Empty pockets and tight budgets are in style this season, but it looks like Apple missed the memo. The company reported an unfashionably prosperous third fiscal quarter, growing its revenue nearly 12 percent year over year to US$8.34 billion. Its gross margins shot up to 36.3 percent, compared to last year’s 34.8.
Where did it all come from? Well, there was a 4 percent uptick in Mac sales, which may have something to do with the Macbook improvements it’s made over the last year. iPod sales actually trailed off by 7 percent. The real star was the iPhone, and the release of the new 3GS model and a price cut on the old version managed to move 5.2 million units, representing growth of 626 percent. That’s 5.2 million iPhones sold in Q3 alone.
Almost all of those sold in the U.S. — along with the many millions sold in previous quarters — send a handful of cash AT&T’s way every month in the form of mobile data fees. So the iPhone must be great for AT&T’s bottom line, right? Not entirely.
AT&T also pays a big fat subsidy on most of the new iPhones it sells. As iPhone sales accelerate, so do AT&T’s expenses. Sure, the idea is to eventually get the money back — and then some — by chaining you to a contract for a couple of years. But for now, it just has to keep feeding the beast. That grocery bill ground down the company’s profit by 15 percent in its second quarter this year.
Also, iPhone users tend to deal with a lot more wireless data than other smartphone users — all that browsing and Facebooking and Twittering and app downloading really adds up. AT&T has had to pump money into its 3G infrastructure just to keep pace. So, when the iPhone 4G eventually comes out — you just know it’s gonna happen someday — who knows whether AT&T or someone like Verizon would be the best carrier for the job?
Listen to the podcast (11:50 minutes).
A Shoo-In for Amazon
That silly airhead Amazon just went and spent $900 million on shoes. Actually, that might not be such a bad idea at all. The etailer has purchased Zappos.com, a very popular online footwear vendor, in what looks to be Amazon’s biggest deal ever.
The deal includes the transfer of more than $800 million in Amazon’s common stock, and Zappos employees will get another $40 million in cash and restricted stock. It will close by the time you’ll need winter boots, and Zappos will remain independently operated.
Overall, reaction has been positive. Zappos is a strong etailer, having doubled its sales between 2006 and 2008 to nearly $1 billion. It also gets high marks for customer service. Amazon’s goal is growth, and the buy will deliver the brain power that took Zappos in that direction. In exchange, Zappos will surely get huge traffic by associating itself with the Amazon brand.
Microhoo: Myth or Reality?
For years, we’ve been hearing about Microsoft’s flirtation with Yahoo in the hope of coming together on some sort of joint search project. Now there’s a new crop of rumors suggesting that the mythical Microhoo beast lives on, and that the two companies are finally getting down to the details.
Neither Microsoft nor Yahoo is saying anything official, which gives the gossip a certain “cry wolf” flavor. But it was reported by Kara Swisher at All Things Digital, a blog associated with The Wall Street Journal — a publication that companies love to go to with their officially unofficial corporate leaks.
Of course, the rumored deal would most probably be a partnership, not the whole-hog buyout Microsoft was gunning for when the Microhoo dance music began. Some things have changed since then — online advertising is much weaker, for one thing. Yet other things haven’t changed much at all: Google still dominates Yahoo, and Microsoft is still a distant third, despite its aggressive promotion of Bing.
Summertime Mojo
Ever since it first showed us the Pre back in January, Palm has promised a software developer kit for webOS, its new operating system. The SDK is what allows devs to churn out applications for a particular platform — such as Windows Mobile, iPhone, Android or any of the six dozen other smartphone operating systems now on the market.
We were told a while back to expect a Pre kit by the end of summer, so we figured sometime in September. Then last week, there it was: the webOS SDK, also known as “Mojo,” in all its glory.
So, did Palm’s crew pull a month’s worth of all-nighters and live on nothing but Red Bull and pure, uncooked protein in order to get done early? Perhaps — or maybe a late-June leak of the SDK motivated them to get something out there sooner rather than later.
In any case, some developers are calling the kit half-baked, since it apparently gives them little or no access to certain components, which limits their ability to create the kinds of apps people can find for other platforms — specifically games. Then again, this kind of problem is exactly what the word “beta” is for.
More Megapixels, Please
Most camera phones are capable of making even the happiest moments of our lives look cold, dreary and awful. They take low-res pictures, the lighting is almost always bad, the focus is off, and the end is rarely worth the memory space, much less something you’d want to print out and frame.
However, a few cellphone makers are trying to make it better, putting 8 megapixels or more into the cameras attached to their new handsets and upping the quality to around what you’d find in a low-priced pocket camera from a company like Canon or Nikon. We’re still not talking pro quality, but definitely something capable of taking a decent photo. Instead of a phone that happens to be a camera, these are cameras that also happen to be phones.
One is the Nokia N86, a smartphone running the Symbian OS. The company will make the phone available in the U.S. in the coming weeks, but like most high-end Nokias, this one is for big spenders only: It rings up for $558, whereas phones from rivals like Sony Ericsson and Samsung go for somewhere around a third of that.
That’s probably because Nokia’s selling the phone unlocked rather than through a partner carrier. That’s business as usual in Europe and other parts of the world. In the U.S., buyers are used to getting a discount from carriers in exchange for service agreements, so the N86’s popularity may be pretty limited stateside.
VIP Access
Customers aren’t the only ones U.S. wireless carriers like to tie up and hang by a strap. They also like to string up their vendors. If a company like Apple or RIM or Palm or HTC is coming out with a nice new phone and the carriers smell a hit, chances are one of them will call dibs on it and become the only company you can go to if you want to buy this lusted-after little techno-bauble — at least for the first year or so.
Sometimes that can be a good thing for both phonemaker and carrier. They can work closely together to develop proprietary pieces of software, and a slow launch gives them both time to deal with glitches and shortages. On the other hand, it can also hurt. The vendor has fewer sales channels, and the carrier may draw consumer fire if it’s shouldered with a really popular device — like the iPhone — that it can’t manage to support perfectly.
So, phone exclusivity may not always work out to the benefit of customers, but does that make it anticompetitive? Maybe not so much for the Big Four — they’ve all managed to get theirs, after all, and may the best phone win, right? But what about smaller carriers that operate regionally or in rural areas of the U.S. that aren’t well-covered by big carriers? They tend to get the short end of the deal, which is one reason some members of Congress are apparently talking about investigating the practice.
Verizon’s latest move may be an attempt to head off a probe. It’s promised to limit itself to six months of exclusivity on new phones, after which smaller carriers can have at it. Frost and Sullivan’s James Brehm said this might be a decent model for compromise, but Free Press’ Chris Riley said it’s all just an attempt to forestall regulation.
Land, Sea, Air and Cyberspace
Over the Fourth of July weekend, Web sites in both South Korea and the U.S. were hit with a denial of service attack. Some of them, including some government sites, were actually knocked out for a little while. Suspicion quickly centered on North Korea, but regardless of whodunnit, the event called attention to some worrisome soft spots in America’s national defense — specifically, its weakness in defending against cyberattacks. There may not be any bombs and bullets, but an online attack on a country’s digital infrastructure could still cause a lot of chaos.
This week, the Partnership for Public Service and the consultancy firm Booz Allen Hamilton released a report detailing just how unprepared the federal government is when it comes to cyberdefense. The main problems are lack of skilled personnel, a bureaucratic quagmire, outmoded approaches, and frequent communication breakdowns between agencies.
The report urges the White House to develop a government-wide strategic blueprint to address the problem. It recommends reaching all the way down to middle school level to stoke interest in computer science education.
It’s up to you, youth of America. If not for love of country, do it for love of Facebook.
For MacBerry Users
Just because you happen to use a Mac doesn’t mean you have to go whole-hog for Apple. You don’t have to get an Apple TV, you don’t have to buy a $500 computer monitor, and you don’t have to wear black turtlenecks and drive around with a little Apple logo sticker in your back windshield. You can even use a BlackBerry, if you prefer it over the iPhone.
The trouble with that, until lately, was that syncing your BlackBerry to your Mac required a third-party app like PocketMac for BlackBerry or the Missing Sync. Now, though, Research In Motion itself is coming out with BlackBerry Desktop Manager for Mac, which will give users a variety of smartphone control options by hooking it up to an Apple computer. The application even allows the user to sync a BlackBerry through iTunes.
That’s funny, because recently Apple gave phone maker Palm the boot, cutting off the Palm Pre’s ability to sync with iTunes. RIM may have to approach iTunes syncing a little differently in order to avoid getting 86ed.
This just in: The Pre syncs with iTunes again … for now …
Bookseller Battle Royal
I’m going to go ahead and call the Kindle the iPod of e-readers. Please don’t start spouting sales figures and telling me how wrong I am. All I’m saying is that there were e-readers before the Kindle, just like there were MP3 players before the iPod, but it took Amazon’s entry to really knock down doors and get people to notice this new type of media device that’s out there. Now that we’re all in agreement, I’ll move on.
Having won the approval of Oprah and her minions and enjoyed a lot of publicity for making more people understand what an e-reader actually is, Amazon’s Kindle looks like a good target to try and topple, and next at bat is bookstore chain Barnes & Noble.
Its new eBookstore isn’t its first foray into the e-book market, but now that more people are aware of what’s out there, perhaps it’ll see more success this time around. Barnes & Noble boasts a larger library than Amazon’s Kindle has, and it’s lined up Plastic Logic as its manufacturing partner.
You won’t have to buy a Plastic Logic e-reader, though — you’ll also be able to read Barnes & Noble e-books on iPhones, BlackBerrys and home computers.
The relatively high cost of the Kindle may give Barnes & Noble an opportunity if the Plastic Logic item can hit the right price point, and if the apps for reading on a smaller device don’t make us all go blind. Or this could be the dawn of the Zune of e-readers. We’ll see.
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