Internal Apple document: FY'14 Planning Offsite

http://www.scribd.com/fullscreen/216526160?access_key=key-1uv8ibrvnzr4dnx0fu5c&allow_share=true&escape=false&view_mode=scroll

by molf • 12 years ago

131 195 12 years ago

scribd.com

davis_m• 12 years ago

Seems more like "The customers we don't have want what we don't have"

jusben1369• 12 years ago

Or "Prospects (tive customers) want what we don't have"

kenjackson5• 12 years ago

Apple faces a severe potential financial crisis in coming years -- one that dwarfs Microsoft's. They rely so heavily on the premium subsidy for their revenue that if the subsidy is merely brought down to normal levels they will see a huge drop in revenue -- and this assumes that they keep selling the same number of phones.

Now that there are viable alternatives in Android, and to a lesser extent Windows Phones, with much lower subsidies, I think you'll see the carriers push these other devices.

And if we move to a model where consumers pay for the full price of the phone (which is what much of the world does today), then you'll actually see iPhone sales fall. Sub $200 low-margin phones are the future. Apple can still do well with a premium phone -- especially if the camera is really good, but I think it's a tougher niche than the high-end PC market.

NathanKP2• 12 years ago

My understanding of Apple's business model is that they plan to make most of their money from the 30% commission on in app purchases, and their share from media sales made through iTunes. The sale of the hardware is just a way to get a purchase platform in the hands of the consumer.

Apple could probably sell a sub $200 iPhone with no difficulty, and then pay off the subsidy using their other sources of indirect revenue. Of course in that case we will probably see iPhones become even more of a walled garden, and a lot more of a crackdown on jailbreaking.

0x0• 12 years ago

You're probably right, which is funny since just a couple of years ago the app store was claimed to be a break-even operation.

Too bad for Samsung they don't have one.

bdcravens6• 12 years ago

My understanding of Apple's business model is that they plan to make most of their money from the 30% commission on in app purchases, and their share from media sales made through iTunes.

Actually, it's project to only grow to about 37% of their total profit by 2020, not exactly "most":

http://appleinsider.com/articles/14/03/24/itunes-and-app-sal...

kenjackson5• 12 years ago

Apple makes such huge money off of subsidy, I don't think they can make that money back from app commissions. I've heard the subsidy north of $300/phone. That's a LOT of in app and media purchases to get that back in 2-3 years.

Plus remember that the subsidy is on top of the app purchase dollars they make today, since phones with the subsidy still buy apps. There is no real upside to them on this. Sure they make good money on apps, but its hard to replace effectively free money from the carriers.

bdcravens6• 12 years ago

Sub $200 low-margin phones are the future.

Wouldn't this be as problematic for Samsung (or any other vendor with high end offerings, but Samsung is the big dog) as Apple? While Samsung has some sub-$200 phones, doesn't the massive profit from the latest and greatest make that possible?

Mikeb853• 12 years ago

It's problematic for a lot of manufacturers, but it's what Google, Amazon, and even MS are pushing for, since their business is software (Google through ads, MS) and commerce (Amazon). Not to mention it's the eventual result of a competitive market (Econ 101).

happyscrappy• 12 years ago

As long as Apple keeps making the best hardware available they will have my money. Are you willing to put your hard earned dollars on the line shorting AAPL? If not why?

hindsightbias• 12 years ago

AAPL is not treated rationally by Wall Street. The stock has been bad mouthed every quarter for years. Last quarter, they ONLY sold 52M iphones instead of the analysts' projection of 54M. Stock drops.

As an AAPL holder, it makes me want to get into shorts, but then I'm speculating on the whim of some ass on the TV.

pjmlp• 12 years ago

I think I already went through this scenario around 20 years ago.

usethis• 12 years ago

It is a matter of staying ahead of the curve and not let your competitors catch up. Whether that means in terms of marketing, or product quality doesn't matter. So far plenty consumers are convinced that Apple's prices are justifiable and don't have a reason to switch an ecosystem they have invested in.

You are right that Apple faces a crisis if their sales drop, so does every other company. The worst reaction though, would be to start competing on prices, and thus quality. This inevitably leads to a race to the bottom, where they're unable to compete against companies that are based in cheap labor countries. Much in the same way as Philips, or Sony couldn't compete against companies like Samsung once they lost their competitive edge in their product categories.

kenjackson5• 12 years ago

I think you missed my point. They face a crisis even if their sales do NOT drop. They face a crisis if Verizon says to them, "We are no longer willing to give you a subsidy premium. You will get the same subsidy rates as the Samsung Galaxy Sx." Apple will continue to sell at the same rate, but their revenue will drop substantially.

On top of that is the fear of their sales actually dropping if carriers stop doing subsidies altogether (which is the direction they are going).

anon1385• 12 years ago

Why being insanely profitable is bad for Apple

Microsoft fans have been making this argument for 15 years or more. They said Apple should copy Dell and sell cheap enterprise desktops with low margins because that was where the money was. Then they said Apple should copy Asus and HP and sell cheap netbooks with low margins because that was the future. Then people said Apple should be making a really cheap ebook reader to compete with the Kindle.

People are constantly advising Apple that they should get into low margin markets and compete on price with companies that are barely breaking even. This advice seems to mostly be based on what they want the market to look like, more than how it actually is.

kenjackson5• 12 years ago

To be clear I think Apple has a great model, but they need to be realistic that it won't last. The only markets in the world that the iPhone has substantial market share is in countries with subsidies (at least I believe so). In markets with no subsidy, Android is killing.

As the US (and the world) moves more to a non-subsidy model I think this disproportionately impacts the iPhone. All OEMs will have to deal with this, but Samsung, LG, Huawei, Coolpad, are used to this world already as they sell really well worldwide. iPhone hasn't figured out how to sell full price phones around the world.

simonh• 12 years ago

More like 25 years plus.

I keep seeing people talk like Apple 'lost' the PC wars and will 'lose' the phone wars the same way, yet Apple's PC business is insanely profitable by PC market standards. Commoditization of the PC market hasn't touched Apple's PC business in any way. What it does is lock the other PC vendors into a race to the bottom, leaving Apple as the only company with the resources and brand position to support premium gear at premium prices.

Exactly the same thing is happening in phones. Every single Android phone is in an even battle with every other Android phone. The market for premium Android devices in split roughly evenly between the top half dozen, perhaps even a dozen or more devices. Meanwhile the market for the premium iPhone is split between, er, one device. None of the other manufacturer can afford Apple's software, services and several-year-long device support. This dynamic isn't going to change any time soon.

At some point yes perhaps Apple's huge phone margins may decline, but there's no reason to suppose their premium brand position and margins will disappear completely for the foreseeable future. They've been living that life in the PC market for almost their entire existence. It's what they do.

Pxtl2• 12 years ago

Good point. You don't see the swarm of MacBooks all over campus because of carrier subsidies, you see it because every other company makes miserable plastic crap laptops. Even if a company sells a notebook that provides a comparable experience to a Macbook, the company soils its own reputation with the crappy ones so people are suspicious of the higher-end.

smackfu2• 12 years ago

And if we move to a model where consumers pay for the full price of the phone (which is what much of the world does today)

It's coming pretty fast. AT&T is pushing Next pretty hard, which is essentially an interest-free repayment plan spread over 20 or 26 months. If you go to buy a phone now, that installment price is listed first, rather than the contract prices. You still don't see the "real" retail price, but you sure do see that an iPhone is $25 a month and a Moto X is $15 a month. (The Moto X is the cheapest current gen phone they have, I think. Something like a Nexus 5 would be even less but isn't on Next.)

waylandsmithers• 12 years ago

Maybe someone can correct my uninformed opinion on this (plus I've had the same iphone 4s for about two and a half years), but doesn't it seem like all the cool stuff is happening on Android?

Android: Pause video when you look away, send data by bumping two phones, run multiple apps at once, watch/wrist devices

iPhone: Now in five different colors

cloudwalking• 12 years ago

The problem is, these "cool" things you mention are mostly just marketing and don't work very well. I have only heard complaints about Galaxy Gear. Same for the eyeball tracking stuff on the new Galaxy phones--it just doesn't work very well.

bunderbunder2• 12 years ago

At the peak, Microsoft's profit margins on their core products where hovering around 90%. If I remember right, Apple's profit margins on the iPhone peaked at a bit short of 75% with the 4S, and have generally been sub-60%.

Furthermore, Apple hoards cash in a way that Microsoft never did. What this means is that Microsoft was sinking the cash into other business ventures - in other words they created a heavy reliance on those wide profit margins by creating a bunch of units that needed to be subsidized by other units' wide profit margins to survive. By contrast, Apple's taken a strategy of building up an enormous nest egg that they can use to help get them through the lean times should that ever become necessary.

Who'd you say is living at greater financial risk? Someone who makes an enormous salary but is only a brief period of unemployment away from foreclosing on their palatial house and having their Porsche repossessed? Or someone who relatively recently fell into a very high-paying (if not quite so enormously lucrative) job but has stuck with a relatively frugal lifestyle and instead devoted the extra money to investing in more liquid assets?

300bps• 12 years ago

Someone who makes an enormous salary but is only a brief period of unemployment away from foreclosing on their palatial house and having their Porsche repossessed?

So, in this part of your analogy, it seems Microsoft is the company you're comparing to a person that is ready to have their possessions repossessed. Is that right? If so, I humbly invite you to look at the facts regarding Microsoft. Microsoft's most recent quarter saw literally record revenue and they blew away everyone's profit expectations.

http://www.bloomberg.com/news/2014-01-23/microsoft-s-second-...

Microsoft also has more cash on hand than the U.S Government:

http://finance.yahoo.com/news/microsoft-starting-hoard-cash-...

joshontheweb2• 12 years ago

For Apple to maintain the lead they have had they need to continue to innovate new types of products, not just keep improving what they have. I think there is plenty of opportunity for this. Think smart appliances, houses, cars. The question is whether they still have the ability to do that with Jobs gone. Time will tell.

Edit: Probably the most likely new category would be wearable computing now that I think about it. Longterm perhaps electronics integrated with the body.

psychometry2• 12 years ago

They've done some impressive things on the hardware front recently--the Mac Pro redesign and streamlining their MacBook line come to mind--but since the iPhone 4, which had some incredible innovations like the antenna and Retina display, their mobile line has only seen predictable iteration. I expect the iPhone 6 to be a significant deviation in form factor from the iPhone 4/5/5S because Apple is run by smart people who are rarely late to the party.

joshontheweb2• 12 years ago

No doubt. They are still doing great things. But, especially in the case of the smart phone market, the competition is catching up. Or at least coming close enough for a lot of consumers. In order for them to maintain the kind of dominance they are now used to, I think new types of products will be necessary. FWIW I'm not giving up my iPhone anytime soon and would be lost with out my Macbook Air.

hahainternet2• 12 years ago

I hate to be the anti-Apple cynic here, but really? Higher resolution screens, a smaller computer and discontinuing products?

That really doesn't strike me as that impressive.

hershel• 12 years ago

The problem with wearables is that it's far easier to design a new wearable than a mobile OS. So this field is swamped with competitors ,some of are pretty innovative and some are very good at the cost game , and collectively they try many possible products.On top , there's no ecosystem to build(app store) so copying is far easier. Same goes for smart appliances.

malux85• 12 years ago

Where are their 4K displays? ... That's what I'm waiting for :)

octopus• 12 years ago

They recommend to buy this 4K display (it is not produced by Apple) if you own a Mac Pro 2013 or a MacBook Pro 2013:

http://store.apple.com/ca/product/HD971LL/A/sharp-32-pn-k321...

oxymoron• 12 years ago

Better mind those second derivatives.

GazNewt• 12 years ago

I'm hoping for 2,272 x 1280 5-6 inch screens this year

gum_ina_package• 12 years ago

Apple needs to show customers what they want, that's the real issue. Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted. Instead, they've made defensive moves by making their existing products cheaper and more attractive.

matthewmacleod• 12 years ago

Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted.

Jobs died a relatively short time ago; even when he was at Apple, it's not like they created new product categories all that often - maybe every 3–5 years?

I can't help but feel people have expectations which are a little too high.

phantomb• 12 years ago

This. In its 35+ years Apple created - or at least codified - the personal computer, the mp3 player, and the modern smartphone. I think it's closer to a big new product category every 5-10 years, really.

dragonwriter• 12 years ago

Since Jobs died, Apple hasn't really created a new product category that none of us knew we wanted.

More like since the PC. Since then, they've mostly capitalized on market needs that were widely recognized (and, in the case of portable digital music players, that were already widely popular), but where there was an opportunity to execute better than the incumbents were executing. (Not saying this isn't noteworthy, but its very different than creating "a new product category that none of us knew we wanted.")

iandanforth• 12 years ago

This strikes me as very boring, non-Apple style thinking. I don't think the experience of a 5 inch phone is better than a 4 inch phone. But it is a bigger number and thus easy to market. And things that are easy to market are the playground of boring companies.

Apple, on the other hand, should look at these numbers and say "people obviously want something new." Giant phones are being heavily marketed as the new thing, so people are buying them. Not because it feels good to try to shove a small book into a front pocket, or that they love having to use both hands to type out text messages.

A boring business would follow the heard because they don't know how to distinguish customer needs from customer inertia. Apple, traditionally, is very good at knowing when something is a trend, and when something speaks to a deeper human need.

I sincerely hope that Apple has not become a boring company.

JoeAltmaier2• 12 years ago

Apple is periodically a boring company. It just made better macs for a decade, and slid into irrelevance. Then they got (back) a CEO that made their products relevant again. Then he died. So I'm predicting history will repeat itself.

gress21• 12 years ago

Yeah - because they've forgotten about that.

mortenjorck• 12 years ago

That's not really a fair characterization. 1990s Apple did indeed only iterate its Macs until Jobs returned, but they absolutely didn't stop trying to innovate – they just didn't do it with focus. I mean, Apple invented the PDA without its co-founder at the helm, and repeatedly tried to put a revolutionary operating system on the Mac, but failed due to institutional bloat and uncertain leadership.

Infinitesimus• 12 years ago

" I don't think the experience of a 5 inch phone is better than a 4 inch phone."

I would respectfully disagree with that as someone who moved from a 4.3" Xperia to a 4.7" Nexus 4 and now a 5" Nexus 5. The extra real estate is a godsend for everything I use my phone for. IMHO, 4.7-5" makes the most sense (perhaps 5.2" as well). At the very least, I think apple should give people a choice of 4" and 4.5"-4.7".

Of course, doing that will introduce a problem since most development on iOS is very focused on optimizing for a single screen experience.

smrtinsert• 12 years ago

Absolutely agreed. Gf considered going back to iphone after early annoyance with GS3, now she can't imagine it after she got used to her screen size.

chiph• 12 years ago

In my case, I want a larger screen, but I don't want a huge device that doesn't fit in my pocket, either. If they were to push the usable screen out to the edge of the device, I could have both.

blinkingled• 12 years ago

Seconded. When I was using my Note 2 I found myself not using my laptop as often. (After dropping my Note 2) I am back to using a Moto G nowadays and despite it being an amazing phone for $200 - I find I am going back to using my laptop more, entirely due to screen size.

thekevan3• 12 years ago

"I don't think the experience of a 5 inch phone is better than a 4 inch phone."

You don't have to. But I am someone who does. There are many, many people like me who love their phones like the Galaxy Note who feel the same way. If I made a list of the top 5 reasons I really like my phone, 1 - 3 would be screen size.

I have been surprised at how many people have gone from, "let me see that phone, it is ridiculous that you carry the around" to "wow, I never realized how hard my screen is to use compared to this." I know three people who have gotten a larger screen phone because of me in the past 9 months and I don't evangelize at all. They just see my phone and want to try it.

I almost didn't get my Note 2 because I was afraid of carrying around a "small book". To honest it is less obtrusive in my pocket than my Motorola Droid 3 was, that thing sat in my pocket like a thick brick. The single time it can be an issue is getting it in and out of my pocket while sitting and wearing jeans.

Supermighty• 12 years ago

I love my Note 2. It is close to perfect in the size category. As part of my job I sometime test on a 4" iPod Touch, and it feels to very tiny. I can't remember how I even used my old iPhone 3G. Typing on the 4" was painful; the hit target was so small.

I think this is one of the reasons that Samsung has taken such a large share of the market. They offer devices in a variety of sizes, for which they've been criticized, but allows for a perfect size for everyone. I know I could never go back to a smaller screen size.

radley• 12 years ago

Should point out the most popular devices, Samsung's Galaxy S3 & S4, are 4.7" & 5" phones. The Galaxy Note series is 5.3", 5.5", and 5.7" respectively.

dreamfactory28• 12 years ago

I will likely end up upgrading my iphone 4 to a 5 instead of a 6 if the rumoured size increase happens. The only reason I still use an iphone is the smaller screen size. I would bet that Steve Jobs had the nous to make sure that the iphone comfortably fits in the front pocket of a pair of jeans.

hrktb• 12 years ago

There is definitely a sweetspot. I understand 4 inches is very small for any mildly serious task, it can be done but it's painful. But IMO 5 or 6 inches don't feel so liberating. It's better, but not that much, and at the end of the day I really want an iPad to do any task that will last more than 5 min.

For people who usually have a carry bag, an iPad is not so big or clunky. Having a 4 inch phone to pocket is then good enough.

DCKing2• 12 years ago

"I don't think the experience of a 5 inch phone is better than a 4 inch phone. But it is a bigger number and thus easy to market."

It's all good that your personal preference is for smaller sized phones. But it's really false to say that bigger screens are just about marketing. Having gone up from a 3.7 to a 4 inch to 4.7 inch device, each of them has been a progressively better experience because of screen real estate. My next phone might be 6 inches, so far bigger is better to me.

If Apple really does pick their phone size based on user experience alone, I think they're doing it wrong. However, I think they got stuck on dimensions set in 2007 and an operating system that isn't flexible enough. (FYI all my devices except my phone are made by Apple.)

gress21• 12 years ago

You're right about the operating system not being flexible enough, however it is now.

chrisdevereux• 12 years ago

However, I think they got stuck on dimensions set in 2007 and an operating system that isn't flexible enough. (FYI all my devices except my phone are made by Apple.)

Not really the operating system, so much as the APIs provided to developers, which previously required complex layouts to be hand-coded.

However, constraint-based layout was introduced 3 years ago and is being aggressively marketed as 'the future', although it has required some learning time for developers (and wastage of old devices) to become mainstream.

It is likely that the reason for introducing this several years ago was to ease the future introduction of varying screen sizes. I'd view the delay as a consequence of thinking about the problem in its entirety instead of rushing to play the numbers game.

weland• 12 years ago

And things that are easy to market are the playground of boring companies.

Apple is already playing in that field with the Retina display.

I don't think the experience of a 5 inch phone is better than a 4 inch phone.

I'm a pretty tall and well-built man with rather large fingers; even a slightly larger on-screen keyboard is a huge improvement for me.

MisterBastahrd3• 12 years ago

I agree. I spread my hand out and my thumb and pinky touch the edges of the long side of an 8x11 sheet of paper. I'd rather use an iPhone as a projectile than a productivity device.

jcampbell1• 12 years ago

In my non-scientific observations, some women seem to really like giant phones. They typically keep the phone in a purse, so the bigger it is, the easier it is to access. They also tend to use the phone in a two handed operation.

slantyyz2• 12 years ago

My wife avoids using computers after work. Her phone is in essence, her surrogate for an iPad (which she used to love until she got her 4S), laptop and camera. For her, a 5" screen is a plus given her use case.

A few years ago, I also thought the 5" screens were silly, but that was before I had to start wearing reading glasses. I just upgraded my iPhone to an Android phone with a larger screen, and it's so much easier on my aging eyes.

gress21• 12 years ago

Apple has to live in the real world. It's actually reassuring to me that they are able to consider these kinds of facts. It's certainly the job of Schiller and the marketing team to understand what the market is doing.

I agree with you that they need to design something great to serve the demand and not just follow others.

However, as an iPhone user, who loves the portability and one-handedness of the small form factor, I am using my phone for 'real work' all the time now, and would really like a larger screen for things like quip and mindnode. I think the demand for different tradeoffs is real.

cdent• 12 years ago

When someone makes a phone that separates the screen, input and processing into three physically different pieces (different in shape, volume, mass) that are connected by a micro local network I will buy it in a heartbeat.

All modern smartphones are far far far too big.

ctdonath3• 12 years ago

Granted the "iPhone Shuffle" is usually considered a joke, it would fit what you & I want: scrap or aggressively minimize the screen, focus on I/O via earpiece, cram "amazing talk time" motion-charging battery & radio into clip-on unit, and seamlessly integrate with the iOS ecosystem a la usually-nearby tablet.

The dumbphone has its place, and nobody is addressing it right.

moogleii• 12 years ago

I actually think it's very inline with their thinking. Apple has always (since Jobs came back anyway) focused on being smart/choosy about their product lineup, but IMO they chase good design, not what's new. If the two happen to coincide with each other, great, but if not, design over something out of this world new. They were in the right place at the right time for the original iPhone, but I think that was an anomaly due to lazy competition. I think Nest had/has similar culture, and they were kind of a spin off from Apple anyway (designer of the iPod or something like that?). Thermometers are not new, but they managed to clean it up a bit (I'd like to see the same happen to receivers, why is the UI so terrible for them still).

I suspect their design values will preclude them from ever making a phablet, and that there is a line in the sand beyond which a device is too large, and at that point they will try to figure out an alternative solution rather than boosting physical phone size, but I don't think the current 5/5s screen size is at that line yet.

m4tthumphrey• 12 years ago

Have you actually tried using a 5 inch phone? I think you may change your mind if you haven't. Trying to use someone's iPhone X after using my Nexus 5 is quite frankly laughable to say the least.

ctdonath3• 12 years ago

I have the iPhone as a phone. I make calls with it, keep it in my pocket, and other uses are secondary (albeit common). Insofar as it's uncomfortably small for some uses, that's why an iPad is usually in arm's reach. Sure, 5" is more usable for many applications than 4", but ~10" is much more so. Make the phone more than 4" and I'm apt to just not carry it, as it won't reasonably fit in my pocket and looks/feels like a wall held to my ear.

iPad + iPhone Nano = winning combination. If Apple makes a 6" iPhone, I'd sure hope they at least retain the 4" version, if not shrink & optimize for a much smaller version. I need a phone that excels at being a phone and integrates well into the iOS ecosystem; got my tablet for applications needing a more complex/larger interface.

tomkinstinch• 12 years ago

How does one use a 5-inch phone one-handed? My thumbs aren't large enough to hit the extremes of a 5-inch screen. (fully-grown American of European descent with a height exactly at the center of the bell curve)

wonderzombie• 12 years ago

I can barely use my Moto X one-handed (e.g. standing on a bus). I must be one of the only people on the planet who a) does this and/or b) does not have monstrously large hands. :P

bdcravens6• 12 years ago

I hear this alot, and I wonder: is that because I frequent developer forums, where the users are mostly male? I'm a guy, but have really tiny hands (smaller than my wife's, and most every girl I ever dated) I have an S3 (and S5 on order), and have had most iPhone models. The larger phones really are uncomfortable for me, but I suppose the same is true if you reverse it (smaller phones are uncomfortable for larger hands ... I heard the reason why Shaq sucked at the free throw line was because to him, shooting a basketball was like a normal person trying to shoot an orange)

mitchty2• 12 years ago

Yep, prefer the iphones smaller width to be honest. Not everyone has huge hands.

rdl• 12 years ago

The main use case for the bigger screen, that I've seen, is people watching video content. This is a very common use of the smartphone in places like Singapore. I was surprised how many people had smartphones and used them despite only having 3G service -- it's because they preload with video to watch on transit. I assume much of Asia is the same way.

piyush_soni2• 12 years ago

I don't think the experience of a 5 inch phone is better than a 4 inch phone.

Would you still say this when Apple launches a bigger phone? (Rumor has it that their next phone is going to be considerably bigger)

wuliwong• 12 years ago

While I disagree that screen size is all about marketing, I switched from a Galaxy Nexus (4.65") to the iPhone 5s and have found that the smaller screen hasn't bothered me at all. This was my biggest concern in switching and I am actually a little surprised that it hasn't bothered me. Generally, I always want bigger and bigger screens, I'm the guy that wants 3 27" monitors to work on, a 70" TV, etc., etc.

Tangential note: I recently switched from the Nexus 7 (2012) to the LG G-pad and the 1.3" bump in screen real estate has made a huge difference. I hardly ever used the N7, but I use the G-pad every day.

Iftheshoefits• 12 years ago

Every time I have purchased a smartphone in the last 5 years I have got one with a larger screen than the previous I owned. It is fantastic. Up to a certain limit (probably another quarter- to half-inch bigger than my Nexus), bigger is definitely better for me. And my wife. And basically everybody we know. That said, whether it's boring or not, Apple has a problem.

Apple has (almost) always been a marketing company. They appeal to and market a certain kind of culture, which they bundle with hardware and charge a kind of fee for "joining the club" in the form of a brand-based premium over similarly functional competitor devices' retail. That's just how they make their money. Show me an Apple product and I can almost guarantee there is an alternative that performs almost identically in every way, but is 50-95% of the cost of the Apple product.

Their "sexy" is all about marketing; not substance (although the latter is necessary to some minimum level of quality). I don't know if "boring" is the right term to use, but it's not unusual; companies try to differentiate their products from their competitors' with appearance and marketing all the time. What is unusual--as demonstrated by their enormous cash holdings--is how successful they have been at it. But the genius driving that success has passed away. They need to: a) find another Jobs-like genius; b) adapt to the market.

InclinedPlane• 12 years ago

You think that people want a device with nearly 50% more screen area because it's a "bigger number"? That's delusional.

It's 2013, most folks who are buying smartphones are not buying their first smartphone ever, they know what they want, many of them are fairly savvy at this point, and people want larger phones. I have a lot of friends who are extremely technically savvy and are not easily subject to marketing influence, they buy phones based on lots of research and recommendations from friends. Almost universally they are buying 4.7" screen phones, because there are many exemplary models in that form factor such as the HTC One or the Moto X which are excellent phones.

dclowd9901• 12 years ago

I agree 100%. Apple's biggest problem is they've ceased innovating. Was a flimsy fingerprint reader really supposed to be the killer app of the iPhone 5s? Jesus.

Here's a list of things that would blow everyone else away:

1) NFC realized from the ground up. It absolutely will be a must have in the very near future, and I won't be stuck with a phone that doesn't have it.

2) An enormous innovation in battery tech. I want you to figure out a way to make my battery last 2-4 days on a charge.

3) Some sort of major design innovation. Edge-to-edge screen? That would look incredible; so novel, it'd be impossible to ignore.

4) A software-level overhaul of what it means to have a device on you that is capable of being constantly connected to the internet. It can be an ecosystem (we already know apple is good at building those), or something similar, but the future is one where you don't have to check your phone for anything. It already knows.

That's all I can think of for the moment, but it's clear they need to prove something, and I think they're simply coming up short in that regard.

samelawrence2• 12 years ago

1) iBeacons

2) Yes, agreed, and I think they're working on this.

3) Edge to edge causes accidental taps for many users. They may or may not go this way.

4) Not sure what you mean here beyond things like push notifications. I would like more apps to advance-load data and predict my behavior, but I think a lot of this is already possible with background tasking. Not sure why this would have to occur at the OS level.

Touche2• 12 years ago

I agree 100%. Apple's biggest problem is they've ceased innovating. Was a flimsy fingerprint reader really supposed to be the killer app of the iPhone 5s? Jesus.

No, the problem is they are innovating around what will be in the new commercial. The truth is that smartphones are largely "done". Usually this is when Apple moves on to the next thing but unlike in the past there is no obvious new next thing to move into. Because of the success of the iPhone and to a lesser degree the iPad the expectation among shareholders is that the next thing has to be high-margin like those things are/were.

gress21• 12 years ago

Have you tried the fingerprint scanner? Why do you say it is 'flimsy'?

Tloewald• 12 years ago

I'm getting older and find I often need to take off my glasses (I'm short-sighted) to read my iPhone 5's screen. I would cheerfully pay $100 extra for an iPhone with a bigger screen.

My guess is Apple plans to deliver larger-screened iPhones, but they want to do it the right way, i.e. without causing fragmentation. My guess is simply scaling up the UI display without increasing resolution violates their sensibilities (not "retina" any more) so it's a question of getting ducks in a row (true scalable UI elements). Note that the iOS7 switch away from skeumorphism and bitmapped UI components does a lot to pave the path.

The idea that a small phone is just better for everyone is -- I think -- silly. Apple just won't release a half-assed product.

samelawrence2• 12 years ago

Larger screen !== larger text, necessarily.

wnevets13• 12 years ago

iphones feel like a child's toy in my hand. Thats pretty boring to me.

gress21• 12 years ago

Child's toys are usually large and chunky. I recommend not buying an android phone.

auggierose• 12 years ago

I've had only iPhones until this year, my only tablet is an iPad, I work on a Macbook Pro 17''. Last month, I got a Nexus 5, because the screen (4.95'', 1920x1080 pixels) is just so much better. I can read ebooks very comfortably on it, it totally replaces a Kindle for me. There are apps like Calibre Companion which I don't have on iOS, and there are no apps on iOS which I miss on Android (except my own :-)). Before I got the Nexus 5, I thought the iExperience is still too good on mobile to be matched. Now I think Apple should be very very VERY scared.

bane2• 12 years ago

The pros of a larger screen vastly outdo the cons. I can't even imagine the tiny screens I used to deal with, and my next phone, I'm definitely looking for something even larger.

It's madness that Apple doesn't offer two different phone sizes, the only rational I can come up with is that they blew their load convincing people that their size and form factor was the best best best.

gress21• 12 years ago

It could be some psychological mumbo-jumbo about blowing their load, or it could be that it is actually taking work to prepare the UI toolkit and manufacturing processes needed to make multiple sizes of iPhone.

revelation• 12 years ago

Presumably analysts and market researchers have done their work and due diligence and compressed their findings into this high-level presentation.

Only for you to dismiss it in infamous HN style, with a complete nonsensical "explanation" and appeal to some evasive magical quality. Jesus.

clarky076• 12 years ago

There are options between "huge phablet" and the current iPhone size. I've play with the HTC One for development, and while I like my iPhone 5S better, the size is nice. I wouldn't even consider getting a Note, but going from 4 to 4.3,4.7,and maybe even 5 could be nice.

Certainly there is a segment of the market that likes bigger phones, and I think Apple could capture a lot of that interest with something in the 4.7 range that doesn't sacrifice much of the usability that comes with a smaller phone. I also don't think it's unreasonable to offer 2 sizes, 1 for people with bigger hands. Not convinced they will do that though.

forgottenpass• 12 years ago

This strikes me as very boring, non-Apple style thinking.

That's because this is Apple's thinking. Not Apple's external messaging that carefully crafts a picture of how they "think."

I sincerely hope that Apple has not become a boring company.

Boring is just a matter of perception, I grew up exposed to Apple's branding and always thought they were boring. They're very much like a career-politician running as a "Washington outsider" but with more success selling it. Cultivating a family-friendly counter culture image was a smart response to the fact their primary competitor was the juggernaut of the day.

If they become "boring", it'll be because their customers perception of them as an underdog to Microsoft has finally worn off, and now they're recognized as top dog to Android. Not in market share but as a luxury brand. Now that I actually think about it, their messaging has been turning towards a "car manufacturer quite pleased with themselves" vibe...

badman_ting• 12 years ago

I guess Apple really is doomed! Based on these three pages of a document.

hit8run• 12 years ago

Authenticity? It's bullshit because Apple is successful because it doesn't follow every trend and it's not serving the low margin non premium segment.

DannyBee• 12 years ago

It's a court exhibit, filed in Apple v. Samsung. It shows up on the pacer docket. It's authentic (AFAICT), presumably part of discovery apple was required to turn over to samsung.

GVIrish• 12 years ago

I think this is a case of Apple's stubborness giving them a little bite in the ass. It took them a long time to come out with the iPad mini because they didn't believe in the inbetween tablet size, and now it's taken them far longer than it should've to come out with a bigger iPhone. Apple was late to the party with 4G as well.

I think once a bigger iPhone drops it will put a big gust of wind in their sails but I also think that Apple needs to be skating to where the puck will be if they want to keep their place as the premium manufacturer. If they're 2 or 3 years behind what Android (Samsung really) phones have the narrative that Samsung is more innovative is going to gain steam.

The other looming challenge for Apple is that software services are growing as a differentiator in phone ecosystems. Most of the Google services thoroughly outclass iCloud, meaning that iCloud doesn't give the Apple the competitive boost that it could.

dreamfactory28• 12 years ago

N.B. that the _smaller_ ipad was the untapped opportunity. Plenty of people choose the iphone precisely because it is smaller. If Apple want to find the undiscovered new market again, they should look at an iphone mini, not a me-too iphone maxi.

selectodude• 12 years ago

Apple was late to the party with 4G as well.

I remember the battery life being just awful on LTE phones until around the time the iPhone 5 came out.

onmydesk• 12 years ago

Its dated only a year ago.. Id have hoped they would have been working on this obvious problem for a lot longer

shawnc• 12 years ago

I remember when everyone was bagging on the iPhone for being 'so big'. "who is going to put that damn thing up to their face? They look hilarious! What is this, 1990?"

Really amazing how times change. I think it's because when the iPhone came out, no one could think of using their Phone for everything that they are now used for - so it just seemed like overkill. Now for a lot of people, it's their computer.

TheCoelacanth• 12 years ago

Maybe that should be taken as an indication that there isn't any one size that will suit everyone's needs. Some people want a phone that is larger than an iPhone and some people want one that is smaller than an iPhone. Those people are served well by other phone manufacturers who have a variety of sizes, but aren't well served by Apple who only makes one size of phone.

cooper12• 12 years ago

Apple makes their iphone screen that size because it is part of their tailored user experience (ie: you can reach each part of the phone with your thumb and developers can target that screen size) and because of uniformity (You know a case will fit and you know what to expect). If apple started making their phones larger it would disrupt that experience they built and would introduce fragmentation.

Apple does consider screen size though, thats why the ipad mini was released and the ipad itself was made even though Steve Jobs hated the idea of a tablet, so it's not entirely unplausable that they would release an iphablet alongside the next iphone, and as this document shows they are aware of the problem.

Apple has also considered the price aspect of the document too, with the iphone 5c, so time will tell what else they'll try.

reboog711• 12 years ago

I have no memory of that...

1ris• 12 years ago

That didn't happen in my world. The iPhone was always small. Even when it was new the competitors where bigger. The HD2 had a 4.7" display, the iphone had a 3.5". I got a Nexus One, with a sightly larger display and i considered it too small right from the beginning.

yalogin• 12 years ago

This is all over the internet today. Why is this a bad thing? Everyone knows the smartphone market is maturing (or matured) Samsung/Google has exhausted all its options (all screen sizes) where as Apple still has the bigger screen sizes to release. So we know Apple atleast one more product cycle to go through.

schuke• 12 years ago

I'm surprised keyboard size is mentioned only once so far. When I have to type Chinese a bigger screen is a lot more accurate. I switched to my current iPhone 5c from a Lumia 920. Typing Chinese has been a major setback for me. (Typing English is not that much different though)

ergest• 12 years ago

I wonder how a document that says "Highly Confidential - Attorneys' Eyes Only makes it into the wild.

Spooky23• 12 years ago

It was turned over during discovery and released with court documents in the Apple vs. Samsung litigation.

Internal Apple document: FY'14 Planning Offsite

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