Linked List: January 28, 2015

Wednesday, 28 January 2015

‘Apple May Not Have a Choice but to Release a Watch’ ★

Matt Asay, writing for ReadWrite back in February 2013:

Apple is reportedly developing a smart watch made from curved glass. Does it really have a choice? With iPhone sales stalling, the Cupertino innovator is in desperate need of another hit product, and not just any product: Apple needs something that consumers will refresh every 12 to 18 months.

In desperate need. Desperate. I’m surprised they made it this long.

‘Grass Mud Horse’ ★

Craig Hockenberry, following up on a mysterious and overwhelming DDoS attack on Iconfactory’s web server originating in China:

In my first post about the attack from the Great Firewall of China, I stuck to the facts. There was a simple reason for this: you don’t want conjecture when your site is down. You want to understand the problem and see suggestions on how to fix it.

This post will be different: these are my opinions and they are pointed. I’ll first note some of the reactions I received, then examine some of the technical subtleties, and conclude with speculation on the motives behind the attack.

By time you finish, you’ll also understand the odd title for this post.

Bad Assumptions ★

Great post by Ben Thompson on how Apple remains profoundly misunderstood by many:

And yet, the perception that Apple is somehow hanging on by the skin of their teeth persists. I was speaking to someone about Apple’s particularly excellent China results this afternoon, and was struck at how their questions were so focused on threats to Apple — “How will Apple respond to Xiaomi” for example. This is in stark contrast to the way most think about a company like Google, where their dominance in whatever field they choose to enter is assumed, just as Microsoft’s was a decade ago. Apple, though, is always a step away from catastrophe.

It’s difficult to overstate just how absurd this is, but here’s my best attempt: last quarter Apple’s revenue was downright decimated by the strengthening U.S. dollar; currency fluctuations reduced Apple’s revenue by 5% — a cool $3.73 billion dollars. That, though, is more than Google made in profit last quarter ($2.83 billion). Apple lost more money to currency fluctuations than Google makes in a quarter. And yet it’s Google that is feared, and Apple that is feared for.

His list of three wrong assumptions about Apple is so spot-on. Worth bookmarking. I’d venture to say that just about all wrong-headed analysis of Apple’s future prospects comes down to one or more of those assumptions. The only one I’d add to the list: Apple can’t innovate without Steve Jobs.

Apple and China ★

Brian X. Chen, writing for the NYT:

The company on Tuesday reported $16.1 billion in revenue from “greater China” — which includes mainland China, Hong Kong and Taiwan — in its first fiscal quarter, up 70 percent from the same period a year ago. Canalys, a research firm, estimates that Apple is now the No. 1 smartphone maker in China.

The conventional wisdom just two years ago was that Apple needed to create a low-priced iPhone — not just lower-priced but low-priced — to compete in “emerging markets” like China. That would be true if Apple were interested primarily in market share. But they’re not, never have been, and never will be interested primarily in unit sale market share. Far from hurting them, Apple’s commitment to the premium end of the phone market is helping them separate from the pack in China.

An aside, on Chen’s lead:

Apple is famous for setting trends.

In China, though, Apple has found success by following one.

For years, Apple rivals like Samsung offered large-screen smartphones. Although the bigger phones sold well in China, Apple held off on releasing a similar model, and the country remained a weak spot. But Apple introduced its own versions last September, and now the sales spigot is wide open.

There’s no question that Apple was a latecomer to the bigger-display phone game, and I think few would dispute that the iPhone 6 and especially 6 Plus display sizes played a primary role in this quarter’s breakout success in Asia. The Asian market prefers bigger phones. (From Tim Cook’s remarks on the analyst conference call: “There is clearly a geographic preference difference, where some geos would skew much higher on their preference to iPhone 6 Plus than other geos. So it’s something that’s not consistent around the world.”)

But China was far from a “weak spot” for Apple prior to the iPhones 6. In the year-ago quarter Apple had $8.8 billion in revenue in China, up from $6.8 billion the year before that.

The Most Profitable Quarter of Any Company Ever ★

Greg Kumparak, writing for TechCrunch:

This page charts the past record holders. Until today, Russia’s Gazprom (the largest natural gas extractor in the world) held the record at $16.2 billion in a quarter.

Apple now holds the record: $18.04 billion in profit, fiscal Q1 of 2015.

Absolutely. Insane.

For reference, that means Apple makes around $8.3 million dollars per hour in profit (24 hours a day).

Of the current Top 20 record holding earners, 15 are Oil/Gas producers — primarily ExxonMobil and Shell. The other five are all Apple, over various quarters.

Who knows how long Apple’s ride at the top will last, but this is a moment worth savoring. A toast to the value of good design.