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Apple's Growth Rocket Has Hit A Wall. What Will Get It Started Again?
Apple’s stunning growth over the past decade has been one of the biggest stories in all of tech. Even as the company released new product after new product, and grew larger and larger, its growth rate continued to accelerate, far surpassing its competitors.
For the past ten years, Apple has posted year-over-year revenue growth every quarter, almost always more than 25% and frequently more than 50%. In that span, it’s gone from a company with less than $2 billion in quarterly sales to one with (once) more than $50 billion. For two quarters in a row in 2011, as the iPad and iPhone both picked up steam, Apple posted growth rates above 80% — each quarter representing more than $10 billion in new sales from the year prior. That’s just crazy for a company that big.
But now, that unbelievable growth rocket has come back to earth. Apple’s most recent quarter, reported today, showed just 1% growth over last year. And it’s not a fluke: Growth has sloped down for more than a year. After a great winter in 2011-2012, when Apple’s sales grew 73%, then 59%, it’s been 23%, 27%, 18%, 11%, and now 1%. For its next quarter, Apple expects growth ranging from 3% to a 5% year-over-year decline.
What happened? Some of it’s just funny timing: A product launch early one year then late the next. Inventory adjustments as products mature and markets settle — this played a role in this past quarter’s weakish iPad sales, for example. This year, in particular, Apple has been quiet on the new-gadget front, as design boss Jony Ive rehauls its iOS operating system, presumably for new iPhones, iPods, and iPads in time for Christmas. This is where arbitrary quarterly marking periods can sometimes cloud the lens.
But there’s also been a bigger-picture trend that Apple can’t just replicate: The vast shift towards smartphones and tablets — the “post-PC” revolution. Apple has captured this movement brilliantly, dominating the industry’s sales and profits despite selling relatively fewer, mostly high-end devices. And it may continue to do so. But that first-time adoption cycle isn’t going to happen again. At least not in the markets where Apple is strongest — and where carrier subsidies allow for such high profit margins — like the United States.
So what can Apple do next, assuming it wants to continue to grow? (A safe assumption.)
One obvious answer is to move downmarket in its existing product lines. This is always a tricky proposition with Apple, because the company swears it would never release a low-quality product that it isn’t proud of. (And it shouldn’t.) So far, this has meant selling old iPhones at reduced prices, which has been pretty successful. But if the growth is happening in even further-downmarket segments, Apple might have to even figure out something cheaper. Where will it draw the line, design- and quality-wise, to compete? We may find out this year if rumored low-cost iPhones are real.
Another possibility, of course, is to blaze into new markets. There’s been speculation for years that Apple will start to sell television sets. The latest chatter is about wearable computers — Apple gadgets for the wrist, à la Nike’s Fuelband.
The nice thing about wearables is that like smartphones — and unlike, say, desktop PCs — they’re the kind of device where everyone in the house will need their own, meaning a larger potential market, people-wise. But unlike mobile phones, there isn’t an established precedent for subsidies, carrier distribution, or even pricing, really. Can Apple design the kind of thing you’d want to wear on your body all day? We’ll see. Will that create the same level of demand, favorable pricing, and high margins that the rise of smartphones did? Probably not. Still, if it’s a hit, it could certainly fuel significant growth for Apple.
So that’s the big question going forward: Can anything propel Apple’s growth the way the iPhone and iPad did over the past 6 years, and the iPod and Mac before them?
Longtime Apple analyst Gene Munster asked a version of that question on today’s earnings call: “Are there product categories out there that are big enough to move the needle for Apple?” Apple CEO Tim Cook’s response: “We’ll see, Gene. We’re working up some stuff that we’re really proud of, and we’ll see how it does.” And, in typical Apple fashion, “We’ll announce things when we’re ready.”
Dan Frommer is founder of SplatF, a tech news site, and City Notes, a mobile travel startup. He previously helped create Business Insider, where he led Apple coverage. Follow Dan on Twitter at @FromeDome.
Who Honestly Wants Bill Gates To Come Back And Run Microsoft?
Bill Gates is not coming back to Microsoft as its CEO. He’s not. He’s said so again and again. And yet, today, some unsourced rumors began to circulate that the man was coming back to manage the company he helped found.
It’s not happening. That should go without saying, but at this point I’ve surrendered to reading the same bullshit at least twice a year. Not only has Gates himself been deliberately plain that he has no intention of returning to run Microsoft, his exit from the company is indicative of how his attention drifted from the firm following the forming of the Bill & Melinda Gates Foundation in 2000, the same year he gave up the CEO reins.
Following his formal surrendering of the boss role to Ballmer, Gates held onto board chairmanship, and an amorphous role created for him called Chief Software Architect. Around a half decade later, Gates cut his Microsoft time, leaving full-time duties to others. At that point, the foundation became his main activity.
Then in 2008, Gates left Microsoft’s daily operations entirely. He has retained his board presence, but that’s it.
Gates has been clear about what he wants to do, and it is not running Microsoft. So, why the endless rumor cycles? I can’t summon a reason better than that some desperately hope for his return to the software giant. This raises a better question: Who the hell wants that?
Gates left daily time at Microsoft around the eras of Vista and Internet Explorer 7, two products that were stilted and led to a general decline in Microsoft’s hegemony in the computing business. This isn’t to cast aspersions on Gates, but more to point out that even then his lingering influence didn’t stop Microsoft from releasing mediocre products.
The Microsoft of today is a far superior firm than the Microsoft of 2008 — disregarding financial metrics. And that is the Microsoft that Gates is steeped in, not the device and service, recently re-org’d one that has a different business model and operational structure.
Now, Microsoft is embracing web standards, supporting open source code on its Azure cloud computing service, and has a mobile platform — Windows Phone — that is the most compelling in its history. And, perhaps most importantly, much of the company’s former arrogance has dissipated. Mostly because the firm got spanked by Apple’s iPhone, Google’s Chrome and a host of other products and services that bested its own efforts for years.
Who might argue that Gates’ leadership style would be a good fit for such a company? It could be, but it’s at best a hypothetical. Ballmer, on the other hand, has enacted the above changes, so he is at least sufficiently in tune to lead day to day.
Mary Jo Foley has a good take on the above, of course:
Yes, I know there are many who equate the heady years of Microsoft growth with Gates. And I know there are many inside and outside the company — including some current and many former employees, along with quite a few Wall Street analysts — who think a Gate-full Microsoft would trump a Ballmer-led one. I think many of those people are looking at Microsoft history with Fortaleza (instead of Google) glasses.
Gates founded Microsoft. But Microsoft is a very different company than when Gates retired from his day-to-day duties there in 2008. When Ballmer eventually goes, it’s time for new management, not a return to the past.
Gates is a massive figure in technology and now a global force for good. However, Microsoft as a company has outgrown its original methods, products, and business gist. To bring back Gates – and he wouldn’t come to boot – would be to retread old, lost ground.
So whenever someone tries to lie to you about Gates coming back, out of his own form of retirement, to install himself atop Microsoft Tower, blink twice and spit on the messenger. They are full of it.
My friend Matthew Panzarino put together a set of charts that show how much Apple has grown under the primacy of its current leader Tim Cook. The charts are up and to the right. It was a jokish reminder that those clamoring for the firing of one executive or the next are often a bit short-sighted. And, of course, calling for Gates to take the CEO role at Microsoft is the same as calling for Ballmer’s canning from it.
Well, we can at a minimum run stats on Ballmer. The following graph (via SeattlePI) shows Microsoft’s revenue growth since 2005. Not the full Ballmer tenure, but a decent shot of how the company has performed:
The above performance is hardly a fireable offense. The middling of Microsoft’s stock price could be, but that’s a value call that doesn’t really implicate the Gates question. So, we can simply state that Microsoft’s key metric performance under Ballmer isn’t as desperate as many think; the market has simply allowed its stock to sit flat and fire out dividends as its income grew and its price-earnings ratio fell.
What this kicks down to is simple: Gates, no. So let’s never talk about this again. We’re done.
Top Image Credit: DFID
Latino Startup Accelerator Partners with Google For Entrepreneurs To Launch In Fall
Manos Accelerator, a program to support Latinos involved in the startup community, has announced a partnership with Google For Entrepreneurs and will launch its first session for five to six startups in September.
Based in San Jose, Manos Accelerator is meant to increase the number of Latino entrepreneurs and startups. Less than one percent of venture-backed startups were founded by Latinos, according to a report by CB Insights. Through a three-month program, Latino startup teams will collaborate with other startups, develop their business plans, and meet with angel investors, mentors, corporate executives and venture capitalists.
“I’m just trying to create a cog and insert it in this wheel that already exists. If this was something that didn’t have an existing ecosystem, it would be difficult to sustain it over time,” Co-founder and CEO Edward Avila tells me. The wheel, he elaborates, is the startup-laden Silicon Valley.
Avila says Manos Accelerator’s partnership with Google will help get the accelerator off the ground through experienced advising and resources. Google For Entrepreneurs launched in September 2012 and has partnered with global startup initiatives including iHub in Kenya, Le Camping in France and Kstartup in Korea. The program has also paired with several other accelerators for increasing minority representation in the industry, such as Women 2.0 and NewMe Accelerator.
While NewMe Accelerator and similar program DreamIt Access are providing resources and collaboration for minorities, Manos Accelerator is the first program specifically created for Latinos. Avila says Manos Accelerator is part of Google’s initiative to do more in Latin American startups.
With about 30 business submissions so far, Manos Accelerator is a long way from TechStars or Y-Combinator, which the program will be modeled after. However, Avila says the numbers he has seen are encouraging. About 100 people have volunteered to be mentors for the program, and a third of submissions are from international startups.
Applications close on July 31, and the first session begins Sept. 9. You can apply for Manos Accelerator here.
Mixamo Is Building A Platform For The Game Developers To Create And Animate 3D Characters
With app stores becoming ever more competitive, game makers have had to upgrade from building 2D games to creating 3D titles over the past two years. That has meant even more creative and intensive work for artists and producers, as the graphics processing power on smartphones has increased.
But there are tools to help. Mixamo is a 25-person startup that has existed very quietly for the past five years. Even though they haven’t really spoken to the press much before, they’ve raised about $11 million in total and have racked up customers like Microsoft, EA, Sony, Blizzard and Gameloft.
They’re a web-based service that helps developers rig and animate 3D characters by making rigging and animation easier. A developer can upload the mesh for a character, place joint locators and locator rings to figure out how to make the character move, and then run Mixamo’s auto-rigging software. For console titles, the company says they can cut the cost of producing animations by anywhere from 70 to 80 percent compared to standard techniques like keyframing and motion capture.
An offshoot from some research out of Stanford’s BioMotion Lab, the company has built up a store where they sell existing characters and animations on top of a subscription-based service. (They’re one of the largest animations providers in the asset store for Unity, a hugely popular game development platform backed by Sequoia Capital).
“We are an end-to-end 3D character art solution that allows developers and artists to easily and affordably create, rig and animate high-quality characters,” said Stefano Corazza, the CEO and co-founder of Mixamo.
Naturally, Mixamo has a SaaS-based business model, where they sell subscriptions by the seat to gaming studios. Their All Access product gives studios one year of unlimited access to their 3D characters, Auto-Rigger and their library of thousands of animations for $1,500 per seat.
They’re seeing developers handle about 800 or 900 characters per week and have a few thousand customers. The company has taken funding from Granite Ventures and Keynote Ventures.
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