A machine of success

Tech Life

Apple’s recently announced financial results for its fiscal first quarter of 2012 are astounding:

The Company posted record quarterly revenue of $46.33 billion and record quarterly net profit of $13.06 billion, or $13.87 per diluted share. These results compare to revenue of $26.74 billion and net quarterly profit of $6 billion, or $6.43 per diluted share, in the year-ago quarter. Gross margin was 44.7 percent compared to 38.5 percent in the year-ago quarter. International sales accounted for 58 percent of the quarter’s revenue.

The Company sold 37.04 million iPhones in the quarter, representing 128 percent unit growth over the year-ago quarter. Apple sold 15.43 million iPads during the quarter, a 111 percent unit increase over the year-ago quarter. The Company sold 5.2 million Macs during the quarter, a 26 percent unit increase over the year-ago quarter. Apple sold 15.4 million iPods, a 21 percent unit decline from the year-ago quarter.

I’d anticipated yet another very positive outcome, but not like this. As always, after a Quarter Results Conference Call, I headed to John Gruber’s Daring Fireball to read some of the best handpicked ‘Claim Chowder’, and as always Gruber doesn’t disappoint:

  1. Claim Chowder: ‘iPad Demand Said to Be Fading as Competition Heats Up’
  2. Claim Chowder: ‘The iPad: In the Middle (of Nowhere)’
  3. Claim Chowder: ‘iPhone Dead in Water’
  4. Huffington Post Headline Two Days Ago: ‘Apple Q1 2012 Earnings Call Could Reveal Chinks in Armor’
  5. Claim Chowder: ‘The Apple Bubble Is Ready to Burst’

Apart from their short-sightedness, I noticed one common denominator in all these ‘analyses’ on Apple: they all seem to imply that Apple is on some kind of lucky streak, and that it won’t last much longer. With any business, luck is always a factor, but I think that Apple’s success in the last few years (starting with the iPod in 2001, but especially since the iPhone introduction in 2007) has very little to do with luck and very much to do with manufacturing great products at affordable prices on the hardware front, and coherent, cohesive ecosystems on the software front. When you join these two fronts, what you get as an end user is a solid, smooth, rewarding experience.

A new eWorld, in a way

Come to think of it, it’s almost like a modern version of Apple’s own eWorld. Just look at what was eWorld’s main screen and metaphor: a small city where users could find anything that could be of interest to them. It was an easy-to-understand interface for the then new-ish World Wide Web, and at the same time it felt like a self-sufficient space with its community. Look at the labels of those ‘places of interest’: Arts & Leisure Pavilion, Learning Center, Computer Center, Marketplace, Newsstand, eMail Center… and now think of Apple’s services of today: the various Stores (iTunes Store, iOS App Store, Mac App Store, iBookstore, the brick and mortar Apple Stores), iTunes U and the recent education-related news, iCloud services… there are a few similarities. Not in the implementation, of course, just in the general concept, in how they all have their part in the creation of the container. Sure, many focus on the negative aspects of this and call it ‘lock-in’ or ‘walled garden’, but it turns out that users really like what this self-contained, self-sufficient experience gives them.

You can’t just take a single product and analyse it out of the big picture. Apple products are successful also because, in the end, it’s the whole experience, the Über-Product that’s successful. By offering high-quality products with thoughtful design and user interfaces, and backing them up with good-enough services, Apple has managed to create an environment where the inherent success is generated by bidirectional force between the parts and the whole. I believe Apple has come to a point where only Apple itself could undermine its success, by making huge missteps that could compromise the balance of that aforementioned bidirectional force that fuels the whole Apple machine.

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