APPLE AND THE WINDS OF CHANGE?

I don’t usually write stories about individual companies, but this hit me like a ton of bricks in the last 24 hours so I thought it was worth touching on briefly.  Now, I wouldn’t call myself an uber tech nerd, but I am fairly tech savvy.  I’m also generally a first adopter meaning that when some new technology hits the shelves I feel compelled to be one of the first users to test it out no matter how much it costs me (stupid yes, I know).  I bought the original Iphone for however much it was outrageously marked up.  I stayed up til 2AM EST while on vacation so I could order the Ipad when it first became available (sad, yes).   So I wouldn’t say I’ve been ahead of the trend, but I am not exactly out of the loop.

I’ve been in love with all of my Apple products over the last 5 years.  And then this past weekend my Iphone started having some issues.  The touch screen was acting up and the power button stopped working.  I had jailbroken the phone and rigged it up in a way that was very specific to my tastes so the thought of getting a new phone was like breaking up with a long-time girlfriend (ironically, my obsession with technology has often been the greatest threat to my relationships or so they say).  But then the screen’s brightness went out and it was hardly legible.  I was driving home yesterday afternoon and decided to stop at the local AT&T store to order the new 4S.  There was no debate about it.  I was getting the new Iphone.  I was programmed to get it and I would rig it up the same way I loved my current phone.

When the sales guy started his pitch about the new Android phones I thought to myself “buddy, I was in sales for years and I know what you’re doing and why you’re trying to sell me the phone that AT&T wants me to buy”.  But I listened.  And then he showed me.  And then when he realized I didn’t care about how much I was going to spend he quickly pushed the most expensive phone in the store.  I thought to myself: “this guy thinks he’s dealing with a total moron”.   And the moron kept listening.  And the moron kept getting more and more interested.

He went through the Samsung Galaxy S2.  And then his partner came over and said I should get the Motorola Atrix 2.  He said it was better than the Galaxy, cheaper and had just arrived.  I was skeptical because I had messed with some of the Android phones before and never found them as user friendly, visually appealing or as dynamic as the Iphones.  So now I was thrown entirely off my game.  It was like I had walked up to the bar to order a White Russian and they were out of Kahlua.  You have to think quick because you always feel like you’re wasting the bartender’s time if you don’t order quickly.  This is how mistakes are made.  But I wasn’t buying a drink.  So I stopped him in his tracks and said: “look, I have this super nerd friend who knows all of this much better than I do.  I’ll be back in 5 minutes”.   So I consult the friend and he tells me he made the switch from Iphone to Samsung Galaxy and that he had heard great things about the Atrix, but didn’t know much about the Atrix 2.  So I walked back in and said “Can I return this thing when I hate it?”  He said yes.  I told him to ring me up.

So, my relationship with the Iphone officially ended and I became an Android user.   And I have to say – Apple finally has real competition.  I’m still learning how to use the phone, but I am incredibly impressed by the Atrix 2 at first glance.  First, the phone is sleek, light and just as aesthetically pleasing as any iPhone.  This was always a major gripe of mine with the first few Android phones.  They were clunky or felt odd.  Not the Atrix.  It’s very light, has a massive display, but doesn’t feel huge.  You barely even notice it in your pocket.

The touch screen experience is every bit as impressive as the iPhone.  This was always another distinguishing feature on the early Android phones.  The user experience via touch was clunky compared to a super smooth iPhone.  That’s all been rectified.  And the screen is crystal clear as if you’re staring into blue ocean water.

As far as the technology goes – the Andoird OS is really impressive.  It’s every bit as fast as the iPhone, but the Android OS has the potential to outmatch the Apple OS.   The voice recognition is a big plus.  And Google’s built-in voice navigation is a huge selling point.  You are basically buying a Garmin GPS navigator for free.  And this doesn’t even mention all the other benefits of the voice recognition such as talk to text and search.  It’s all seamlessly intertwined with Google so the synergies are obvious right off the bat.

The apps are no different.  As far as I can tell, Android has everything that the Itunes store had.  The web experience on Android is every bit as convenient as the iPhone and the phone is 4G so it’s blazing fast.  One strange thing was navigating to a flash website and having video actually play.  It makes a huge difference.

The hardware appears every bit as impressive as any iPhone.   The camera is a monster at 8 megapixels with HD 1080P video.  It has a powerful LED flash and front and back cameras.  The only real weaknesses I see at this point are the battery life and the memory.  But again, you can actually take the back off of your Android phone and insert larger memory chips (~$30) so that’s not much of an issue.  The battery is a problem on most smart phones and if you’re a nerd you just get over it and make sure you have car chargers, office chargers, etc.

All in all, I am impressed with the new phone.  And I think Apple has reason to finally be scared of the competition.  The Android OS has always had the capability to outpace the Apple OS.  It was only a matter of time before the hardware caught up with the software and created the same seamless experience.

All of this makes me wonder if the Apple fad isn’t getting a bit blown out of proportion.  Back when I bought my first iPhone it was unique.  I would find people staring at my phone in public because it was a rare item.  Today, everyone and their mother owns an iPhone.  It reminds me of the Motorola RAZR when it first came out and everyone owned one.   I am not saying that Apple is ready to be crushed by Google, but they finally have some competition.  The days of 20% annual unimpeded growth might finally be at risk.   And that’s the problem with being #1.  There’s only one direction to go.

Before he passed away, Steve Jobs said he wanted to crush Android:

“I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.”

Unfortunately, Jobs passed away before he ever had the chance.  And from my individual experience, it looks like Android has the potential to go thermonuclear on Apple…..

* Disclosure – I have no interest in shares of Apple.  

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. Android is a direct rip off of Apple and oracle technology. Merely to preserve the potential for ad revenue,Google gives this software away for free to foreign companies. Google stole tech from oracle and apple and gave it to Korea. Now cheap android clones crowd the market undercutting the people who developed the technology. This is criminal and anti American. Copyists should be ashamed and shut down. Anyone buying this technology should consider buying American and support creators not copyists. Those that think that apple is in trouble only need to look at profit. Apple has 10 billion in cash flow per quarter with only 5% of handset market.

  2. What about when that 16 year old Eastern European nerd / hacker pushes the button on the open source phone?

  3. Apple owns the supply chain. They make their own processors and have locked up pretty much most of the flash capacity out there.

    Android and Win7 boxes may compete, but not with empty flash sockets.

    Besides, have you noticed what Android/Win7 is copying? iPhone. Not the other way around. Oh… and their products are profitable. All of them. Very.

    Better designers, better architects, better manufacturing, pretty good products, loyal fan base, tiered and integrated product line, retail establishments, excellent customer service; Average Joe cares about these things.

    I think it’s a stretch to call this peak.

    Just keep in the back of your mind: There has NEVER been a company of this size, growing at this rate, this profitable, this innovative, in a market as unsaturated as this, with such anemic competition that is this far in front of everyone else. Add to that that they have more cash on hand than the revenues of all but the top 25 of the Fortune 100. Last, they just sold 4 million phones in 3 days. ASP of those phones was $600 US. That’s $2.4 billion in revenue.

    In 3 days.

    3 days.

    Yup, they are on the ropes all right. And Nokia and Google and Motorola are surely going to prevail.

  4. Apple currently has the number one smartphone, the number one laptop, the number one tablet, and the number one desktop computer. That’s right, number one. Better than HP, Or Samsung, Or HTC, or motorolla. Yeah if you combine every android manufacturer together they sell more phones than the single company that is apple. But on an individual basis Apple is number one in sales and profits. People are willing to pay slightly more to get the best. Apple provides the best ecosystem and user experience for most people. Now if you are a geek looking to test your new program you just wrote, well yeah maybe you would be better off with an android device. But for 90% of Americans I would think that Apple would be the best choice.

  5. I had a lot issues with Iphone and ipad, mostly the videos. I cannot see the video posted here and other places on iphone or ipad. I made switch two or three months ago. I was awake at 1:30 am to order the ipad2 when the apple store first opened. It sounded like the Adobe flash player will be out, but many still use it. Android device works nicely with those videos.

  6. I’d rather pay for products of the company that has been more innovative to support them to continue with developing really innovative products/OSs/software/combinations of all…

  7. The first tenet of investing is that all stocks are bad stocks, even the ones that make money. The second tenet is to never fall in love with a stock.

    So, my son (a newly minted college grad who managed to find a job) decides that he’s leaving the family cell phone plan. He got tired of waiting for my wife to add data capability. After some pretty impressive research he decides on a Sprint plan, and the phone he wants is (what else?) an iPhone. After visiting the store twice, talking to me, and again doing quite a bit of research on his own he walks out with a Samsung Galaxy (Android) phone. He said it wasn’t even a contest. Part of his research was to snag a Google Music account (still don’t know how he did that), where he found that one of the first options is to upload all of his music in his iTunes database to Google’s Cloud. A simple YES and several hours later it’s done. Another free download from the Android App store and he has all his music at his beck and call with no memory constraints imposed on his phone, and he has finally divorced himself from rather clunky and restrictive iTunes.

    I believe that we’re witnessing the Mac/PC contest, closed versus open architecture, all over again. And you know how that one turned out. Anyone who made a lot of money on AAPL on the upside could perhaps make just as much on the downside if they short it.

    I’m just sayin’.

  8. My wife has a new Galaxy and I got the iPhone 4S on my latest upgrade from AT&T. After playing with the 2 phones side by side, there is still no comparison. The IPHONE is a Porsche and the Android phone feels like a Mustang. Of course many prefer mustangs, but in the end, the Porsche wins hands down. The iPhone is a much smoother experience and much faster with almost every task. The problem with google is they keep following. Apple already has the IPHONE 5 in development which I am sure will be another mile leap ahead of Android. Time will tell, but the 4S is not even in the same ballpark as the Android phone. I think for AAPL, the biggest hit is yet to come in there takeover of the television run by Siri, we should see this in late 2012. I think this will be the largest money maker to date and really there encore, after that hoopla it may be time to sell your AAPL longs. Of course if the market tanks, p/e’s will come down across the board and stock prices with them, so to determine stock prices based on actual products and profits is futile as anything over a multiple of book value is always just guessing what price somebody is willing to pay, and that is determined by the excess cash flow from the household and their current tolerance for risk. So, while these articles are nice, they should be taken for what they are, an opinion that has no market price relevance but merely tech talk.

  9. Good grief, you applefans are a goofy bunch. Do you pray toward Jobs birthplace 5 times a day or something.
    Look, these things are TOOLS. Nothing more, nothing less. Get the one that does the job you need done the best.
    We have Androids, iPhones, and a windows 7 phone because my wife needed internet explorer. They all work fine and do the job.
    Which one is “best” that, like beauty, is in the eye of the beholder.
    I’ve never met Gates or Jobs, from what I know about them I don’t think I’d like either one of them. However, I do repect their work and what they accomplished.

    • That’s the problem with most of you who don’t understand Apple or Steve Jobs. It is a TOOL but it is also something you use every day. If we don’t have people or companies like Jobs who care about the nitpicky details of interface and design and trying to make a perfect experience the world will be a sea of crap devices.

      If Apple hadn’t set the bar nice and high we would be just seeing a bunch of crappy RIM clones in the marketplace and we might have gotten somewhere near iphone of today in 10 or 15 years. Just look at Symbian, Windows Mobile and RIM and that is what you would be getting if it weren’t for Apple showing the way.

      I don’t want to see a replay of the PC story. That set the world back 10-15 years in technology adoption, they had to wait that long to get the tech that NeXT had working in 1988.

      It is also about reducing complexity. SJ was always about simplicity and cutting shit that doesn’t need to be there. This is important for a mass consumer product and is why the ipod was so successful and why the ipad will dominate home computing. It is computing for your Grandma.

  10. I’ll go with a Win 7 phone. I currently have a Zune player, and it’s excellent. And it includes a high-def FM radio. I’d love to have a phone that will bring in radio stations.

  11. Just popped over to BI for a chuckle and saw the title they put on this piece.

    Ridiculous.

  12. Nice topic, and one of my favorites as well. I’ve been an iPhone user and am ready to order the Samsung Nexus S (although the Atrix2 ain’t a bad choice, or Droid Razr)

    In my opinion, it’s all going to come down to the paid content and the cloud – music, tv/movies & apps. Once you buy into an “ecosystem” and commit yourself to the hardware/OS, and more importantly their paid subscription services and cloud-storage, it will be hard to leave. Advertising (paid-search, etc.) could subsidize the hardware and content at some point (ala cable tv)

    As I see it, there are 4 key players, which I’ve listed in order of how I think they ultimately rank in terms of success:

    -Apple/iTunes/iCloud
    -Google/YouTube
    -Amazon/Netflix (they could buy??)
    -Microsoft/xBox/Skype

    Facebook will likely partner with one (not Google) and help drive the ultimate success (maybe MSFT via the Skype Integration)

    Apple has a nice lead on the hardware end (but Android is closing)and iTunes, but lack the all you can eat content model. Siri is a nice addition and should be a direct threat to Google’s monopoly on paid search.

    Look for the next big thing for these 3 to be the living room and television. I’ve heard that AAPL has a patent on a 3-D TV (holographic) which requires no glasses. If you include the content (tv/movies), web surfing, video-conferencing and integration with all you other cloud content and other devices, you have a winner. My bet is still on AAPL given their warchest of $85B + in cash and the ability to go out and partner or buy the content to monopolize the industry. As Netflix has shown, the content companies (ie. Starz) are beginning to wake up and see that they hold alot of value in the new cloud paradigm where exclusivity to content can provide the edge.

  13. And now Kindle has taken a shot at the IPad with the Kindle Fire…significantly cheaper, and totally content oriented (something that Amazon is at least as adept at as Apple). Steve Jobs has been the technology Prima Donna for a long time, but my bet is that Jeff Bezos (and Amazon) will have an even greater impact on the long term future of Apple than anything else…

  14. Re: Apple vs. PC

    I recently sold my iPad2 to my niece. What I didn’t fully grasp when I bought it was that the iPad really isn’t a tablet computer. It is an entertainment device. I realized too late that I needed word processing and occasional spreadsheet power. If tablet = computer, iPad ain’t it. Setting up directories to organize documents? Fuggediboudit. Where is the UBS port to stick in a thumb drive. Oh, want to transfer photos from other devices? Just use iTunes – yeah, that’s user friendly (there may be another way, but this is what my Apple-lovin’ tech-savy son told me to do). To be fair, I will miss some of the cool apps. Yes, I hate MS, but better the devil you know (how it works).

    • I have found that the ipad is really a reader. If you read a lot then it’s fantastic. I read a ton so I am in love with my ipad. But I only recommend it to people who read a lot. Otherwise, as you noted, a laptop is what they need. If you want your kids to be distracted buy them a soccer ball. :-)

      • I have a hard time with keeping two devices in mind and in sync. so I’m jazzed to see the new Android phones come to market now – like the Samsung Nexus with a 4.7 inch HD display and ultra-slim design.

        http://www.google.com/nexus/

        Slides nicely into a pocket, yet big enough to do some fairly serious reading and web-surfing. The Android 4.0 looks promising and more “Apple like” in terms of the UI>

    • You should have held on to it for a bit longer. You can do casual word processing and spreadsheet stuff using the Pages and Numbers apps from Apple, $5 each I believe. iOS 5 introduced wifi syncing and printing and now with iCloud you can automatically sync and share your documents over the cloud.

      Apple is moving away from the file directory structure, it will all be hidden from the user. Your apps will see all the documents they can access or have created thru the app. Search will become more predominant and metadata filtering will become a big way of accessing the files. This is the way things are starting to go with iOS , Lion and with apps like Final Cut Pro X and Aperture.

      Files, folders and understanding directory structure are actually too hard for most people to grasp. Hard to believe if you’ve used computers for a while, but unfortunately true.

      That said, the iPad is for casual computing (reading, viewing, listening, surfing, doing email, facebook etc.). If you need to do a lot of work on it you are still better off with a laptop.

  15. I bought my first inteligent phone recently and i am really dissatisfied with it.
    If guys at Android would had a clue and wanted to have bigger market share, they would sell their Android OS with some easy system (like old Nokia phones have) enabled.
    Android is for geeks, not for regular folks.Me, as computer guy, 12h behind computer every day, I am really bored trying to customize my phone .
    I have better things to do…

    • teomax

      Sounds like you’re a perfect candidate for the iPhone 4s. “It just works!”

  16. Your missing the importance of the 4S.
    Siri is a disrupting technology.
    Sorry Google, you’re done.

    • As a gimmick, Siri is a sweet application. But Google has had voice recognition for iPhone/Android for 2 years and does not have the “busy server” issues that AAPL is experiencing. Definitely a plus for Apple and threat for GOOGs monopoly search business, but hardly a destroyer and not unique to AAPL.

  17. and my last rant is, that my “intelligent” phone (htc wildfire s} doesnt even have working alarm, when its switched off. even your 1998 phone had it, LoL.
    sorry guys for bothering you with my stupid rants

  18. Cullen,

    It has been over a week. How are you liking the Atrix? Are you considering going back to the iPhone?

  19. I ordered one today hope to have it set up and working by Wednesday. I was going to just order the 4S for durability concerns and the fact everyone I know loves theirs … but there is a 2 to 3 week wait and it’s more money. The Atrix 2 they waived activation ($39) and it cost me $79.99 from Costco with a car charger and case … and it’s available from Amazon Wireless for $49.99. So with the stellar reviews of this phone I thought it was the right move. I can’t wait to get it.