‘Weak’ Apple iPhone 5 Sales Are A Glitch

Largely due in part to today’s perpetual 24-7-365 news cycle, everyApple Inc. (AAPL) talking point degenerates into what the New York Times describes as “fan boys” against “haters.” On September 21, Apple launched the iPhone 5, amid the typical speculative feeding frenzy that is now par for the course for this company. With the smoke clearing, Apple reports sales of more than 5 million iPhone 5 units during the first weekend of product launch. Wall Street, of course, is not impressed.

UBS analyst Steve Milunovich hurriedly revised his Apple estimates downwards, while shares have cratered from $700 to $660 over the past week on heavy volume. To long-term investors, the scuttlebutt and hysteria are much ado about nothing. At worst, Apple will transition into the product maturity stage of the Web 2.0 business cycle. Only a fan boy would expect this gravy train to last indefinitely. For now, reports alleging rioting at a Chinese factory, alongside technical glitches in glass screen manufacturing, highlight questions surrounding the Apple iPhone 5 supply chain.

The Apple iPhone 5 Supply Chain

Wall Street analysts were calling for iPhone 5 sales of between 6 million and 10 million units during this past first weekend of launch. According to Tim Cook, CEO, “we have sold out of our initial supply.” Cook’s statement may serve as evidence that either Apple fully intended to limit this launch, or that disruptive bottlenecks plague the iPhone 5 supply chain.

Wall Street is taken aback by the idea of Apple supply chain gaffes, considering the fact that Tim Cook is an operations man. Today’s happenings are eerily reminiscent of the Steve Jobs mystique that seemingly revels in product shortages and consequent nightclub settings at metropolitan Apple stores. The Steve Jobs halo effect lives on.

Apple has already set up shop to sell its iPhone 5 in the United States, Canada, Australia, France, Germany, United Kingdom, Japan, Hong Kong, and Singapore. By the end of this year, the iPhone 5 will be available in more than 100 countries, with 22 of these countries welcoming product on September 28.

By nature of this schedule, Apple iPhone 5 sales receipts will appear weak over the next two quarters. Although Apple is leaving money on the table, the smartphone competition is not likely to pick up the slack.

The Smartphone Competition

According to recent comScore data, Apple iOS and Google (GOOG) Android lord over 33% and 52% of the smartphone market, respectively. Beneath this duopoly, Research In Motion (RIMM), Microsoft (MSFT) Windows, and Nokia (NOK) Symbian fight desperately over the remaining table scraps of 15% of smartphone subscriptions.

For its latest fiscal third quarterly period ended June 30, Apple reports sales of 26 million iPhone units. This performance amounts to $16 billion of Apple’s $35 billion in total net sales for Q3 2012. The iPhone remains the centerpiece of Apple’s closed ecosystem that includes the iPod, iTunes, iMac, and iPad. To steal Apple’s shine, competing smartphone and ecosystem design are converging together. Going forward, results will therefore be largely reliant upon branding and what consumers perceive as “cool.”

On August 24, a California jury ordered Samsung (SSNLF.PK) to pay $1.05 in damages to Apple on patent infringement charges. The following week, a Japanese court ruled Samsung innocent of these very same patent infringement charges. Obviously, the Apple iPhone 5 and Samsung Galaxy SIII handsets appear eerily similar, beneath the contradictory legal rhetoric.

Weighing in at 112 grams, the iPhone 5 stands 4.9 inches tall by 2.3 inches wide by 7.6 millimeters thick. This new look for the iPhone negotiates a compromise between the compact iPhone 4S and the vertical Galaxy, which Samsung promotes as a stand-in for an Olympic Track and Field baton. Both 16GB versions of the Apple iPhone 5 and Samsung SIII galaxy retail for $199, if you agree to the terms and conditions of a two-year phone service contract.

At this junction, Microsoft poses the most significant threat to today’s smartphone status quo. On October 26, Microsoft is set to release its Windows 8 and Surface tablet. Windows 8 is an amalgamation of traditional personal computer, smartphone, and tablet interfaces. For example, a Windows 8 user is able to execute desktop commands through touch screen technology, before picking up the nearest smartphone and scrolling through tiles to open up Microsoft Excel.

The Samsung ATIV S and Nokia Lumia 920 Windows 8 phones are both set to launch this Holiday Season. The ATIV S is notable for its relatively large Super AMOLED 4.8-inch screen and brushed aluminum finish. Similar to the iPhone 5, Samsung’s flagship Windows 8 phone converts into a camera that takes pictures with an 8-megapixel sensor.

Alternatively, the Lumia 920 is already being lauded for the picture clarity of its 8.7-megapixel camera. A Qualcomm Snapdragon S4 dual-core processor powers both Nokia and Samsung Windows 8 phones. Despite Windows 8 creativity, Wall Street is not exactly impressed. Nokia stock immediately lost 15% of its value earlier this month, simultaneously alongside Stephen Elop’s New York City Lumia 920 demonstration.

Apple’s Bottom Line

Apple remains on course to sell between 100 million and 150 million iPhone units over the course of the next year. I project that this iPhone performance will tally $95 billion in revenue and $25 billion in fiscal 2013 profits for Apple. If iPad sales were to grow at a 50% clip, Apple may then post $50 billion in earnings. At that point, Apple would then carry a market capitalization of $750 billion, if it were to conservatively trade at a price-to-earnings multiple of 15; $750 billion in Apple earnings on top of 929 million shares outstanding breaks down to a rough $800 per share one-year price target.

For now, shareholders can take solace in the fact that the Apple Way remains a cash machine. At today’s $667, Apple now trades for 24 times trailing 2011 earnings. This stock remains relatively cheap, considering the fact that Apple is averaging 66% average annual net income growth over the past four years. For Q3 2012, Apple closed out its books with $117 billion in cash and investments to cover $51 billion in total liabilities on the balance sheet. One Apple share therefore represents $71 in built-in net liquidity, after Peter Oppenheimer, CFO, effectively writes a check to pay off all debt.

If anything, the Apple bandwagon is inevitably destined for a trip up The 5 Freeway to unite with Microsoft as a beta stock. By beta definition, Apple would then track the S&P 500 and offer regular dividend payment increases. A special dividend would signal that Apple is shifting into the product maturation stage of this Web 2.0 business cycle. In July 2004, Microsoft approved a one-time, $3 special dividend to help relieve itself of a bloated, $56 billion cash position.

Besides generate income, Microsoft, personal computer investments, and the S&P 500 Index have done nothing for more than one decade. Apple will follow a similar pattern, if the iPhone 5 proves to be this corporation’s last hurrah as a blockbuster event.


Is The Nokia Lumia 920 Too Expensive?

The Nokia Lumia 920 is the most high-profile phone that doesn’t run on iOS 6 or any of the many Androidversions currently out in the market. Powered by the new smartphone OS from Microsoft, Windows Phone 8, it has managed to capture the people’s attention and could be Nokia and Microsoft’s ticket back to the smartphone limelight. But will people still bite once they find out that the Nokia Lumia 920 costs almost as much as the iPhone 5 or Samsung’s Galaxy Note 2 and Galaxy S III?

Nokia Lumia 920 price too expensive Is The Nokia Lumia 920 Too Expensive?

Reports as to how much the Nokia Lumia 920 will actually cost are starting to trickle in. Based on our sources, it can go from anywhere between $700 to close to a thousand dollars without a contract. Sure, the Nokia Lumia 920 has some nice features such as the new Windows Phone 8 OS and the amazing PureView camera with Carl Zeiss optics but will these be enough to justify the premium price? Analysts don’t think so.

Ovum analyst Nick Dillon thinks that the Nokia Lumia 920 and Windows Phone 8 are untested commodities and people may not be so keen to grab one if it’s too expensive:

“Windows Phone is still largely an unknown to consumers – they would probably expect to pay less if they are taking a risk. Hardware-wise they are pretty similar [to the Samsung Galaxy S III] , it would be hard for Nokia to justify that extra cost to consumers.”

CCS Insight’s Ben Wood agrees and says that it may not end well for Nokia if they price the Lumia 920 above the Samsung Galaxy S III:

“Nokia will find it difficult to command a premium over Samsung’s Galaxy S3 which is the pricing benchmark for a non-Apple flagship smartphone.”

The Samsung Galaxy S III is selling for less than $700 dollars without a contract in most European countries and is still one of the best-featured phones in its class.

With the Nokia Lumia 920, the Finnish phone manufacturer and their partners at Microsoft have a chance to reclaim some of the ground they lost in the long-running smartphone wars. But in order for them to succeed, they need to make sure they have an amazing product at a price that people would be willing to buy. They’ve already got the “amazing product” part down, they just need to make sure they price the Nokia Lumia 920 right.

AMD, Bluestacks launch AppZone bringing Android apps to Windows

On Thursday, AMD announced the launch of AppZone, an “online showcase” for applications and games which offers access to over 500,000 Android apps, ready to run on AMD-based Windows PCs.

The emulation software enabling this crossover was developed by BlueStacks – the company responsible for technology that “married” Android and Apple’s Mac OS in June.

It will directly compete with Intel’s AppUp software marketplace, which doesn’t currently offer Android apps. Intel-based PC owners can still download the older, non-branded version of BlueStacks software from the company website, but will miss out on AMD’s convenient interface and “optimisation”.

The launch of AppZone means that popular games and applications like Fruit Ninja and Evernote will be available on Windows 8 tablets as soon as they hit the market in October. Google’s mobile OS currently has around 500,000 apps available for installation. That’s around 498,000 more than the number of apps developed for Windows 8, with the release date just weeks away.

AppZone works like an average software marketplace, offering regular PC software titles alongside Android apps. Users can automatically sync their AppZone apps with Android-based devices via BlueStacks Cloud Connect, and all apps will be presented on PC and tablet displays in full-screen mode.

AMD, a major investor into BlueStacks, hopes that the new platform will help counter the low number of apps currently available for Windows 8.

“This helps AMD leapfrog Intel by making Windows 8 more attractive on their tablets and PCs,” BlueStacks CEO Rosen Sharma told Wired in an email. “We’ve worked closely together to optimise the performance of the apps for AMD’s unique ‘graphics and computing on one chip’ setup. The result is awesome — mobile apps run beautifully on their machines.”

BlueStacks is currently in talks with OEMs to make the software come preloaded on future AMD devices.

“BlueStacks’ cross-platform innovation bridges the Android and x86 application ecosystems, providing new opportunities for developers and better experiences for users,” said Manju Hegde, corporate vice president for heterogeneous applications and developer solutions at AMD.

“By collaborating with BlueStacks, we are enabling software developers to more easily tap into the full capabilities of AMD’s products, and providing millions of consumers with great experiences as they can now run Android apps on AMD-powered devices.”

Earlier this week, Intel CEO Paul Otellini told his employees that Windows 8 was not ready for commercial release, but Microsoft had no choice but to go ahead with the launch, scheduled for 26 October. He later published an apology.

Microsoft sets record for software development marathon

BANGALORE, INDIA–Microsoft hosted India’s largest developer event, the Windows 8 AppFest, over the past weekend and the app developers who participated helped the software giant clinch a new Guinness World Record.

As a lead up to the general launch of its Windows 8 operating system (OS) in October, Microsoft invited 2,567 developers to the marathon which saw them code for 18 hours straight. This, in turn, helped the company get awarded the record of having the “Most participants in a software development marathon in one location”.

The scale of the event showed Redmond’s commitment to the India market, considering it is the second-largest developer population in the world.

John DeVaan, corporate vice president of Windows Development at Microsoft, who was here to attend the event, said: “Developers are the center of Microsoft’s success, and India is home to some of the world’s most talented developers. We are focused on enabling developers to succeed as they build the next generation of apps.”

Bhaskar Pramanik, chairman of Microsoft India, added that Windows 8 will be “good for India” as it offers local developers a platform to showcase their works.

One app developer who attended the Windows 8 AppFest said the event was a great platform to learn about the features of the new OS. Yoganandh D, a Bangalore-based developer said while he has already published apps on mobile platforms, this is his first time developing one for Windows.

The experience was helped by the casual set-up of the event as well as guidance from Microsoft programmers and engineers who were present throughout the marathon, Yoganandh added.

Ubuntu to continue using GRUB 2 with Windows 8 Secure Boot

Canonical has reversed its decision to drop Ubuntu’s GRUB 2 bootloader in favor of EFILinux on systems using Secure Boot, which prevents the loading of drivers or OS loaders that are not signed with a certain digital signature, after the Free Software Foundation (FSF) stepped in and said it will help find a workable solution for Linux installations.

Last year, Microsoft confirmed that new computers carrying the “Certified for Windows 8” logo will implement UEFI’s Secure Boot feature. While that’s good news for Windows users who will be better protected against malware and rootkits, the move proved controversial because initial feedback suggested it was likely to prevent users from booting alternative operating systems such as Linux or Unix.

Canonical announced earlier this year that they had found a solution to the problem, which involved the creation of their own private signed keys for “Ubuntu Certified” hardware pre-loaded with their OS, in much the same way as Microsoft is going to do for Windows 8.

That meant changing Ubuntu’s bootloader for systems using Secure Boot though, as Canonical was concerned that GRUB 2’s GPLv3 license would require them to reveal their private signed keys if an OEM mistakenly shipped a computer with Secure Boot enabled. In order to avoid this happening, Canonical said it would use a modified version of Intel’s EFILinux as a bootloader instead of Grub 2.

In a whitepaper published in June, the FSF asked Canonical to reconsider this approach, and instead support users in creating their own signed keys to run Linux on their computers. “We offer our help in working through any licensing concerns,” FSF executive director, John Sullivan wrote. He argued that the license used by GRUB 2 actually protects users against the dangers of Secure Boot and Canonical wouldn’t be required to hand out its private signed keys to any third party.

Canonical confirmed the reversal in a blog post late last week and said it has taken steps “to ensure security and user choice is maintained” on Ubuntu systems. “Grub 2 is the best choice for a bootloader, and [we] will use only Grub 2 in Ubuntu 12.10 and 12.04.2 by default,” the post read.

Microsoft to deliver new Windows 8 and Windows RT Lync app in late October

Testers have been putting the new version of the Lync 2013 desktop client and Lync Server 2013 through their paces for a few months.




But there’s another Lync product in the family — an Lync app built specifically for Windows 8 and Windows RT. This is the product to which Microsoft officials previously referred as Lync 2013 MX. This touch-centric, Metrofied (“Windows Storized”?) version of Lync was not released as part of the Office 2013 Customer Preview in July.

But there’s now word that this new Lync application will be available in the Windows Store for both Windows 8 and Windows RT as of late October. That’s according to a September 20 post on the Lync Team Blog.

Lync is Microsoft’s unified communications family of products. Lync offers enterprise instant messaging, VOIP and conferencing. In addition to the desktop client, the server and the new Windows 8/Windows RT Lync app, there also are versions of the Lync client for a variety of smartphone platforms and a browser-based Lync web app.

“The new Lync App … will be compatible with both Lync Server 2010 and Lync Server 2013,” explained the team in the latest blog post. It “is Lync re-imagined for the new Windows Experience.”

The coming versions of Lync, as Microsoft officials have indicated, will include Skype federation. Lync 2013 users will be able to see presence, instant message or call anyone on Skype.

Microsoft officials have attempted to distinguish Lync and Skype by describing Lync as Microsoft’s inside-the-firewall unified-communications solution, and Skype it’s outside the firewall one.

The fact that this new Lync for Windows 8/Windows RT application will be available in the Windows Store in late October 2012 does not mean that Microsoft will release all of the Office 2013 products to manufacturing in October. Microsoft officials are continuing to decline to say when Office 2013 will be released to manufacturing or generally available. (The rumor is November for RTM and February 2013 for general availability/launch.)

Microsoft officials said recently that the final version of Office 2013 Home & Student for Windows RT would be available starting in early November.

Windows 8 Tablet Fragmentation and the App Dilemma

I was having a discussion with an iPad software developer recently and we were discussing the iPad mini. Interestingly he was still a skeptic about the iPad mini and I thought his reason was interesting. He noted that the apps they develop, and primarily the user interface, are specifically designed for the current iPad screen size. He said that everything is placed where it is for a reason.

His skepticism about the iPad mini was based on his conclusion that if a 7-8 inch iPad was to come out his current app would not work. His point was that 2 or so inches may not seem like a big difference but for many apps that have menu’s and touch based navigation interfaces, 2 inches is a lot of screen real estate to loose. Basically he had concluded that for many applications developers would target each tablet screen size independently.

His points got me thinking. First of all I agree with him. If we have learned anything about Apple’s developers is that they are willing to take the time to make sure their app experience is ideal no matter what the screen size. The iPhone 5’s larger screen and app developers already starting to take advantage and optimize their apps for the new 4” screen. Interestingly Apple, during this transition, is faced with having apps with two different looks and feel in their app store for both 3.5” and 4” iPhones. So as developers look to tweak their UI for the iPhone 5 which app UI will we see in the app store? Apple is solving this elegantly but only showing consumers the new app UI for 4” apps only if they have an iPhone 5. That way consumers who don’t have the iPhone 5 will still see app preview screenshots of the 3.5” UI.

Now with all of that in mind let’s turn our thoughts toward Windows 8. In all the above examples I mentioned we were talking about screen size differences ranging from .5 to 2 inches of difference. And within that extremely small range we should expect to see developers uniquely tweak their app experience and UI. In essence they are not simply shrinking or expanding their apps to work on smaller or larger screens, they are in essence creating new app experiences for those screen sizes. Windows 8 touch based hardware will be so fragmented in screen size that we will see touch based Windows 8 hardware ranging from 10” all the way up to 27.” If developers feel the need to optimize their software for a screen that is anywhere from a half-inch and even a 2” difference, what will they do when they have 4, 5, or 6 different screen sizes to target in the Windows 8 touch hardware ecosystem? And more importantly will they feel that their energy and resources will be worth the investment and hard work?

Microsoft needs developers to be writing touch based applications but my concern with the touch based hardware fragmentation is that it will may cause them to target only specific screen sizes and not others. This would mean that the touch based software experience will be better on some Windows 8 hardware but not others. I can tell you right now that an application that is built for 10” Windows 8 hardware is not going to be a pleasant experience on a 27” all-in-one running Windows 8 with a touch screen.

Some categories, like games for example, may work fine within this fragmentation. However, it would seem logical that even developers of many of the popular games may want to make tweaks for larger vs. smaller screens that may run their apps.

The bottom line is that I expect developers who are looking to sell software to the masses to want their software to be the ideal experience on any screen size. To do that they will inevitably need to write software and create user interfaces that are specifically made for certain screen sizes. This is where I feel developers may feel the need to pause and truly evaluate the effort they put into Windows 8 touch based software.

You can make the point that the screen size fragmentation I mention has existed for decades in the Windows ecosystem. This is true but I fundamentally believe that when it comes to mouse and keyboard software and UI this fragmentation is not an issue. Because of the unique way touch based software UIs are made, I believe fragmentation becomes an issue when it comes to touch computing in a way it never was with mouse and keyboard computing.

I believe touch computing is the future, and so does Microsoft with the emphasis they are putting on touch. Microsoft’s challenge over the next twelve months is to convince developers who also believe in touch based computing that their platform is the one worth investing in.