Holiday today - no new hints until Monday
Macworld is closed today in observance of the Fourth of July holiday in the United States. The hints will return as usual on Monday morning. For those in the USA, enjoy the long weekend! -rob.
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Reminder: No new hints Monday
Monday is the Labor Day holiday in the USA -- so I have the day off, which I'll spend not laboring on hints :). If you have the day off as well, enjoy the long weekend with friends and family. We'll be back as usual on Tuesday morning.-rob.
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Hints holiday hiatus...
Happy holidays!The macosxhints.com crew -- OK, so that's just me, myself, and I -- are taking today and tomorrow off to spend the holidays with family and friends. New hints will return on Wednesday, and in case you didn't stop by this weekend, here's what you missed -- the final batch of entries in the 10.5 best hints contest, including a pretty cool one that enables Data Detectors in iChat. Next week, the finalists will go online for voting, with the winner to be decided based on your votes and those of the Macworld editors.I hope everyone has a wonderful Christmas / holiday season, and we'll be back to hints as usual in a couple of days.-rob.
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Hints on holiday...
Today is Labor Day in the United States, so no new hints. I'd tell you I'll be off enjoying the day with friends and family, but the reality is that I'm still trying to get over a nasty little cold/flu bug that our kids seem to have brought home on Friday. :(We'll be back as usual tomorrow.-rob.
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Wall Street Breakfast: Must-Know News
TI dips on weak guidance. Texas Instruments (TXN) reported in line Q1 EPS of $0.43 on revenue of $3.27B (+2.5%, in-line). TI's Q2 revenue forecast ($3.24-3.5B) fell short of analyst estimates ($3.44B). Anticipated Q2 EPS is even weaker: $0.42-0.48 vs. $0.51 consensus. "Given uncertainty in the near-term economy, we have become more conservative with our outlook for the second quarter," CEO Rich Templeton said. In that light, and given that shares gained 3.3% in regular trading Monday, a 2.5% drop in extended trading is hardly a selloff -- perhaps a testimony to TI's long-term growth potential. Citi turns to HP; selling $6B in hybrids. In a novel move to defend its controversial business model, Citigroup (C) is asking Hewlett-Packard (HPQ) for advice on both IT issues and general strategy. Sources say Citi execs want to know how HP managed to overcome investor pressure to spin off its computer business, similar to the present calls for Citi to split its wholesale and retail banking units. Meanwhile, Citi is bolstering its balance sheet by selling $6B of hybrid bonds at 8.4% for 10 years, after it posted writedowns of almost $16B last week. Hybrid bonds allow banks to bring on cash with deferred interest payments, while the bulk of the offering is considered equity by credit-raters. "It's a way of not upsetting the apple cart," portfolio manager Bill Larkin said. "They don't want to dilute shares, and they don't want to issue more debt." RBS: Big writedown, big share sale. Royal Bank of Scotland (RBS), #2 UK lender, is selling £12B ($23.7B) in shares to reinforce its capital. It announced £5.9B in asset markdowns, and said it will cut its 2008 dividend. RBS said its 2008 outlook is still "inevitably clouded" by U.S. subprime fallout, not to mention its $22.7B spend on ABN Amro, which now seems impossibly expensive. RBS has lost almost half its market value; shares were down 5% in London. "I can well understand this is not easy for shareholders. It is not easy for me," CEO Fred Goodwin said. He told journalists he would consider selling the firm's insurance unit, but not ats "fire sale" prices. Netflix plunges on weak outlook. Netflix (NFLX) posted in-line EPS and revenue of $0.21 and $326M. For Q2, it sees EPS of $0.33-0.42 (consensus: $0.39). Netflix lowered its full-year guidance to $1.16-1.29 from $1.18-1.30 (consensus: $1.25). On its conference call, NFLX said that the numbers assume its market continues to grow. Investors were spooked: shares fell 13.5% in AH trading. Gross margin (31.7%) was down 2.1% sequentially and 4.4% from a year ago. Churn rate dropped to 3.9% from 4.4%. Netflix shares were up almost 50% YTD on reduced competition from Blockbuster (BBI), which turned its focus back to in-store rentals, and is now bidding for brick-and-mortar retailer Circuit City (CC). The wildcard is how emerging online video offerings from Apple (AAPL) and Amazon.com (AMZN) will affect its sales. CIT to squeeze $1B from stock sale. Commercial lender CIT Group (CIT) will raise $1B in a stock offering, as it tries to escape a liquidity crisis. It will use the proceeds for general corporate purposes; to pay a dividend; and to meet debt payments. Unfortunately, CIT already cut its dividend by 60%. It also sold $5B in assets and drew down $7.3B of its emergency credit lines. Shares fell 13.7% in AH trading. Intrepid Potash's intrepid IPO. Fertilizer producer Intrepid Potash (IPI) priced its 30M share IPO at $32 ($960M) -- $3 better than the top range of the $27-29/share forecast (which was originally 24M shares at $24-26). Underwriters including Goldman Sachs (GS), Merrill (MER), Morgan Stanley (MS) can purchase another 4.5M shares. Intrepid accounts for about 1.5% of global potash production. Some have compared its IPO to that of Google (GOOG) and Visa (V). CME beats on large volume jump. CME Group's (CME) Q1 EPS of $4.67 were just short of analyst estimates ($4.80). Revenue of $625M (+25.5% adjusted for CBOT acquisition) was in line. Volume grew a robust 32% during the quarter amid broad strength. "This performance illustrates the benefits of the exchange model for managing risks in diverse global markets," CEO Terry Duffy said. DuPont beats; guides in line. DuPont (DD) reported Q1 EPS of $1.31, $0.05 better than consensus. Revenue of $8.57B (+9.3%) was in line. For Q2, DuPont sees EPS of $1.05 (consensus: $1.08). For 2008, sees EPS of $3.40-3.55 (consensus: $3.48). "Our investments in agriculture and emerging markets enabled us to capitalize on robust growth in those areas which, when combined with gains from our productivity improvement programs, more than offset higher ingredient costs and weakness in certain U.S. markets," CEO Charles Holiday said. Baker Hughes beats by penny. Oilfield servicer Baker Hughes's (BHI) Q1 EPS of $1.21 was slightly better than analyst estimates ($1.20). Revenue of $2.67B (+8%) was in line. "Results from North America were better than expected," CEO Chad Deaton said. "Improving fundamentals for natural gas reflected in lower storage levels, higher natural gas prices, increased oil-directed drilling, and announcements by E&P operators of spending increases support higher drilling activity and additional opportunities for Baker Hughes in North America in the second half of 2008." Oil-services provider Smith International (SII) posted in-line EPS of $0.87 on in-line revenue of $2.37B (+12.5%). Slick quarter for EnCana. EnCana (ECA) beat Q1 EPS estimates of $1.28 by $0.11. Revenue of $5.34B (+20.4%) were better than $4.9B consensus. Free cash flow rose to $540M from $271M. AU Optronics shines. Liquid panel developer AU Optronics (AUO) smashed Q1 EPS estimates: $1.12/share vs. $0.48 consensus. Revenue of $4.5B (+85%) was better than consensus estimates of $4.24B. For Q2, AUO expects PC LCD shipments to fare better than TV panels. The firm said it will build a new factory. "In my crystal ball, I'd say visibility of the LCD industry is clear because it's a growing market," Taiwan asset manager Kevin Yang said. "TV is a very promising sector and the pie is getting bigger and bigger." UnitedHealth drops outlook. UnitedHealth Group (UNH) posted Q1 EPS of $0.78, $0.02 short of consensus estimates. Revenue of $20.3B (+6.6%) beat consensus of $19.88B. UNH lowered its full-year guidance to $3.55-3.60 from $3.95-4.00 (consensus: $3.87). "These financial results are not acceptable for a company with our capabilities and potential. They are due in part to broader economic challenges and in part to our own performance. We are adjusting our approaches, in particular to strengthen organic growth and address operating costs, to deliver financial performance that more appropriately represents the capacity and potential of our organization," CEO Stephen Hemsley said. Shareholders are unlikely to be appeased. SunTrust sees cloudy future. SunTrust Banks' (STI) Q1 EPS of $0.81 were $0.21 short of analyst estimates. Revenue of $2.3B (+22.9%) beat consensus of $2.13B. SunTrust increased its loan-loss provision to $560M (1.25%) due to the deterioration of residential real-estate markets. "The backdrop of emerging recession fears clouds the near-term outlook," CEO James Wells said, adding, "SunTrust is financially strong, with ample liquidity, adequate capital, and a solid balance sheet." Cash infusion socks NatCity. National City (NCC) agreed to sell a $7B stake to a private-equity group led by Corsair Capital at a 40% discount, sending shares plummeting 28% to $6.03. Shares are down 84% over the past 12 months. KBW analyst Melissa Roberts thinks banks will still seek to raise another $12.4B, adding to the $163B they've already sought since July (not sure if she's including Citi's $6B hybrid offering). "There's an appetite out there for risk, but at a price," RBC analyst Jason Arnold said. Oil price keeps gushing. Oil posted new highs of $117+ a barrel amid a falling dollar and attacks on Nigerian pipelines owned by Royal Dutch Shell (RDS.A). "We are clearly headed over $120 a barrel and we are targeting $125," said MF Global's John Kilduff. "The last thing we need is another supply disruption. The outage certainly adds to the bullish sentiment." Lexmark beats; guidance midpoint is low. Lexmark (LXK) posted Q1 EPS of $1.16, $0.26 better than the consensus. Revenue of $1.18B (-6.8%) was in line. For Q2, Lexmark sees EPS of $0.65-0.75 vs. $0.73 consensus. WSJ loses managing editor. WSJ managing editor Marcus Brauchli is expected to resign as early as today after just 11 months; publisher Robert Thompson may take over for now. The separation is said to be "amicable" and Brauchli is expected to stay on with WSJ parent News Corp. (NWS). Sources say that Brauchli tried (unsuccessfully?) to find a middle-road between the Journal's traditionalists and Rupert Murdoch's new vision for the paper. Separately, sources say Murdoch has all but sealed a deal to buy Tribune's Newsday (excluding its real-estate) for about $580M. Murdoch is thought to see Newsday as the solution to the New York Post's lack of profitability. Today's Markets Markets in Asia were mixed Tuesday. Nikkei -1.09% to 13,548. Hang Seng +0.88% to 24,939. Shanghai +0.99% to 3,148. BSE Sensex +0.27% to 16,784. In Europe, markets are essentially flat at midday. FTSE flat at 6,053. CAC +0.22% to 4,921. DAX +0.13% to 6,794. U.S. futures are also flat at 7:15 AM. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
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WOW! Apple posts record earnings
Back in the day, Apple would report poor earnings on a Friday after the market closed (so people might forget about it over the weekend) and good earnings on a Thursday. And when they announced today, a Monday, people expected big news. But not this big! Apple generated $24 Billion dollars in revenue in FY07 (their first fiscal qtr is the holiday qtr) and shipped more than 2 million Macs, 10 million iPods, and 1 million iPhones. Analysts expected profit of around $0.67 per diluted share: Apple reported more than $1 per share - above even the highest expectations. Apple's after hours stock price hit another all-time high of over $184 per share. This performance, coming off a great Back To School season, and reports of huge market share gains may be just the beginning. Now that the holiday season is here, can we expect even bigger things from Steve and Co?
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1 Million iPhones: Why Today?
When Steve Jobs said last Wednesday that Apple (AAPL) was on track to sell 1 million iPhones by the end of Apple's fourth quarter, 25 days away, he probably had a pretty good idea how many units the company had already sold. But he waited until today to announce some big news on that front. "One million iPhones in 74 days -- it took almost two years to achieve this milestone with iPod," said Steve Jobs, Apple's CEO. "We can't wait to get this revolutionary product into the hands of even more customers this holiday sea- son." (link) Hmm. Color me cynical. It's possible that the price cut Jobs sprang on us on Wednesday boosted sales just enough in the four days afterward to put the iPhone over the 1 million mark on Sunday. It's also possible that the timing of today's announcement was a decision driven less by sales figures than by public relations. Why bury a piece of news like this in an event crafted to spotlight the new iPod line when you can save it for just before the stock market opens on Monday, when it will make a much bigger splash.
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★ The Phone Company
For a long time — the entire decade of the ’90s and the first few years of this decade — the story of Apple was the story of a company searching for a way to be something other than “the Mac company”. From a financial perspective of revenue and profit, the Mac was Apple, and Apple was the Mac. This was problematic on two fronts. First, it was an “all of their eggs in one basket” scenario. If the Mac had sunk, the company would have gone under. Second, the potential for growth was severely limited by the fantastic success of Windows. The iPod was Apple’s first breakthrough success after the Macintosh. During some quarters in recent years, iPod revenue has run even with or (in holiday quarters) exceeded Mac revenue. The iPod solved both of the problems Apple faced as “the Mac company”: its eggs were now divided between two baskets, and they’d entered a field with room for significant growth. Last year, immediately after its debut, Steve Jobs began describing the iPhone as the third leg of the company. The numbers Apple released yesterday for its fourth quarter of financial year 2008 (July through September) back this up. The main thing you must keep in mind regarding Apple’s reported numbers for the iPhone is that they’re using subscription-based accounting for it. When you buy a Mac or an iPod today, Apple reports the entire sale as revenue for this quarter. When you buy an iPhone today, however, Apple reports the revenue split evenly over eight quarters. Apple’s interpretation of U.S. accounting regulations is that this is only way they can provide free feature upgrades over the course of two years. That’s why iPhone OS 2.0 was a free update for existing iPhone owners, but a paid update for iPod Touch owners. In the long run, Apple doesn’t make any more or less money from this. It’s just a method of accounting for the money they have made. (Indirectly, Apple clearly hopes that it helps sell additional iPhones, on the grounds that people enjoy getting “free” OS upgrades.) But in the short run, Apple’s iPhone revenue and profit are underrepresented in the company’s quarterly results — only one-eighth of the revenue from iPhones sold during the just-completed quarter appear in the quarter’s results. It also makes the iPhone numbers hard to compare against those of the Mac and iPod. So, Apple is now providing two sets of quarterly numbers. First, GAAP results with subscription-based accounting for iPhones and Apple TV. (GAAP stands for Generally Accepted Accounting Principles.) Second, a new set up numbers — non-GAAP results — which, more or less, show what Apple’s quarterly numbers would look like if they weren’t using subscription-based accounting for the iPhone and Apple TV. Here’s what Apple CFO Peter Oppenheimer said during his opening remarks of yesterday’s analyst conference call: As we reported in our press release, iPhone unit sales grew significantly in the September quarter, resulting in a material increase in the amount of iPhone revenue and product costs that had been deferred for recognition in future periods. Specifically, deferred revenue from iPhone and Apple TV sales grew to $5.8 billion at the end of the September quarter, an increase of nearly $3.8 billion from the end of the June quarter. If iPhone revenue was not deferred, iPhone would have represented 39% of Apple’s revenue in the September quarter. This means, I think, that Apple generated more revenue last quarter from iPhone sales than from either Mac or iPod sales. The iPhone, just 15 months old, is perhaps already the strongest of the company’s three legs. And it’s not like iPod or Mac sales are down — compared to the year-ago quarter, Mac sales are up 21 percent in terms of units and 17 percent in terms of revenue, and iPods are up 8 percent in units and 3 percent in revenue. And in terms of the momentum of the iPhone OS as a platform, keep in mind that the iPod Touch is put on the books as an iPod, not an iPhone. (And Apple does not break those “iPod” numbers out into specific models; no one other than Apple’s top executives know exactly how many iPod Touches have been sold.) Steve Jobs rarely appears on Apple’s quarterly analyst calls. I’m pretty you can count on one hand Jobs’s appearances on these calls over the last 10 years. Typically, Jobs has appeared when Apple has bad news to announce. (His appearance yesterday seems to have been about addressing Apple’s plans for weathering the current worldwide economic downturn.) Here’s what Jobs had to say in his prepared remarks regarding Apple’s revenue and profit from the iPhone: As you can see, the non-GAAP financial results are truly stunning. By eliminating subscription accounting, adjusted sales for the quarter were $11.68 billion, 48% higher than the reported revenue of $7.9 billion, while adjusted income was $2.44 billion, 115% higher than the reported net income of $1.14 billion. Adjusted net income that is more than double our reported income — if this isn’t stunning, I don’t know what is, all due to the incredible success of the iPhone 3G. I would like to now highlight two remarkable milestones resulting from iPhone’s outstanding performance last quarter. The first is that Apple beat RIM. In their most recent quarter, Research in Motion, or RIM, reported selling 6.1 million BlackBerry devices. Compared to our most recent quarter sales of 6.9 million iPhones, Apple outsold RIM last quarter and this is a milestone for us. RIM is a good company that makes good products and so it is surprising that after only 15 months in the market, we could outsell them in any quarter. But even more remarkable is this — measured by revenues, Apple has become the world’s third-largest mobile phone supplier. I know this sounds crazy, but it’s true — as measured in revenues, not units, Apple has become the third largest mobile phone supplier. Let’s look at the ranking — Nokia is clearly number one at 12.7 billion; Samsung number two at 5.9 billion; Apple is number three at 4.6 billion; Sony Ericsson, number four at 4.2; LG, number five at 3.4 billion; Motorola, number six at 3.2; and RIM number seven at 2.1. Pretty amazing. So, last quarter: (1) the iPhone was a bigger revenue and profit generator than either the iPod or Mac; (2) Apple sold more iPhones than RIM sold BlackBerrys; and (3) Apple trailed only Nokia and Samsung in worldwide mobile phone handset revenue (and they’re not far behind Samsung). Jobs followed with this caveat: Now, both of these things, beating RIM in units and becoming the third largest mobile supplier in revenues are amazing feats but part of this was the result of expanding into over 50 countries and there’s no guarantee that sustained sales will equal initial sales. And who knows what the future results will be, given the worldwide economic slowdown but we actually outsold RIM last quarter and ranked as the third largest mobile phone supplier in revenues. Not bad for being in the market for only 15 months. He’s right that no one knows what the results will be for the current quarter (which start three weeks ago, and runs through the end of December) — but we can make an educated guess. Because it encompasses the entire holiday season, Apple’s October-December quarter has always been the strongest for iPod sales. A year ago, iPod sales went from 10.2 to 22.1 million from Q4 (Jul.–Sep.) to Q1 (Oct.–Dec.). Two years ago, they went from 8.7 to 21.0 million. Three years ago, 6.5 to 14.0 million. In terms of a multiplier, that works out to 2.17, 2.41, and 2.15, respectively. I.e., Apple consistently sells a little more than twice as many iPods in the holiday quarter than in the preceding quarter. We only have one year of data for the iPhone. Last year, Apple sold 1.1 million iPhones in Q4 2007. It went on to sell 2.3 million iPhones in Q1 2008 — a multiplier of 2.09, very much in line with previous years of holiday-quarter iPod sales. So, it seems quite possible that Apple could sell twice as many iPhones during the current quarter as it did in the just-reported quarter. If they did, that would be 13.8 million iPhones. Even if they fall short of that mark, they seem poised to sell about 20 million iPhones in calendar year 2008 — more than double their oft-stated goal of 10 million. Many analysts doubted that 10 million iPhone goal for the year; Apple might in fact sell 10 million iPhones in a single quarter. Even if sales are flat in the current quarter, it seems almost certain they’ll sell more than 10 million units in the first six months after the iPhone 3G went on sale. As for where this growth positions the iPhone industry-wide, recall Microsoft’s projections for Windows Mobile licenses this year: The warning signs were there. After boldly proclaiming that it would sell “more than” 20 million licenses to its Windows Mobile operating system by the end of its fiscal year on June 30, Microsoft later scaled that prediction back to “nearly” 20 million units. This week, however, the software giant conceded it did not hit its target: The company sold just 18 million units in the fiscal year. So not only is Windows Mobile growth significantly slower than what Microsoft had publicly anticipated, but the iPhone seems set to surpass unit sales of all Windows Mobile phones combined next year. In fact, given that Apple acknowledged during yesterday’s conference call that, including October sales to date, they’ve already surpassed 10 million iPhones sold for calendar year 2008, the iPhone may well already be outselling all Windows Mobile phones combined. The entire iPhone platform is only 15 months old. The cheapest model still costs $199. The room for growth in this market is unlike anything Apple has ever seen. So the question is: Despite continuing strong iPod sales and record-breaking Mac sales, how long until the iPhone is undeniably the primary product and platform made by Apple? My answer: Not long. And I think Apple’s executive team sees it the same way.
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Microsoft's Mojave Attempts to Wet Vista's Desert
Daniel Eran Dilger Nearly two years after Windows Vista was finally released, Microsoft has remained unable to shake off its reputation as being slow, incompatible with existing hardware and software, and generally a poor and overpriced product that nobody wants. Microsoft is now trying to reverse Vista's bad reputation by insisting that the software's problems are not technical but rather just the fault of ignorant customers duped in part by Apple's “Get a Mac” campaign. What's Vista's real problems, and will Microsoft's “Mojave Experiment” help solve them? Blame Apple! Microsoft CEO Steve Ballmer has joined Windows Enthusiast pundits in theorizing that Vista's image problems are primarily the result of Apple's advertisements that regularly poke fun at the problems in Vista. The company has now taken aim at shooting at the messenger with a $300 million ad campaign. In July, Brad Brooks, Microsoft's VP of Windows Vista consumer marketing, addressed the company's business partners at its Worldwide Partner Conference, saying, “We've got a pretty noisy competitor out there. You know it. I know it. It's caused some impact. We're going to start countering it. They tell us it's the iWay or the highway. We think that's a sad message.” Another sad message Brooks had to deliver was that Vista's problems aren't really the fault of Apple. “We broke a lot of things,” Brooks admitted. “We know that, and we know it caused you a lot of pain. It got customers thinking, hey, is Windows Vista a generation we want to get invested in?” Vista: Pay it Forward! Brooks also noted that “Windows Vista is an investment in the long term. When you make the investment into Windows Vista, it's going to pay it forward into the operating system we call Windows 7.” Pay it forward? Is Windows 7 going to be a free upgrade to Windows Vista users, in the same way Apple is expected to offer the next Mac OS X 10.6 Snow Leopard release to existing users of 10.5 Leopard? That's highly unlikely, as Microsoft can't sustain its egregious profits collected through the Windows monopoly by giving away updates for free. Windows Vista raised the price of Windows, putting a new definition on the phrase “pay it forward.” Myths of Snow Leopard 7: Free?! Microsoft Admits Windows Vista Mistakes, Criticizes Apple Ads - InformationWeek Reality Impairment at Microsoft Talking out one's ass appears to be a job requirement for all Microsoft executives, starting at the top. A serious case of reality impairment has resulted in the paradox of the company both admitting that Vista is flawed and “broke a lot of things,” while at the same time maintaining that Vista's reputation is entirely the fault of stupid customers and a comically unflattering portrayal by its competitor. In the “Mojave Experiment,” Microsoft plans to dispel the notion that Windows Vista is problematic and incompatible by publishing a series of videotaped interviews with users who arrived with negative impressions of Vista and left excited about the new operating system. This was achieved by presenting the users with a demonstration of “Mojave,” a new operating system that Microsoft later revealed to be Vista, much to the surprise of the interviewed users who'd heard so many bad things about it. However, the Mojave Experiment is so full of false information and saccharine gloss that it couldn't possibly appeal to anyone smart enough to turn on a PC. Even setting aside the fact that the ad experiment basically seeks to blame users for being dumb, the attempt by Microsoft to paint over Vista's problems is transparent and flawed, for a number of reasons. What's wrong with Mojave. Microsoft can't seem to decide whether it wants to admit that Vista has problems or not, and its waffling back and forth just makes the company look increasingly disingenuous. Is Vista a poorly launched, flawed product that the company is working to fix as quickly as possible, or is it awesome and wildly successful and just the victim of bad press? Microsoft tries to tell both stories at once, which is purely dishonest. In contrast, Apple said from the start last year that its Apple TV product was a “hobby” attempting to break into a difficult market. Critics lambasted it for not immediately taking over the market like the iPod had or iPhone later did. Apple's more recent problems in launching MobileMe were quickly noted by the company along with the intent to address complaints about it rapidly. Microsoft isn't alone in being able to stumble, but its complete lack of candor makes it hard to understand if the company realizes that it even has problems to solve. With Vista, Microsoft has issued a flurry of giddy press releases claiming widespread adoption based on the number of licenses sold and naming it “the fastest selling operating system in Microsoft history,” ignoring the fact that Windows sales are increasing simply because they are tied to PC sales. Microsoft has no competition in the PC operating system market due to its monopoly position, so it could release Windows Wet Toast and still sell it faster than XP and ME and 98 Special Edition and every other version of Windows in the past that was tied to an increasingly younger and smaller hardware market. Vista Sales to Non-Users. Many of Vista's “sales” were free vouchers distributed with PCs sold in the holiday season prior to its launch. Even more than a year and a half later, PC makers continue to put Windows XP on their systems, even those sold with a Vista license, while corporate users almost always remove the default Vista to install an earlier version of Windows. There's also a busy third party industry developing around removing Vista for consumers. In late July APCMag cited Jane Bradburn, a manager for commercial notebook sales at HP, as saying, “From the 30th of June, we have no longer been able to ship a PC with a XP license. However, what we have been able to do with Microsoft is ship PCs with a Vista Business licence but with XP pre-loaded. That is still the majority of business computers we are selling today.” The arrangement is supposed to end by January 2009, but HP is trying to extend the deadline because customers simply don't want Vista installed. EWeek also noted that between April 2007 and May 2008, its survey of business users indicated that Vista climbed from 2% to 5%, but that Windows XP jumped from 74% to 83%, three times the adoption of Vista. That growth came from migration from older versions of Windows. Even in its wildest projections, EWeek says Vista will only reach 28% adoption in businesses by the end of 2010. CNET reported that a Jully 2008 survey by systems management appliance company KASE found that 60% of companies surveyed have no plans to deploy Windows Vista, a ten percent increase in disinterest from late 2007. A full 42% were actively exploring Vista alternatives, and 11% had already made the switch to Mac OS X or Linux. Microsoft is simply lying about the level of Vista excitement, and it's gotten too obvious for the company to continue to do so. XP still killing Vista in sales volume: HP 60 percent skipping Vista, so Ballmer looks to Apple | The Open Road The Truth Is… oh Look a Distraction! At the same time, Microsoft notes on its Vista website “we know a few of you were disappointed by your early encounter. Printers didn't work. Games felt sluggish. You told us—loudly at times—that the latest Windows wasn't always living up to your high expectations for a Microsoft product.” That's some brutal honesty for a company with a knack for spinning wild fantasies about fictitious product enthusiasm for a product never actually put to use in many cases. At the same time however, in trying to refute away Vista's real problems, Microsoft uses a variety of tactics that just return to blind fantasyland. Microsoft is a Marketing Company, not a Tech Company. The company plays its Mojave Experiment hand on a new website, incidentally designed using Adobe Flash rather than the company's own Silverlight. Despite the site's oddly designed, usability-impared interface, it's still possible to pull out lots of details from the experiment that say as much about Microsoft's crafty, misleading marketing as they do about its technical problems, underling the simple fact that Microsoft is first and foremost a marketing company that flogs third rate technology products. Mojave took 140 people and asked them to score Windows Vista. The average response was 4.4. After demonstrating Vista SP2 under the name “Mojave,” respondents ranked Vista at 8.5, a stunning improvement. But what were they ranking? Microsoft notes that “many said they would have rated it higher, but wanted more time to use it themselves.” That sounds good at first blush, but it really indicates that the responses were biased by hyped up enthusiasm rather than facts, and that participants realized it, reserving their final judgement until they could actually see more. The “Mojave Experiment” What does Mojave Prove? Mojave tries to represent that Vista's bad reputation is the fault of ignorant consumers who have heard bad things that aren't true about Vista, and have made up their mind without getting the facts. At the same time however, Microsoft also publicly admits that Vista “broke a lot of things” and that specifically, “Printers didn't work. Games felt sluggish.” Did Mojave clear up mistaken notions for participants, or did it just erect smoke and mirrors in a carefully controlled demonstration that skirted around Vista's real problems, including those Microsoft admits? That's a question that answers itself. Mojave didn't send uses home with Vista in a Mojave package and then ask them how well it worked with their existing peripherals and games, or how fast it was in comparison to their existing PC software. This is Not the Droid You're Running Vista On. Instead, Microsoft sat them down in front of a HP Pavillion DV 2000 with 2GB of RAM. That's what HP called its “entertainment powerhouse” laptop, although HP only shipped it with 1GB RAM. Microsoft maxed out the RAM for the purposes of the test, making the laptop a bit more expensive than its usual street price of around $1050. According to Windows enthusiast Joe Wilcox, PC laptops actually cost $700, “half as much” as Apple's laptops. At least that's the Average Selling Price for consumer retail PC laptops according to NPD's Stephen Baker, compared to Apple's $1500 ASP. Wilcox insisted that his spin on NPD's figures couldn't possibly be biased because he wrote his article on a MacBook Air running Leopard. However, his $2,700 laptop did help drive up Apple's stellar ASP for its laptops well above the entry price for Mac Books, discounting his theory that revolved around the assumption that every Mac buyer pays the average price of all the laptops Apple sells. Wilcox and Microsoft are both disingenuously dancing on both ends of the truth. Many consumers are actually buying cheap laptops at Target that can't run Vista ideally, while Microsoft demonstrates its Vista on a considerably better equipped system in the Mojave Experiment to suggest that Vista doesn't have the performance problems that users have heard about from the majority of their peers who bought cheap PCs and are seeing Vista run particularly sluggishly on them. Should You Pay Twice as Much for a Mac? I Did! You Get What You Pay For. The fact that Apple sells more high end laptops to pro users at retail, and that it does not sell anything in the range of the cheap junk being hawked at big box retailers like Wilcox' Target both result in Mac laptops fetching a higher ASP. That fact also means that Mac buyers will be happier with their purchase and have a more favorable impression of Mac OS X because they're running it on a better system. That's all obvious stuff. However, selling people cheap laptops that don't work well, and then demonstrating a fake “new operating system” that appears to work well when running on a faster machine full of RAM is simply a dishonest bait and switch scam. Wilcox does nearly admit that PC makers are already stretching their credibility as they attempt to sell cheap boxes based on price alone, citing Baker as saying, “We aren't seeing any particularly substantive moves down in price on the Windows side, either in desktops or notebooks.” PCs can't get cheaper because they're already unprofitable and consumers are already disgusted with their performance when running the increased overhead of Vista. Wilcox also sets up a tilted comparison between a Dell PC desktop with integrated graphics and an iMac with dedicated graphics and claims a price advantage for Dell, although noting that, while “Dell offers more for less than the iMac,” “that 'more' also means Windows Vista, which won't satisfy some shoppers.” Why Aren't Shoppers Satisfied with Vista? Like Microsoft, Wilcox and his Windows Enthusiast pundit friends can't seem to decide if Vista has any real problems or if it's all just an unfair taint suggested by Apple's Get a Mac ads. However, while Apple has taken shots at Vista's incompatibility with printers and other hardware and its scarce updates that have been few and far between over the last year and a half of its being on the market, Apple also notes in its Get a Mac ads that Macs can run Vista, and can run it faster than PCs. So Apple isn't inventing and publishing false reports on Vista, it's merely advertising its Mac hardware as superior to PCs. The Vista flaws Apple's ads have referenced are flaws Microsoft itself has admitted to its partners, so the Get a Mac umbrage frequently voiced by Windows Enthusiasts is both hypocritical and ridiculous. However, in the Mojave Experiment, Microsoft downplayed those well-known faults by only carefully demonstrating certain features on a high end machine, and without actually exposing Mojave/Vista users to 'a lot of things Vista broke,' 'printers that didn't work', or 'games that felt sluggish.' It Can't Even Print. In response to complaints that Vista doesn't work well with existing PC hardware, Microsoft's Mojave website says that “the Windows Vista Compatibility Center lists compatibility status for over 9,000 products (5,500 devices and 3,500 software programs).” It even notes 2,000 printers, 200 scanners, and 500 cameras specifically. That sounds good until you realize that Apple ships support for over 3,100 printers in Mac OS X Leopard, a product that is targeted primarily toward education and consumers and which is not expected by users to run on any old hardware that might be in use by PC users. Vista is supposed to run on 95% of the world's PCs, and yet it doesn't even match the printer drivers that ship with Leopard, a number which does not include all of the third party drivers available for the Mac. Oh, but there's more. Not only did Microsoft dance around the truth to feed its Mojave Experiment participants a carefully controlled stream of garbage, but it also inadvertently revealed more serious problems related to Vista, which I'll consider in the following article. Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? 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The Eyes Have It
So little real information leaks out of Apple these days that we tech pundits tend to jump on any crumb we can get and munch it to death. That's certainly the case with this week's story about Apple possibly dumping Intel chipsets for the new MacBooks expected to be announced in September. What's funny to me is that the answer to what's REALLY happening has been in front of us all for more than a year. Here's how this mess of a story got started. On Monday, July 21st Apple Chief Financial Officer Peter Oppenheimer dropped a bomb on those listening to Apple's quarterly conference call on earnings for Wall Street analysts. He said that gross margins for the coming quarter, and possibly beyond, would be lower for three reasons: 1) a back-to-school special; 2) a one-time charge related to a contract manufacturer, and; 3) "a future product transition that I can't discuss with you today." That's it. That's all he said. And from that sprang a zillion stories about what that future product transition could possibly be. It settled eventually on the idea that Apple might be abandoning Intel processors, later downgraded to Intel chipsets, for the new MacBooks and beyond. Of course Apple's recent purchase of PA Semi got folded in as pundits wondered if Apple was going back to PowerPCs after all. I know how these stories develop, having written more than a few of them myself over the last 20 years. You start with one fact, get the usual suspects to speculate on what that fact could mean, throw those speculations into print, then look for an official denial of the parts that are wrong. Once that denial comes through we rinse and repeat with the goal of eventually converging on something close to the truth. It's not a very elegant way to do journalism, but that's the way it happens in the tech trades, which now include everything from blogs to the New York Times. But what's REALLY happening here? Stepping back from the carnage we can see that Apple has a "product transition" coming up that will hurt margins in the near term, but Oppenheimer also said it was dramatic and would definitely HELP margins in the long term. That's all we really have to work with from Apple, but it is really quite a bit if you parse the data carefully. First is the product transition, which quite specifically DOESN'T mean a new product. If Apple was announcing something completely new as they did last year with the iPhone and Apple TV, then Oppenheimer would have referred to it as a new product. As CFO he has fiduciary and legal responsibilities that could land the guy in hot water with the SEC, so language on these calls is important and never by chance. Second is the margin hit that will go away, which smart readers right away saw as a change of chips, because they start expensive and become very cheap over time. By making an aggressive semiconductor move Apple would be trading profit margins for technical market advantage knowing that in a few months the new chip process would come down and margins could return to normal. THAT's why all the smart money went immediately to speculating about Intel, then backed off somewhat as official denials began filtering through back channels from Cupertino and Santa Clara. As of today people are just left scratching their heads. Apple isn't changing CPU families and evidently they also aren't dumping Intel chipsets for those of Nvidia. But SOMETHING is happening because Peter Oppenheimer gets no pleasure predicting lower margins that he knew would drive down Apple's share price, if only temporarily. So now the pundits are wasting even more packets wondering what Apple is planning, at the same time generally admitting that they (the pundits) don't really have a clue. Regular readers of this column may well have an idea what's up, because I wrote about it more than a year ago. Before I drop my own bomb, though, I should say that I have no new information and what I am about to predict is based solely on my earlier reporting. Here's what I THINK Apple is about to do. I reported more than a year ago and repeated in this year's predictions that Apple would be adding H.264 hardware support to its entire line of computers. The chip they are adding comes from NTT in Japan and was developed in cooperation with Japanese broadcaster NHK. The chips began sampling a year ago and should now be available in volume, though Apple may be paying as much as $50 each for early production. This would be a major blow to gross margins because, unlike all the speculation covered above, this wouldn't be a matter of replacing one chip with another but of adding a new chip to the mix. That'll be an extra $50, thank you, with no savings from eliminating other parts. The fun part is figuring how this all fits into Apple's strategy as not just a maker of computers but also as a seller and distributor of entertainment content. The NTT chip is not just an H.264 decoder, it encodes, too, which is what makes it so special. The last I heard NHK was claiming the chip could compress a 1080p video and audio stream into four megabits per second, down from the 20 megabits normally required. If we assume Apple will apply the same kind of wink-wink, nudge-nudge transcoding to 1080p that they've already applied to 720p in the Apple TV, then it is within reason to expect they'll claim to distribute 1080p over iTunes in two megabits per second. As the dominant technology platform in television and movies today, it makes good sense for Apple to put this H.264 hardware capability into the Mac Pro line, and maybe even into the MacBook Pros for professional use, but darned if I can immediately see why such powerful and expensive compression capability is required in a MacBook, iMac, or Mac Mini, yet I was told long ago that the chips would be applied "across the entire line." We'll see. Of course this is all about taking command of the 1080p video market. Apple's strategy with iTunes will continue to evolve, but for the moment having a unique real-time 1080p capability will suck a lot of early adopters back into the Apple stores and give Apple's emerging content competitors like Netflix something new to worry about. When Apple marketers sit down to talk about the competition they discuss Netflix and MAYBE TiVo, but that's it. Hulu is something iTunes could emulate overnight so it doesn't matter and none of the other video distribution channels are seen as having the potential to achieve critical mass. What really excites me as a content creator is the amazing potential of real-time HD. Video and games are by far the greatest consumers of cycles on modern PCs. By embracing a dedicated H.264 chip THAT IT MAY WELL HAVE EXCLUSIVELY FOR A YEAR OR MORE, Apple is taking an out-of-the-box approach that will frustrate its competitors in both software and hardware. While the H.264 chips are expensive, they'll enable Apple to save money elsewhere by having slower computers that run faster video. Though it is doubtful that many will use it, you can be sure Apple will trumpet the ability to support 720p video in iChat. So why am I the only one writing this? It's because I could be wrong, of course. But I don't think so. I'll just have to take a chance and see.
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Hints will return tomorrow...
Macworld's offices are closed today in observance of Martin Luther King, Jr's. birthday. We'll return with the usual slate of new hints tomorrow. -rob.