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Midnight Madness: Benjamins for iPhones in Manhattan
In New York this week for the NewTeeVee Pier Screenings, I was stranded without a crucial piece of Apple (AAPL) equipment and had to make an emergency run to the store tonight. I decided that with the time difference in my favor I’d go out and see my cousin’s friend’s band first, since she had told me the Fifth Avenue Apple Store is open 24 hours.
After cabbing over, I descended from the street, through the glass cube, and into the store shortly before 1 a.m. I was shocked to see that it was totally packed. I grabbed what I needed, got in line, and asked the guy in front of me what was going on at 1 a.m. on a Wednesday.”Oh, I’ve seen it this bad at 3 a.m.,” he replied. An Apple Store employee later said that it never, ever slows down. It took 15 minutes of waiting in line just to get to the counter.
So what is every in such a rush to buy in the middle of the night? iPhones. Five at a time. I started looking around and realized everyone else in line was clutching stacks of twenties. The guy in front of me had hundreds. “Where do you sell these?” I wanted to know. “Europe,” he said.
“But isn’t it incredibly expensive to use them there?” I asked. “Yeah, the data fees are crazy. But people still want to buy them, so that’s not my problem,” he replied. I asked the clerk who helped me if he had any idea how much money the store pulls in each night. He said he had no idea.
Maybe buying a phone at midnight and carrying fistfuls of cash around is just something busy, crazy New Yorkers do — who am I to judge!? However the experience made it clear to me that three months after the iPhone went on sale, things like unlocking, slow data rates, and high-ticket prices have yet to knock sense into people’s heads. The iPhone phenomenon is far from losing steam.
Photo #1:The checkout line snakes around as we wait to give Apple money.
Photo #2: A security guard stands watch over the Apple Store Fifth Avenue entrance.
Jobs’ Mea Culpa is Apple’s Victory
Steve Jobs is sorry. He wants to give you $100 back for what you paid when you bought your iPhone too early. Provided, of course, you spend that $100 in one of his stores.
I disagree with Om on this. I get this feeling that this is exactly what Steve Jobs had planned all along? The chances are high that that extra $100 you would have saved, had the iPhone been appropriately priced to begin with, would have been spent outside an Apple (AAPL) store. Now it’s staying in Apple’s coffers. And Steve Jobs looks like a caring, responsive CEO who didn’t mean to hurt anyone’s feelings.
So Apple wins again. Forget the news stories that say Apple cut its price because sales were sluggish. On Tuesday, iSuppli, a research firm, said nearly one in 50 mobile phones sold in the U.S. was an iPhone, and that Apple was on track to sell 4.5 million iPhones this year. Today, iSuppli reiterated that view:
The iPhone outsold all competing smart-phone and feature-phone models in the United States in July on an individual basis. iSuppli�s teardown research indicates that Apple was generating a robust hardware margin at its previous pricing, and will still be profitable at the new pricing.
I suspect the money Apple makes off the iPhone will be a wash: What it loses in the new discount it will easily make up in holiday-season volume. And it will end the year with an even higher market share in handsets.
But what about Apple’s stock? It fell to $132.93 this morning from a high of $145.73 Tuesday, a drop of nearly 9%. Again, the press has been quick to assert that Wall Street was disappointed with Jobs’ announcements yesterday, particularly the iPhone price cut. But look at the 5-day chart, and it’s clear that Apple is actually up. It was a classic case of buying the pre-announcement hype and selling on the news. It may even offer a last-chance to buy in at this level.
Over at Barron’s Tech Trader Daily, there is a nice summary of analyst’s preliminary reactions to the iPhone news. Bottom line, analysts were taken aback by the timing and the degree of the iPhone discount, but overall they remained “fairly enthusiastic” and few dared to lower their ratings or price targets.
Apple does not take pride in disappointing investors, and it may be that this iPhone discount, coming sooner rather than later, is a way of signaling that iPhone sales have been strong enough that it can lower prices without missing targets.
Seagate Sees Future in Application-Specific Drives
The hard disk drive is the Rodney Dangerfield of the technology industry: can’t get no respect. Despite being the key ingredient of everything from fat iPods to notebook computers and digital video recorders, the HDD business is treated with faint disdain.
Bill Watkins, the colorful and plain-talking chief executive office of Scotts Valley, Calif.-based Seagate Technology (SEG) knows it all too well, and is doing his best to overcome the commodity challenge. As a guest of the debut episode of The GigaOM Show he lamented the kamikaze tactics of his overseas rivals and lack of profits in the business.
He acknowledged that everyone could learn from Apple (AAPL) and offer a better user experience as a differentiator for the commodity technology products. The next time I saw him, he was busy showing off his company’s efforts at a recent meet-and-greet event for the media. Seagate is launching a major refresh of its consumer disk drives (some up to a terabyte (TB) in capacity). including a 60 GB drive for the D.A.V.E. (Digital Audio Video Experience) technology platform.
D.A.V.E is supposed to work in tandem with mobile devices via Bluetooth or WiFi giving additional capacity to everything from mobile phones, video cameras and even portable media players. Watkins argues this new platform will allow mobile devices to get capacity at an affordable price point.
However, the most exciting aspect of the new technology refresh launched by Seagate are two drives: one designed specifically for digital video recorders and another for surveillance gear. “Most people confuse that drive is a drive,” said Watkins. “But the environments they work in are different.”
This is an opportunity for Seagate, he claims, because they can optimize the software (inside the drives), and tweak the drive components to meet “application-specific needs.” DVR drives, for instance, need to be quiet and have to be able to perform in an environment where the system is giving off a lot of heat. The surveillance specific drives, Watkins points out, have different needs, such as ability to handle multiple video streams and high capacities.
Over next few years, he believes that the disk drive industry is going to have to get more specific in how it puts together drives. Seagate is committing a lot of R&D dollars towards this end, and has built up an army of software coders whose job is to optimize the firmware software inside the drives to meet specific demands of a device or an application.
With the volumes of digital devices - DVRs and media centers, for example - hitting millions, it is now economically viable for Seagate (and others) to do semi-bespoke drives. And maybe that is what it would take for the industry to get some respect.
What Seagate Announced: * Maxtor OneTouch family of drives get a new look. * The first 1TB desktop PC hard drive with hardware based full-disc encryption (FDE) * Seagate D.A.V.E.™ technology platform with up to 60GB of wireless storage * 250GB 2.5-inch notebook hard drive for rugged mobile computing * 1TB hard drive for High Definition DVRs and home media centers * 1TB hard drive for surveillance DVRs, and * A 450GB 15K-rpm Enterprise drive
PC Maker Gateway Sold For $710 Million To Acer
Taiwan-based Acer has acquired the once high-flying Gateway Computer for a mere $710 million, in what could be the last significant deal in the PC hardware business, reports the Wall Street Journal. Acer also acquired the parent of Packard Bell, thereby becoming the third-largest PC maker in the world, after Dell and Hewlett Packard.
The $710 million price tag is quite a comedown from the mid-1990s, when Gateway and Dell (DELL) were spoken of in the same breath and commanded mega-billion dollars in market capitalization. Gateway was one of the companies I covered back in the day, but then slowly lost interest in as the company floundered.
Over the years, a lack of focus and ill-thought forays into consumer electronics turned the company of cow spots into a cow patch. Dell was focused on squeezing efficiencies out of its supply chain and selling to the corporations, while Gateway’s management took a scattershot approach — they did everything and were never good at anything in particular.
They opened retail stores, tried to sell to businesses, and then when low-cost PCs took off, they bought eMachines. No focus! In comparison, post-Carly Fiorina, Hewlett-Packard (HPQ) overcame a poor start, developed a coherent strategy around printers and digital media, has slowly seen its market share climb and is now neck-to-neck with Dell.
Apple (AAPL), HP and Dell are the only three U.S. majors left standing after the Acer acquisition, each with its unique expertise (and thus the ability) to play in the highly commoditized PC market place. IBM (IBM) got out while the going was good and sold its PC-business to China-based Lenovo. Apple has its own cult of users, H-P (digital media) and Dell (corporate buyers.)
Gateway founder Ted Waitt left the company in 2005 after attempting a turnaround that failed. He’s currently chairman of the Waitt Family Foundation, which funds Waitt Institute for Discovery and Waitt Institute for Violence Prevention. He has also set up Avalon Capital Group, a private investment company.