Apple Creates New iPod Division

[macker]

The first step to creating a new spin off company is to seperate it into its own division though, no?

I'm not saying this is a good idea and its not my understanding, its the analysts in Goldman Sachs et al that can see an opportunity for a successful ipo. What they have been saying to apple is that the high water mark has been reached. Ipod market share will not get any greater, it can only go down. Spin it off and sell it now, goes the argument, and the company will make a LOT of money.

To do that, you have to establish it as a division with its own management etc. They probably have a window of opportunity for this of about 12 months.

 

[whooleytoo]

Apple has spun off iPod development into its own division within the company.

The move was made in response to an internal company-wide email from Apple CEO Steve Jobs.

At great personal risk and expense, I have managed to acquire a copy of that email, to share with Macrumors readers. Opening it now...

"Hey Apple. Open an iPod division already!"

D'oh!

 

[clearly]

No more iPod rumours?

This is great news. It means that this site should now concentrate on Mac rumours (as its name suggests) and not on iPod rumours. Apple has made it crystal clear that the Mac and the iPod are so separate that they require different divisions. Perhaps this site will get back to discussing Mac topics and not digital music devices. (And I say this as an iPod owner who loves the little thing.)

Clearly

 

[Abstract]

As I indicated in another thread this seems logical to me, in order to prevent lawsuits from The Beatles/ Apple. In this way the new company can expand their musical horizon.

Unless Apple pulls off a Madonna and renames the "Apple iPod" to just "iPod", it really won't make a difference. Apple Music is bitter because Apple computers is associating itself with music using the same name and a very similar logo.

Since iPods are synonymous with portable music anyway, and since its so damn famous, it could easily be a stand-alone name and ditch the Apple part of the name. iTMS can do the same thing and clasp itself to the iPod name instead of the Apple name, because again, iPods are synonymous with portable music anyway, kinda like how mp3 is synonymous with digital music.

Anyway, this could be a bad thing if iPod and iTunes/Mac integration is compromised. If they didn't work seamlessly together like they used to because of this entire "separate division" business, it won't be good.

Also, I think they're doing this because they're about to enhance the iPod big-time very soon, which is why it's a separate division. Sony doesn't make a separate division in order to make a particular stereo system. They'll have very very wide range of stereos to offer. Apple's iPod division can offer iPod with 3 different HD sizes, but with the exact same looks, its really like 1 model. The iPod mini makes another product. That's 2 products, and you don't make another division to make 2 products. They're coming out with something else....something HUGE!, and they want the new iPod division to get it going.

 

[rdowns]

also, why does anyone think this hurts either of the new divisions. Each will be profitable in it's own right. If anything, it will put added emphasis back on the macintosh division, which otherwise may have started to coast and let the iPod carry the company.

This is a fallacy that keeps getting posted here. In terms of profits, the Macintosh and their billions in cash are carrying the company. One could argue that the iPod is carrying the company in terms of consumer mindshare.

 

[dstorey]

few interesting things about this:

1) It seems to be the iPod division and not a Digigal lifestyle device section. Does this suggest that Apple are going to just focus on the iPod and not other new devices, unless they use iPod as a brand name and you get the iPod music player, iPod DVR, iPod phone etc etc.

2) Does this suggest the splitting of focus for apple computer here, away from a computer company that does a music player, which happens t obe damn good, to a company where computers are just one division and thus less focus. iPod gets equal focuc, r&d, etc as the computer division

3) It's interesting the head harware guy, ruby is going to be in charge of iPod division. He seems one of the more 'houshold names' in Apple. It could be worrying that the Mac loses his talents. The guy taking over on the Mac side of the fence seems to not be as much of a hardware guy so it's a bit worring.. Anyone know anything about him?

 

[whw5]

I don't like the idea of doing this. It seems like it will create a rift between the company. I have a feeling somthing painful will come of this, like a break away.

 

[whooleytoo]

3) It's interesting the head harware guy, ruby is going to be in charge of iPod division. He seems one of the more 'houshold names' in Apple. It could be worrying that the Mac loses his talents. The guy taking over on the Mac side of the fence seems to not be as much of a hardware guy so it's a bit worring.. Anyone know anything about him?

This is the bit that worries me, Rubenstein is an out-and-out hardware engineering guy, while Tim Cook is more of a manager.

Who knows, perhaps at that level of the company, management skills are more valuable than engineering knowledge? Personally, I wouldn't think so.

(To be forthright: I don't like Cook for personal reasons. He came to the Cork plant to give a long spiel on how great Apple was doing, and how safe we all were - only to be followed by hundreds of redundancies a few short weeks later. I understand full well why he had to do it, but I'll never appreciate being lied to.)

 

[sushi]

reminds me of the old school "mac" vs "apple" interoffice competition. could this potentially be a bad thing?

Understand your concern.

However, I don't think it will be an issue since the iPod and Macs compete for a different market. Unlike before when the Mac team was against the Apple IIGS team. In that case, Apple was producing competing products.

Also, as a separate enity, it will be able to focus more on cross platform issues I would think.

Sushi

 

[~Shard~]

Hopefully this will allow for moe concentrated efforts in parallel development. Although different teams have no doubt already been working on the iPods and Macs, (I doubt there has been substantial overlap), it seems like when updates come out, it's sort of one or the other - either iPod updates/announcements or Mac updates/announcements. I'm not sure how much exactly this will change things, but it is definitely good to have this departmental focus and mindset, so hopefully Apple will prosper from it. I guess only time will tell!

 

[ibjoshua]

You completely midunderstand this- iPod is a new DIVISION, not a new company. Like Mitsubishi sells cars, and they sell TVs. There is only one company called Mitsubishi, yet these two things are in different divisions.

You don't have an IPO for a new division.

Mitusbishi is a bad example. The big Japanese company groups are best described as 'families'. Mitsubishi Motors is a different company from Mitsubishi Electric and there are others. In fact Mitsubishi Electric owns lots of same brand companies many of which were born from seperate divisions.
For more info on Mitsubishi: mitsubishi.com


However you are correct, the formation of a new division which is essentially a department does not necessarily mean an IPO.

i_b_joshua

 

[dhdave]

I don't like the idea of doing this. It seems like it will create a rift between the company. I have a feeling somthing painful will come of this, like a break away.

On paper, it will allow the Mac team to focus on the Mac and the iPod team to focus on the iPod. Even in a large company like Apple there was bound to be a lot of overlap among departments. It may also allow for some growth now that each division will probably asses it's staffing needs independently. So far so good.

Replacing Rubenstein is Tim Bucher, another NeXT alumnus, who it says here has a BS in electrical engineering and a Masters in computer architecture. His webTV background instrests me. While flawed, it was conceptually one of the ultimate "consumer" devices of the nineties. He owns a company on the side that manufactures a personal server. I wonder if we won't see an even greater consumer oriented focus from the Mac unit.

-dh

 

[macker]

Mitusbishi is a bad example. The big Japanese company groups are best described as 'families'. Mitsubishi Motors is a different company from Mitsubishi Electric and there are others. In fact Mitsubishi Electric owns lots of same brand companies many of which were born from seperate divisions.
For more info on Mitsubishi: mitsubishi.com


However you are correct, the formation of a new division which is essentially a department does not necessarily mean an IPO.

i_b_joshua

I didn't say or claim there was going to be an imminent IPO. Using Japenese companies is a very bad comparison, due to the multiple layers of ownership and a whole host of other complications.

Apple are a US company. Their share price is very vulnerable to analyst's comments. Some analysts think that they should spin off and IPO the ipod before it's too late. I'm not saying it will happen, but this is an interesting development don't you think? Suddenly the Ipod has its own management, development strategy etc. Give it it's own accounting team, balance sheet, etc and then you can make it stand on it's own two feet. Then you can IPO it.

It's a long way from that, but don't underestimate the pressure that shareholders can exert, especially institutional ones.

 

[reaper]

The thing that worries me about this, is that Apple seems to be confirming what we have known for quite some time - to Apple the iPod is just as important, if not more so, than their entire line of computers.

I mean, when you think about it, they are putting the chief hardware engineer in charge of the iPod division and leaving the development of the computers to a marketing guy (as mentioned earlier). Furthermore, they are making a new division for the iPod in a company where the only two divisions used to be hardware and software. Think about it... the iPod is now on par with the all other hardware and all other software in the eyes of the company.

Possibly the R&D money will be better spent now, allocating it between two hardware divisions (instead of within one) so that the disparity between money spent on the iPod and mac can be clearly seen and remedied, but I forsee the possibility that this could even further the lack of imagination and innovation put into the mac line as Apple tries to leverage the iPod for all it's worth.

I don't necessarily know whether I think this is a bad thing or not. I like Apple because it is a computer company, not a digitial music company (although I do own an iPod). That being said, if they can make more money from the iPod and possible derivations of it down the road, then that makes more fiscal sense for them. I however, will stay with the Apple because of the mac line and I think a lot of other people feel the same way (hopefully they won't alienate all of us).

I think it's a given that one of Apple's strongest assets is its devotion to the integration of hardware and software. I only hope that they can keep this aspect of the mac line while trying to focus on another, completely different, product in the iPod. I realize that they have already been doing this to a certain extent, but updates to software and mac lines haven't been exactly stellar lately, have they?

I can only hope Apple figures out what type of company they are (computers or digital music) and follows that road. Hopefully, they won't lose sight of their roots of making better computers than the rest of the industry, for a short term gain in a market where innovation and resources will eventually dictate who wins.

- reaper

 

[singletrack]

I read in one of the business pages that analysts will start looking unfavourably on Apple if they DON'T spin off the ipod. As the market for hard drive players and Apple's share of it, is getting to it's peak then they will generate the most from an ipo if they do it sooner rather than later. The market would go nuts for an ipod ipo, was the general feeling. Apple could make a killing to secure the medium term future of the company. It's inevitable that it's market share in the music space will get eroded in the next 2-3 years.

Quite possible.

In other news, Napster UK launched today..

http://www.theregister.co.uk/2004/05/20/napster_uk_live/

And it was all over the lunchtime BBC news.

 

[mrkstu]

For the best...

...
I mean, when you think about it, they are putting the chief hardware engineer in charge of the iPod division and leaving the development of the computers to a marketing guy (as mentioned earlier). Furthermore, they are making a new division for the iPod in a company where the only two divisions used to be hardware and software. Think about it... the iPod is now on par with the all other hardware and all other software in the eyes of the company.
...
- reaper

Actually, this is probably for the best. The Mac doesn't have technical problems- its R&D is proceeding well, new apps are appearing constantly (from Apple and others), and IBM will get its processor act straightened out. The problems with Macs are marketing decisions- so Cook is the right guy for the job.

The iPod on the other hand is a whole new kettle of fish- I can see why a hardware guy wants in on the "digital lifestyle" division. And it ain't just gonna be the iPod. You don't create a division for one or two devices- you create whole familes of devices. This is the expression of the Sony-fication of Apple- and it doesn't bother me in the least as long as those assigned to the Mac hardware and software divisions are doing there jobs. The one thing that Steve has believed in all along is spending money to make money, so I don't think any division is going to be starved for resources.

 

[agentmouthwash]

I have a feeling that Apple is going to spinoff iTunes and the Ipod into one company and of course be the majority shareholders for one simple reason:
APPLE CORPS the Beatles Music company.

Just to get them off their back.

 

[mrkstu]

I have a feeling that Apple is going to spinoff iTunes and the Ipod into one company and of course be the majority shareholders for one simple reason:
APPLE CORPS the Beatles Music company.

Just to get them off their back.

Only one problem with that - I think if you do a spin off and keep a significant stake you are hit with all kinds of nasty taxes- but if you spin off a 100% you are not... IANAIPOSOEAA (I Am Not An IPO Specialist Or Even An Accountant)

 

[Porchland]

I was wondering if they would do this... The only logical next step would be to spin off the iPod & iTunes into another company (kind of like they did with Claris) if they keep becoming more and more popular.

Whoa! Did you see the earnings last quarter? iPod IS the company. I hope that this is nothing more than a streamlining of responsibilities for P&L and R&D purposes.

Mac and iPod are NOT the functional equivalent of Proctor & Gamble having Tide and Crest. Mac and iPod are yin and yang, two product lines that should genuinely help each other the next few years. In particular, Apple should be lasered in on using iPod to help make Mac a more consumer-oriented product with greater market share. (And I know Mac is never going to be a 15-20 percent market share company, but going from 4 to 8 is double the Macs. That's a good thing.)

Mac and iPod have great brand identity right now, and I sincerely hope this demarcation of divisions will not distract Apple from the prize.

 

[iggyb]

I was wondering if they would do this... The only logical next step would be to spin off the iPod & iTunes into another company (kind of like they did with Claris) if they keep becoming more and more popular.

It's REALLY nice being the king!

That doesn't seem to work for Apple. They brought Claris back in to change ClarisWorks (which was a good program) to AppleWorks (the forgotten program). FileMaker is a spin-off of Apple, and (although they just released an update) they seem behind the curve as well.

 

[Porchland]

I think that iTunes will stay with the iPod in development. You know they develop each side by side and they both work off of eachother...Hell, they share their own section on Apple.com... iPod + iTunes...I think it will be this way for a while.

I think a logical progression -- maybe not the next one but sometime down the road -- is that iTunes will eventually become iMedia (or some other iContent-ish brand) and continue to be the engine for the iPod. With the addition of music videos and movie trailers to iTunes, I've got to think there's more content and video-oriented features for iTunes on the way.

Movies on your iPod seems to be a logical end point, but Steve-o continues to say no video on itsy-bitsy screens. An Apple branded portable video-player wouldn't surprise me, particularly since the portable DVD players have moved into the $300 range. And Apple could push content to push sales, just as with the iPod. New this Tuesday, last week's "Soprano's" for $3 or whatever.

Who knows.

 

[Lepton]

I smell a video iPod

Speculation: iPod is taking more and more of a chunk of our time, especially with the development of the video iPod. So let's split it out. The new section can work on the iPod and video iPod hardware, iTunes music and music video sales, and getting the devices into non-Apple retail stores. It can also develop a new logo and brand as part of our settlement deal with Apple Music Corps.

 

[Porchland]

But it's still a division of Apple. I don't see how making it a separate division changes that situation. I assume the iPod will continue to have the Apple logo on it and will continue to be sold on Apple's website. And I assume Steve Jobs will continue to announce updates to it in his keynotes.

I haven't really researched what the Apple-Beatles conflict comes down to -- trademark, breach of some use agreement, etc. -- but it wouldn't be unusual for a company to control another company that uses its brand. (Franchising is the classic example, but I'm talking about Company A controlling an A-branded Company B.)

Time Warner Entertainment, for example, used to be (is still?) owned by Time Warner and various minority owners. Sometimes it's a result of a complicated acquisition; sometimes it's the result of a financial decision to maximize profits by creating a controlled spinoff or "a kept house."

 

[pjkelnhofer]

There is no new company. Apple is simply reorganizing the way the look at things. I agree the person who said that the main reason could be that the iPod is cross-platform (maybe iTunes for Linux will be out soon ).

It will simply allow the people who work on iPods to focus on iPods and the people who work on Macs to focus on Macs.

Could the iPod division someday become it's own company? Sure, but why would it make sense for Apple to spin off it's most profitable division into a seperate entity? Too make a large chunk of money at a one time IPO? Doesn't make sense to me.

Would Apple have turned a profit the last few quarters without the iPod?

 

[pjkelnhofer]

I haven't really researched what the Apple-Beatles conflict comes down to -- trademark, breach of some use agreement, etc. -- but it wouldn't be unusual for a company to control another company that uses its brand. (Franchising is the classic example, but I'm talking about Company A controlling an A-branded Company B.)

Time Warner Entertainment, for example, used to be (is still?) owned by Time Warner and various minority owners. Sometimes it's a result of a complicated acquisition; sometimes it's the result of a financial decision to maximize profits by creating a controlled spinoff or "a kept house."

I don't think it is odd at all for a company to control another company with a different brand. Usually though it takes place when a company buys another company and keeps the old brand name since consumers already have a connection with it (ie, Coca-Cola bought Minute Maid in the 1960's, but the Minute Maid brand name stills exists. If you read a carton of their OJ it has the Coca-Cola logo on it somewhere).