Newsletter Issue #899
February 20th, 2017THIS WEEK’S TECH NIGHT OWL RADIO UPDATE
So when Apple decided to partner with LG to produce a 5K display primarily for the MacBook Pro (at least for now), you’d think that construction quality would meet Apple standards. All right, it may not have looked very pretty, and I suppose the functional looks of the UltraFine 5K Display are acceptable, but what about the glitches? Some units reportedly freak out when in proximity to a Wi-Fi router. How was that allowed to happen? How was such a obvious bug overlooked during quality control?
Whatever the cause, supposedly modified units, with improved shielding, are being made, and will eventually reach consumers. Those who encountered the problems evidently have to bring their displays to a dealer, I presume Apple, for repair. Or does Apple just replace the product on the spot? Regardless, it goes to show that maybe Apple was too eager to stop building monitors. Just saying.
Now on this weekend’s edition of The Tech Night Owl LIVE, we featured Adam Engst, of TidBITS and Take Control Books. The main focus was on Apple’s decision to discontinue displays, and the deal that resulted in the development of the troubled LG UltraFine 5K Display, which was announced along with new MacBook Pros. What went wrong, and why did some units fail when in close proximity to a Wi-Fi router? Adam also discussed the possibilities for future upgrades to Mac desktop computers, and the rumored use of ARM processors to manage more Mac functions. What about replacing Intel processors with Apple’s A-series silicon?
You also heard from Adam’s colleague, Josh Centers, Managing Editor for TidBITS, and author of “Take Control of Apple TV” and other titles. There was a complete discussion of the hopes and dreams for the Apple TV, and how Apple has failed, so far, in its plans to conquer the living room. What about attempts to forge content deals with the TV networks? When does Apple TV support 4K and HDR, and where is the rest of the industry going? Can Apple find a way to dominate the set-top box market? Will the networks and cable/satellite companies let them? What about the lack of new AirPort Wi-Fi routers, and is it true, as published reports claim, that Apple moved its AirPort engineering team to other divisions in the company? Is there room for an AirPort in the current marketplace, and what about combining AirPort with Apple TV?
I also mentioned the possibility of a revised AirPort supporting a mesh network. which allows multiple routers to expand and enhance a Wi-Fi signal across a home or office. For those of you who are perfectly content with a single router, and receive a decent signal, it’s not an issue. But for those who encounter poor signals and drop-outs in various parts of a home, a seamless way to provide a consistent signal could be a real benefit. It comes at a cost, at least so far. So even though you can get a decent 802.11ac router for $75-$100 or so, a mesh network consisting of three units may cost around $350 or more.
Of course the price is likely to drop as the technology spreads to more manufacturers. But I wonder whether Apple has any such plans, or will, as rumored, give up on AirPort? Remember that when the AirPort was first introduced, there were very few Wi-Fi routers. Now there are loads of models, and many aren’t all that difficult to configure. So perhaps Apple really doesn’t see much of a market opportunity there anymore.
On this week’s episode of our other radio show, The Paracast: Gene and guest-co host Goggs Mackay interview Robert Schroeder, author of “Solving the UFO Enigma: How Modern Physics is Revealing the Technology of UFOs.” So if UFOs are real an extraterrestrial, just how do they perform amazing stunts of maneuverability? What can we learn about advancing our own understanding of physics and possible propulsion systems for future spacecraft? It’s going to be a fascinating journey to the frontiers of science. According to Robert: “I retired a few years ago from Hewlett-Packard after 26 years in operations and product management…I’ve done talks at Phoenix MUFON 2015; MUFON Symposium 2015, Irvine, Calif.; International UFO Congress 2014, Phoenix, Arizona, etc.”
LEARNING FROM OLD APPLE CRITIC NONSENSE
Over the years, Apple’s critics have been busy claiming that the company should do this, that and the other thing. When the requests — or demands — aren’t acknowledged, or are shown to lack logic, they are just repeated ad infinitum. In fact, you hear the stories so often that you wonder whether they are just copying from one another, or living in a vacuum.
A common complaint is that Apple needs to bite the bullet and cut prices. How dare they make big profits from the sale of their gear? Wouldn’t they sell more units if they just sacrificed some profit?
I suppose they would, to some degree. But would sales increase enough to compensate for the loss of profits? I suspect not, because other tech companies are not nearly as profitable with hardware. Apple earns more than 90% of the profits in the smartphone industry, and Samsung receives most of the rest. That means that loads of smartphones, many sold at lower prices than the iPhone, aren’t generating profits for their manufacturers. You wonder why they are even making those things, since a company lives and dies by cash flow and profit.
Well, maybe not Amazon, which usually doesn’t earn much in the way of profits, except for a rare quarter. During the holiday quarter, with sales up 22%, somewhat less than industry analysts expected, profits came in at $1.00 per share, substantially lower than predicted. That’s certainly better than little or no profit, but Amazon exists in a universe separate from many other companies. If Apple’s profits were substantially lower than Wall Street predicted, you’d never hear the end of it.
In any case, it’s clear that Apple isn’t going to build cheap gear. That doesn’t mean there won’t be price cuts. The iPhone SE may seem costly at $399, but that’s $50 less than what Apple usually charges for entry-level gear. While many Mac users chafe at paying hundreds of dollars more for the MacBook Pro with Touch Bar, there’s nothing unusual about upping the price for an all-new model.
The new prices, in fact, aren’t altogether different from the first Retina display MacBook Pros when they were introduced in 2012. Over the next few years, they got cheaper. And don’t forget that the first MacBook Air premiered in 2008 at $1,799. Compare that to its 2015 counterpart, which retails for $999.
This trend also applies to the 27-inch iMac with 5K Retina display. The very first version, in 2014, retailed for $2,499. Today’s $1,999 mid-range model is fairly similar in capabilities.
It stands to reason that the $1,299 MacBook may soon get cheaper, and the MacBook Pro with Touch Bar is probably destined to become more affordable. But this is not necessarily a case of Apple deliberately gouging customers. It’s likely a matter, in part, of recovering development costs. As production ramps up and becomes more efficient, it becomes cheaper to build these machines. So Apple can still earn high profits and sell its gear for less.
Early adopters may feel cheated paying Apple’s new product tax, but the hard economics of the situation dictate that a responsible company will price its products and services on the basis of what they cost to build and ship.
That takes us to the quality of recent product refreshes. The iPhone 7 was supposed to be a ho-hum upgrade. The number of new features wasn’t altogether different from previous models, so why? Well, because it didn’t look different enough. “Wait for the iPhone 8,” they said, which would be markedly different.
Evidently the number and quality of new features is less significant than a change in the looks. So if Apple delivered an iPhone 7 with a significantly changed case design, with no new features whatever, it would count to some as a significant refresh. Go figure.
Customers, however, felt differently. The iPhone 7 sold more units than expected by most industry analysts during the holiday quarter. A greater percentage of customers preferred the iPhone 7 Plus, meaning higher average sale prices.
Now when it comes to Macs, Apple has been criticized for not upgrading them often enough. But part of the problem isn’t theirs. It’s Intel not making significant improvements to its processors each year, and delivering them late. So it appears that the critics who said Apple should have placed Intel Kaby Lake processors in the Late 2016 MacBook Pro never bothered to do their research. If they did, they’d realize that the quad-core versions of those chips hadn’t shipped yet.
But never let facts get in way.
Now Apple really got attacked in a recent Bloomberg hit piece over its failure to deliver a compelling upgrade to the Apple TV set-top box and take over the living room. But it may well be that ship has sailed already, because the TV networks reportedly haven’t been inclined to strike agreements with Apple for a subscription service. Was that Apple’s fault for making impossible demands? Was it Apple’s fault for not sacrificing customer privacy and delivering the sort of stats that the networks demanded?
Apple will not reveal what happened. How would you expect otherwise? It doesn’t mean a way forward won’t be found. At the same time, it doesn’t appear that other companies who make video streamers are doing any better. Sure, Apple ought to get out a model with support for 4K and HDR, and that might happen this year. Beyond that, just what are Amazon, Google and Roku doing to overhaul our living room experience?
Not very much it seems. It’s all on Apple — as usual.
THE FINAL WORD
The Tech Night Owl Newsletter is a weekly information service of Making The Impossible, Inc.
Publisher/Editor: Gene Steinberg
Managing Editor: Grayson Steinberg
Marketing and Public Relations: Barbara Kaplan
Sales and Marketing: Andy Schopick
Worldwide Licensing: Sharon Jarvis
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If Apple is to be criticized for any one thing, surely it is the fact that its corporate reserves have climbed to nearly $700 billion dollars. Yes folks, that means that someday in the future a corporate reserve totaling a trillion dollars is not inconceivable. How many sovereign nations can boast wealth on that scale?
When money climbs to such dizzying heights, it is probably most useful to think of it as a huge reserve of energy. And the truth is that any reserve of energy is largely meaningless if it is allowed just to sit around without being put to some kind of work. Sure, you want to hold some back in reserve as a hedge against emergencies, but beyond what what’s the point in simply keeping it in storage? All it can do is earn interest, and is there any real point in replacing one number so large as to be virtually incomprehensible with another number that is even larger? This may look great on paper but in the real world is virtually meaningless.
One possible answer is to start paying massive dividends to AAPL shareholders. This would make them overjoyed and at least would have the benefit of putting a lot of unused cash back circulation. But it’s hard to see how this would otherwise benefit Apple.
Gene’s article touches on this issue insofar as he points out that at the moment Apple is not entirely in control of its own destiny since it depends on Intel and other third-party manufacturers for the processing chips used in its various products. Likewise its display screens and other crucial components.
Wouldn’t it be an intelligent use of some of Apple’s obscenely huge cash reserves to put an end to this situation and maximize its corporate independence by acquiring the capacity to manufacture all the key components of its entire line of products, either by acquisition of existing companies or by starting up its own new ones?
And I must say that I’m surprised Apple hasn’t been confronted by a major revolt concerning this issue, in which its shareholders positively demand that its cash reserves be put to better use.
Dana I think you have their cash hoard confused with the market cap.
But your comments do make sense. While Apple already gives dividends to stockholders, they ought to be doing something more long-lasting in spending their excess cash beyond money manipulation.
Peace,
Gene
I don’t suffer from this confusion, but the reporter whose article I read may have done so.
Apple’s cache hoard was last reported in its quarterly financials as $246.09 billion.
I’m sure they can do a few things with that beyond paying some more cash to investors and making a few tiny acquisitions.
Peace,
Gene