To Beat the Law of Large Numbers, Apple Must Expand Its Product Line

[charlituna]

re original article

sir jony ives is probably tinkering with the next insanely great growth driver

Which might not actually be a new product but just the next version of something they already have. Say a camera less 16 GB iPad 2 at a vastly reduced price valuable only to schools for those textbooks etc

Also, re the original article. It's a pity that they aren't allowing comments or I would go in and post this bit of 'sense' to the writer about his reference to "the law of large numbers"

http://youtu.be/G2y8Sx4B2Sk

 

[kiljoy616]

Apple need to keep doing what they do, and forget all this mumble jumble voodoo make-believe. Take their time and bring out top quality things that we life and want that is all they need to do. Oh and not listen to the crazy people with wild ideas that lead nowhere.

----------

Interesting article, however, I'd propose that Apple do not need to earn a single dollar more than they are already earning.

One sane person finally.

 

[GeniusJon]

Whenever somebody says "Mac Pro", most people assume its the "MacBook Pro". There's a difference ya know...

It's really quite amusing because there was a conversation about wanting a Mac Pro, and then some guy saying how his MacBook Air was a good alternative.

 

[hspace]

I don't see why so many are having trouble understanding this story. Perhaps the terminology is a bit off, but it is just common sense.

iPhone sales (to take an example) can't keep growing like it is now. Most of the growth is coming from new smartphone buyers. Once everyone has a smartphone, growth *will* slow down. Even if *everyone* on the planet got an iPhone, the market would then be tapped out. Sure, they will replace them every so often, but that won't be the same kind of growth that Apple has been seeing recently.

To keep growth going at the current rate, Apple needs to go into new market segments (like TV's), or create new markets (iPad).

 

[Icaras]

APPL doomers have been around for years, maybe some year they will be right, but it's not going to be in 2012.

I honestly don't think any sort of "doomsday" for Apple (read: declining growth, not loss of money), will be at all imminent within the next 5-10 years at the very least.

 

[joelypolly]

Part of the story only...

Seriously disappointing article... One must talk about things in context. Large numbers are only large with the correct context. I can say I have a billion dollars but is it in USD or Korean Won is it large or small? (BTW 1 billion won is only about (900K USD).

It only becomes big numbers if you are saturating the market or if the market is stagnant. If the market is a 500 billion a year in total rev then 50 billion is only 10% with a lot of room to grow. CISCO the example used was already one of the biggest (by marketshare) network/telecommunication equipment providers during the 2000's for them. Compared to Apple who by marketshare is one of the smaller players with Mac & iPhone in the single digits worldwide. Exception is obviously the iPad but we can look at it as a PC that expands the PC purchasing population. (people who haven't purchased a PC because it was too difficult to us)

So while some of the points were good in the article, it comes off as another doom and gloom by presenting only part of the data. Sure not many other companies have been over 500 billion market cap but then not many companies know how to really make money. Apple has making a profit down to an science while companies like HP, Dell and Moto etc generate huge revenue with almost no profit.

 

[thewitt]

Apple doesn't need to sustain this growth rate to be successful, because unlike similar ecosystems, they are not consuming their cash reserves to sustain the growth.

If they had zero growth effective immediately, they would be able to operate on cash reserves for the next 10-15 years...

 

[swingerofbirch]

The thing is

The thing is that all of Apple's products now (at least the ones that make the lion's share of profits: iPhone, iPod touch, iPad, and Mac) is that they are all general-purpose computers. You could say they are diversified, but they are really diversified in form, not in product functionality.

I think Apple has shown that a lot of markets don't need specific purpose devices and that specific devices for niche products are often more expensive and less user-friendly than a general purpose device that with an app can easily become specific to a task.

How do you add to a product line-up when each product in the line-up is already a conduit to access everything? Apple's products are everything products, really.

I don't think Apple will bring to market anything terribly specific like they did with the iPod, again. Maybe there is something to be done with iOS and a real keyboard or OS X and a touch screen, but again that's just changing the form.

Apple's devices are like big open windows to anything and also through apps can become almost any device. The only area left to really focus on is content. Although they've never made a lot of money off of content, it still is an area where they could grow more dominant (and by content I mean all forms of media). I certainly don't think the question of how we will access TV/movies is settled. Books aren't settled. And maybe they could do something new with the Web. Since Google monetized the Web by indexing it and becoming the Western world's on-ramp to the Web, not a lot has changed (well, except for big-app web-sites like Facebook). But Apple could change the Web in some way. Its Wolfram Alpha approach with Siri is already slightly novel.

Whatever they do will be strategic. I'm not holding my breath for anything like Dalmatian iMacs or a super powerful, super quiet, super computer in an 8-inch cube. Those announcements were actually more exciting to me because they were more emotional than strategic.

I would like to see Apple innovate a new text-input method for its iOS devices. The iPod was cool in that it had the scroll wheel. The Newton had handwriting recognition. But iOS still doesn't have a good way to enter text—maybe there isn't one. Maybe there is. The current solution is the obvious solution. It's not inspired like the scroll wheel was or really new like Newton was, and it isn't great for writing that much.

And if all that fails, maybe some new colors of iPod socks. That could rock the market.

 

[gnasher729]

Apple doesn't need to sustain this growth rate to be successful, because unlike similar ecosystems, they are not consuming their cash reserves to sustain the growth.

If they had zero growth effective immediately, they would be able to operate on cash reserves for the next 10-15 years...

If they had zero growth effective immediately, they would be able to add about $40bn to their cash reserves every year.

and take back his Pulitzer Prize and his business journalism professorship at Columbia University Graduate School of Journalism.

His Bio:
http://topics.nytimes.com/top/reference/timestopics/people/s/james_b_stewart/index.html

Didn't stop him from talking complete crap. But spanking seems quite adequate punishment.

 

[Dave00]

If he started with "at some point, they should run up against the law of large numbers" I'd be right there with him.

But to say "It's running up against the law of large numbers" is not based in any reality at all.

Agreed. Obviously, you can't double forever. Overall sales/revenue will level off, like it did with the iPod. But when? It took nearly 10 years for the iPod. Could've made the same argument with the stock at $150, or $200, or $400. And their share price is justified by earnings, unlike internet stocks at the end of the 90's.

 

[xoggyux]

I think the article is mixing up some concepts here .
The law of large number pretty much says that if you flip a coin, the more times you flip it, the closer the results will be to the "average" number for heads (or tails). For instance, if you only flip once, you might get 100% head, flip 5 times and you might get 66% head, but if you flip a million times you are going to get 50/50 as for large number of tries, the observed value approaches to the "average."
This cannot apply in the same way to growth because there is not an actual "fixed" average to approach to. Demand changes, supply changes, people needs/wants also changes. A companies have the potential to grow and grow assuming they don't make huge mistakes and play it smart.

 

[69650]

All products pass through a standard product life cycle over time. Eventually iPhone sales will start to level off as the market becomes saturated and more competitors enter the market with competitive products. It would be impossible for Apple to keep growing at the current rate but they don't need to. Even if they stayed at their current sales/profit levels that's still a lot of money.

I suspect that once the annual growth slows to a more sustainable level and the share price stabilises Apple will probably have to start paying dividends to prevent a flight by investors and the resulting fall in their share price.

2012 will see new versions of existing products which should help to maintain the current growth levels. It will interesting to see what happens in 2013. That is when Apple is most likely to release it next star product and it's also very likely that they will seek to make brand extensions of their existing products such as a larger and/or smaller iPad.

 

[laserbeam273]

Fascinating, nice article. But Apple has a lot of room to grow even without new product lines - their market share in PCs and mobiles is still so low.

 

[rumplestiltskin]

There will come a day when "everyone" doesn't want an iPhone; I don't as long as I would have to pay Verizon for web use I don't want nor need. If we can agree that nomophobia (look it up) is a sickness and not a virtue, and an iPad is a tool and not for use 24/7, then Apple will need to come up with something else to replace that business.

As they only have 8%(maybe less) of the global PC market, there seems to be plenty of room there for improvement and a 15" and 17" MacBook Air would help. Perhaps the shift over to the AppStore for OSX purchases (no physical media at all) might permit Apple to bring on the clones again (just for MacPro replacements maybe?) and start collecting all of that OS revenue that, at the moment, is going to Microsoft.

Seems to me like there is still room for growth.

 

[sterlingindigo]

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"Never tell me the odds!"

 

[The Economist]

While I am by no means an expert on professional computing needs, I see no reason for Apple to continue this product line.

As far as I know, no OSX/iOS app developer NEEDS a 12-core Mac Pro. That's the only part that concerns Apple, but I am willing to argue that those apps can be written on higher end quad-core iMacs. With mainstream (quad-core) processing becoming evermore powerful, the need for a Mac Pro diminishes.

I have a 2010 13" MBP, and the current 13" Macbook Air is 60% more powerful. Having said that, it is clear that performance is moving in the right direction, and it is moving rather quickly.

It's just a matter of time until we see 2 quad-core processors in the MBP and iMAC, at which point the processing power will generally far exceed the consumer's needs.

THOUGHT EXPERIMENT: Maybe Apple will discontinue the Mac Pro and will instead allow you to daisy-chain multiple Macs together, creating one powerful processing machine.

What in the world are you talking about? Do you honestly think that only app developers need CPU power?

You do realize that high–end computers are needed in many scientific areas, right?

 

[bigjohn]

no pressure Apple R&D


also, you heard it here first, but I think the Apple TV Display Unit whatever it's called is a bad idea.

and maybe the Mac Pro can achieve "hobby" status like the Apple TV Puck

 

[blow45]

I would counter that Apple has always been like that. THey don't do things because anyone else says they must. Whether that is the vocal minority of tech geeks that cry over the loss of their precious Mac Pro, X Serve, Shake etc or stock analysts, bloggers or whatever.

People said that Apple simply must include blu-ray in their machines, must include a stylus with the iPhone and iPad, simply must must must. And pretty much every time Apple has flipped those groups the finger and rejected those claims. And rather than going bankrupt they are seeming more and more sales, higher stock values etc. Microsoft and Samsung haven't become the poster company for hit seeking bloggers. They haven't had riots over new products or people conniving to gain truck loads of products to sell here or overseas. What other company has had naysayers declaring that the company would crash and burn within weeks when the CEO died but in fact has gone up easily $100 per share in the stock market after that event occurred.

Simply put Apple is doing what they want, when they want and it isn't hurting them one bit. So why fix what isn't broken by saying they simply Must do anything more.

They didn't do what they wanted, they did what they had to under the guidance of a guy with a vision and a plan, so they wouldn't do what they want to but take the right course. Steve killed the iPad so he could put a phone in first since most people were using phones, and he d killed the Newton before. He certainly did not go with the attitude why do anything more or why fix what isn't broken, he's attitude was let's try to find an even better way to do it, let's do more, but with consistent focused effort, a plan, and an understanding of the functional and the aesthetic.

But Steve is no longer there and that if your kind of delusional do no wrong and complacent attitude is shared by its members now that the leader with the vision and plan and the experience is gone they are guaranteed to eff it up if they go along with your line of thinking. Steve left a few valuable words, which they don't really seem to have understood, don't do as I would have done, do as you should do, don't act in my way of doing things, but in the broader spirit of my doing things...

 

[FasterQuieter]

I really don't care how many units they shift, as long as they keep making great things I can buy and enjoy.

 

[leon44]

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Capitalism and stock markets need growth,
but a company, to make money, doesn't need to grow, it just needs to keep doing what it does

Apple really can't keep growing at this rate, something has to give, and it worries me,

If it does keep getting bigger then it'll end up with a genuine social responsibility to give that money back to the world and not keep it in a bank account

 

[jackc]

If it does keep getting bigger then it'll end up with a genuine social responsibility to give that money back to the world and not keep it in a bank account

What do you think happens when money is in a bank account?

 

[saoir]

You would know this article is written by a business nut, who knows zilch about Apple.

Apple has no desire and has never had a desire to follow a 'growth' strategy in business. It has no interest in continuing massive growth along the silly extrapolation models offered by this dumb reporter.

Apple is about producing great and excellent products. if it's growth slows then so be it. I see no one in Apple who will give a damn. They will produce products as and when they are ready an in the meantime their sales in all sectors will grow ... at the rate that it grows.

 

[skh]

Thanks for the read. This is quite possibly the most well-written article I have read on MacRumors.

 

[blow45]

What do you think happens when money is in a bank account?

Lehman and Goldman eventually speculate on it and we end up with an almost worldwide financial melt down while at the same time weakening real production and service sectors and dipping the western world in a prolonged financial recession where young people are suffering all sorts of emotional problems due to rampant unemployment and older people lose their pensions while the mega rich become even richer, they same mega rich that merely took a hit and were subsequently bailed out by the societies they speculated upon with scarce regard for the future of other people and the damage to the planet?

Is that what you are referring to?

 

[notromeel]

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Very good read, in depth and statistical. However, their growth is from the focus of making mobile products that people love and running a tight ship behind the scenes. If you think Apple is going to enter a market to make money the first priority, you're wrong. Making a product introduction for any other reason than does it "just make sense", is not worth the effort or in their best interest.

It was a good article, but size is irrelevant to great products.