All Articles Tagged business model

Digital Daily brings BOOM!ing word that Apple’s market cap has just exceeded Google’s, at $159.37 vs. $157.56.

Good on Steve Jobs and Apple. And kudos to Valleywag for saying, way back in 2007 that this would happen because “Apple knows how to design not just gadgets, but the businesses that go around them.”

We here at TiPb have been marveling at Apple’s unique 360 degree spherical integration for a while now as well.

We, like pretty much everyone else in the blogosphere, probably can’t help but wonder how Michael “I’d shut down Apple and give the money back to its shareholders” Dell is doing lately? But is all this market cap stuff really anything more than a seriously juicy headline? Any savvy investors reading, please enlighten me on how much more or faster this news, never mind the ever fickle and capricious dice-game that is the current market, will restore our childlike sense of wonder?

Microsoft’s most recent 10K filing with the SEC gives every indication you-know-who may be bringing them some future pain:

A competing vertically-integrated model, in which a single firm controls both the software and hardware elements of a product, has been successful with certain consumer products such as personal computers, mobile phones and digital music players

Sure, Microsoft has their Xbox and Zune end-to-end business models, the former of which has enjoyed both success and red-ring framed troubles, and the latter of which is jettisoning even its… er… more eccentric fanbase, but they’ve yet to enjoy iPod-level triumph in the space.

To put this in some perspective, we know Microsoft’s CEO, Steve Ballmer, has said Apple’s tight integration is something they want to emulate going forward, but Microsoft basically invented software as the mega-business. They’ve made gatestillions of dollars on software and enjoy a monopoly level position in both PC OS and Office applications.

So, even as Apple sold a million iPhone 3Gs in a weekend, and Steve Jobs wants 1% of the global mobile market, and 10 million units shipped short term, Microsoft came close to moving 20 million software licenses for Windows Mobile in the last year, and even as Mac sales keep inching on up, Microsoft still sits so far atop that market share mountain, its basically everest.

Still, if we discount Microsoft’s endemic — and groundless — Apple (and now Google) envy, could Ballmer and co. seriously still see Apple’s 360 degree, spherically integrated business model as a threat? And if so, why?

Posted from my iPhone

Read that title again, and realize that the iPhone 3G will sell for LESS than the infamous price drop given the original iPhone before the holidays. (Recap: it’s started at $599 and was dropped to $399 with early adapters getting an equally infamous $100 Apple Store gift certificate Jobs-a-culpa).

And while the price drop was big news then, the retail price of $199 should be HUGE news today.

At $199, that’s HALF the price of the original iPhone at its lowest. It’s the SAME price as an 8GB iPod Nano. It’s LESS than an iPod Classic, and MUCH LESS than an iPod Touch!

When we consider the possibility of carrier subsidies on top of that (Europe has been heavily rumored, with Orange at the extreme gossipy end of giving them away free to current iPhone owners), the iPhone may just be cheaper than “competing” Blackberries, Windows Mobile, and Treo smart phones.

Profit margins (averaging 30%) on hardware have historically been Apple’s bread and butter, but this isn’t the personal computer market (where they’re a founding name) or the MP3 player market (where they have a dominant market share already), this is a much bigger, much less saturated market for Apple. Consumers will buy for a variety of reasons. Features often tops the list. Fashion certainly plays its part. But price can be the difference between dream and reality for a lot of shoppers.

Apple knows this, and they’ve developed an unparalleled 360 degree, spherically integrated business model to support it. A share of App Store sales and MobileMe subscriptions are just two examples surfaced today. Apple Retail Store profits, accessories, Mac hardware, licensing fees, iTunes sales, and a host of other factors let them maintain profitability while minimizing sticker shot for their users.

Steve Jobs once said that the mistake made by the management prior to his return was to go for money rather than market share. By keeping high prices in the present, they all but killed the platform’s future.

Judging by today’s WWDC 2008 Keynote, Jobs learned that lesson well.

8GB iPhone 3G for $199. Perfect price-point storm?

What do you think?

[Updated following Phone Different Podcast #19, see below!]

Way back in February, Apple’s Chief Operating Officer, Tim Cook said:

“We’re not married to any business model.”

At the time — and it’s scary how long ago it seems already — the iPhone was only available in the US, UK, Germany, and France, with rumors of Ireland and Austria waiting in the wings. What’s more, these were all exclusive deals, with Apple doing their best to lock the iPhone down to single carriers in each territory in exchange for lucrative — and unprecedented — revenue-sharing deals that some have estimated could be netting Apple up to $15 per month, per subscriber.

So, with a potential billion dollars on the table, while they weren’t married to it, they no doubt felt more than a little lusty.

But in true Apple fashion, invoking perhaps the pirate mantra of old, and embracing the same mindset that has them run iTunes as a near-loss leader, price-cut the iPhone a scant few months in, and offer cheap family upgrade options on their OS and iApps, it looks like Tim Cook was serious.

Read on to find out just how serious he was…

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