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Was Apple’s Outstanding Q1 a Fluke?

Apple had a good quarter, but if you look under the numbers there is a ton of trouble. It just dropped behind Google in brand value, and some analysts have predicted valuation will crater in a few months.

The iPhone 7 did well, but that shouldn’t be a surprise, given that its biggest competitor, Samsung, saw its phone literally go up in flames last quarter. The Galaxy 8 is coming, though — maybe sooner than anyone expects — and it looks really impressive. This suggests Apple’s one-up quarter is not repeatable, unless Samsung decides burning phones is a feature. (Just think of the marshmallows you could roast right in your car! Or “the Samsung S8 Burns Faster, Better, Hotter!”)

Apple has moved aggressively to get suppliers to cut costs — even going to court in an effort to move some of Qualcomm’s profit to its own bottom line (this rarely ends well). Apple apparently hit a wall on top line growth, even though it is threatening to raise prices. (Good luck with that, because raising prices in a very competitive market ALWAYS ends well.)

Looking back, the Steve Jobs cycle really worked only once. It may not be Tim Cook’s fault it is failing — maybe working once was all it could do.

I’ll explain and then close with my product of the week: the Microsoft Surface Book 2, the halo product in the tablet family that is going up as the traditional iPad goes down.

The Apple Cycle

The Apple product cycle was an amazing thing to watch — not least because it showcased how folks could have, but didn’t, compete with the once unbeatable iPod. When the iPod was at its peak, Sony, Samsung, Dell — and even Microsoft, with the Zune — tried to make a dent in its sales, but they bounced off the product like it was made of diamonds.

The only product that even worried Steve Jobs was a prototype from HP, and he was able to trick HP’s then CEO Carly Fiorina into licensing the iPod instead. Then he really took advantage of her. Imagine how different history would have been for both HP and Carly if, instead of being screwed by Apple, HP had been the only company to displace the iPod. Maybe Fiorina, not Jobs, would have been CEO of the decade. (OK, I doubt it too.)

As it happened, Jobs saw that the real risk to the iPod was the emergence of smartphones that could do what the iPod did better. Instead of defending the iPod, he did what Microsoft and Palm should have done, leading Apple to create the best MP3/phone bundle.

That was particularly embarrassing for Microsoft’s Steve Ballmer, because he’d disagreed with his internal team, which had wanted to do the same thing instead of creating the Zune. Ballmer wasn’t alone, however. Palm’s then CEO also killed a similar effort, saying something like “smartphones are just for business.” There is some irony in HP buying Palm and then burning it to the ground, given its iPod mistake.

The iPod became the iPhone — an even bigger hit — and suddenly we had what looked like an amazingly powerful cycle, which worked pretty well for a decade.

When the Apple Cycle Broke

That successful cycle broke with the iPad. You see, the iPhone was an iPod-plus, so the next product in the cycle should have built on the iPhone — but it didn’t. The iPad is built on the iPod — it basically is an iPod with a bigger screen.

The iPhone already had made the iPod redundant, and the iPhone’s screen eventually grew, so instead of the iPad being an extension of the iPod, the iPhone became an extension of both. Instead of the iPad expanding the market like the iPhone did, it peaked and then went into an impressive nosedive.

Granted, the iPad Pro, which is sort of trying to be a blend of the iPad and MacBook, is having some success — but largely as a result of Microsoft’s Surface efforts. It arguably is doing a better job of slipstreaming the Surface than Zune did the iPod, but a huge hit it isn’t.

Then the Apple Watch came along, breaking Apple’s naming convention. It basically is a small iPod touch with limitations in screen size, features and platform compatibility. The iPod worked with Windows and the MacOS; the Apple Watch should work with Android as well as iOS but doesn’t. As a result, the Apple Watch is a crippled wearable iPod, and there should be no surprise it isn’t selling that well, even though it is considered one of the best smartwatches in the segment.

Wrapping Up: One-Trick Wonder

What all of this means is that Steve Jobs really only got this right once. Granted, he was increasingly sick after the iPhone and was gone for the Apple Watch, so he might have figured it out had he been alive and well. This makes me wonder if it even would be possible to extend the iPhone further. Could you create an iWonder product that would expand the smartphone to embrace the PC, for instance?

That is what Microsoft imagined with Continuum — the idea that a smartphone truly could become a PC — and what makes this ironic is that once again, it didn’t execute on what might have been a true iPhone replacement.

If Jobs were around, I’d bet that’s where he would go. What then would be the next step? Maybe some kind of Hololens-like product that could eliminate virtually everything else in its final form? I wonder who is going to get that right?

Rob Enderle's Product of the Week

The most memorable launch of this decade, for me, was the Surface Book. That’s because it was introduced as a laptop computer — and to look at it, it is hard to tell the screen becomes a tablet. With a flourish and the release of an electronic latch, the presenter mirrored what Jobs used to do with his “one more thing” surprise, and I haven’t seen people get so excited about a PC since the 90s.

I carried the Surface Book for months, and I had just one major complaint — that it couldn’t play any decent games. When you travel as much as I do, there is a lot of down time in airports or between meetings when time just drags. It’s even worse on long flights, when you can’t even move for hours.

I do read a lot, but the way I can burn through hours is with video games. The typical trade-off is that you either get a notebook that is thin and light with good battery life, or you get one that is heavy and thick with lousy battery life, but that plays games. Games don’t pay the bills for me, though.

What is amazing about the Surface Book 2 is that it significantly ups the graphics performance and increases battery life by a third — from 12 to 16 hours — while adding only one-third of a pound of weight.

Surface Book With Performance Base

Surface Book WithPerformance Base

Granted, you still aren’t at gaming laptop speeds, but this one now runs my current favorite game, Ashes of the Singularity, while the old one wouldn’t.

The Surface Book has never been a cheap date. It costs around US$2K for the sweet spot configuration of an i7 and 256M SSD drive, but the Surface Book 2 adds only $400 for a far more capable product with the same options.

It has a couple of shortcomings. To get it out before Christmas, Microsoft had to miss Intel’s latest Kaby Lake processor. Also, it doesn’t have USB-C ports — just the older USB 3.0 configuration. Still, given that most of what I have is still USB 3.0-compatible and that Kaby Lake was a minor upgrade, neither has been a problem.

Carrying the Surface Book is like carrying art. To my eye, it is arguably the best-looking laptop in the market. It can transform into a very attractive tablet that I rarely use — but most important, it will play games! As a result, the Surface Book 2 is my new carry box and my product of the week. It is a pretty thing.

Rob Enderle

Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends. You can connect with him on Google+.


  • The only real thing that compels to Apple is its branding. Everyone knows the "i" series of tech. It’s all the same really, just with different size screens. The only problem facing Apple is that nothing has changed much since the invention of mp3 and mp4. Digital data is mainstream. Everyone has it and uses it, even without knowing what or how.

    For me, I’d always rather have an Android phone and an iPad. Not because I favour any particular one, but because I get the best of both worlds. I know how to use my phone widgets and keep it locked. Everyone else knows how to use my iPad. Both don’t sync with each other, so no one messes with my phone by accident. Simple.

    • I had the exact same experience when I saw the heading of this article, a thought that this must be a rant by some anti Apple person, and it turnes out to be true.

      "Maybe some kind of Hololens-like product". Get down to earth Rob, this is the typical mindset of people like you, that Apple in order to succeed should produce something extremely mind blowing and unrealistic product of the future. But you don’t seem to apply the same kind of mindset when it comes to brands like MS, Samsung or the like, here you’re just satisfied with a bunch of gimmickly useless features that’s fun to play with for 5min

  • I didn’t see the, "Opinion" until I read it and started asking myself, "What the hell is this?" And went up to read it again…just to make sure I didn’t have an aneurysm and just made up something in my head.

  • The question is if indeed Apple had a good iPhone quarter is will this take away buyers from the next iPhone release? The other question somewhat ignored is the flat line predicted for Mac sales going forward. Plus the decline in iPad sales, and the fact that Apple has now basically pegged all its positives on the iPhone, the app store, and iPhone accessories. Apple fans can argue all day long this is not happening but it is. Apple has become a one hit wonder and the rest of its product line like Mac’s, Apple Watch, iPad, iPod, and so on are floundering. Plenty of people who ere once really positive on Apple are asking serious questions about their sustainability going forward.

  • As soon as I started reading this article I thought, this is Rob Enderle’s work. Scroll to the bottom, sure enough. No point reading any more. It’s just another anti Apple rant by someone whose pet hate keeps upsetting his previous dire predictions.

    By his reconning Apple should just roll over and give up producing world class products that millions of deluded customers keep spending their own money on. Might as well subscribe to the Microsoft and Google newsletters as very soon Apple will be toast. Soon, very soon, just about now, maybe ? Time to unsubscribe before he really lets his Apple hating, biased opinions get to me.

    Cheers and goodbye Rob. I’ll put my faith in Apple over you any day.

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