Apple nuked another market!

July 18, 2010

You never know where they hit. Once Apple admitted their iPhone 4 had the antenna problem, they had to either make a major recall (3 million units sold already) or provide everyone with a free iPhone case. Of course, it’s a no-brainer. So they went with the free cases and accidentally wiped out the market for iPhone case manufacturers. While it may seem that the smartphone case manufacturing is not an important business, still there are companies that make their money by making and selling the cases. I guess they could never imagine that Apple would start giving cases for free.

There is another point of view, that Apple has actually significantly expanded the iPhone case market, now that everyone is going to need one. Since Apple cannot create that many cases in a limited time, they will go and buy them from third-parties. However, Apple is a hard bargainer, so they will probably be buying a hundred for a dime, destroying the margins.

Market destruction with a free offer is a fascinating theme. The most famous example is Microsoft’s offering of IE and IIS for free, bundling it with Windows, and eventually wiping out Netscape Communications, once a $13B company. A lot of startups offer their services and products for free these days, in the hope of hitting it big via ads or some magic freemium model. This is basically a market destruction from the very beginning. When this happens, they don’t even need Apple or Microsoft to drop a nuke. The startups are destroying the market themselves.

The difference between a good business and a good investment

July 10, 2010

A good business is a company that generates profits. A good investment is the investment that grows significantly better than the market on average. If a company (Apple) exceeds another company (Microsoft) in market capitalization (i.e. it’s a better investment), but their profits don’t catch up, that means that the investment growth is based on faith. The faith that Apple will eventually generate better profits than Microsoft. That might happen or might not. And if that doesn’t happen soon enough, the investors will be disappointed and they will punish Apple’s capitalization. Simple as that.

Despite all the criticism, Microsoft is a very innovative company. They created tablet PCs, ebook readers, and Windows Mobile ten years ago. Too bad these things were too early for that time.

They created this 5 years before iPad:

NSFW: Catch the latest news about eyePhone, twitcher, and the Killer App!

July 6, 2010

The Always Amusing Futurama is back! You surely want to know about the Third World, the eyePhone, and the evil Killer App a thousand years from now. Watch episode 3! Did I say a thousand years?

Microsoft is still an awesome business

July 4, 2010

While nobody likes Microsoft, and Apple has recently topped their market capitalization, Microsoft remains to be a very strong business. There is a good post Microsoft by the numbers that shows it.

A few of my favorites:

$8.2 Billion
Apple Net income for fiscal year ending  Sep 2009. [source]

$6.5 Billion
Google Net income for fiscal year ending Dec 2009. [source]

$14.5 Billion
Microsoft Net Income for fiscal year ending June 2009. [source]

What? Microsoft makes the same amount of money as Apple and Google COMBINED?

Linux Server market share in 2005. [source]

Predicted Linux Server market share for 2007 (made in 2005). [source]

Actual Linux Server market share, Q4 2009. [source]

The Linux Servers were predicated to make Windows Server irrelevant one day. Looks like Linux is the loser now.

Number of Windows 7 licenses sold, making Windows 7 by far the fastest growing operating system in history.[source]

Percentage of US netbooks running Windows in 2008. [source]

Percentage of US netbooks running Windows in 2009. [source]

Android, Chrome OS, anyone?