Monday, January 21, 2013

Think ... about Apple

Has Apple reached a zenith? Is it now sliding down the backside of history? It’s happened before. Once the mighty IBM stood astride the IT marketplace. IBM’s competitors were so weak that it was called "IBM and the seven dwarfs." Burroughs, Control Data (or CDC), General Electric, Honeywell, NCR, RCA, and Univac.

Who remembers those companies? GE and RCA are still around, but not in the computer business. Burroughs still has a small presence, especially in banks. Honeywell might have made your thermostat. No, these competitors were replaced with Digital Equipment Corporation (DEC), Data General, Wang, Apollo, Prime, HP.

Then came Tandy, Atari, Commodore, WYSE, Sun, Apple, Compaq, Epson, NEC, Dell, NeXT.

The names have come. Most have gone. A few are still around. Some merged or were bought. Compaq bought DEC and was then, in turn, bought by HP.

Anyone who studies this history must see how it is impossible to predict what will happen next. New magic is pulled out of the hat while old companies fade away … some with a whimper and some with a bang.

IBM has settled in nicely as still the main mainframe seller. Sure there’s Hitachi and Fujitsu and NEC. And of course there’s the trail of Gene Amdahl from the IBM 360 to his self-named company to the modern supercomputer builders Cray and the IBM Blue Gene.

HP continues to reinvent itself. Under a set of failed leaders it has fallen and fallen from its one time top position, but there is still the likelihood it will right itself. It is currently the number one PC maker in tight completion with Lenovo who bought out IBM’s PC business and even Dell who has gone up and down in the ratings. Sony and Hitachi, Samsung and Acer and ASUS. The latest crop shows a decided Far Eastern trend.

But what of Apple. Are they becoming so last year? Is the popularity of the iPhone being overtaken by Google’s Android protégés? Is the iPad finally hitting tough competition? Without Steve Jobs has Apple run out of ideas?

No, I don’t think so. The history of Apple has always been one of small market share but phenomenal profit margins. The Apple Stores continue to be mob packed selling more dollars per square foot than any retail outlet known to man. Sure the stock got over priced. Heck, it wasn’t that long ago it was $7 a share, so $700 was a bit rich.

I did suggest one sell off last October, and – for once in my investing life – I hit the peak right on the head. Very smart of me to sell in October. But, the great conundrum of investing is, if you sell, what do you buy? I bought more Amazon and Google and even some AT&T. But I don’t really want to talk about it :-(

By the way, I did keep ten shares of Apple. Always want to keep some chips in the pot … never know when the big hand will be dealt.

No, Apple has always had some boom and bust. Someone yesterday said they heard Jobs left a ten year plan of new products and the current executives just threw that away. That’s wrong on both parts. Steve was a refiner. He would polish and shine an idea until it was brilliant. He didn’t leave a list of ten years of new ideas. Even he didn’t have a crystal ball … it just seemed like it.

And the current leadership at Apple is very competent and they are the designers and engineers that came up with everything so far. Steve was a great leader, but it was his company that succeeded. Like a great ship, he directed which way to sail, but the crew pulled on the oars and set the sails. The success is as much theirs as his.

What do I see for Apple’s future? Simple, continued success. Possibly a decline from the scary heights, but they’ll still be here in ten years and as successful as always.

Here’s some of the reasons why I think that:

“I think you still have to think differently to buy an Apple computer,” he said. “The people who buy them do think different. They are the creative spirits in this world, and they’re out to change the world. We make tools for those kinds of people.” When he stressed the word “we” in that sentence, he cupped his hands and tapped his fingers on his chest. And then, in his final peroration, he continued to stress the word “we” as he talked about Apple’s future. “We too are going to think differently and serve the people who have been buying our products from the beginning. Because a lot of people think they’re crazy, but in that craziness we see genius.” During the prolonged standing ovation, people looked at each other in awe, and a few wiped tears from their eyes. Jobs had made it very clear that he and the “we” of Apple were one.

Isaacson, Walter (2011). Steve Jobs (Kindle Locations 5667-5674). Simon & Schuster, Inc.. Kindle Edition.

Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world are the ones who do.

Isaacson, Walter (2011). Steve Jobs (Kindle Locations 5775-5779). Simon & Schuster, Inc. Kindle Edition.

When Jobs took over and gave his pep talk, Ive decided to stick around. But Jobs at first looked around for a world-class designer from the outside. He talked to Richard Sapper, who designed the IBM ThinkPad, and Giorgetto Giugiaro, who designed the Ferrari 250 and the Maserati Ghibli.

[That’s Jonathan Ive, the lead designer of many of Apple’s products including the MacBook Pro, iMac, MacBook Air, iPod, iPod Touch, iPhone, iPad, and the iPad Mini. He is the owner of 596 design and utility patents. He is still a top leader at Apple.]

Isaacson, Walter (2011). Steve Jobs (Kindle Locations 5982-5984). Simon & Schuster, Inc. Kindle Edition.

Cook, the son of a shipyard worker, was raised in Robertsdale, Alabama, a small town between Mobile and Pensacola a half hour from the Gulf Coast. He majored in industrial engineering at Auburn, got a business degree at Duke, and for the next twelve years worked for IBM in the Research Triangle of North Carolina.

Isaacson, Walter (2011). Steve Jobs (Kindle Locations 6273-6275). Simon & Schuster, Inc. Kindle Edition.

Jobs got an email from a young man and invited him in. The applicant was nervous, and the meeting did not go well. Later that day Jobs bumped into him, dejected, sitting in the lobby. The guy asked if he could just show him one of his ideas, so Jobs looked over his shoulder and saw a little demo, using Adobe Director, of a way to fit more icons in the dock at the bottom of a screen. When the guy moved the cursor over the icons crammed into the dock, the cursor mimicked a magnifying glass and made each icon balloon bigger. “I said, ‘My God,’ and hired him on the spot,” Jobs recalled. The feature became a lovable part of Mac OSX, and the designer went on to design such things as inertial scrolling for multi-touch screens (the delightful feature that makes the screen keep gliding for a moment after you’ve finished swiping).

Isaacson, Walter (2011). Steve Jobs (Kindle Locations 6329-6334). Simon & Schuster, Inc. Kindle Edition.

Steve left a legacy. These people are geniuses. BUT … there are a lot of other geniuses in the business too. Companies come and companies go. Companies shine and companies fade. It is the nature of the business. Welcome to the future … brought to you each day by these shining stars. I could not be more excited to see what’s next. I won’t even venture a guess. I’ve got some ideas, but I will have to think about it more. I suggest you think about it too.

Did you know that “Think” was Thomas Watson, Sr.’s one word motto for IBM? He had it engraved on the stone steps and buildings in Poughkeepsie and Endicott. That was back in the old “black and white” days. Maybe it was more black and white back then. Now it is all glass and shiny aluminum.

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