26 July 2007

Holding the Observer to account (again)

Back last year, the (Sunday) Observer newspaper - sister to the Guardian - ran a truly amazing full-page article entitled "Why the iPod is losing its cool" by David Smith, supposed technology correspondent.

In this article, Mr Smith, claimed that
Sales are declining at an unprecedented rate. Industry experts talk of a 'backlash' and of the iPod 'wilting away before our eyes'

This article was written as a factual piece not an opinion piece. I made mention of it in this blog post, but decided not to attack it then. After all, perhaps David knew something I didn't and that iPod sales WERE in freefall?

I further chose not to comment on it after Apple's first quarterly announcement post the Smith article when they demonstrated once again iPod sales had risen 35% over the previous year. I again avoided the urge to comment after the December quarter when sales rose an astonishing 50% over the previous year (a year when both the iPod video and iPod nano had been introduced to much acclaim). I chose not to comment on it after Apple's Q2 announcement in April, when sales were up 24%. But now, a full 4 quarters of reporting has passed, and really, I can't let it sit any longer.

In the quarter just gone, iPod sales were up again - 21% in fact over the same quarter last year. In that 12 months, Apple's iPod sales were 35% up on the previous year. In that last year, Apple has sold over 50million iPods which represent 47% of all iPods ever sold. In other words, Apple has in the last 12 months sold just about as many iPods as it did in the previous 5 years COMBINED. Furthermore, in the iPod's history, it has never suffered a sales decline on a year-over-year basis on any measurable financial quarter.

That doesn't sound like a product that is either "losing its cool" or suffering from "declining sales at an unprecedented rate". I haven't seen too many analysts dissing the iPod either (though there's always a few media boys).

What was the reason for Mr Smith's article? Was it to try to create a backlash? Was it influenced by another company about to launch a product? Was he hoping to be able to claim when a possible iPod decline came along that he was first? Or was it just absolute stupidity and ignorance?

Would Mr Smith or the Observer like to apologise and to admit they have been wildly wrong? Would they care to write a similar full page article gushing about the apparently unstoppable iPod phenomenon? Given how the Observer can not even bring itself to apologise about a life and death issue it has got blatantly wrong, I'm not holding my breath.

(I'd like to think there ISN'T a conspiracy here and that it is plain ignorance. I suspect Mr Smith used two sequential quarters of iPods sold to point to a decline. That's a pretty poor way to use statistics that surely anyone at school is taught about. It was also an "unprecedented rate of decline" because there had never been a decline (and there still hasn't unless you believe consumer products exhibit no seasonality).

How about owning up, David, and saying you were absolutely and completely wrong? Or are you going to try getting the same message out again in the hope that at SOME point in the future, you will actually be right?

Tags: , , , ,

Apple Overtakes Hewlett Packard

A quick observation following the market today digesting Apple's Q3 results announced last night.

Apple has now overtaken HP in terms of market capitalisation (as of 26th July at 14:45 GMT). (Market Capitalisation is the figure that represents the total enterprise value attached to that company by the stock market). That is quite an achievement, as it was little more than than a year ago that it overtook Dell Computer. Apple is now close to double Dell's market capitalisation. To match HP, Apple has done very well indeed. It's not as if HP has had a bad time either - taking significant business from Dell in recent quarters.

Apple has also overtaken Oracle in the last year. The next target, ironically, is Intel - currently around $141bn. Then Google at $158bn, closely behind Cisco and IBM each in the $170bn range. Overhauling any of these companies could happen with a good year or two for Apple, though it would also require comparative stagnation for those companies. I certainly wouldn't bet against Google!

Microsoft is still a long way ahead of the rest of the IT industry with a market cap of around $280bn. We'll have to wait a while longer before that is even a possibility.

As always with such numbers, there is a lot of variation from hour to hour and day to day. Apple and HP will no doubt each be trying to push ahead of each other over the coming few months before a clear trend emerges. But for now, we've got a 1-1 draw in the first match of a long season.

Tags: , , , ,

25 July 2007

iPhone Sales Numbers - BEFORE Q3 results

I'm writing this BEFORE Apple announces today's earnings, but AFTER the crazy market/media reaction to news that AT&T "only" activated 146,000 iPhones by 30th June.

What IS amazing is that in 30 hours, from 6pm Friday to midnight Saturday, 146,000 iPhones were purchased, taken home, unboxed, plugged into a computer, and then successfully activated. Had anyone suggested such numbers even a day or two before the iPhone was released, they would have been considered an optimist. Now, some are comparing the 146,000 number to some mythical 1million figure some analysts ended up speculating on.

As far as I can recall, I have seen few analyst projections of 1million iPhones and certainly not even in the few day initial period. I have seen numbers as low as 50,000 (originally from Shawn Wu of American Technology Research, and general Apple bull) to perhaps 350,000 from Goldman Sachs. Some of those numbers were then doubled AFTER the weekend (to 700,000 in the case of Goldman Sachs).

But remember here, the weekend includes a Sunday - only the second full shopping day the iPhone was on sale. How many iPhones could not be activated at first (certainly a few by some rumours)? How many iPhones did not get activated by the Saturday evening because the person hadn't had time, was keeping the iPhone as a present, or whatever other excuse? How many iPhones were ordered from the online stores on those days for later delivery?

And, what is success anyway? Is failure just the inability to hit whatever highest number some analyst (perhaps a naysayer anyway) set just to create a headline?

At 146,000 iPhones sold in 30 hours, Apple and AT&T created a revenue stream of $292m to share between them over 24 months.

Today, Apple will report its own financial figures for the last quarter (its financial close period which began BEFORE the iPhone was released is the fundamental reason it has not been legally able to comment on sales before this time). Apple may also (like AT&T) choose to report just the 30 hour period (or perhaps 33 hour period in its case being based on the West Coast). But, even in this period it will include over the counter sales - not activations. It may also account for sales via the AT&T store differently - as these essentially are sales as a wholesaler of the product.

My wild guess at this point is that Apple will report sales of around 225,000 or more for the 30 hour period. And, if they are to report sales for the first week, or first month (we're just 2 days away from that point), we will genuinely see that they will have between 400,000/700,000 and 500,000/1million iPhones in people's hands today (firstweektarget/firstmonth target). I suspect Apple's control of PR extends to its agreement with AT&T and allows it to publish the first important headline numbers for sales.

Sales of more than 500,000 iPhones will be a 2 year revenue stream of at least $1billion between Apple and AT&T (they are currently the sole retailers - so no other retailers to split with). Not bad for one month!

Contrast this with Zune and XBox360.

Assuming Zune sales so far of 1.2m, and even assuming full retail price of $249, this is $298m in revenue - almost exactly equal to the revenue from the 146,000 AT&T activations. Only this has taken Microsoft not 30 hours, but more than 8 months. It is also a widely held belief that Microsoft has not SOLD 1.2m Zunes, but shipped them. Many remain unsold on shelves. And, there has also been some significant discounting from the $249 price, to say nothing of the retail margin.

XBox360 has been with us for about 20 months. 11.6m units shipped (but not necessarily sold). Assume price of $299 again, and we reach $3.468b. Then take the $1.2bn cost of repairs announced recently out of that - and we have a number approaching $2bn - for 20 months!

I know which company I would be betting on today.

We will see crazy headlines today, and we will see unpredictable market reaction whatever the numbers. But what is already clear is that Apple has a phenomenal hit on its hands. Reviews have been overwhelmingly outstanding. Sales have been very robust indeed - whatever these sky high forecasts make you think the boundary of success is. Apple is only to be praised for seemingly being able to just about keep up with demand (something in the past it has not been good at, with fair criticism from the same quarters who now say any unsold stock is a failure!) Any commentary on today's numbers that doesn't recognised the success for what it is - both in technical and business terms is very delusional (or in the pockets of some of Apple's and AT&T's competitors).

I'll be writing on the financial numbers after they come out. I'll be paying particular attention to what the sales of iPods and Macs have been in the last 12 months. But, if the market reaction is negative today, look at this as your best time to pick up Apple stock for some time.

Disclosure: the author holds 600 shares of Apple, and last time he bought shares was 11th July 2006 - a little over 12 months ago when they were as low as $54. I hope you followed my advice then!.

Tags: , , , ,

22 July 2007

Pathetic Observer non-apology

I posted about this a couple of weeks ago.

Today, buried well inside the paper and after the editorials and most commentaries was a "clarification."

Really, this is just not good enough. Speaking with friends last night, they are strongly influenced by such reporting (which was of course copied and run by the other mainstream press groups). We have trusted our newspapers to give fair and balanced reports based on fact. This article and its subsequent coverage in the other press has set back public understanding of this subject by several years and unreasonably made the public question science even more, ironically when it is proper science that is the only way to truth in this, rather than the mumbo-jumbo "science" practised by Wakefield. Will The Observer make an apology over their sycophantic piece on him from the same edition after he is found guilty of professional misconduct by the BMA, as he surely will be? There are serious consequences of this public misunderstanding.

I will leave it to Ben Goldacre (Bad Science columnist at the Guardian) to give his verdict on the Observer "clarification", with suitable links to the whole sorry story. (Ben, I don't think they made a hash of apologising! They didn't apologise at all for the article and the mistakes - only a weak apology for not trying harder to contact one of the people they quoted! Surely, an apology for actually quoting somebody you didn't speak to wouldn't have been too difficult would it as a start?)

I am still considering abandoning my subscription to the Observer over this. Today's article makes that more likely not less. They had a chance to set the record straight, but all they've done is to compound their mistakes and demonstrate that they either don't get it, or don't want to get it.

UPDATE: I have indeed cancelled my subscription for the Observer. It doesn't save me very much - just about £10 per year, as I will now revert to just a Guardian subscription. I have also complained to the Readers' Editor. I feel better!

Tags: , , , ,

Surreal Experience

On Friday, we witnessed the most torrential rain I've ever seen in the UK - a truly massive amount of water descending in London in just an hour or so. We spent several hours sorting out the problems caused by an overflowing gully to the flat downstairs.

Having checked traffic reports which seemed to be generally ok (c'mon Highways Agency/AA/RAC/BBC etc can't you do better than this?), we headed off for the weekend at 7pm on a journey that usually takes us 2 hours. We arrived 6 hours later, but at least we arrived. We passed possibly 300-400 vehicles which had been left stranded at the side of the roads all the way from Swindon to Ross-on-Wye. We went under the M5 motorway, which at almost midnight was at a complete standstill. While we had numerous in-water experiences of our own, we probably didn't have anything worse than about 300mm. I think had we been earlier, we'd have been stranded like many of the others.

Here's a link to some photos on the BBC site by local people, the first one being the M50 motorway very close to us. Look also at number 37 to see it getting even worse! Here are some from Gloucestershire - including underwater Cotswold villages which we passed close to.

As my partner Sue pointed out, weather is a great equaliser. Among the stranded cars was a rather distraught Bentley!

What a summer this is turning out to be!

Tags: , , ,

20 July 2007

XBox360 Double Whammy

The news on XBox 360 failures is truly quite amazing - easily on a par with the Sony laptop battery recall episode last year. Amazingly Microsoft's stock has hardly budged. There are very few companies in the world that could withstand a write-off of over $1bn so easily. Yet, I don't think Microsoft has yet done the right thing by its users. I think this post makes many reasonable points. Microsoft should do a recall and fix this problem for good. However, I would say that, based on comments attributed to Microsoft VP Peter Moore (see same link),

In our interview with Microsoft corporate vice president Peter Moore, he pointedly declined to offer specifics about what was causing the problems on the grounds that he is not a technical person, nor would he answer whether the flaws should be attributed to design or manufacturing.

it's not entirely clear that Microsoft has a complete solution to this problem even now.

However, it was not this particular issue I wanted to post about. It seems that Microsoft used that tried and trusted PR technique of burying bad news on a day of other bad news. In this case, its own bad news. Hardly commented on was the amazing confession that they had failed to hit their target of selling 12million XBox 360's by end of June 2007. Maybe those that read this saw that they had sold 11.6m, so it wasn't after all that far off the target. But let's look a little closer at this. Only in January this year did Microsoft revise its target from 13-15m units to 12m. So, it is now at least 1.4m below the target it had just 6 months ago, and perhaps up to 3.4m below. So, it's not 0.4m of 12m (just over 3%) but between 11 and 22% below.

There's another way to look at this, too. By the end of December, Microsoft had sold 10.3m XBoxes. It has since sold just 1.3m boxes. Instead of the 3-5m for that period (as per Microsoft's own December targets), it has sold between 1/4 and 1/2 of that number. This is the truly amazing statistic and something I'm surprised has not been more widely commented on. During this time, Microsoft introduced the XBox 360 Elite, and it has had ample product to sell globally. Despite this, its sales have been less in the most recent 6 months than the first 3 months of its life when it was limited to the US market and very supply-constrained. These statistics are available here.

Now, in fact, things are not as bad as this, but only if you understand the phenomenon of channel stuffing - whereby a vendor records sales by stuffing products on shelves even though they remain unsold. This is widely reported as how Microsoft account for both XBox and Zune sales and why individual figures need to be taken with a pinch of salt. It is highly likely Microsoft stuffed the retail channel with lots of XBox 360's leading up to Christmas last year, perhaps so it could meet its target then of selling 10m by the end of 2006. So, either you think Microsoft missed both targets, and engages in this practice, or you think it only missed the current one - by a large margin. It's pretty bad either way (in fact a cynical person might suggest that channel stuffing is continuing and that the situation is even worse than the numbers suggest). And, a nasty by-product of that strategy is if you were to buy an XBox 360 today, it is quite likely you may be buying one made sometime last year and subject to the potential failures noted. As Microsoft have not published serial number ranges, this makes it pretty hard to guess what you're getting.

(As an aside, I don't believe Apple can account for sales in the same way due to its own retail presence which accounts for a significant chunk of sales. At the very least, I believe that Apple would not be able to call an iPod sale via its own online or retail stores a sale until it was sold to a real customer).

Really, this XBox 360 sales fiasco is a BIG deal, and it should have been picked up as such. I am somewhat surprised in all honesty, as I had expected the XBox 360 to be a winner. Back in 2005 before any of the new generation consoles was released I posited that Sony would be the loser and that it seemed Nintendo might defy the odds and with the XBox 360 would be the other winner (not a bad forecast for a non-gamer!). At this point in time, both the high-end consoles are struggling badly, despite (or perhaps because of) the huge companies behind these products. There has been just one winner so far - the company that focused not on stuffing untried/unproven/unwanted technology in to a device then subsidising its high price, but on delivering a value product that consumers adored, could afford and all the while making sure that it makes a profit from each unit sold. Both Microsoft and Sony are behaving almost as state-sponsored monopolies delivering what they THINK the public want, using the vast resources of their other monopoly/semi-monopoly businesses to get by. Microsoft's failings have opened the door to Sony who, while being late to the party, at least have the better-specified box. Instead, they should have been dead and buried. A real price cut from Sony (not the reduced price for discontinued models) at this time might allow it yet to beat Microsoft.

Some will say that new games about to be delivered for the XBox 360 and other developments will rescue it from this lull. But unless Microsoft sells at least 10m more units before the end of the year, its shareholders should be calling for it to pull the plug. Even then it will have TOTAL sales for 2 years of around the same as the iPod for just Christmas quarter 2006. Indeed, its own sales for this calendar year will be barely above 2006 calendar year sales. The supposed "future of gaming consoles" selling less in its second full year than its first is a pretty bad sign.

Update: Is this in fact a triple whammy with reports that Robbie Bach (head of the MS division that includes XBox) sold over $6m of Microsoft stock just a few weeks before these announcements? Or a quadruple whammy to include this week's news that Peter Moore (see above) has left?

Tags: , , , , ,

19 July 2007

Hobsbog....An Admission

I have been overcome with admiration for the string of Cabinet ministers who have come out today and admitted they smoked cannabis. What guts to come out right after the first admission from Jacqui Smith (who at least came out first). I'm 110% sure that opportunism was not a factor in these new admissions - just honesty and integrity.

I would therefore like to take this opportunity to admit that I, too, have smoked cannabis on one occasion in San Francisco, and on one occasion in Amsterdam. I did this purely to ensure the smooth conclusion to business deals by showing my empathy with the real criminals who were obviously addicted and probably dealers in their spare time. I absolutely did not inhale, and I was not affected by it in any pleasurable way. I would never do it again, and I hope those that do now are put away for a longtime as they should know better, especially now as the Independent has told them it's a BAD thing.

< /sarcasm> but unfortunately not < /end mass hypocrisy from mainstream media and political establishment>

09 July 2007

The British Press...(continued)

I've run a number of posts here about how badly our newspapers report on certain subjects. Yesterday, however, we reached a new low, with two sickening articles in the Observer about MMR and autism, including a cringing interview with the person who has done most to spread FUD, and consequently led to increased deaths and serious disabilities via higher (perhaps quasi-epidemic) measles and rubella infection rates. The main article was the front page headline.

I almost cancelled my Guardian/Observer subscription on the spot, but then how would I get my regular dose of ire?

I will not go into this subject in too much detail here, as there are far more qualified people, and better writers to boot covering this development.

I will instead first link to Ben Goldacre's Bad Science post which covers the developments pretty well, links to other stories, and has some interesting developments (including one of the two scientists the Observer quoted as "privately supporting an MMR link" apparently accused the Observer of fabricating comments, and therefore presumably leaving the Observer with just one of the seven academics thinking this way. Evidence shown on Ben's post seems to show this "academic" as somewhat unhinged and unprofessional at the very least.

Other links to follow include:
A reasoned article at Breath Spa for Kids
Or have a look at the journalist's qualifications for writing about this subject!

Also look out for articles at The Holford Watch
- an anti-dote site to one of the more ridiculous "media nutritionists" who pass themselves off (to the gullible press) as scientists.

MMR WAS a valid idea to be researched as involved in (some cases of) autism. But it has been researched ad nauseam and shown not to be involved AT ALL. The damage done because of the insistence on this link is severe around the world and especially in this country. What is so sad to see is how the supposedly-intelligent broadsheets run with this stuff.

Perhaps, those who believe in good science reporting should complain to the Press Complaints Commission?

Incidentally, if anyone dares to say the Observer is balanced because Goldacre writes a column for the (sister) Guardian, then please also show me when he's been on the front page, or where an editorial has taken up his piece to correct an earlier sare and FUD article?

Tags: , , , ,

05 July 2007

iPhone in Europe

Just one comment on the plentiful rumours each day about exactly which carrier is going to get the exclusive rights for iPhone in Europe (one day it's Vodafone, then it's T-Mobile, maybe in Germany, maybe not), then it's O2 in UK, Orange in France....

Most of the rumours say it's going to be the same 2.5g device as in the US. But I'm going out on a limb here and say that it will NOT be that. As I understand it, only Orange supports Edge in Europe. Other carriers have either slower 2G (GPRS) data networks, or 3G networks.

Given the lack of availability of wi-fi hotspots (at least for free) in much of Europe, the importance of 3G (or at least fast networks) is going to be MORE important in Europe.

My prediction is that Apple will release the 3G iPhone in Europe. At the very least, I do not believe they will release a slower one than the Edge version in the US. In making this prediction, I am betting against the supposedly more informaed Times, FT etc all reporting on this matter so certainly.

On a similar theme, while Apple appears to have agreed a 2 year exclusive with AT&T in the US, I do NOT believe they will agree such an exclusive in European markets. This is because they are more fragmented than the US (eg. typically 5 providers in many markets often with similar shares). Sure, there may be country exclusives. But I don't believe they'll be for much longer than a supply shortage would exist.

The mistake most media is making is that the deal and product that is in the US is the deal and product that will be made here. I don't think it is right to make that assumption. Sure, there will be similarities and the AT&T deal gives us a number of pointers. But no more.

What is important in all this is that Apple holds their ground and has driven the service providers so that they do not cripple the device. I'll be posting soon on why the Nokia N80 I got last year is the most disappointing phone I've had and how the UI on the iPhone trounces it.

Tags: , , , , , ,

03 July 2007

The definitive iPhone review?

Trust AnandTech and Anand Lai Shimpi himself to write what is probably the definitive iPhone review - all 20 pages of it.

What I like about this site is that they do a thorough job of every test they do. Second, they have no particular agenda other than doing a great job. This is not a pro-Apple site per se (though Anand did I believe switch to Mac last year).

If you thought the pro-Apple journalists such as Walt Mossberg and David Pogue are not independent enough, you should certainly read this one.

On a related note, I think this article at Blackfriars marketing gives great insight into Apple's business strategy. Admittedly unlike the iPod (which Apple didn't have to bring to market), they were always going to have to build a phone as a defensive measure. What is so remarkable is that they've entered this market and turned it inside out. They say the best form of defense is attack, and this product will define the starting point of a long-overdue period of innovation in both products and services for the mobile industry.

Tags: , ,