Open Season on Apple: Bloomberg and Others Take Aim

Share This:

Any time there is an Apple hardware release, the vultures hover above, waiting for the tiniest sliver of fresh meat. As such, a new “gate” is lurking around every corner. It doesn’t matter how big the sample size of users is or what percentage of devices are affected, you can bet Gordon Kelly and Ewan Spence will be giving you daily updates with headlines containing phrases like “nasty surprise,” and “serious problem.”

They probably thought they nailed a big one last year when some early battery swelling issues appeared right after the iPhone 8 launch. Nope. That one was gone quickly, as was the Apple Watch Series 3’s early WiFi and Cellular connection woes. Maybe they think one of their current stories on launch issues with iPhone XS and XS Max charging, cell signal, or speakers will also be the next “big one.” Or maybe they’re just sitting back and raking in the clicks. Not thanks to me, as you won’t see any links to those fools here today.

Apple Watch Follies

However, while hearing from the usual suspects above is no big surprise, they’ve had some interesting company over the last two days. First off, John Herrman from the New York Times Magazine wrote a strange and meandering article claiming that Apple has no control of its own platforms, basically lucked into developers showing them what to do with the iPhone, and that they are making the same mistake with the Apple Watch. Oh, and he openly longs for the good old days when Jobs was in charge and the Apple Watch isn’t the iPhone. Fresh stuff here, right?

I was going to write an article in response, but it hardly seems worth it. The only thing noteworthy about this piece is where it comes from, and the fact that I expect a lot more from a writer at the Times- the paper or the magazine.

If you do read Mr Herrman’s article, here are my brief counterpoints:

  • No one else is, or will ever be, Steve Jobs. As for Tim Cook, he may not have the showmanship or pizazz, but the numbers don’t lie. He is not failing at Apple by any measure of a CEO.
  • No other device will ever define a computing or electronics category that already exists in mature form today the way that the iPhone did. Comparing other things to it and the business that it has become is a fools errand. Even Jobs’ own follow-up, the iPad, paled in comparison to the iPhone at the peak of its sales. Specifically, comparing the sales of a smartwatch that is literally still a subservient satellite of the iPhone to the iPhone itself, well…yeah.
  • Developers may have given the iPhone a big edge with apps, but Herrman completely ignores the fact that Apple laid the foundations for that success. Not only with the App Store in year two, but before that with the approachable capacitive touch interface that defined the original iPhone. They also showed the way with their limited, but well presented original apps. Without this foundation, the App Store never becomes the hit that it turned out to be. And this doesn’t even account for the fact that they were the first smartphone manufacturer to construct a development platform and store that were coherent and that both developers and users wanted to be a part of. How can any of this be ignored? Apple didn’t luck into this. This was a Field of Dreams-level setup: Apple built it, and they came.
  • It is easy to forget about this next point, because Apple doesn’t hold onto technological leads in many areas for too long. However, they do like setting key trends with their devices. While Herrman rants about apps defining the iPhone, what key elements are we most focused on with our smartphones today? Simple- the screen and the camera. This is where companies are focusing their R&D and innovation, and they are the elements that device marketing is centered around today. Who started this trend? Apple, of course. Do you remember using a great smartphone camera before the iPhone 4? There were a few good Nokias back in the day, but they were never mainstream, and other mainstream smartphone cameras before the 4 flat out SUCKED. Along the same line, do you remember a phone screen before the iPhone 4’s Retina Display? Probably not. Even Apple’s weren’t very memorable, in hindsight. They laid down the gauntlet with the 4, and the entire industry followed along at full speed. This does not fit Herrman’s narrative of a company that doesn’t know what to do, doesn’t have control of its products, and doesn’t know what its customers want.
  • Herrman’s ultimate argument that Apple still doesn’t know what to do with the Apple Watch seems like a reach to me. They completely rebooted watchOS in year 2 and refocused around what they learned about how people used the device. While Herrman is dismissive of Apple shifting the spotlight to health and fitness, I can’t help but point out the results. The Apple Watch is far more expensive than most products from their main competitors like Fitbit, Garmin, and Xiaomi, but they routinely come in with the top spot in smartwatch marketshare despite that. That means they are selling a lot of expensive Apple Watches. When you also consider that all of these other brands are ALSO focused on health and fitness, you would think he might get the point that this IS what users want.

I could go on, but I frankly don’t want to. I’m just surprised to see a tech story this flimsy in a Times publication. I certainly can’t imagine someone like David Pogue publishing anything like this mess in years past. And for what’s its worth, some of Mr Herrman’s other stuff that I looked at seemed very well-written and solidly thought out. I guess we all have bad days, but his was a doozy.

Bloomberg Bombshell

Yesterday, we had a bombshell of a story from Bloomberg Businessweek that seemingly came out of nowhere. It alleges that insiders from a government investigation, at Amazon, and at Apple all leaked information to them about Chinese agents embedding small chips in cloud server motherboards used by both Apple and Amazon in and around 2014 and 2015. This story has it all- government agents, corporate espionage, international intrigue, political leaders, and LOTS of money on the line.

If this report turns out to be true, and it certainly seems to be well-sourced, it could turn into a huge mess, with implications that go beyond just the companies involved to politics and international relations. Even though this story is focused on events from a few years ago, the investigation is evidently ongoing, and so are the hacks. With financial relations between the US and China strained by tariffs and a possible full-on trade war, the timing of this couldn’t be worse. To be honest, there is a real possibility that the timing isn’t an accident, and that there are political motives at play, at least among those leaking the information to Bloomberg.

As for Apple, considering that privacy and security are pillars of their current marketing, if this story is confirmed as fact, it could be a blow that undermines confidence in that message. However, if you read the article, the alleged leakers from Apple made it clear that all affected servers were removed after boards with these altered motherboards were found. They may be in the clear now, but the fact that they and Amazon would be targets of something this sophisticated is troubling.

It is worth noting that Apple did respond to this story.

“On this we can be very clear: Apple has never found malicious chips, ‘hardware manipulations’ or vulnerabilities purposely planted in any server.”

As Apple fans know, they don’t respond to trivial issues and reports, so that alone should tell us something about how important this news is.

The article is very long, but also very well written and quite interesting, so I definitely recommend giving it a look. However, if you aren’t going to heed good advise, enjoy this small, humorous nugget that I enjoyed:

Elemental servers sold for as much as $100,000 each, at profit margins of as high as 70 percent, according to a former adviser to the company. Two of Elemental’s biggest early clients were the Mormon church, which used the technology to beam sermons to congregations around the world, and the adult film industry, which did not.

Taking on a Titan

I am including this one here because it flat-out made me laugh. The article is from Sunil Shah at Seeking Alpha, and it is entitled, Buffett Should Sell Apple: First Trillion Bagged While Risks Mount. I mean, the title alone was enough to make me wonder what this guy is thinking. After a few bullet points describing how wrong more of the more successful institutional investors in history is, Mr Shah drops this gem:

This article is daring. Not only do I dispute the wisdom of the world’s greatest investor, but I propose the most successful company in the world is a terrible investment for a buyer of Apple (AAPL) shares today.

Daring is one way to put it. There are others. And on that note, I bid you all goodnight.


Share This:

Leave a Reply