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By Wells Fargo Research

Retail sales fell slightly more than expected in June, with overall sales declining 0.5% and sales excluding motor vehicles declining 0.1%. The weakness was not totally unexpected as several weekly sales measures have been posting declines for much of the past two months and consumer confidence and buying plans both fell sharply in June. The loss of momentum is most apparent in the three-month rate of growth, which has slowed to a 4.1% pace for overall sales and just a 2.7% pace for sales excluding motor vehicles.

Sales at motor vehicle dealers fell 2.3% following a 0.6% drop in May. The major motor vehicle manufacturers recently announced they would keep assembly plants operating throughout the summer, as sales were reported to be robust and inventories were reported to be in line with demand or possibly even a bit tight. This morning’s sales figures cast some doubt on these predictions and raise the possibility that we may see an unintended build in inventories this summer that requires more extensive sales incentives or production cutbacks to clear out inventory.

The one big gainer for the month was electronics stores, where sales jumped 1.3 percent, following a 0.9 percent jump in May. The increases likely reflect the introduction of a number of new smartphones, most notably the newest iPhone, which debuted in June.

April 30, 2007

Microsoft CEO Steve Ballmer on music, gaming

Q: People get passionate when Apple comes out with something new — the iPhone; of course, the iPod. Is that something that you’d want them to feel about Microsoft?

It’s sort of a funny question. Would I trade 96% of the market for 4% of the market? (Laughter.) I want to have products that appeal to everybody.

Now we’ll get a chance to go through this again in phones and music players. There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.

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From Fortune

Apple passed an important milestone last quarter that nobody on Wall Street seems to have noticed: the iPod, once Apple’s (AAPL) No. 1 source of revenue, fell into third place after the Mac (No. 1) and the iPhone (No. 2).

Think of Apple’s business model — as Steve Jobs often does — as a three-legged stool: Mac, iPod, iPhone. As recently as 2006, the iPod leg accounted for 55.5% of Apple’s revenue. By last quarter, its share had shrunk to less than 18%.

But this is a good thing, argues Bullish Cross‘ Andy Zaky, a day trader and occasional blogger whose estimates of Apple’s earnings regularly beat — by a long shot — the estimates published by professional analysts.

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From MacRumors

All Things Digital reports on research from analyst Toni Sacconaghi of Bernstein Research that shows Apple holding 32% of the cellphone handset industry’s operating profits for the first half of 2009. Apple’s profit share is driven by high average selling prices and high margins on the iPhone, which accounts for only 8% of industry revenue and under 2% of industry unit sales.

‘Our analysis indicates that Apple’s iPhone accounted for only 8% of handset industry revenues but 32% of industry operating profits in 1H09,’ Sacconaghi wrote in a note to clients today. ‘Even if we exclude the operating losses generated by Motorola and Sony Ericsson, Apple still accounted for 25% of industry profits. iPhone’s success is akin to Apple’s position in the PC industry–where the company enjoys an estimated 25% of industry profits, despite capturing only 6% of industry revenues.’

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From MacRumors.com

With the growing evidence that Apple will be releasing some sort of Apple Tablet in the next 3-6 months, analysts and writers have started speculating about the potential success or failure of such a device.

Both Gizmodo and PC World have taken the time to detail why they think that such a product will be a flop. John Gruber, however, points out that these people are incorrectly assuming that such a device would mimic present day tablets and offer no compelling new features.

This is not the first time that Apple has been close to releasing a tablet device. Back in 2003, the evidence for a Mac Tablet had reached similarly high levels, but for whatever reason, Apple ultimately decided not to release that device. We’ve always felt that the reason has been more a marketing decision than a technical one. Until Apple comes up with that ‘killer feature’ for a tablet, we don’t believe that Apple would commit to the market. Apple has always said that they won’t pursue a product line unless they feel they can offer something new and compelling. While these promises could simply be dismissed as marketing propoganda, it seems clear that Apple’s entries into the MP3 and mobile phone markets have met those standards.

Arguably, the iPhone’s killer feature on launch was its excellent mobile web browser. This feature was poached from another internal Apple tablet project called ‘Safari Pad’. Steve Jobs is said to have recognized its value and morphed it into what became the iPhone.

So the question remains, what added value has Apple decided it can provide in a tablet device that its competitors have been unable to offer? Are interactive album booklets alone compelling enough to launch this new device? Or have they finally decided to deploy more advanced multi-touch on a larger screen?

(Via MacRumors)

Internet-addicted iPhone addicts, rejoice: Push instant messaging is here. That means you can constantly stay connected to your IM services (e.g., AOL Instant Messenger and Gchat) on your iPhone even when it’s asleep; you can receive IMs similar to the way text messages work.

BeeJive is one of the first IM clients to take advantage of push. I’ve tested the app for about seven hours, and I’m pleased to report push IM works quite nicely. On my iPhone 3GS, push IMs appeared almost immediately on my screen, even when I was using other apps. The IMs appear in a small rectangular box, giving you the option to close the message or view it in the BeeJive app.

During testing there were occasions where push IMing simply wasn’t working. However, some users are also reporting similar problems with the AOL Instant Messenger IM app, which is also supporting push. Kai Yu, developer of BeeJive, assures me this is likely a problem related to Apple’s push-notification server — new technology, so hopefully Apple will improve it over time.

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Marketing research company ComScore recently conducted a survey highlighting socioeconomic differences between iPhone and iPod Touch users.

First spotted by Fortune 500’s Philip Elmer-DeWitt, the survey discovered the following about the general iPhone and iPod Touch population:

• 70 percent are men
• 50 percent surf the mobile web more than they read newspapers or magazines
• More than 40 percent use mobile devices more often than their computers to browse the web
• More than 40 percent spend more time on mobile web browsing than they do listening to the radio

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By Jesus Diaz from Gizmodo

So you bought your heavily subsidised iPhone 3G with a two-year contract and now you are upset because AT&T wants to charge you full price for the new iPhone 3GS, right? Well, stop whining. You have no arguments.

I have the iPhone 3G—by the way, I paid an extra $500 deposit on top of the price tag because I didn’t have US credit history back then—and I don’t qualify for a subsidised upgrade. I have to finish my contract first, then renew to qualify for the subsidy. If I was in Spain or anywhere else in the world, it will be the same.

But I am not whining. Not because I am a fanboy—I hate AT&T with a passion—but because there are no logical arguments to support the whining.

Sure, it sucks to be me and pay almost-full price for the iPhone 3GS, but that’s how life is. You don’t get a reduced price on your new notebook just because you bought the old model a year ago. You don’t get reduced price on cars, or anything else.

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Engadget reports that Apple has just received approval from a certification board for four new iPhones with capacities ranging from 4 GB to 32 GB.

4GB to 32GB — that’s one hell of a range, but we’re hearing from a trusted source that new iPhones in 4GB, 8GB, 16GB, and 32GB capacities just garnered approval by the PCS Type Review Certification Board, the standards body responsible for certificating handsets for use with some carriers (AT&T, for instance).

Engadget believes that Apple is unlikely to deploy high-end hardware and software features on iPhone models with capacities as low as 4 GB, suggesting that Apple may begin offering models differentiated by more than just storage capacity. Numerous rumors regarding an ‘iPhone nano’ with scaled down hardware and/or software, as well as speculation regarding software-driven differentiation, have long pointed to the possibility of such variation in Apple’s iPhone offerings.

(Via MacRumors)

Palm’s upcoming Pre handset is again making headlines after it was discovered that early production units contain native support for syncing with Apple’s iTunes software as if they were built by the iPhone maker itself.

Fortune notes that this isn’t an entirely new revelation, given that it was mentioned back in January during the Consumer Electronics Show, but only recently has the tech media really clamped down on the matter.

‘Plug a Pre into a Mac and it syncs, seamlessly, with Apple’s iTunes,’ the financial publication reports. ‘In fact, the iTunes Store treats the Pre just as it would an iPod or an iPhone with one exception: it can’t handle old copy-protected songs.’

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A surprise it isn’t, but it’s nice to know that at the very least the iPhone is about to get a storage boost, doubling its internal flash memory to 32GB. Up until the euthanization of the 160GB iPod Classic, Apple could always be relied upon to increase drive size in iPods.

The rumors/leaks come from two independent sources, and both are the results of either incompetent slip-ups or a genius-level marketing strategy. First, T-Mobile Austria posted a placeholder on its site listing a ‘iPhone 32GB’ starting at €0 (that’s $0, for the mathematically challenged), and the blog Area Mobile was sharp enough to grab a screen shot.

Next up, Rogers. The much ‘loved’ Canadian carrier has posted a list of upcoming handsets according to the Boy ‘Genius’ Report. Here’s the relevant line: ‘# iPhone — ETA: unknown (July/August), outright: not allowed, 3-year: TBD.’ That’s right folk: three years. This doesn’t point to a 32GB model, but it at least offers some confirmation of an early Summer launch.

Finally, Vodafone Australia has issued an end-of-life notice for the 32GB iPhone. This could, of course, just means that the 16GB iPhone 3G is about to be replaced by a newer 16GB iPhone, but we agree with MacTalk.au that it looks like there will be a bigger model along soon.

And you know what else this means? The iPod Touch has always had double the capacity of the largest iPhone, which probably means a ridiculously large 64GB model is on the way.

(Via Wired.com)

(Via Gizmodo.)

Regarding the Verizon and ‘iPhone Lite’ Rumors:

There’s been much speculation this week regarding reports in BusinessWeek and The Wall Street Journal of talks between Apple and Verizon. To wit: that Apple is considering Verizon for a future iPhone and/or its mythical forthcoming tablet. This is not too complicated. Let’s just play ‘What’s in it for them?’

Verizon — Would they want to sell some sort of iPhone model? Yes, of course. The iPhone has undeniably turned into a big deal. Verizon has nothing to do with it, and it is the single best competitive advantage held by AT&T, Verizon’s biggest rival. None of the iPhone rival devices Verizon has offered so far is any good or very popular (cf. the BlackBerry Storm), and the Palm Pre is exclusive to Sprint.

AT&T — The iPhone means more to AT&T than any other phone it carries. Most people decide which carrier to buy a phone from, go there, then pick a phone. With the iPhone, people decide they want to buy one, and then they go to AT&T. Some number of iPhone owners switched to AT&T specifically and only because of the iPhone. In fact, there are some who switched to AT&T to get the iPhone despite the fact that, all things considered, they’d prefer to buy a phone from another carrier — often Verizon, which is widely regarded as having the best overall U.S. network coverage. It is very much in AT&T’s interests to keep the iPhone as an exclusive AT&T device for as long as it can.

Apple — The iPhone matters to AT&T, but AT&T doesn’t really matter much to Apple. The U.S. is Apple’s (and the iPhone’s) biggest market, but it’s still just one country in a big world. In the just reported quarter, AT&T reported activating 1.6 million iPhones. But Apple reported selling just under 3.8 million total iPhones — so 58 percent were sold outside the U.S. AT&T isn’t Apple’s iPhone partner. They’re just Apple’s iPhone partner in the U.S. I think the U.S. tech press often overlooks this, hence some of the knee-jerk skepticism that Apple would even talk to Verizon.

Apple wants profit and they want market share. The trick is balancing the two. Surely Apple makes more money per iPhone with an exclusive deal, but they would sell more total devices if iPhones were available on both AT&T and Verizon. Yes, Verizon’s network is CDMA, not GSM, and so it would require Apple to produce different hardware. But there are some number of Verizon customers who won’t switch to AT&T but who would buy an iPhone from Verizon, and my guess is that that number is high enough for Apple to at least consider producing Verizon-compatible hardware.

So, even if Apple would prefer to stick with AT&T exclusively, at least for another year, I’d find it surprising if they didn’t at least talk to Verizon just to hear an offer, and perhaps more importantly, to leak the flirtation to the press so as to keep the pressure on AT&T to offer Apple the best possible terms.

But as for whether I think an iPhone on Verizon is actually imminent — as in ‘coming in the next few months’ imminent — I doubt it. During Apple’s quarterly finance call last week, analyst Gene Munster asked why Apple has maintained its exclusive agreement with AT&T. COO Tim Cook said:

On AT&T, Gene, we view AT&T as a very good partner. We believe
that they’re the best wireless provider in the U.S. and we are very
happy to be doing business with them. They have done a very good
job with iPhone, they’ve put the full force and weight of their
company behind it, it’s a major strategic thrust for them and so
we’re very happy with the relationship that we have and do not
have a plan to change it.

And then Cook again, responding to a follow-up question regarding any ‘technical hurdles’:

Well from a technology point of view as you know, Verizon is on
CDMA and we’ve shown from the beginning of the iPhone to focus on
one phone for the whole of the world and when you do that, you
really go down the GSM route, because CDMA doesn’t really
have a life to it after a point in time.

Steve Jobs, famously, is known for pooh-poohing ideas or features only to turn around months or years later and declare them to be the best ideas or features ever, now that Apple has embraced them. Apple doesn’t announce big changes until it is ready to announce them, direct questions be damned. And so I wouldn’t count on Apple’s ‘not having a plan to change’ the AT&T exclusivity lasting forever.¹

But the CDMA comment does not sound like misdirection from a company planning to unveil CDMA phones this summer. That comment was specific, and it wasn’t something along the lines of we’re not going to do CDMA, but rather more along the lines of CDMA is on its way out industry-wide. That’s just not something Cook would say if Apple were planning to announce a CDMA phone in June — and without a CDMA iPhone, there’s no iPhone for Verizon.² Ask again when Verizon’s next-generation LTE network is running, though.

But that’s just the iPhone. If Apple is preparing to soon announce its supposed tablet?/?mediapad?/?whatever, and if said tablet?/?mediapad?/?whatever is going to support mobile broadband, it could well use EVDO from Verizon without contradicting anything Cook said about CDMA or the iPhone remaining exclusively on AT&T.

(Brief Interpolation Regarding the Proper Perspective Regarding Any Rumored New Devices: Keep in mind that these tablet?/?mediapad?/?whatever rumors are growing to the point where if the WWDC keynote comes and goes without any mention of this device, the jackass contingent is going to blame Apple for not releasing it rather than blame the rumor reporters for being wrong. BusinessWeek’s report had the most details about purported new devices, but in terms of timing, only said ‘One of these devices may be introduced as early as this summer.’ Point of this interpolation being that if — and it very much remains an if — this really is a device that Apple is preparing to release, fever-pitched rumors won’t make it appear any sooner than when Apple deems it ready.)

Erring on the Side of Increased Market Share

It’s my assumption that Apple’s long-term plan for the iPhone platform is patterned after Apple’s long-term plan for the iPod. Apple’s iPod strategy has been phenomenally successful, and there are many obvious parallels. The biggest difference is that the iPhone has succeeded far faster than the iPod did — Apple didn’t release the Windows version of iTunes until two years after the original iPod was released as a Mac-only peripheral.

One of the key points in the history of the iPod was the release of the iPod Mini in January 2004. That’s when Apple expanded the iPod from a single product to a family of products, and the Mini proved to be a smash hit. The formula behind the iPod Mini was simple: Apple made a smaller, cheaper device with more or less the same technical specs as the original iPod from October 2001.

Apple went on to repeatedly improve upon the iPod in two ways: on the high end by producing new devices with the same shape and price but with new features (additional storage, color screens, larger screens, video, etc.); on the low end by taking the existing features and making them smaller and cheaper.

So here’s how I see Apple applying its iPod strategy to the iPhone. At some point the iPhone will expand to two form factors:

1. A high-end iPhone with the same basic size and price as previous
   iPhones, but with significant new features. Obvious potential
   new features would be things like more storage space, more RAM,
   a faster CPU, an improved (and eventually video-capable) camera,
   802.11n Wi-Fi, and superior battery technology.
2. A new, lower-priced, smaller, and more adorable iPhone, with
   more or less the same technical specs as the original iPhone.
   Given that those specs include the 320?x?480 display, I wouldn’t
   expect something tiny, but remember that the original iPod
   Mini was ‘just’ 35 percent smaller by volume than the
   then-current full-sized iPod. Shrink the iPhone’s forehead and
   chin and make it thinner — maybe a lot thinner — is what I’m
   thinking. Existing iPhone apps would run just fine on the new
   device, as it’d have similar, if not identical, CPU performance
   and RAM to previous full-sized iPhones. Such an iPhone sounds
   much like the ‘iPhone Lite’ that BusinessWeek reported its
   source saw.

The only question is when. Could be this year. Could be next year. But put me on the record for predicting it’ll happen before the end of 2010.

The reason why Apple did this with the iPod, and why I’m convinced they’ll do it again with the iPhone, is that when it comes to managing the balance between per-unit profit and overall market share, Apple is determined to err on the side of market share. (Not as much with the Mac, however — the difference being that PCs are now a firmly established market.) Most gadget companies, when they have a smash hit on their hands, try to milk it. A typical company that found itself selling millions of $400 hard-drive-based digital music players would try its best to continue selling the same $400 hard-drive-based digital music players for as long as it could. Apple, despite an overwhelming 70 percent market share, aggressively added features and drove down its own prices, year after year after year.

I’ve previously quoted the following passage from Steven Levy’s 2004 Newsweek interview with Steve Jobs, but it’s worth repeating here. The topic was the Mac’s long-stagnant (at the time) market share.

If that’s so, then why is the Mac market share, even after Apple’s
recent revival, sputtering at a measly 5 percent? Jobs has a
theory about that, too. Once a company devises a great product, he
says, it has a monopoly in that realm, and concentrates less on
innovation than protecting its turf. ‘The Mac user interface was a
10-year monopoly,’ says Jobs. ‘Who ended up running the company?
Sales guys. At the critical juncture in the late ’80s, when they
should have gone for market share, they went for profits. They
made obscene profits for several years. And their products became
mediocre. And then their monopoly ended with Windows 95. They
behaved like a monopoly, and it came back to bite them, which
always happens.’

In the near term, Apple could fuel explosive iPhone unit sales growth just by reducing the entry price. But at some point, looking a handful of years down the line, expanding the iPhone’s U.S. market share is going to require going beyond AT&T. The only question is when.

”

(Via Daring Fireball.)

Lazard Capital Markets analyst Daniel Amir believes that Apple is working on two new iPhones that will arrive in the coming months. These would include a high end 32GB iPhone with camera improvements as well as a lowe-end 3G version. Production for the devices would begin in April and ramp up in May, with a release in June 2009.

A 32GB iPhone has been long expected and has been dependent on the release of suitably dense memory chips that could fit within the current iPhone casing. A couple of vendors have announced possible memory chips that would be available this year. As a whole, analysts have been notoriously unreliable sources, and this particular group has no notable track record. Still, a June release of the new iPhone is certainly expected. Now with WWDC’s dates set for June, Apple has an appropriate venue to announce new products.

[Via MacRumors]

Last week some more details about the next iPhone revision continued leaking out.

First, there were spottings of new Apple device IDs found embedded within the iPhone 3.0 firmware. Silicon Alley Insider then claimed that the next iPhone would come with “much faster internet”. Finally, AppleInsider said that the new iPhone would indeed have a video camera, supporting evidence of video publishing screenshots also found in iPhone 3.0.

It’s not surprising that the number of leaks is increasing as Apple does have to keep their carrier partners at least somewhat informed heading into a new release. We’ve also continued to hear unconfirmed whispers and have specifically heard that the new iPhone with support a 7.2Mbit chipset.

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From AppleInsider

Tucked within Apple’s iPhone 3.0 beta firmware are hardware strings that mention not one but two unreleased iPhone models as well as similar changes in store for the iPod Touch.

An exploration of device strings by the same source that correctly leaked MMS and tethering ahead of Apple’s iPhone 3.0 preview event now finds that there are at least four and as many as six new devices in the pipeline that would share OS X iPhone as their foundation.

Again speaking to Boy Genius, the insider notes that the previously discovered iPhone 2,1 has been joined by iPhone 3,1 as well as iPod 2,2 and iPod 3,1. As Apple always uses the first number in these device identifiers to refer to major revisions, the naming schemes allude to a second major reworking of the iPhone in testing at Apple as well as a minor revision of the current iPod touch and a third-generation overhaul.

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The three children of Bill and Melinda Gates may not be allowed to have a product from a certain Cupertino-based rival (aka Apple) in their home, but that doesn’t mean Mrs. Gates doesn’t wish for an Apple gadget every once in a while.

Melinda Gates told Vogue in a recent interview that the couple’s three children try to have “as regular a childhood as possible,”, but that doesn’t include Apple’s ubiquitous iPod digital music and video player or its cellular companion, the iPhone.

“There are very few things that are on the banned list in our household,” she said. “But iPods and iPhones are two things we don’t get for our kids.”

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Pictures claiming to depict the back cover of the new iPhone 4G have started circulating on the Internet. The photo allegedly depicts an unreleased 16GB iPhone with the model number A1303. This new iPhone case is said to “shed its glossy appearance for a matte black look” and also introduce a new case-back made of metal.

MacRumors received additional images that appear to be from the same series. The images have reportedly come from China and are said to depict the back-casing of the next iPhone. The case is also said to be textured for better gripping. Man, I want it! [MacRumors]

According to Ventura Beat, an Android team member says that Apple asked Google not to use multitouch in the G1, or else. Obviously, they complied. Their alleged source said that Google had plenty of reasons.

Their source claims the company didn’t want to angry Steve Jobs. Even while the G1 hardware supports multitouch, the possibility of clashing with Apple-who is an strategic partner with the iPhone-was not convenient for the interests of the company. In addition to that, Ventura Beat’s source says that the legal battle would have been too much and Apple has the upper hand with a billion patents on the whole multitouch arena. [Gizmodo]

This beautiful concept, inspired by the curves and tapering of the Macbook Air coupled with the iPod Touch’s back, is even better than the cool Macbook-inspired iPhone 4G previously featured.

The most exciting part is not the aesthetic aspect of it. It’s the front camera and the fact that people seem to be excited about getting videoconferencing on the iPhone. Specially about the idea of interacting with desktop videoconferencing software on both the PC and the Mac. This is a must for the videochat feature to be really useful. Make it crossplatform! Either with Apple releasing iChat for the PC or working on the connection with existing PC software like MSN or Skype.