Apple CEO Tim Cook’s most urgent task is not necessarily to roll out new products, with the iPhone 5 still ramping up, but to convince the market that ‘amazing’ launches are on the horizon. Faced by accusations that Apple has lost its design magic, he promised ‘several more game changers’ but, in his two years at the helm, he has not yet been able to talk about anything, in concrete terms, that might actually alleviate the current depression of Apple watchers.
In an on-stage interview at the All Things Digital conference in California this week, he said there were ‘incredible plans’ in the pipeline, echoing similar comments he made after Apple’s disappointing (by its own standards) quarterly results. Those were frustratingly vague, and few felt Cook had grasped back the innovation baton from Google, which has been stirring up a furore around Glass and Google Now.
Cook was a little more forthcoming this time, though the areas of interest he highlighted were predictable ‘ television and wearable computers such as watches.
‘What we have to do is focus on products,’ Cook said. ‘If we do that right, if we make great products that enrich people’s lives, then the other things will happen’ ‘ referring to the steady loss of stock value, and other problems such as allegations of creative tax practices and working conditions in suppliers’ factories.
He said wearable computing ‘could be a profound area’ and that the wrist was especially ‘interesting’, the strongest indicator yet that Apple will launch the much rumored ‘iWatch’ late this year or early in 2014. Analyst Kuo Mingchi of KGI Securities told Bloomberg: ‘Wearable devices would complete the Apple ecosystem, yet the technology is not yet mature enough.’
Predictably, Cook took a shot at another wearable innovation, Google Glass, which is gaining the kind of buzz usually experienced for Apple products. He said the eyewear could struggle for mass uptake because of their design, commenting: ‘People that do wear them generally want them to be light, to be unobtrusive.’
He also said Apple had a ‘grand vision’ for television, a market where it has struggled to succeed, though the Apple TV set-top box is starting to gain traction, and has sold more than 13m units so far, he said.
Cooks’s real problem is that Apple’s famous combination of complete official secrecy and skilful leaks has broken down amid disappointment with the less-than-radical nature of the recent iPhones. However, that is partly a reflection of the change in the company’s priorities. It used to focus on a relatively small elite of mobile users, wooing them with expensive and highly differentiated products that others would then emulate. Now it is chasing the mass market, which means lower prices and less freedom to be at the cutting edge, certainly in hardware terms.
All of which makes it vital that Apple reinvents its user experience this year, in order to seize back the initiative in software. It will preview the latest generation of the iOS platform at its annual worldwide developer conference, starting on June 10, but like Google at its recent I/O event, there are not expected to be any hardware products (except possible Macs) to generate the biggest headlines.
However, the firm is investing in amassing the skills to create a new-look software platform. It has made nine acquisitions so far in the current fiscal year, Cook said, and expects to make more, and many are thought to be in the web and user experience areas. ‘We’re not currently looking at a big one, but we’re not opposed to doing that if it makes sense,’ he said.
In hardware terms, it will continue to chase the lower end of the user spectrum, where most growth lies. Citi Research notes a ‘marked shift’ towards less expensive devices, and in a new research note, forecasts an even cheaper iPad Mini, priced below the current $329 model.
Analyst Glen Yeung wrote: “Supply chain checks by Citi’s Asia-Pac Technology Team suggest a mix shift surprisingly toward Apple’s older iPhone4/4S. With our expectation of a low- iPhone slated for September launch, followed by a sub-$250 iPad Mini, we expect this trend to persist.”
He refers to comments by Apple COO Peter Oppenheimer during the recent quarterly earnings call, when he said: “We are managing the business for the long term and are willing to trade off short term profits where we see long term potential.” The firm believes that, in the September quarter, low end iPhones will sell 15m units and iPhone 4/4S 10m, which will ‘meet or exceed’ the shipments of iPhone5S (10m) and iPhone5 (5m).
Meanwhile, Apple backers will be praying that there is more than Apple TV on center stage at WWDC. Cook seemed to be grasping at straws with his emphasis on this product during his conference session. He said the TV experience is not one that many people love and that it hadn’t changed much in the past 10 or even 20 years. This is hardly true – DVRs, over-the-top, tablet viewing, second screen data services, recommendation systems, integrated linear and VoD EPGs (electronic programming guides), apps on TVs ‘ it has been changing radically.
But for Apple to nail down sufficient content – ahead of its rivals but with no antitrust implications or illegal leverage of its devices or iTunes – is almost impossible. There will be a new and improved Apple TV, but it will not change the game for the company. This is a device which has sold 13m units, despite being attached to a massive brand and available globally. By contrast, Roku has managed 5m device shipments, even though it is only available in a tiny footprint, and has just a few million dollars of working capital and almost no exclusive arrangements.
And breathing down Apple’s neck this week is news that Samsung will even meet it in the US TV space. The Korean firm has asked for an FCC analog tuner waiver, for an as-yet unlaunched device – a box equipped with CableCARD, which can also support OTT subscription video services such as Netflix and Vudu. It is being dubbed the Smart Media Player and seems designed to make any TV smart. This is the kind of development which highlights how Apple has fallen onto the back foot in its key markets, and far from playing constant feature leapfrog with Samsung, it needs to break out of its current comfort zones and pull something dramatic out of the hat.