Monday, October 25, 2010

Steve Jobs Speaks: RIM Blackberry, Google Android, iPad Competitors (Review) "Confident iOS will triumph over Google's fragmented approach" AAPL GOOG RIMM

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Apple CEO Steve Jobs introducing the iPad earlier in 2010


Steve Jobs Speaks: RIM Blackberry, Google Android, iPad Competitors

Apple reported record revenues and net income for calendar Q3 2010. CFO Peter Oppenheimer called it a "monumental year for Apple". We call it near-legendary. A review of the Apple earnings conference call has been posted on the Apple Earnings Conference Call page. The actual financial results, charts, and commentary have been posted on the Apple Financial Performance page.

Apple CEO Steve Jobs showed up unexpectedly at the calendar Q3 (fiscal Q4) earnings conference call because Apple quarterly revenues topped $20 billion for the first time. CFO Peter Oppenheimer reviewed quarterly financial results, product lines, and fiscal year financial results. Afterwards, Mr. Jobs made some remarks about Research in Motion, Google Android, and iPad competitors. He spent considerable time on the Google so-called "open" model versus the Apple so-called "closed" model for Android and iOS, respectively, saying it was actually "fragmented" versus "integrated". That is, there are many versions of the Google Android software platform while there are only two versions of the Apple iOS - the current and the predecessor. Jobs then addressed the weaknesses of iPad competitors with 7-inch screens versus the Apple iPad 10-inch screen. Some of his remarks appear are directed at app developers and why the Apple integrated model is superior. Most of the transcription of his statements are below.


Q3 Earnings Call: Highlights from Steve Jobs' Address

Blackberry vs. iPhone Sales: "We’ve now passed RIM and I don’t see them catching up with us in the foreseeable future."
"RIM has a high mountain ahead of them to climb” to create a competitive software platform to Apple iOS and Google Android
"We await to see if iPhone or Android was the winner in this most recent quarter” in total device activations
“Google loves to characterize Android as ‘open’ and iOS and iPhone as ‘closed’. We find this a bit disingenuous..."
Regarding multiple Google Android app stores: "This is going to be a mess for both users and developers."
"We think Android is very, very fragmented and becoming more fragmented by the day."
"We are confident it (iOS) will triumph over Google’s fragmented approach, no matter how many times Google tries to characterize it as ‘open’.”
"Appears to be just a handful of credible entrants, not exactly an avalanche" of iPad competitors
The 7-inch tablets are ‘tweeners’, too big to compete with a smartphone, too small to compete with an iPad."
"iPad now has over 35,000 apps on the app store. This new crop of tablets will have near zero."
"Our potential competitors are having a hard time coming close to iPad’s pricing, even with their far smaller, far less expensive screens"


Steve Jobs Speaks!

After CFO Peter Oppenheimer’s opening statements and presentation, Apple CEO and Tech Legend Steve Jobs said he wanted to “chat”. He was at the earnings call because of Apple’s record and near-legendary $20+ billion in revenues for the quarter.

Research In Motion Jobs repeated the iPhone sales and growth data. He noted iPhone quarterly sales (14.1 million units) “handily beat” RIM Blackberry sales of 12.1 million units sold in RIM’s latest quarter ending in August. “We’ve now passed RIM and I don’t see them catching up with us in the foreseeable future. They (RIM) must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company. I think it’s going to be a challenge for them to create a competitive platform and convince developers to create apps for yet a third software platform after (Apple) iOS and (Google) Android. With 300,000 apps on Apple’s app store, RIM has a high mountain ahead of them to climb.”

Google Android “What about Google? Last week (Google CEO) Eric Schmidt reiterated that they were activating 200,000 Android devices per day and have around 90,000 apps in their app store. For comparison, Apple has activated 275,000 iOS devices per day on average for the past 30 days, with a peak of almost 300,000 activated iOS devices on a few of those days. And Apple has 300,000 apps on its app store. Unfortunately there is no solid data on how many Android phones are shipped each quarter. We hope soon that manufacturers will start reporting the number of Android handsets they ship each quarter, but today that just isn’t the case. Gartner reported that about 10 million Android phones were shipped in the June quarter and we await to see if iPhone or Android was the winner in this most recent quarter.”

Google “Open” vs. Apple “Closed” “Google loves to characterize Android as ‘open’ and iOS and iPhone as ‘closed’. We find this a bit disingenuous and clouding the real difference between our two approaches."

Android is Fragmented, Apple is Integrated "The first thing most of us think about when we hear the word ‘open’ is (Microsoft) Windows, which is available on a variety of devices. Unlike Windows, however, where most PCs have the same user interface and run the same apps, Android is very fragmented. Android OEMs, including the two largest HTC and Motorola, install proprietary user interfaces to differentiate themselves from the commodity Android experience. The user is left to figure it all out. Compare this with iPhone where every handset works the same."

Twitter Deck Example "Twitter client, Twitter Deck, recently launched their app for Android. They reported they had to contend with more than 100 different versions of Android software on 244 different handsets. The multiple hardware and software iterations presents developers with a daunting challenge. Many Android apps work only on selected Android handsets running selected Android versions. And this is for handsets that have been shipped less than 12 months ago. Compare this with iPhone, where there are 2 versions of the software, the current and most recent predecessor. In addition to Google’s own app marketplace, Amazon, Verizon, and Vodaphone have all announced they are creating their own app stores for Android. So there will be at least 4 app stores on Android, which customers must search among to find the app they want. And developers will need to work with (app stores) to distribute their apps and get paid. This is going to be a mess for both users and developers. Contrast this with Apple’s integrated app store, which offers users the easiest to use and largest app store in the world, pre-loaded on every iPhone. Apple’s app store has over 3 times as many apps as Google’s marketplace and offers developers one-stop shopping to get their apps to market easily and get paid swiftly."

Microsoft Plays For Sure Example "You know, even if Google was right, and the real issue is ‘closed’ versus ‘open’, it is worthwhile to remember that open systems don’t always win. Take Microsoft’s Plays For Sure music strategy, which used the PC model, which Android uses as well, of separating the software components from the hardware components. Even Microsoft finally abandoned this open strategy in favor of copying Apple’s integrated approach with their Zune player. Unfortunately leaving their OEMs empty-handed in the process."

Open versus Closed, Fragmented versus Integrated "Google flirted with this integrated approach with their Nexus One phone. In reality, we think the ‘open’ versus ‘closed’ argument is just a smokescreen to try and hide the real issue, which is ‘what’s best for the customer?’. Fragmented versus integrated? We think Android is very, very fragmented and becoming more fragmented by the day. And as you know, Apple strives for the integrated model so the user isn’t forced to be the systems integrator. We see tremendous value in having Apple, rather than our user, be the system integrator. We think this is a huge strength of our approach compared to Google’s. When selling to users who want their devices to ‘just work’, we believe integrated will trump fragmented every time. And we also think our developers can be more innovative if they can target a singular platform rather than a 100 variants. They can put their time into innovative new features rather testing on 100s of different handsets. We are very committed to the integrated approach, no matter how many times Google tries to characterize it as ‘closed’. And we are confident it will triumph over Google’s fragmented approach, no matter how many times Google tries to characterize it as ‘open’.”

Tablet PCs “Second, I’d like to comment on the avalanche of tablets that are poised to enter the market in the coming months."

"First, it appears to be just a handful of credible entrants, not exactly an avalanche."

"Second, almost all of them use 7 inch screens, as compared to iPad’s near 10 inch screen. Let’s start there. One naturally thinks a 7 inch screen offers 70% of the benefits of a 10 inch screen. Unfortunately this is far from the truth. The screen measurements are diagonal, so a 7 inch screen is only 45% as large as iPad’s 10 inch screen. You heard me right - just 45% as large. This size isn’t sufficient to create great tablet apps, in our opinion. Apple has done extensive user testing on touch interfaces over many years and we really understand this stuff. There are clear limits on how close you can physically place elements on a touch screen. This is one of the key reasons, we think, the 10 inch screen size, is the minimum size required to create great tablet apps."

"Third, every tablet user is also a smartphone user. No tablet can compete with the mobility of a smartphone. Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet into their pockets is clearly the wrong trade off. The 7 inch tables are ‘tweeners’, too big to compete with a smartphone, too small to compete with an iPad."

"Fourth, almost all of these new tablets use Android software, but even Google is telling the tablet manufacturers not to use their current release, Froyo, for tablets, and to wait for a special tablet release next year. What does it mean when your software supplier says not to use their software in their tablet and what does it mean when you ignore them and use it anyway?"

"Fifth, iPad now has over 35,000 apps on the app store. This new crop of tablets will have near zero."

"Sixth and last, our potential competitors are having a hard time coming close to iPad’s pricing, even with their far smaller, far less expensive screens. The iPad incorporates everything we’ve learned about building high value products from iPhones, iPods, and Macs. We create our own A4 chip, our own software, our own battery chemistry, our own enclosure, our own everything, in an incredible product, at a great price. The proof of this will be in the price of our competitor's products, which will likely offer less for more. These are among the reasons we think the current crop of 7 inch tablets are going to be DOA - dead on arrival. They will learn the painful lesson that their tablets are too small and increase the size next year thereby abandoning customers and developers who jumped on the 7 inch band wagon with an orphaned product. Sounds like lots of fun ahead.”


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