NetGuide NZ - Steve Jobs hijacks Apple earnings call - transcript

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Steve Jobs hijacks Apple earnings call - transcript

Earlier today Steve Jobs hijacked Apple’s earnings call after the company posted record revenues for its fourth quarter.

On arrival Jobs said he doesn’t usually participate in the earnings calls but said that he couldn't help dropping by for Apple’s first $20 billion quarter. Here’s our transcript of the call, which features Jobs speaking his mind on Apple’s rivals.


We've now passed RIM, and I don't see them catching up with us in the foreseeable future. They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company.

I think it’s going to be a challenge for them to create a competition platform and to convince developers to create apps for yet a third software platform after iOS and Android. 300,000 apps on Apple’s App Store, RIM has a high mountain to climb.

On Google:

Last week (Google CEO) Eric Schmidt reiterated that they are activating 200,000 Android devices per day and have around 90,000 apps on the store. For comparison Apple has activated around 275,000 iOS devices per day on average for the past 30 days with a peak of almost 300,000 per day on a few of those days.

Unfortunately there is no solid data on how many Android phones are shipped each quarter.  We hope that manufacturers will soon start reporting the number of Android handsets they ship each quarter.

Gartner reported that around 10 million Android phones were shipped in the June quarter and we wait to see if iPhone or Android was the winner in this most recent quarter.

On open versus closed:

Google loves to characterise Android as open and iPhone as closed. We think this a bit disingenuous and clouding the real difference between our two approaches.

The first thing we think about when we hear the word ‘open’ is Windows, which is available on a variety of devices. However, where most PCs have the same interface and run the same apps, Android is very fragmented.

Many Android OEMs, including HTC and Motorola, install proprietary user interfaces to differentiate themselves from the commodity Android experience. The user’s left to figure it all out. Compare this with iPhone, where every iPhone works the same.

Twitter client TwitterDeck recently launched their app for Android. They reported that they had to contend with more than a 100 different versions of Android software on 244 different handsets. The multiple hardware and software iterations present developers with a daunting challenge.

Many Android apps only work on selected Android handsets, running selected Android versions. And this is for handsets that have shipped less than 12 months ago. Compare this with iPhone, where there are two versions of the software, the current and its predecessor, to test against.

In addition to Google’s own app marketplace Amazon, Verizon, Vodafone have all announced they’re creating their own app stores for Android. So there’ll be at least four app stores on Android, which customers must search to find the app they want and developers to distribute their app in order to get paid. This is going to be a mess for users and developers.

Even if Google was right and the real issue was ‘closed versus open’, it is worthwhile to remember that open systems don’t always win. Take Microsoft’s PlaysForSure music strategy, which uses the PC model, which Android uses as well, of separating the software components from the hardware components. Even Microsoft abandoned this open strategy in favour of copying Apple’s integrated approach with their Zune player, unfortunately leaving their OEMs empty-handed in the process.

In reality we think the ‘open versus closed’ argument is just a smokescreen to try and hide the real issue, which is ‘what’s best for the customer?’ Fragmented versus integrated? We think Android is very, very fragmented and becoming more fragmented by the day. Apple strives for the integrated model so that the user isn’t forced into being the systems integrator. We see this as a huge strength in our approach compared to Google’s.

When selling devices to users who just want them to work we believe integrated will trump fragmented every time. We also think our developers can be more innovative if they can target a singular platform rather than a hundred variants.

We are very committed to the integrated approach no matter how many times Google tries to characterise it as closed. We are confident it will triumph over Google’s fragmented approach no matter how many times Google tries to characterise it as open.

On the “avalanche” of upcoming tablets:

First, it appears to be just a handful of credible entrants, not exactly an avalanche. Second, almost all of them use 7” screens compared to the iPad’s near 10” screen. Let’s start there.

One naturally thinks that a 7” screen offers 70% of the benefits of a 10” screen. This is far from the truth. The screen measurements are diagonal so a 7” screen is only 45% as large as iPad’s 10” screen. The screens on these tablets are a bit smaller than the bottom half of the iPad’s display. This size isn’t sufficient to create great tablet apps in our opinion.

While one could increase the resolution of the display for some of the difference, it is meaningless unless your tablet also includes sandpaper so that the user can sand down their fingers to a quarter of their present size.

Apple has done extensive user testing on touch interfaces over many years and we really understand this stuff. There are clear limits of how close you can physically place elements on a screen before users can not tap, flick or pinch them. This is one of the key reasons we think the 10” size is the minimum size required to create great tablet apps.

Third, every tablet user is also a smartphone user. No tablet can compete with the mobility of a smart phone, its ease of fitting into your pocket or purse, its unobtrusiveness when used in a crowd. Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet in their pockets is clearly the wrong trade off.

The 7” tablets are tweeners – too big to compete with an iPhone and too small to compete with an iPad.

Fourth, almost all of these new tablets use Android software, but even Google is telling the tablet manufacturers not to use their current release, Froyo, for tablets, and to wait for a special tablet release next year. What does it mean when your software supplier tells you to not use their software in your tablet? And what does it mean when you ignore them and use it anyway?

Fifth, iPad now has over 35,000 apps, this new crop of tablets will have near zero.

Sixth (and last), our potential competitors are having a tough time coming close to iPad’s pricing – even with their far smaller and far less expensive screens. The iPad incorporates everything we’ve learned from building high-value products, from iPhones, iPods and Macs. We create our own A4 chip, our own software, our own battery chemistry, our own enclosure... our own everything.

The proof of this will be in the pricing of our competitors’ products, which will likely offer less for more. These are among the reasons we think the current crop of 7” tablets are going to be DOA – dead on arrival.

Their manufacturers will learn the painful lessons, that their tablets are too small and increase the size next year, thereby abandoning customers and developers who jumped on the 7” bandwagon with an orphan product.

Sounds like lots of fun ahead.

You can listen to the full conference call here. Jump to the 15 minute mark for Jobs’ arrival.

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