Apple’s CEO Tim Cook spoke at the Goldman Sachs Technology Conference yesterday; Macrumors has what looks like a full transcript. Do not expect hot news; there is little or nothing in the way of announcements. It is interesting though as a recap of how Apple sees its future: iPad, iPhone, iCloud, Apple TV, maybe some future huge acquisition financed by its cash pile.
This is what stands out for me:
From the first day it shipped, we thought that the tablet market would become larger than the PC market and it was just a matter of the time it took for that to occur. I feel that stronger today than I did then.
I agree. The reasons are similar to those that caused laptops to outpace desktops. Mobility and convenience trump the better computing value you get in a desktop PC. Note: we still use desktops, and both desktops and laptops will continue to sell, but in smaller quantity.
Although you can list numerous reasons why tablets are not good enough – no keyboard, small storage capacity, underpowered for cutting-edge gaming, not really expandable, favourite apps not yet available, and more – none of these is sufficient to prevent the tablet taking over in the majority of cases.
You can have a keyboard if you want; build it into the case. Storage is increasing all the time, and we have the cloud. Graphics power is increasing all the time. Most people are happy to sacrifice expandability for the simplicity and reliability of a tablet. If your favourite app is not yet available, it soon will be; or else an equivalent will appear that replaces it.
Tablet benefits? Cost, no flappy screen, light and small, designed for ease of use, reliability of an appliance versus a computer for starters.
In itself, the move from one type of computing device to another is no big deal. The reason this one is such a deep change is because of other factors. I will list three:
- The lock down
Pioneered by Apple, this is the idea that users should not have full access to the operating system on their device in almost any circumstances. The lock down is a cost and a benefit. The benefit: resilience against malware, greater reliability. The cost: loss of control, loss of freedom, handing over even more power to those who do have full access, primarily the operating system vendor. Where UEFI secure boot is enabled, it is not even possible to boot to an alternative operating system.
- The store
Hand in hand with the lock down is the store, the notion that apps can only be installed through the operating system vendor’s store. This is not a universal tablet feature. Apple’s iPad has it, Microsoft’s forthcoming Windows 8 on ARM has it, Android devices generally let you enable “unknown sources” in order to install apps via a downloaded package, though sometimes this option is missing. Further, both Apple and Microsoft have schemes whereby corporates can install private apps. Still, the consequence of the lock down is that the ability to install apps freely is something which can be tuned either way. Since store owners take a cut of all the business, they have have a strong incentive to drive business their way.
I have never believed Apple’s line that the iTunes store is intended as a break-even project for the convenience of its hardware customers.
- The operating system
I am at risk of stating the obvious, but the fact that most tablets are iPads and most non-Apple tablets are Android is a monumental shift from the Windows-dominated world of a few years back. Can Microsoft get back in this game? I am impressed with what I have seen of Windows 8 and it would probably be my tablet of choice if it were available now. The smooth transition it offers between the old PC desktop world and the new tablet world is compelling.
That said, this cannot be taken for granted. I watched someone set up a new Android tablet recently, and was interested to see how the user was driven to sign up for a variety of services from Google and HTC (it was an HTC Flyer). Devices will be replaced, but accounts and identities are sticky. Users who switch devices may face having to move documents to a different cloud provider if they know how, re-purchase apps, figure out how to move music they have purchased, re-buy DRM content. A big ask, which is why Microsoft’s late start is so costly. At best, it will be a significant player (I think it will be) but not dominant as in the past.
Late start? Did not Bill Gates wave a slate around and predict that it would be the future of the PC back in 2001:
"So next year a lot of people in the audience, I hope, will be taking their notes with those Tablet PCs … it’s a PC that is virtually without limits and within five years I predict it will be the most popular form of PC sold in America."
Right idea, wrong execution. Microsoft tried again with Origami, the ultra mobile PC, a device that was so obviously flawed that everyone knew it would fail. My belief is that Microsoft, helped by Apple’s example, has a tablet concept that works this time round, but nevertheless the history is discouraging.
One reason for the relative failure of the Tablet PC and the complete failure of Origami was price. Microsoft’s business model depends on selling software licenses, whereas Apple mostly bundles this cost into that of the hardware, and Android is free. Price of the first Windows 8 tablets is unknown, but could again prove to be a problem.
Interesting to debate; but however it shakes out, Windows-only is not coming back .
It follows that as tablet use continues to grow, both business and consumer computing are transforming into something different from what we have become used to. Considering this fact, it would be interesting to analyse affected businesses in terms of how ready they are for this change. It would be fascinating to see companies ordered by some kind of tablet readiness index, and my guess is that those towards the bottom of that hypothetical list are in for a nasty shock.
Current Win8 tablets seem to be quite expensive, but then again, so were the iPhone & iPad.
Something that MS lacked (and still lacks) was polish: they only seem to release half-finished jobs.
Maybe they’re too ambitious, and try to tackle too many things at a time, but from OSes to frameworks, there is always a lack of polish when they release something.
Apple on the other hand seems ready to cut down on features, but what they release is typically quite polished.
We don’t know yet how WOA (Windows on ARM) will be priced. That will be interesting to see.
Tim
Given that BillG was a huge tablet fan, I wonder if MS have a ton of patents on tablet technologies?
This could be a big source of revenue for them in the same way as they make lots of money from Android phones.
“My belief is that Microsoft, helped by Apple’s example, has a tablet that concept that works this time wrong, but nevertheless the history is discouraging.”
This sentence doesn’t parse properly.
Thanks – fixed!
Tim
Everyone knew Origami would fail? Really? When it was just a plastic mockup that everyone raved about, when it had a hugely viral pre-launch marketing campaign or when people saw what the limitations of an Intel processor meant for the form factor?
@Mary I recall the Origami campaign being at its most viral before anyone knew what the product was 🙂
I don’t recall raves about the plastic mockup but I take your word for it.
Tim
Typo issue: A couple extra “that” instances still 🙂
1) “that caused that laptops to outpace”
2) “tablet that concept that works”
Regarding the rise of Apple:
This is pretty amazing: http://read.bi/w7Zxb2
“Tech writer MG Siegler just noted a remarkable fact: Apple’s iPhone business alone is now bigger than Microsoft. Not Windows. Not Office. Microsoft. Think about that.”
@Vic the iPhone figures are interesting but it’s worth noting that it is more about Apple growing than Microsoft shrinking.
Tim
A very odd statement:
“I have never believed Apple’s line that the iTunes store is intended as a break-even project for the convenience of its hardware customers.”
Assuming that you’re referring to the App Stores and not the music store, are you suggesting that Apple makes a huge profit from the sale of apps? The numbers clearly say otherwise:
http://www.macrumors.com/2012/01/24/apple-reports-best-quarter-ever-in-q1-2012-13-06-billion-profit-on-46-33-billion-in-revenue/
In the pie chart, App Store sales (both iOS and Mac) are part of “Other”, which represents 3% of total revenue for Oct-Dec. 2011, or about $1.4 billion. “Other” also includes OS X sales, peripherals, Apple’s own app software sales (Pages, etc.), etc.
Down below we see that Apple paid out $700 million to developers in that quarter, meaning they kept $300 million of those developers’ App Store sales (their 30% cut of $1 billion – consistent with estimate above). Out of that $300 million they had to pay currency exchange/credit card fees, maintain gigantic server farms and pay the people to run them. Let’s say that’s half of the $300 million, meaning they made $150 million profit on 3 months’ App Store sales.
This is a company that made total profit of $13 billion that quarter, meaning our assumed app store profit is about 1% of that. It’s probably much less and the reason why 30% has become sort of the industry standard – that’s the cost of doing business.
@Phil it is a long game, and content as well as apps.
Tim
It’s interesting to replace your bullet points with the things they’re replacing:
* The lock down (malware)
* The store (crapware)
* The operating system (3-year release cycles)
The world that those things represent, where the sun rises and sets every day and there’s a Windows PC on every desk or lap, is gone.
@Phil sadly I suspect we have not quite seen the last of crapware since OEMs will still pre-install stuff. That is part of their “added value” 😉
Note Apple’s announcement today that OS X is going to an annual release cycle.
Also, Mountain Lion will include new option for signing Mac apps that provides much of the security of Mac App Store but without distributing via App Store.