "Apple still has a very profitable Mac business."

I explicitly stated that Apple had several profitable businesses, including computers.

This has nothing to do with the stock exchange -- you are the one who brought the issue that "Apple won't be a growth stock" -- or whether Macs are profitable or not.

It has to do with the _scale_ of individual product lines. The iPhone towers above all others. Apple's success is entirely dependent on it. Nothing else so far is able to provide a substitute in terms of absolute sales and profits.

It corresponds to the definition of blockbusters in the pharma industry -- with the attendant risks.

3) "The smartphone expansion was a one time event."

You are assuming that smartphone never evolved, that we have reached stasis, and that they will not evolve again.

10 years ago, and even earlier, smartphones existed. They looked like the classical Blackberries.

Smartphones have evolved into the current touchscreen slabs and there is no reason why mobile phones should not evolve further.

I believe that Microsoft Continuum is a first step to where things may move: plug a smartphone to a docking station with keyboard and screen, and you have a PC.

Why not have a credit card form factor with all the electronics (possibly even compatible with credit card readers), plug it into a screen with battery and slot, and have a smartphone?

And take it out and plug it into another device with a bigger screen and have a phablet?

And take it out and keep it connected via a PAN to a wrist-device, and have a smartwatch (without having to carry the bulky battery + fragile touchscreen of a traditional smartphone slab)?

This would entail rather different constraints for manufacturers and service developers, and lead mobile into new directions. Or perhaps the evolution will derive from something akin to Google Glass (though I doubt it). Disruption, you know.



I wonder whether people actually _read_ what I wrote.

"Apple has several profitable products that are not mobile phones."

Yes, this is _exactly_ what I said.

What I also said is that _none_ of those other product classes reaches sales and profits comparable in absolute terms with what the iPhone brings to Apple.

Apple depends on one blockbuster: the iPhone. The other products are very nicely profitable, and respectable businesses on their own, but on a scale vastly smaller than the iPhone.

"You are effectively saying how Google has no supporting products for the internet business."

If by Internet business you mean revenue from its advertising segment, then you are right.

Google has several service classes that serve to funnel traffic to its ad machinery, but none that generates income independently to a comparable scale.

Tomi T Ahonen

To all

IDC counted the global 2015 smart watch market at 21 million units. Far far lower than most enthusiast smart watch fanboys had expected (some even thought the iToy sorry iWatch sorry Apple Watch would sell 40M units bwahahahahaha). It will end up having been a fad. Short-lived and very expensive fad. Apple will try a version 2, which will not even sell as well as the first edition, and then - like I predicted at the start, Apple will quietly shut down the smart watch project.

Tomi Ahonen :-)


@Tomi, I disagree. Apple Watch supposedly did gangbusters this past holiday season. The next version is rumored to come out this fall alongside the redesigned iPhone 7 (and just in time for the holiday season). It will likely be geared toward new buyers rather than upgraders. My guess is that Apple will continue to refine it, adding health sensors, a GPS, and other features to continue to make it more attractive to the fitness crowd, as well as the general market.

I doubt Apple was under any illusions they'd sell 40 million. Those were the wild claims of analysts who can't even get iPhone shipment predictions right (even though Apple practically gives away that information each quarter with its revenue and margin estimates). 40 million would have been way too big for Apple to bury in "Other."

Think of Apple Watch to the iPhone what the iPod was to the Mac and PC back in the day. It's a nice source of ancillary revenue.


All this talk about the "success" of the Apple watch has to be seen in perspective. Appel is not Rolex and an iWatch is not a retro mechanical clockwork (like a Rolex). So, I do not see a reason to point to the Swiss watch industry.

The hype in 2015 was considerable:

Apple's first experiment with a watch was an iPhone with a velcro strap: Firm reveals how the project started - as analysts predict it will sell a MILLION in first weekend

And about expectations:
Some investment firms such as JPMorgan Chase, which peg the smartwatch's first-year sales closer to 26 million units and Credit Suisse, which estimates sales as high as 35 million.

Connecting to the iPhone, the Apple Watch is designed as a wrist device for messaging and calls and for a variety of health tracking applications.
'With the built in speaker and microphone you can receive calls on your watch. I have been wanting to do this since I was five years old,' Cook said.
The watch is also integrated with Apple Pay's mobile wallet, and can be used to view pictures and monitor news, and also connect to social media.
It can use other apps ranging from Uber ride-sharing to music to home automation.
'Now it's on your wrist, not in your pocket or your pocketbook,' Cook said.
'I think you're going to be surprised at what developers can do when you unleash that community.'
Apple demonstrated using the watch to listen to music, with lyrics displayed on the watch face.
The company also demonstrated an app to open a garage door from afar to let in a family member who is locked out.

I must say that 2015 has not been the year where the expectations of the iWatch came true. From somewhat less than expected sales to much less than expected integration of use.


@Winter, the apps have been a disappointment, but I don't think that really matters. Once the Watch gets GPS I expect it will sell better with the fitness crowd. A $100 price drop for the Sport and Watch, and some more band options will probably help, as well.

My take is that Apple Watch probably could have used another year in R&D, enough to get an A7-class processor inside (the current version has an A5-class processor) that would use less battery so that they could advertise 2-day or even 36-hour life and open apps more quickly. However, Tim Cook was under pressure to release something "new." They got the band selection right, and from most accounts product satisfaction among owners is good.

I see Apple sticking with this category even if it settles into a niche. Miniaturizing older processors has other benefits (Apple could use that technology in future iPhones or Macs). If Apple switches the iPhone to OLED as rumored, they'll get greater scale there. It has more than replaced the iPod for ancillary sales revenue. Plus those who do buy the Watch are more likely to keep buying iPhones.

Earendil Star

Oh my God... OH MY GOD!!!!!

Apple is not immune to smartphone saturation... it too is declining in its iPhone line!


Will we finally see the usual clueless pundits shutting up now and forever on the humongous menure pile they've been stocking up over the past years and months? Many of those whom, after Elop the Trojan announced the new Nokia delusional WP strategy, were prognosticating WP market share at 20% in 2016?

Not that I'm overly optimistic on this happening... admitting one's own patent idiocy is not a very widespread gift...

Meanwhile, in other news, Tim Cook came out revealing that China sales were fine, without any concern for violating SEC rules, and nobody dared say anything. Not all are created equal, not all are treated the same when they break the law...

A final comment: I'm not an Apple hater, and I do like Apple products, I have both an iPhone 6 and an iPad 2, although I believe they are overpriced. On the other hand, I find it outright nonsensical to believe that a company may be infallible or not subject to the same kind of issues of all others. Especially in a now commoditized market as that of smartphones.

Tomi T Ahonen


LOL :-)

Tomi Ahonen :-)


@Wayne Brady
"In the longer term, the Apple Watch might well revive/boost interest in luxury watches in general."

It might be useful to get a better look what Swiss watches are. They are to time keeping what steam engines are to transport. A $5 Chinese watch does better time keeping than a $14k Rolex Chronometer. I have a 75 euro (analog) radio controlled watch that keeps Atomic Clock time. A precision a $100k mechanical clockwork will never ever match.

So, what is a $14k Rolex other than a pure status fashion ornament that is useless by itself?

In that light, I agree that the Apple iWatch is a strong competitor to Swiss watches.


"analysts predict it will sell a MILLION in first weekend"

Did you try to imply the first weekend sales were too far from that? They got to 95% of that in Friday alone:
"Slice Intelligence said e-receipt data from 9,080 online shoppers indicate 957,000 people in the U.S. pre-ordered the smartwatch on Friday."

What comes to Credit Suisse first year estimates, I wouldn't buy a used car based on any of their past or future estimates. If we try to use some source that Tomi here has ruled to be reliable, we have pre-launch estimates from Strategy Analytics at 15.4 million and IDC at 15.9 million. Current tracking from stores indicate 13-15 million for calendar year 2015 and more for first full year of sales.


"Did you try to imply the first weekend sales were too far from that?"

No, that was the title of the piece.


Claiming that something competes with your product doesn't make it so. See for example GM that claims that Corvette competes with Ferrari.
Mechanical watches are simply jewelry for men and not something really functional so by claiming it competes with something (hopefully) useful like an apple watch they claim that a mechanical watch is useful

Wayne Borean

Maybe we should all put our Apple Watch sales estimates for 2016 in writing. Tomi has already done so, and I'll do the same later today (am currently on my way out the door, and I'll need to do a bit of research before going on record...)

So post your estimates, and next year we can see who called it closest.



"Mechanical watches are simply jewelry for men and not something really functional so by claiming it competes with something (hopefully) useful like an apple watch they claim that a mechanical watch is useful"

What a nonsensical statement. Typical Apple bullshit.
Believe it or not, most people that use a watch still use it as a timepiece, and in that regard the Apple Watch is a dismal failure with its short battery life.

And it's also typical for the iPropaganda machine to define away the competition as you did.

You people are just utterly pathetic in your predictability.

Niall Shakeshaft

I just went back to your 2007 article. You need to clean up the spam in the comments. That was a truly visionary piece of analysis. I don't think I read it at the time, but I think you understood the seismic shift about 3-5 years ahead of everyone else. I left Nokia in Feb 2007. I like to joke that was in the time between when the iPhone was announced and when it was launched. Peak Nokia! But even though the writing was on the wall in 2007 I don't think it was legible to the majority until about 2010. So for you to predict the disruption of the industry so accurately is quite spooky.

As for the watch. I wear a fitbit and although I just bought it has a fitness gadget, I really like some of the UI things that complement my phone. The vibrating alarm clock (no waking the wife up when I get up early to catch a flight), the vibrating call alerts and caller ID on my wrist. I like them a lot. This has had me thinking of buying an Apple watch. To see if that experience could be expanded. But it is a lot of money...

I sense that the watch a device touchpoint is not dead, just not a home-run success in the manner of iPhone. I'd like to think Apple will persevere with it in the same manner as they have with Apple TV. There could be a great niche product for the wrist one day. I'd also like to see them experiment with other wearable and nearable concepts.


I’m not sure how you can call the Apple Watch a failure when it is selling faster than both the iPod and the iPhone at launch.

The iPod took 4 years to sell 10 million units and the iPhone took 7 quarters to sell 13 million units.

In contrast, the $500 ASP Apple Watch is estimated to have sold around 12 million units in a mere 3 quarters.

Strategy Analytics reports that Apple absolutely dominates the smartwatch market with 74% market share.

The Watch is also meaningfully moving the dial financially for Apple.

Apple's "Other Products" category which includes the Apple Watch and the AppleTV surged 62% YoY growing from 2.7 Billion dollars to 4.4 Billion this quarter.

As a comparison, "Other Products" has increased from 2.7% of Apple’s iPhone revenue to 8.4% of this quarter’s iPhone revenue in that time.

For perspective, that $4.4 Billion for Other Products is equivalent to 25% of Google’s ENTIRE $18.7 Billion revenue in Q3 2015 and is growing a massive 62% YoY.

That sounds like a pretty impressive start considering it is growing far faster than the iPhone at launch despite being a completely new form factor that would normally take time for the mainstream to accept it.

Per "wertigon" Ekström


It's living mainly on the Apple hype. The watch will need to prove itself - to have some sort of killer application to drive sales forward.

No such apparent app have emerged, and it's likely not to emerge. But yes, it might be a rare one-off like the Wii, which sold in tens of millions and then started to collect dust as people grew bored of the novelty of it.

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